New York, April 14, 2011 -- Moody's Investors Service has downgraded the ratings of 15 tranches and
confirmed the ratings of 11 tranches from one RMBS transaction,
backed by prime jumbo loans, issued by Banc of America Funding 2005-3
Trust.
RATINGS RATIONALE
The collateral backing this transaction consists primarily of first-lien,
fixed-rate, prime jumbo residential mortgage loans.
The actions are a result of the rapidly deteriorating performance of jumbo
pools in conjunction with macroeconomic conditions that remain under duress.
The actions reflect Moody's updated loss expectations on prime jumbo pools
issued from 2005 to 2008.
The principal methodology used to project losses on the pool is as described
under "Prime Jumbo RMBS Loss Projection Update: January 2010" published
in January 2010. However, to project the rate of current
loans becoming delinquent in future, in projecting future delinquencies
on the pool, Moody's calculated the rate of new delinquencies
on the pool over the past year, instead of projecting delinquencies
to a housing market trough, and applied the annual delinquency burnout
factors noted in the publication above. These delinquencies were
then translated into defaults and losses by applying the lifetime default
frequencies ("roll rates") and loss severities, which
are also detailed into the publication above. As a percentage of
current balance, Moody's expects losses of 2.5%
on the pool.
To assess the ratings on the bonds, Moody's considered the level
of credit enhancement available for each tranche relative to updated pool-level
loss expectations. Within the senior note waterfalls, Moody's
took into account credit enhancement provided by seniority, cross-collateralization,
excess spread, principal payment waterfall, and other structural
features .
The above mentioned approach "Prime Jumbo RMBS Loss Projection Update:
January 2010" is adjusted to estimate losses on pools left with a small
number of loans. 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
(3.5%, 6.5% and 7.5% for
the 2005, 2006 and 2007 vintage respectively). This baseline
rate is higher than the average rate of new delinquencies for the vintage
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.
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 and hence the stress applied.
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 2005 vintage, the adjusted rate
of new delinquency would be 3.535%. If the current
delinquency level 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 0.2
to 1.8 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.
As part of the sensitivity analysis, we stressed the updated expected
loss on the pool of loans by an additional 10% and found that the
model implied ratings of Classes 1-A-3, 1-A-4,
1-A-8, 1-A-9, 1-A-10,
1-A-11, 1-A-14, 1-A-18,
1-A-19, 1-A-20, 1-A-23,
1-A-24, and 1-A-25 would be one notch
lower (for example, Baa1 versus A3).
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found at www.moodys.com
in the Rating Methodologies sub-directory on Moody's website.
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: Banc of America Funding 2005-3 Trust
Cl. 1-A-1, Confirmed at A1 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-2, Confirmed at A1 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-3, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-4, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-5, Confirmed at A1 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-6, Confirmed at A1 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-7, Confirmed at A1 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-8, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-9, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-10, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-11, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-12, Confirmed at Aa3 (sf); previously
on Dec 17, 2009 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-13, Downgraded to Aa3 (sf); previously
on Dec 17, 2009 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-14, Downgraded to Baa1 (sf); previously
on Dec 17, 2009 A2 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-15, Confirmed at Aa3 (sf); previously
on Dec 17, 2009 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-16, Confirmed at Aa3 (sf); previously
on Dec 17, 2009 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-17, Confirmed at Aa3 (sf); previously
on Dec 17, 2009 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-18, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-19, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-20, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-22, Confirmed at Aa3 (sf); previously
on Dec 17, 2009 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-23, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-24, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 1-A-25, Downgraded to A3 (sf); previously
on Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
Cl. 30-IO, Downgraded to Aa3 (sf); previously
on Dec 17, 2009 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. 30-PO, Confirmed at A1 (sf); previously on
Dec 17, 2009 A1 (sf) Placed Under Review for Possible Downgrade
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF240861
For more information please see www.moodys.com.
REGULATORY DISCLOSURES
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.
New York
Ilana Fried
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Deepika Kothari
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's takes action on $113 million of Jumbo RMBS issued by Banc of America Funding 2005-3 Trust
