New York, April 11, 2012 -- Moody's Investors Service has downgraded the ratings of 34 tranches and
confirmed the rating of one tranche from nine RMBS transactions,
backed by prime jumbo loans, issued by Washington Mutual.
RATINGS RATIONALE
The actions are a result of the recent performance review of Prime pools
originated before 2005 and reflect Moody's updated loss expectations on
these pools.
The methodologies used in these ratings were "Moody's Approach to Rating
US Residential Mortgage-Backed Securities" published in December
2008, and "Pre-2005 US RMBS Surveillance Methodology" published
in January 2012.
The methodology used in rating Interest-Only Securities is "Moody's
Approach to Rating Structured Finance Interest-Only Securities"
published in February 2012. Please see the Credit Policy page on
www.moodys.com for a
copy of these methodologies.
Today's rating action constitute of a number of downgrades.
The downgrades are a result of deteriorating performance and/or structural
features resulting in higher expected losses for certain bonds than previously
anticipated. For e.g., for shifting interest
structures, back-ended liquidations could expose the seniors
to tail-end losses. The subordinate bonds in the majority
of these deals are currently receiving 100% of their principal
payments, and thereby depleting the dollar enhancement available
to the senior bonds. In our current approach, we capture
this risk by running each individual pool through a variety of loss and
prepayment scenarios in the Structured Finance Workstation® (SFW),
the cash flow model developed by Moody's Wall Street Analytics.
This individual pool level analysis incorporates performance variances
across the different pools and the structural nuances of the transaction
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 set at 3% for Jumbo and which is typically
higher than the average rate of new delinquencies for larger pools.
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, the adjusted rate of new delinquency would
be 3.03%. 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 0.75 to 2.5
for current delinquencies ranging from less than 2.5% to
greater than 10% respectively. Delinquencies for subsequent
years and ultimate expected losses are projected using the approach described
in the methodology publication listed above.
When assigning the final ratings to senior bonds, in addition to
the methodologies described above, we considered the volatility
of the projected losses and timeline of the expected defaults.
For bonds backed by small pools, we also considered the current
pipeline composition as well as any specific loss allocation rules that
could preserve or deplete the overcollateralization available for the
senior bonds at different pace.
The above methodology only applies to pools with at least 40 loans and
a pool factor of greater than 5%. Moody's may withdraw its
rating when the pool factor drops below 5% and the number of loans
in the pool declines to 40 loans or lower unless specific structural features
allow for a monitoring of the transaction (such as a credit enhancement
floor).
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 Macroeconomic
Board and Moody's Analytics (MA) still expect a below-trend
growth for the US economy for 2012, with the unemployment rate remaining
high between 8% to 9% and home prices dropping another 2-3%
from the levels seen in 1Q 2011.
Complete rating actions are as follows:
Issuer: WaMu Mortgage Pass-Through Certificates Series 2003-AR10
Trust
Cl. A-6, Downgraded to Baa2 (sf); previously
on Apr 20, 2011 Downgraded to A2 (sf)
Cl. A-7, Downgraded to Baa2 (sf); previously
on Apr 20, 2011 Downgraded to A2 (sf)
Cl. B-1, Downgraded to B2 (sf); previously on
Jan 31, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade
Issuer: WaMu Mortgage Pass-Through Certificates Series 2003-AR6
Trust
Cl. A-1, Downgraded to A2 (sf); previously on
Jan 31, 2012 Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. A-2, Downgraded to A2 (sf); previously on
Jan 31, 2012 Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to Ba3 (sf); previously on
Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to B3 (sf); previously on
Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. B-3, Downgraded to Ca (sf); previously on
Apr 20, 2011 Downgraded to Caa2 (sf)
Cl. B-5, Downgraded to C (sf); previously on
Apr 20, 2011 Downgraded to Ca (sf)
Issuer: WaMu Mortgage Pass-Through Certificates Series 2003-AR7
Trust
Cl. A-6, Downgraded to A3 (sf); previously on
Apr 20, 2011 Downgraded to A1 (sf)
Cl. A-7, Downgraded to A3 (sf); previously on
Apr 20, 2011 Downgraded to A1 (sf)
Cl. A-8, Downgraded to A3 (sf); previously on
Apr 20, 2011 Downgraded to A1 (sf)
Cl. B-1, Downgraded to B1 (sf); previously on
Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to Caa2 (sf); previously
on Apr 20, 2011 Downgraded to B3 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates Series 2004-AR3
Trust
Cl. A-1, Downgraded to Ba3 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. A-2, Downgraded to Ba3 (sf); previously on
Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to Caa2 (sf); previously
on Jan 31, 2012 B2 (sf) Placed Under Review for Possible Downgrade
Issuer: WaMu Mortgage Pass-Through Certificates Series 2004-AR4
Trust
Cl. A-6, Downgraded to Ba2 (sf); previously on
Apr 20, 2011 Downgraded to Baa3 (sf)
Cl. B-1, Confirmed at Caa1 (sf); previously on
Jan 31, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade
Issuer: WaMu Mortgage Pass-Through Certificates Series 2004-AR9
Trust
Cl. A-1, Downgraded to Ba3 (sf); previously on
Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. A-7, Downgraded to Ba3 (sf); previously on
Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to Caa3 (sf); previously
on Jan 31, 2012 B1 (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to Ca (sf); previously on
Apr 20, 2011 Downgraded to Caa2 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2003-AR1
Cl. A-5, Downgraded to Baa1 (sf); previously
on Jan 31, 2012 A2 (sf) Placed Under Review for Possible Downgrade
Cl. A-6, Downgraded to Baa1 (sf); previously
on Jan 31, 2012 A2 (sf) Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to B2 (sf); previously on
Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2003-AR3
Cl. A-5, Downgraded to Ba2 (sf); previously on
Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to Caa1 (sf); previously
on Jan 31, 2012 B1 (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to Ca (sf); previously on
Apr 20, 2011 Downgraded to Caa3 (sf)
Cl. B-3, Downgraded to C (sf); previously on
Apr 20, 2011 Downgraded to Ca (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2003-AR5
Cl. A-6, Downgraded to A3 (sf); previously on
Apr 20, 2011 Downgraded to A1 (sf)
Cl. A-7, Downgraded to A3 (sf); previously on
Apr 20, 2011 Downgraded to A1 (sf)
Cl. B-1, Downgraded to Ba3 (sf); previously on
Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to Caa2 (sf); previously
on Apr 20, 2011 Downgraded to B1 (sf)
Cl. B-3, Downgraded to Ca (sf); previously on
Apr 20, 2011 Downgraded to Caa3 (sf)
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF281285
A list of updated estimated pool losses, sensitivity analysis,
and tranche recovery details is being posted on an ongoing basis for the
duration of this review period and may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF243269
For more information please see www.moodys.com.
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.
Information sources used to prepare each of 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 assessmentss 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.
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.
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.
Gregory Bessermann
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
Deepika Kothari
Vice President - Senior Analyst
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 takes action on $2.1 billion of Prime RMBS issued by Washington Mutual from 2003 to 2004
