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Rating Action:

Moody's takes action on $22 million of Alt-A RMBS Issued in 2005

25 Jan 2012

New York, January 25, 2012 -- Moody's Investors Service has upgraded one tranche, downgraded one tranche and confirmed the ratings on two tranches from CSFB Mortgage-Backed Pass-Through Certificates, Series 2005-4 and MASTR Alternative Loan Trust 2005-2. The collateral backing these deals primarily consists of first-lien, fixed rate Alt-A residential mortgages.

Complete rating actions are as follows:

Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series 2005-4

Cl. III-A-16, Confirmed at B1 (sf); previously on Dec 22, 2011 B1 (sf) Placed Under Review for Possible Upgrade

Cl. III-X, Confirmed at B1 (sf); previously on Dec 22, 2011 B1 (sf) Placed Under Review for Possible Upgrade

Issuer: MASTR Alternative Loan Trust 2005-2

Cl. 3-A-1, Downgraded to Caa1 (sf); previously on Apr 15, 2010 Downgraded to B3 (sf)

Cl. 5-A-1, Upgraded to B3 (sf); previously on Dec 22, 2011 Caa1 (sf) Placed Under Review for Possible Upgrade

RATINGS RATIONALE

These actions correct an error in the Structured Finance Workstation cash flow model used by Moody's in rating these transactions, specifically in how the model handled cash distribution from prepayments between senior and subordinate certificates. When rating these deals, the error in the model led to some senior certificates not being credited with the appropriate amount of principal prepayments. It should be noted that model-generated output is but one factor considered by Moody's in rating these transactions.

Moody's also assessed deal performance to date, which also impacted the final rating actions. Therefore the rating downgrade announced today can be attributed to specific deal performance deterioration.

In transactions involving multiple loan pools the cash flow modeling was conservative in determining when some performance triggers would send 100% of prepayments to the senior certificates in deals.

RMBS structures initially allocate cash collections from voluntary prepayments only to the senior certificates. Gradually over time, a portion is then allocated to junior certificates. The amount of cash that senior certificates receive from prepayments starts off at 100%. After a certain number of months, that percentage starts decreasing according to a deal-specific schedule as long as certain conditions are met. However, the share of prepayments to the senior certificates can revert back to 100% at any distribution date if certain performance triggers are breached.

One performance trigger measures whether the current credit protection, expressed as a percentage, to senior bonds from subordination is greater than the percentage of original credit protection. Should the deal perform poorly and absorb losses on the underlying collateral and available credit protection falls below the original level, then 100% of prepayment cash reverts back to the senior certificates.

In cases where a deal has two or more loan pools, the calculation for this performance trigger can be done in one of three ways:

1. "Aggregate level credit protection" Approach: When the percentage of credit protection available for all senior certificates, in aggregate, falls below the original percentage of credit protection, then the prepayment share to all the senior certificates groups reverts back to 100%.

2. "Individual group trigger" Approach: When the percentage of credit protection available for a group of senior certificates falls below the original percentage of group credit protection, then the prepayment share to the senior certificates of that particular group reverts back to 100%. All other senior certificates' share of prepayment remains unchanged.

3. "Combined" Approach: This is a combination of the above two approaches. When the percentage of credit protection available for a senior certificates' group falls below the original percentage of credit protection, then the prepayment share to all senior certificates from all groups reverts back to 100%.

All the transactions included in these rating actions follow the above mentioned Combined Approach when calculating performance triggers.

This trigger helps protect senior certificates if credit protection is eroding by reducing principal payments to junior certificates and diverting them to pay the senior certificates instead. While all three approaches described above benefit senior certificates, the third approach benefits senior certificates the most, while the first approach benefits senior certificates the least. The third approach redirects payments to the senior certificates sooner than the other two approaches. For example, consider a deal backed by two distinct pools of mortgages (pool A and pool B) and over time there is a vast difference in performance of two underlying pools. Pool A performs much stronger, with lower losses, while pool B performs much weaker. As per approach 1, the average loss, when pool A and B are combined, will be medium and hence current combined credit protection may be higher than the original credit protection. As a result, payments will not be diverted to the senior certificates. In contrast, approach 3 will test pool A and pool B individually instead of taking the average of the two pools. Since pool B is performing weaker, current credit protection may be lower than the original credit protection. As a result, it will divert payments to the senior certificates backed by both pools A and B. Approach 2 will only revert payments back to senior certificates backed by pool B, so it is beneficial for only one group.

The Pooling and Servicing Agreements for the deals impacted by this rating action require the use of the "combined trigger approach". As Moody's explained when these bonds were placed on review, previous rating actions on these deals mistakenly used the "aggregate level credit protection" approach in their modeling. Under this approach, prepayment allocation to senior certificates was changed back to 100% only when all groups failed the test, with the result that senior certificates received too little credit for prepayments while junior certificates received too much. As a result the paydown rate of the senior certificates was slower than it should have been, while the reverse was true for the junior certificates. The cash flow models have been corrected to reflect the application of the appropriate approach required in the deals. In resolving the review actions Moody's has taken into account the corrected models as well as the performance of the impacted transactions.

The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 - 2008 US RMBS Surveillance Methodology" published in July 2011. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

The above mentioned approach is adjusted slightly when estimating 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 (10%, 19% and 21% 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 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 with a base rate of new delinquency of 10.00%, 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 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the "2005 -- 2008 US RMBS Surveillance 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. Moody's now projects house price index to reach a bottom in early 2012, with a 3% remaining decline in 2012, and unemployment rate to start declining, albeit slowly, as the year progresses.

Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. Please refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Please see the Credit Policy page on www.moodys.com for a copy of this methodology and the Request for Comment.

A list of these actions including CUSIP identifiers may be found at:

Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF274229

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:

Excel: http://v3.moodys.com/page/viewresearchdoc.aspx?docid=PBS_SF198174

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 ratings are 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 rating are the following: parties involved in the ratings, parties not 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 neutralimpact on the rating.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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.

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.

Soumya Vasudevan
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 takes action on $22 million of Alt-A RMBS Issued in 2005
No Related Data.
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