Mexico, January 11, 2011 -- Moody's de México (Moody's) has downgraded five certificates
from Mexican RMBS issued by Hipotecaria Su Casita, S.A.
de C.V. Sociedad Financiera de Objeto Múltiple E.N.R.
("Su Casita"). The underlying collateral consists of
first-lien, fixed-rate mortgage loans denominated
in UDIS and granted primarily to low-income borrowers in Mexico.
This concludes the review for possible downgrade that was initiated on
September 15, 2010.
Originator and Servicer: Hipotecaria Su Casita, S.A.
de C.V. Sociedad Financiera de Objeto Múltiple E.N.R.
Issuer: The Bank of New York Mellon, S.A. Institución
de Banca Múltiple, acting solely as trustee.
-- Class A-2 BRHCCB 07-2U, rating downgraded
to B1.mx (sf) from Ba3.mx (sf) (Mexican National Scale);
B3 (sf) (Global Scale, Local Currency) rating confirmed.
-- Class B BRHSCCB 06-6U, ratings downgraded
to B1.mx (sf) from A2.mx (sf) (Mexican National Scale) and
to B3 (sf) from Ba2 (sf) (Global Scale, Local Currency).
-- Class B BRHSCCB 06-4U, ratings downgraded
to Caa2.mx (sf) from B1.mx (sf) (Mexican National Scale)
and to Caa2 (sf) from B3 (sf) (Global Scale, Local Currency).
Issuer: HSBC México, S.A. Institución
de Banca Múltiple, Grupo Financiero HSBC, División
Fiduciaria, acting solely as trustee.
-- Class A-2 BRHCCB 08-2U, ratings downgraded
to Ba2.mx (sf) from A1.mx (sf) (Mexican National Scale)
and to B2 (sf) from Ba1 (sf) (Global Scale, Local Currency).
-- Class B BRHCCB 08-3U, ratings downgraded
to Ca.mx (sf) from Caa1.mx (sf) (Mexican National Scale)
and to Ca (sf) from Caa1 (sf) (Global Scale, Local Currency).
RATINGS RATIONALE
Today's downgrades were 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 pools. 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
a possible servicing transfer.
In addition, the BRHCCB 07-2U Class A-2 certificates
benefit from a financial guaranty provided by MBIA de México,
S.A. de C.V. (B3 and B1.mx insurance
financial strength ratings) which covers timely payment of interest and
ultimate payment of principal on the certificates. The BRHCCB 07-2U
Class A-2 certificates' B3 (sf) and B1.mx (sf) ratings
are in-line with MBIA de México, S.A.
de C.V.'s B3 and B1.mx insurance financial
strength ratings. The certificates' current ratings are 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), as a percent of the original
pool balance for each of the underlying pools were as follows:
-- BRHCCB 08-2U & BRHCCB 08-3U (Classes
A-2 and B2): 25.0% after 33 months since closing,
versus 17.9% as of 12 months ago.
-- Class A-2 BRHCCB 07-2U: 36.9%
after 39 months since closing, versus 22.6% as of
12 months ago.
-- Class B BRHSCCB 06-6U: 12.1%
after 53 months since closing, versus 9.2% as of 12
months ago.
-- Class B BRHSCCB 06-4U: 18.8%
after 54 months since closing, versus 17.1% as of
12 months ago.
Accumulated net losses in each transaction, however, represented
less than 1% of the original pool balances given the relatively
low level of reported REO sales and recoveries to date.
Further, the transactions have relatively high outstanding pool
balances (including REOs) ranging between 61% and 84% of
the original balances. Given the transactions' weak performance
trends to date and their high pool factors, Moody's expects significantly
higher lifetime cumulative gross defaults as a percent of the original
pools as compared to the level of defaults observed to date.
Moody's projected lifetime cumulative gross defaults in each transaction
is as follows:
-- BRHCCB 08-2U & BRHCCB 08-3U (Class
A-2 & B): 49% of original balance, or 59%
of current balance.
-- Class A-2 BRHCCB 07-2U: 61%
of original balance, or 73% of current balance.
-- Class B BRHSCCB 06-6U: 23% of original
balance, or 38% of current balance.
-- Class B BRHSCCB 06-4U: 28% of original
balance, or 45% of current balance.
After estimating projected lifetime gross default rates as a percent of
the current pool balances including REOs, Moody's determined the
pool expected losses by applying a severity of loss assumption on the
projected defaulted loan balance (assumed severities range between 47-62%
across the four transactions). Moody's updated expected net loss
projections are as follows:
-- BRHCCB 08-2U & BRHCCB 08-3U (Classes
A-2 and B2): 28% of current balance.
-- Class A-2 BRHCCB 07-2U: 45%
of current balance.
-- Class B BRHSCCB 06-6U: 19% of current
balance.
-- Class B BRHSCCB 06-4U: 23% of current
balance.
Moody's then compares these net loss projections with the estimated lifetime
available credit enhancement by certificate (including any subordination,
overcollateralization, and remaining excess spread), which
is as follows:
-- Class A-2 BRHCCB 08-2U: 26%
of current balance.
-- Class B BRHCCB 08-3U: 15% of current
balance.
-- Class A-2 BRHCCB 07-2U: 33%
of current balance.
-- Class B BRHSCCB 06-6U: 19% of current
balance.
-- Class B BRHSCCB 06-4U: 21% of current
balance.
Regarding the variability of the BRHCCB 07-2U Class A-2
certificates' B3 (sf) rating, if Moody's were to downgrade
MBIA de México, S.A. de C.V.'s
insurance financial strength rating by one notch to Caa1 from B3,
the BRHCCB 07-2U Class A-2 certificates' would also
likely experience a one-notch downgrade to Caa1 (sf).
Regarding the variability of the ratings of Class B BRHCCB 08-3U
downgraded to Ca (sf)/Ca.mx (sf), Moody's notes that as of
this date it does not foresee further rating downgrades. Certificates
with expected recoveries of 35% to 65% are generally rated
Ca (sf), while certificates are generally rated C (sf) if their
expected recoveries are below 35%. However, a one
notch benefit is generally applied for at risk Mexican RMBS certificates
that do not experience write-downs in principal balance and are
expected to continue receiving coupon payments for many years, as
is the case for the affected certificates. As a result, Moody's
does not foresee further ratings downgrades on the affected certificates
under this approach.
Regarding the variability of the Class B BRHSCCB 06-6U, Class
B BRHSCCB 06-4U and the Class A-2 BRHCCB 08-2U ratings,
if Moody's were to instead assume the following cumulative gross
defaults as a percent of the current pool balance, the certificates'
would also likely experience a one-notch downgrade:
-- Class B BRHSCCB 06-6U, 41% (instead
of 38%).
-- Class B BRHSCCB 06-4U, 49% (instead
of 45%).
-- Class A-2 BRHCCB 08-2U, 61%
(instead of 59%).
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 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 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
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 de Mexico S.A. de C.V
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No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
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Moody's downgrades five certificates from Su Casita Mexican RMBS
