New York, February 28, 2011 -- Moody's Investors Service has downgraded the ratings of 5 tranches from
Bella Vista Mortgage Trust 2004-2. The collateral backing
the deal primarily consists of first-lien, adjustable rate,
negative amortization residential mortgages.
The actions are a result of deteriorating performance of Option ARM pools
securitized before 2005. Although most of these pools have paid
down significantly, the remaining loans are affected by the housing
and macroeconomic conditions that remain under duress.
The actions reflect Moody's updated loss expectations on Alt-A
pools issued from prior 2005. The principal methodology used in
these ratings was " Pre-2005 US RMBS Surveillance Methodology"
published in January 2011.
Moody's final rating actions are based on current ratings, level
of credit enhancement, collateral performance and updated pool-level
loss expectations relative to current level of credit enhancement.
Moody's took into account credit enhancement provided by seniority,
cross-collateralization, excess spread, time tranching,
and other structural features within the senior note waterfalls.
The above mentioned approach " Pre-2005 US RMBS Surveillance Methodology
" is adjusted slightly when estimating losses on pools left with a small
number of loans to account for the volatile nature of small pools.
Even if a few loans in a small pool become delinquent, there could
be a large increase in the overall pool delinquency level due to the concentration
risk. To project losses on pools with fewer than 100 loans,
Moody's first estimates a "baseline" average rate of new delinquencies
for the pool that is dependent on the vintage of loan origination (10%,
5% and 3% for the 2004, 2003 and 2002 and prior vintage
respectively). The baseline rates are higher than the average rate
of new delinquencies for larger pools for the respective vintages.
Once the baseline rate is set, further adjustments are made based
on 1) the number of loans remaining in the pool and 2) the level of current
delinquencies in the pool. The fewer the number of loans remaining
in the pool, the higher the volatility in performance. Once
the loan count in a pool falls below 75, the rate of delinquency
is increased by 1% for every loan less than 75. For example,
for a pool with 74 loans from the 2004 vintage, the adjusted rate
of new delinquency would be 10.10%. in addition,
if current delinquency levels in a small pool is low, future delinquencies
are expected to reflect this trend. To account for that,
the rate calculated above is multiplied by a factor ranging from 0.5
to 2.0 for current delinquencies ranging from less than 2.5%
to greater than 30% respectively. Delinquencies for subsequent
years and ultimate expected losses are projected using the approach described
in the methodology publication.
The primary source of assumption uncertainty is the current macroeconomic
environment, in which unemployment levels remain high, and
weakness persists in the housing market. Overall, Moody's
assumes a further 5% decline in home prices with stabilization
in late 2011, accompanied by continued stress in national employment
levels through that timeframe.
For more information please see www.moodys.com.
Moody's Investors Service received and took into account one or more third
party due diligence reports on the underlying assets or financial instruments
in this transaction and the due diligence reports had a neutral impact
on the rating.
Complete rating actions are as follows:
Issuer: Bella Vista Mortgage Trust 2004-2
Cl. A-1, Downgraded to Caa3 (sf); previously
on Apr 12, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. A-2, Downgraded to Caa2 (sf); previously
on Apr 12, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. A-3, Downgraded to C (sf); previously on
Apr 12, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. A-4, Downgraded to C (sf); previously on
Apr 12, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. X, Downgraded to Ca (sf); previously on Apr 12,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
list of these actions including CUSIP identifiers may be found at:
A list of updated estimated pool losses and sensitivity analysis is being
posted on an ongoing basis for the duration of this review period and
may be found at:
Information sources used to prepare the credit rating 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 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.
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's FIS Domestic Sales Office - San Francisco CA
Moody's Investors Service
Moody's takes action on $112 million of Option ARM RMBS issued by Bella Vista in 2004
250 Greenwich Street
New York, NY 10007