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11 Jan 2011
New York, January 11, 2011 -- Moody's Investors Service (Moody's) has downgraded the Class A Insured
Residential Mortgage Backed Floating Rate Notes due 2035 to B3 (sf) from
B1 (sf) (Global Scale, Foreign Currency). This concludes
the review for possible downgrade that was initiated on May 6, 2009.
The underlying collateral consists of first-lien, fixed-rate
mortgage loans denominated in UDIS and granted primarily to low-income
borrowers in Mexico.
Originator and Servicer: Hipotecaria Su Casita, S.A.
de C.V. Sociedad Financiera de Objeto Múltiple E.N.R.
("Su Casita").
Issuer: The Bank of New York Mellon, S.A. Institución
de Banca Múltiple, acting solely as trustee.
-- Class A Insured Residential Mortgage-Backed Floating
Rate Notes due 2035, rating downgraded to B3 (sf) from B1 (sf) (Global
Scale, Foreign Currency).
RATINGS RATIONALE
Today's downgrade was based on the continuing deterioration of the
collateral's performance and Moody's updated projection of lifetime
cumulative gross defaults and expected losses on the pool. These
projections consider an additional stress factor to account for possible
further deterioration related to servicing quality as a result of Su Casita's
operational restructuring and the possibility for disruptions following
the servicing transfer to Patrimonio, S.A. de C.V.,
Sociedad Financiera de Objeto Limitado.
The Class A Notes benefit from a financial guaranty provided by MBIA Insurance
Corporation (B3 insurance financial strength rating) which covers timely
payment of interest and ultimate payment of principal on the notes.
The notes' B3 (sf) rating is in-line with MBIA Insurance
Corporation's B3 insurance financial strength rating. The
notes' current rating is consistent with Moody's practice of rating
structured finance securities wrapped by financial guarantors at the higher
of (1) the guarantor's insurance financial strength rating and (2) the
underlying rating (reflecting the intrinsic credit quality of securities
absent the guarantee).
As of December 2010, delinquencies greater than 90 days, including
accumulated real estate owned (REO), represented 24.2%
of the original pool balance, versus 15.2% as of 12
months ago. Accumulated net losses, however, represented
less than 1% of the original balance given the relatively low level
of reported REO sales and recoveries to date.
Further, the transaction has a relatively high outstanding pool
balance (including REOs) equal to 70% of the original balance.
Given the transaction's weak performance trends to date and its
high pool factor, Moody's expects significantly higher lifetime
cumulative gross defaults as a percent of the original pool as compared
to the level of defaults observed to date.
Moody's projects lifetime cumulative gross defaults of 40% of the
original pool balance (or 57% of the current balance), an
average severity of loss of 63%, and expected losses of 36%
as a percent of the outstanding pool balance (or 57% of defaults
multiplied by a 63% loss severity). The expected loss projection
of 36% of the outstanding pool compares with an estimated lifetime
credit enhancement of 31% for the Class A Notes including subordination,
overcollateralization and excess spread.
Regarding the variability the Class A Notes' B3 (sf) rating,
if Moody's were to downgrade MBIA Insurance Corporation's
insurance financial strength rating by one notch to Caa1, and assume
a cumulative gross default of 61% as a percent of the current pool
balance instead of 57%, the Class A Notes would likely experience
a one-notch downgrade to Caa1 (sf).
The primary sources of assumption uncertainty are related to the macroeconomic
environment, the timing of recovery of the Mexican economy and labor
market, the severity of loss assumption given the limited market
data related to historical recoveries for REOs, and Su Casita's
ultimate strategic direction and solvency and the extent of any potential
servicing disruptions.
The principal methodology used in this rating was "Moody's Approach to
Monitoring Residential Mortgage-Backed Securitizations in Mexico"
published in August 2009. Other methodologies and factors that
may have been considered can also be found on Moody's website.
Moody's also considered that a loan servicer's capabilities can have a
significant effect - either positive or negative - on realized
loss levels in residential mortgage loan securitizations. Moody's
assesses a servicer's ability to affect residential mortgage losses today
and into the future. A servicer's financial stability could negatively
affect its ability to properly perform its duties as primary servicer
of securitized mortgage loans. Furthermore, any negative
impact on the servicing function may in turn adversely affect the performance
of the loans serviced by the company.
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.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
related to the monitoring of these transactions in the past six months.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings and public information.
Moody's 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
Karen Ramallo
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Maria Muller
Senior Vice President
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 Su Casita's 2007 Cross-border Class A Insured Residential Mortgage-Backed Floating Rate Notes to B3 (sf)
No Related Data.
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