New York, February 22, 2012 -- Moody's Investors Service has affirmed 2,091 tranches, downgraded
741 tranches and upgraded 75 tranches from 870 RMBS transactions backed
by Jumbo, Alt-A, Option ARMs, Subprime and other
RMBS mortgage loans issued between 1996 and 2010 due to the introduction
of a global methodology for rating structured finance IO securities.
Moody's Investors Service also put 494 tranches on review for downgrade
from 261 transactions, 41 tranches for review for upgrade from 30
transactions and 37 tranches for review with direction uncertain from
21 transactions.
RATINGS RATIONALE
The methodology addresses expected differences in cash flows to the IO
holder that arise from defaults and losses and maps them to a credit rating.
The methodology is the result of extensive analysis into the meaning of
the IO rating and how to better align IO ratings with Moody's expected
loss (EL) ratings framework. The ratings framework approach is
based on the results of our cash flow analysis. Prepayments are
considered non credit events. IO ratings are sensitive to any rating
changes on referenced bonds or changes in expected loss on referenced
pools.
The methodologies used in these ratings were "Moody's Approach to
Rating Structured Finance Interest-Only Securities" published
in February 2012, and "Moody's Approach to Rating US Residential
Mortgage-Backed Securities" published in December 2008.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
The primary source of assumption uncertainty is the current macroeconomic
environment, in which unemployment levels remain high, and
weakness persists in the housing market. Moody's now projects house
price index to reach a bottom in 2012, with a 3% remaining
decline in 2012, and the unemployment rate to start declining,
albeit slowly, as the year progresses.
Recently Moody's placed on review a number of tranches and transactions
backed by pre-2005 Jumbo, Alt-A, Option ARMs
and Subprime loans. Pre-2005 single pool and multiple-pool
IO ratings were capped at Ba3 (sf) in accordance with the methodology
and certain pre-2005 IOs were placed on review for possible downgrade
and certain IOs tranches that had ratings below Ba3 (sf) were placed on
review direction uncertain pending resolution of the pre-2005 transactions.
Pre-2005 single tranche and multi-tranche IO ratings were
updated to reflect the recent actions.
Notional balances of Option ARM IOs are linked to either a single pool,
multiple pools, single tranche or multiple tranches and contain
a principal-only (PO)component. The balance of the PO component
increases based on the amount of deferred interest allocable to the IO
class. Option ARM IOs ratings are based on the WARF rating of the
IO component rating using this methodology and the principal-only
(PO) component rating using the RMBS methodology for Option ARMs.
As part of today's actions, Moody's has also adjusted the
ratings of eight interest-only (IO) tranches, identified
below, from four Alt-A and three Jumbo transactions.
The notional balance of these interest-only tranches are linked
to a single P&I tranche (reference tranche) within their respective
transactions. Pursuant to Moody's methodology, the
ratings of these interest-only tranches should have been the same
as the reference tranche; however, prior rating actions did
not reflect the appropriate linkage. Moody's has adjusted
the ratings of these interest-only tranches to reflect the rating
of the corresponding reference tranche.
Affected tranches from Jumbo transactions:
Banc of America Funding 2006-5 Trust, Mortgage Pass-Through
Certificates, Series 2006-5, Cl. 2-A-13
linked to Cl. 2-A-10; Banc of America Funding
Corporation, Mortgage Pass-Through Certificates, Series
2005-5, Cl. 3-A-7 linked to Cl.
3-A-1; Banc of America Funding Corporation, Mortgage
Pass-Through Certificates, Series 2005-7, Cl.
1-A-4 linked to Cl. 1-A-2; Banc
of America Funding Corporation, Mortgage Pass-Through Certificates,
Series 2005-7, Cl. 1-A-5 linked to Cl.
1-A-2.
Affected tranches from Alt-A transactions:
Bear Stearns Asset Backed Securities I Trust 2006-AC2, Cl.
II-2A-4 linked to Cl. II-2A-3;
CSMC Mortgage-Backed Trust Series 2007-3, Cl.
4-A-7 linked to Cl. 4-A-3; CWALT,
Inc. Mortgage Pass-Through Certificates, Series 2005-75CB,
Cl. A-2 linked to Cl. A-1; RALI Series
2004-QA5 Trust, Cl. A-I-IO linked to
Cl. A-I.
Moody's has also adjusted the ratings of two other IO tranches to correct
inaccurate linkage from prior rating actions. As to Cl.
II-A-IO from the Merrill Lynch Mortgage Investors Trust
MLMI Series 2005-A4 jumbo transaction, the Pooling and Servicing
Agreement provides that the notional balance for this IO tranche is based
on the outstanding balance of Cl. II-A-2.
In our previous rating action on Cl. II-A-IO,
however, the notional balance was incorrectly linked to Cl.
II-A-1. As to Cl. 4-A-4 from
the MASTR Alternative Loan Trust 2005-2 Alt-A transaction,
the Pooling and Servicing Agreement provides that the notional balance
is based on the outstanding balance of Cl. 4-A-3.
In our previous rating action on Cl. 4-A-4,
however, the notional balance was incorrectly linked to Pool 4.
Moody's has corrected the ratings on these two IO tranches,
and today's rating actions reflect the appropriate linkage.
Please click on this http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF277315
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
For more information please see www.moodys.com.
REGULATORY DISCLOSURES
Although these credit ratings have been issued in a non-EU country
which has not been recognized as endorsable at this date, the credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. 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.
Information sources used to prepare the ratings 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 received and took into account one or more third party assessments
on the due diligence performed regarding the underlying assets or financial
instruments in these transactions and the assessments had a neutral impact
on the ratings.
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.
The below contact information is provided for information purposes only.
Please see the issuer page on www.moodys.com for Moody's
regulatory disclosure of the name of the lead analyst and the office that
has issued the credit rating.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
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 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.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Qiuzi Huang
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
Bruce D. Fabrikant
Senior Vice President
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 take actions on 3,479 RMBS Interest Only Securities issued between 1996 and 2010
