New York, December 30, 2010 -- Moody's Investors Service has downgraded the ratings of nine tranches
issued by Washington Mutual 2006-AR19. The collateral backing
this transaction primarily consists of first-lien, adjustable-rate,
negative amortization residential mortgages.
RATINGS RATIONALE
The actions are a result of the rapidly deteriorating performance of option
arm pools in conjunction with macroeconomic conditions that remain under
duress. The actions reflect Moody's updated loss expectations on
option arm pools issued from 2005 to 2007.
In addition, Moody's has adjusted the rating on the Class 1-X2,
which is an interest-only tranche. According to the both
the Prospectus Supplement and the Pooling and Servicing Agreement,
the Class 1-X2 notional balance is based on the outstanding balance
of Subgroup 1A mortgage loans. In our previous rating actions on
Class 1-X2, the notional balance of Class 1-X2 was
linked to all outstanding mortgage loans backing this transaction.
Moody's has adjusted its analysis to take into account the correct collateral
pool.
The principal methodology used in these ratings was "Option ARM RMBS Loss
Projection Update: April 2010" published in April 2010.
To assess the rating implications of the updated loss levels on option
arm RMBS, each individual pool was run through a variety of scenarios
in the Structured Finance Workstation® (SFW), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the different
pools and the structural features of the transaction including priorities
of payment distribution among the different tranches, average life
of the tranches, current balances of the tranches and future cash
flows under expected and stressed scenarios. The scenarios include
ninety-six different combinations comprising of six loss levels,
four loss timing curves and four prepayment curves. The volatility
in losses experienced by a tranche due to small increments in losses on
the underlying mortgage pool is taken into consideration when assigning
ratings.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck.
The primary source of assumption uncertainty is the current macroeconomic
environment, in which unemployment remains at high levels,
and weakness persists in the housing market. Moody's notes an increasing
potential for a double-dip recession, which could cause a
further 20% decline in home prices (versus its baseline assumption
of roughly 5% further decline). Overall, Moody's assumes
a further 5% decline in home prices with stabilization in early
2011, accompanied by continued stress in national employment levels
through that timeframe.
For more information please see www.moodys.com.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or financial
instruments in this transaction and the due diligence reports had a neutral
impact on the rating.
Complete rating actions are as follows:
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2006-AR19 Trust
Cl. 1A, Downgraded to Caa3 (sf); previously on Jan 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 1A-1A, Downgraded to Caa2 (sf); previously
on Jan 27, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 1A-1B, Downgraded to Ca (sf); previously
on Jan 27, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. 2A, Downgraded to Caa1 (sf); previously on Jan 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. 2A-1B, Downgraded to Ca (sf); previously
on Jan 27, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. CA-1C, Downgraded to C (sf); previously on
Jan 27, 2010 Ca (sf) Placed Under Review for Possible Downgrade
Cl. 1-X2, Downgraded to Caa2 (sf); previously
on Jan 27, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-X-PPP, Downgraded to Ca (sf); previously
on Jan 27, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. 2-X-PPP, Downgraded to Caa3 (sf);
previously on Jan 27, 2010 Caa2 (sf) Placed Under Review for Possible
Downgrade
A list of these actions including CUSIP identifiers may be found at:
Excel: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF230380
A list of updated estimated pool losses, sensitivity analysis,
and tranche recovery details is being posted on an ongoing basis for the
duration of this review period and may be found at:
Excel: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF225686
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information, and
confidential and proprietary Moody's Analytics information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Maxim Pertsov
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Amita Shrivastava
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades $728.7 million of Option ARM RMBS issued by Washington Mutual