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Announcement:

Moody's places three interest rate swaps in US RMBS transactions on review for possible upgrade

14 Jun 2012

New York, June 14, 2012 -- Moody's Investors Service has placed the ratings of three interest rate swaps on review for possible upgrade. Each of the affected swap is between a US RMBS trust and either Deutsche Bank AG (Deutsche, rated Aa3 on review for downgrade, Prime-1) or Barclays Bank, PLC (Barclays, rated Aa3 on review for downgrade, Prime-1), as counterparty. The rating on the swaps address the credit exposure of the swap counterparty to the respective RMBS trust's ability to honor its obligations under the swap. The drivers of these swap rating actions are: (1) The RMBS trusts' ability to honor their swap obligations have improved, (2) Moody's rating actions on February 15, 2012, which placed the long term ratings of Deutsche and Barclays on review for possible downgrade and (3) the implementation of "Moody's Approach to Counterparty Instrument Ratings ("CIRs")."

The complete rating actions are as follows:

For Swaps where Barclays Bank PLC is the counterparty:

Issuer: BCAP LLC Trust 2006-AA2

Swap (Reference Number 1439003B), A3 (sf) Placed Under Review for Possible Upgrade; previously on March 2, 2009 assigned A3 (sf)

For Swaps Where Deutsche Bank AG is the counterparty:

Issuer: MortgageIT Securities Corp. Mortgage Loan Trust, Series 2007-1

Swap II (Reference Number N614223N), A3 (sf) Placed Under Review for Possible Upgrade; previously on July 28, 2010 assigned A3 (sf)

Swap III (Reference Number N614227N), A3 (sf) Placed Under Review for Possible Upgrade; previously on July 28, 2010 assigned A3 (sf)

RATINGS RATIONALE

The three drivers of the rating action work in opposite directions, but the net effect is positive for the swaps' ratings. For instance, the improved ability of the RMBS trusts' to honor their obligations under the swap contracts and the application of the new approach to CIRs both put upward pressure on the swaps' ratings, while Moody's potential rating actions on the banks put downward pressure on the swaps' ratings. At this time, itis highly likely that the ratings of these swaps will be upgraded. However, the exact magnitude of that upgrade will not be known until the watch status of the banks is resolved.

These swaps are all currently passing stressed cashflow scenarios that are consistent with our Aaa assumptions. Additionally, these swaps have low linkage to their counterparty so, per the new approach to CIRs, they will be eligible for up to a three notch uplift from the rating of their respective counterparties. In the PR dated February 15th 2012, Moody's indicated that the ratings of swap counterparties in these three transactions will likely not be downgraded by more than two notches. The low linkage to the rating of the counterparty is primarily due to the stipulation in the transaction documents that the issuer will use any upfront payment received from a replacement counterparty towards discharging the termination payment owing to the swap counterparty in priority to any other creditors of the issuer, as described in the methodology.

In determining the degree of linkage for these swaps, Moody's believed that uncertainty surrounding the enforceability of contractual provisions allowing for the subordination of swap termination payments will cause RMBS trustees to find replacement swap providers prior to terminating existing swap contracts.

The principal methodology used in these ratings was Moody's Approach to Counterparty Instrument Ratings published in February 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings 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 Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see for each issuer the ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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.

In addition to the information provided below please find on the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued each of the ratings.

Scott Adam Friedman
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Kruti Muni
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's places three interest rate swaps in US RMBS transactions on review for possible upgrade
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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