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Rating Action:

Moody's places the ratings of six certificates from Su Casita Mexican mortgaged-backed securitizations on review for possible downgrade

 The document has been translated in other languages

06 May 2009

Mexico City, May 06, 2009 -- Moody's de México (Moody's) has placed on review for possible downgrade the global and national scale ratings of six certificates from four mortgage-backed securitizations issued by Hipotecaria Su Casita, S.A. de C.V. Sociedad Financiera de Objeto Múltiple E.N.R. (Su Casita). The mortgage pools consist of first-lien, fixed-rate loans denominated in UDIS and granted primarily to low-income borrowers ("interés social").

The affected certificates include:

-- BRHSCCB 06-5U (Class A certificates)

-- BRHSCCB 06-6U (Class B certificates)

-- BRHSCCB 06-3U (Class A certificates)

-- BRHSCCB 06-4U (Class B certificates)

-- BRHSCCB 06U (Class A certificates)

-- BRHSCGCB 04U (Class A certificates)

Prior to today's rating action, Moody's had also placed on review for possible downgrade the global and national scale ratings of the following three certificates from two other Su Casita mortgage-backed transactions: Class A2 certificates BRHCCB08-2U, Class B certificates BRHCCB08-3U, and Class A2 certificates BRHCCB 07-2U. With today's rating action, the ratings of nine certificates from six Su Casita mortgage-backed transactions issued in Mexico are on review for possible downgrade.

Today's rating actions are primarily based on the significant deterioration in performance during the past two months. The underlying pools of the affected transactions have displayed a sharp ramp-up of delinquencies greater than 90 days between January and March 2009. The level of 90+ day delinquencies (including real estate owned loans, or REOs) expressed as a percentage of the original pool balance increased as follows between January and March 2009 across the various transactions that are currently on review for downgrade: BRHCCB08-2U/08-3U (from 4.2% to 8.3%, or 97% increase), BRHCCB 07-2U (from 6.7% to 11.0%, or 63% increase), BRHSCCB 06-5U / 06-6U (from 4.2% to 6.2%, or 46% increase), BRHSCCB 063U / 06-4U (from 8.1% to 11.5%, or 43% increase), BRHSCCB 06U (from 7.4% to 9.5%, or 28% increase), and BRHSCGCB 04U (from 6.9% or 8.6%, or 24% increase).

Moody's is concerned that the weaker than expected trends observed over the last two months may be indicative of the expected performance in the near future. As part of Moody's monitoring approach, a performance-based projection is performed using the pool's historical performance trends to extrapolate cumulative gross defaults as of the end of a short-term projection period of up to one year. The projected default rate is generally determined by linearly interpolating the historical trends in the 90+ day delinquency rate for the pool over the most recent nine months. Moody's is concerned that the performance trends over the past two months may suggest a significantly weaker trend going forward when compared to past performance and that as a result, it may be more appropriate to stress the less volatile historical trend observed over the past nine months.

Further, Moody's also observed a considerable deterioration in the reported percentage of loans that are current, or 0 months past due, between January and March 2009. The "current" percentages (expressed as a percent of the total outstanding pool balance excluding REOs) declined as follows across the various transactions between January and March 2009: BRHCCB 08-2U/08-3U (from 80.9% to 61.6%), BRHCCB 07-2U (from 77.7% to 60.7%), BRHSCCB 06-5U / 06-6U (from 83.5% to 67.8%), BRHSCCB 063U / 06-4U (from 72.9% to 57.1%), BRHSCCB 06U (from 75.1% to 57.2%), and BRHSCGCB 04U (from 75.3% or 60.1%). Given the relatively low percentages of the pools that are current, Moody's is concerned that early delinquencies may convert into serious delinquencies.

During the review period, Moody's will focus on the drivers of the performance deterioration in the months of February and March, as well as Su Casita's ability as servicer of the securitized portfolio and the performance of the transactions.

Please refer to the following description of Moody's approach to monitoring Mexican mortgage backed securitizations for more details.

MONITORING METHODOLOGY

When monitoring the performance of residential mortgage backed securitizations in Mexico, a projected lifetime cumulative gross default rate is determined as a percentage of the current mortgage pool balance. To arrive at this rate, Moody's considers (1) the actual gross default experience to date, (2) a short-term projection of additional gross defaults over a period of up to one year, and (3) a long-term projection of incremental future gross defaults expected to occur afterwards.

In evaluating the level of gross defaults experienced to date, Moody's generally considers "defaulted loans" to include all loans that are currently more than 90 days delinquent, in foreclosure or in real estate owned (REO) status. It is assumed that the vast majority of these loans will ultimately result in a true default, leading to a foreclosure sale, a deed-in-lieu of foreclosure, a short-sale, or a repossession of the property associated with the defaulted loan (REO).

In evaluating the projected level of gross defaults at the end of the short-term projection period (generally one year in the future), a performance-based projection is performed using the pool's historical performance trends to extrapolate gross defaults and prepayments as of the end of the short-term projection period. The projected default rate is determined by linearly interpolating the historical trends in the defaulted loan rate for the pool over the most recent nine months. As a result, it is assumed that securitizations that have experienced high defaults and considerable month-over-month performance deterioration over the past nine months will continue to experience similar performance deterioration during the short-term projection period. This short-term stress addresses currently increasing pressures in the Mexican economy, such as increasing unemployment, that have already impacted the performance of mortgage loans.

After estimating the cumulative gross default rate and the pool factor as of the end of the short-term projection period, Moody's estimates the trajectory of cumulative gross defaults through the remaining pool factor (i.e. long-term projection period). In order to estimate the incremental defaults projected for the remaining pool, a Pool Factor Reduction percentage and a Gross Default-to-Liquidation ratio are calculated as of the end of the short-term projection period. The Pool Factor Reduction percentage represents the proportion of the original pool that is projected to have either paid down (i.e. via principal amortization) or defaulted as of the end of the short-term projection period. The Gross Default-to-Liquidation ratio is calculated as the cumulative gross default rate assumed as of the end of the short-term projection period pool divided by the Pool Factor Reduction percentage. This Gross Default-to-Liquidation ratio estimates the percentage of the projected Pool Factor Reduction amount attributable to cumulative gross defaults as of the end of the short-term projection period.

To illustrate with an example, assume a transaction with a projected Pool Factor Reduction of 30% at the end of a one year short-term projection period, meaning that the original pool balance was reduced by 30% due to a combination of principal paydowns and cumulative gross defaults. Further assume that of the total 30% reduction, 5 percentage points were due to cumulative gross defaults, while the remaining 25 percentage points were due to principal paydowns. In this case, the Gross Default-to-Liquidation ratio is 17%, calculated as 5% (gross defaults) divided by 30% (pool factor reduction).

Moody's then estimates the incremental gross defaults on the pool factor remaining as of the end of the short-term projection period (assuming remaining pool factor equals the original pool factor of 100% minus the Pool Factor Reduction percentage). The approach generally assumes that the remaining pool, which has a "current" delinquency status at the end of the short-term projection period, will experience a lower rate of gross defaults. The short-term projection results in stressed assumptions regarding the build-up in cumulative gross defaults to account for the more challenging employment situation currently in Mexico, particularly for securitizations with relatively high levels of defaults to date such as those affected by this rating action. Moody's expects that performance should not be as stressed after this projection period. To reflect this, Moody's generally assumes a factor that is a fraction of the Gross Default-to-Liquidation ratio calculated as of the end of the short-term projection period.

To arrive at the projected life-time cumulative gross default rate, Moody's adds the incremental defaults projected to occur after the short-term projection period to the cumulative gross defaults projected as of the end of the short-term projection period. The lifetime projected cumulative gross defaults is then adjusted as a percentage of the current pool and a small haircut is applied to reflect that some of these defaulted loans may cure.

After determining the projected lifetime gross default rate as a percentage of today's pool balance, Moody's determines the expected net losses associated with these defaulted loans by applying a severity of loss assumption on the defaulted pool balance (generally ranging between 40% and 75%). Moody's generally assumes a severity assumption that is similar to what was used to originally rate the securitization.

RATING ACTION

The complete rating action is as follows:

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, actuando únicamente como fiduciario.

-- BRHSCCB 06-5U (Class A certificates) ratings of Baa1 (Global Scale, Local Currency) and Aaa.mx (National Scale) placed on review for possible downgrade; the last rating action occurred on September 13, 2006, when the Baa1 and the Aaa.mx ratings were originally assigned.

-- BRHSCCB 06-6U (Class B certificates) ratings of Ba2 (Global Scale, Local Currency) and A2.mx (National Scale) placed on review for possible downgrade; the last rating action occurred on June 30, 2006, when the Ba2 and the A2.mx ratings were originally assigned.

-- BRHSCCB 063U (Class A certificates) ratings of Baa1 (Global Scale, Local Currency) and Aaa.mx (National Scale) placed on review for possible downgrade; the last rating action occurred on August 8, 2006, when the Baa1 and the Aaa.mx ratings were originally assigned.

-- BRHSCCB 06-4U (Class B certificates) ratings of Ba2 (Global Scale, Local Currency) and A2.mx (National Scale) placed on review for possible downgrade; the last rating action occurred on August 8, 2006, when the Ba2 and the A2.mx ratings were originally assigned.

-- BRHSCCB 06U (Class A certificates) ratings of Baa1 (Global Scale, Local Currency) and Aaa.mx (National Scale) placed on review for possible downgrade; the last rating action occurred on June 30, 2006, when the Baa1 and the Aaa.mx ratings were originally assigned.

-- BRHSCGCB 04U (Class A certificates) ratings of Baa1 (Global Scale, Local Currency) and Aaa.mx (National Scale) placed on review for possible downgrade; the last rating action occurred on August 24, 2004, when the Baa1 and the Aaa.mx ratings were originally assigned.

New York
Maria Muller
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Karen Ramallo
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's places the ratings of six certificates from Su Casita Mexican mortgaged-backed securitizations on review for possible downgrade
No Related Data.
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