New York, April 25, 2011 -- Moody's Investors Service has downgraded the ratings of 32 tranches from
three prime jumbo deals issued by Washington Mutual. The collateral
backing these deals consists primarily of first-lien, fixed
rate prime jumbo residential mortgages.
RATINGS RATIONALE
The actions are a result of deteriorating performance of prime jumbo pools
securitized before 2005. Although most of these pools have paid
down significantly, the remaining loans are affected by the housing
and macroeconomic conditions that remain under duress.
The principal methodology used in these ratings is described in the Monitoring
and Performance Review section in "Moody's Approach to Rating US
Residential Mortgage-Backed Securities" published in December 2008.
Other methodologies used include "Pre-2005 US RMBS Surveillance
Methodology" published in January 2011, which accounts for the deteriorating
performance and outlook.
To assess the rating implications of the updated loss levels on prime
jumbo 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
fifty four different combinations comprising of six loss levels,
three loss timing curves and three prepayment curves. For ratings
implied Aa3 and above, an additional prepayment curve is run to
assess resilience to a high prepayment scenario.
The above mentioned approach "Pre-2005 US RMBS Surveillance Methodology"
is adjusted slightly when estimating losses on pools left with a small
number of loans to account for the volatile nature of small pools.
Even if a few loans in a small pool become delinquent, there could
be a large increase in the overall pool delinquency level due to the concentration
risk. To project losses on pools with fewer than 100 loans,
Moody's first estimates a "baseline" average rate of new delinquencies
for the pool that varies from 3% to 5% on average.
The baseline rates are higher than the average rate of new delinquencies
for larger pools for the respective vintages.
Once the baseline rate is set, further adjustments are made based
on 1) the number of loans remaining in the pool and 2) the level of current
delinquencies in the pool. The fewer the number of loans remaining
in the pool, the higher the volatility in performance. Once
the loan count in a pool falls below 75, the rate of delinquency
is increased by 1% for every loan less than 75. For example,
for a pool with 74 loans with a base rate of new delinquency of 3.00%,
the adjusted rate of new delinquency would be 3.03%.
in addition, if current delinquency levels in a small pool is low,
future delinquencies are expected to reflect this trend. To account
for that, the rate calculated above is multiplied by a factor ranging
from 0.75 to 2.5 for current delinquencies ranging from
less than 2.5% to greater than 10% respectively.
Delinquencies for subsequent years and ultimate expected losses are projected
using the approach described in the methodology publication.
Certain securities, as noted below, are insured by financial
guarantors. For securities insured by a financial guarantor,
the rating on the securities is the higher of (i) the guarantor's financial
strength rating and (ii) the current underlying rating (i.e.,
absent consideration of the guaranty) on the security. The principal
methodology used in determining the underlying rating is the same methodology
for rating securities that do not have a financial guaranty and is as
described earlier.
The primary source of assumption uncertainty is the current macroeconomic
environment, in which unemployment levels remain high, and
weakness persists in the housing market. Overall, Moody's
assumes a further 5% decline in home prices with stabilization
in late 2011, accompanied by continued stress in national employment
levels through that timeframe.
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: Washington Mutual MSC 2003-MS6 Trust
Cl. I-A, Downgraded to A2 (sf); previously on
Apr 29, 2003 Assigned Aaa (sf)
Cl. II-A, Downgraded to A3 (sf); previously on
Apr 29, 2003 Assigned Aaa (sf)
Cl. III-A-6, Downgraded to A3 (sf); previously
on Apr 29, 2003 Assigned Aaa (sf)
Cl. III-A-8, Downgraded to A3 (sf); previously
on Apr 29, 2003 Assigned Aaa (sf)
Cl. III-X, Downgraded to A3 (sf); previously
on Apr 29, 2003 Assigned Aaa (sf)
Cl. III-P, Downgraded to A3 (sf); previously
on Apr 29, 2003 Assigned Aaa (sf)
Cl. III-B-1, Downgraded to B1 (sf); previously
on Sep 1, 2004 Upgraded to Aaa (sf)
Cl. III-B-2, Downgraded to Caa1 (sf);
previously on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible
Downgrade
Cl. III-B-3, Downgraded to Ca (sf); previously
on Apr 15, 2010 Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. C-X, Downgraded to A2 (sf); previously on
Apr 29, 2003 Assigned Aaa (sf)
Cl. C-P, Downgraded to A3 (sf); previously on
Apr 29, 2003 Assigned Aaa (sf)
Issuer: Washington Mutual MSC 2003-MS8 Trust
Cl. I-A-1, Downgraded to Aa3 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. I-A-2, Downgraded to Aa3 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. I-A-3, Downgraded to Aa3 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. I-A-6, Downgraded to A1 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Underlying Rating: Downgraded to A1 (sf); previously on Apr
15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Financial Guarantor: MBIA Insurance Corporation (Downgraded to B3,
Outlook Negative on Jun 25, 2009)
Cl. I-A-9, Downgraded to A1 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. I-A-10, Downgraded to A1 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. I-A-11, Downgraded to A1 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. I-X, Downgraded to Aa3 (sf); previously on
Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. I-P, Downgraded to A1 (sf); previously on
Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. II-A-1, Downgraded to Aa3 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. II-A-2, Downgraded to Aa3 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. II-A-3, Downgraded to Aa3 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. II-X, Downgraded to Aa3 (sf); previously
on Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. II-P, Downgraded to A1 (sf); previously on
Apr 15, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Issuer: Washington Mutual MSC Mortgage Pass-Through Certificates,
Series 2002-MS2
Cl. C-B-2, Downgraded to A3 (sf); previously
on Sep 1, 2004 Upgraded to Aaa (sf)
Cl. C-B-3, Downgraded to Ba1 (sf); previously
on Jul 27, 2005 Upgraded to Aaa (sf)
Cl. C-B-4, Downgraded to B2 (sf); previously
on Jul 27, 2005 Upgraded to A1 (sf)
Cl. C-B-5, Downgraded to Caa2 (sf); previously
on Jul 27, 2005 Upgraded to Ba1 (sf)
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF244111
A list of updated estimated pool losses and sensitivity analysis is being
posted on an ongoing basis for the duration of this review period and
may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF243269
For more information please see www.moodys.com.
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
Ola Hannoun-Costa
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Deepika Kothari
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 $76 million of Prime RMBS issued by Washington Mutual between 2002 and 2003
