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Rating Action:

Moody's takes action on $2.9 billion of Alt-A and Option ARM RMBS issued by BCAP, DSLA, and GSAA from 2005 to 2007

23 Dec 2010

New York, December 23, 2010 -- Moody's Investors Service has downgraded the ratings of 33 tranches from 6 RMBS transactions, backed by Alt-A and Option Arm residential mortgage loans, issued by BCAP, DSLA, and GSAA.

RATINGS RATIONALE

The collateral backing these transactions consists primarily of first-lien, fixed-rate or adjustable-rate Alt-A and Option Arm residential mortgage loans. The actions are a result of the rapidly deteriorating performance of Alt-A and Option Arm pools in conjunction with macroeconomic conditions that remain under duress. The actions reflect Moody's updated loss expectations on Alt-A and Option Arm pools issued from 2005 to 2007.

The principal methodologies used in these ratings were "Alt-A RMBS Loss Projection Update: February 2010" published in February 2010 and "Option ARM RMBS Loss Projection Update: April 2010" published in April 2010.

To assess the rating implications of the updated loss levels on Alt-A and Option Arm RMBS, each individual pool was run through a variety of 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 features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings.

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 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 10.10%. 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 methodology publication.

Certain securities, as noted below, are insured by financial guarantors. The Cl. 1A-1B tranche and Cl. 2A-1C tranche issued by DSLA Mortgage Loan Trust 2007 AR1 are wrapped by Ambac Assurance Corporation (Segregated Account -- Unrated). For securities insured by a financial guarantor, the rating on the securities is the higher of (i) the guarantor's financial strength rating and (ii) the current underlying rating (i.e., absent consideration of the guaranty) on the security. The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty and is as described earlier. RMBS securities wrapped by Ambac Assurance Corporation are rated at their underlying rating without consideration of Ambac's guaranty.

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 under the Research & Ratings tab. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck

The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment remains at high levels, and weakness persists in the housing market. Moody's notes an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices (versus its baseline assumption of roughly 5% further decline). Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe.

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: BCAP LLC Trust 2007-AA4

Cl. I-1-A1, Downgraded to Caa3 (sf); previously on Jan 27, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade

Cl. I-1-A2, Downgraded to C (sf); previously on Jan 27, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Cl. I-2-A1, Downgraded to Caa3 (sf); previously on Jan 27, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Cl. I-2-X1, Downgraded to Caa3 (sf); previously on Jan 27, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Cl. I-2-A2, Downgraded to C (sf); previously on Jan 27, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Cl. I-3-A1, Downgraded to Caa3 (sf); previously on Jan 27, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade

Cl. I-3-A2, Downgraded to C (sf); previously on Jan 27, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan 27, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade

Issuer: DSLA Mortgage Loan Trust 2007-AR1

Cl. 1A-1A, Downgraded to Caa2 (sf); previously on Jan 27, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade

Cl. 1A-1B, Downgraded to C (sf); previously on Apr 16, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated)

Underlying Rating: Downgraded to C (sf); previously on Mar 30, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Cl. 2A-1A, Downgraded to Caa2 (sf); previously on Jan 27, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade

Cl. 2A-1B, Downgraded to C (sf); previously on Jan 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade

Cl. 2A-1C, Downgraded to C (sf); previously on Apr 16, 2010 Downgraded to Ca (sf) and Placed Under Review for Possible Downgrade

Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated)

Underlying Rating: Downgraded to C (sf); previously on Mar 30, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Issuer: GSAA Home Equity Trust 2006-11

Cl. 1A1, Downgraded to Ca (sf); previously on Jan 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Cl. 2A1, Downgraded to Ca (sf); previously on Jan 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade

Cl. 2A2, Downgraded to Ca (sf); previously on Jan 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Cl. 2A3-A, Downgraded to Caa3 (sf); previously on Jan 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Issuer: GSAA Home Equity Trust 2006-5

Cl. 1A1, Downgraded to Ca (sf); previously on Jan 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Cl. 2A1, Downgraded to Caa2 (sf); previously on Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade

Cl. 2A2, Downgraded to Caa3 (sf); previously on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade

Cl. 2A3, Downgraded to Caa3 (sf); previously on Jan 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Cl. 2A4, Downgraded to C (sf); previously on Jan 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Issuer: GSAA Home Equity Trust 2006-7

Cl. AF-2, Downgraded to Caa3 (sf); previously on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade

Cl. AF-3, Downgraded to Caa3 (sf); previously on Jan 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Cl. AF-4A, Downgraded to Ca (sf); previously on Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade

Cl. AF-4B, Downgraded to C (sf); previously on Jan 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Cl. AF-5A, Downgraded to C (sf); previously on Jan 14, 2010 A2 (sf) Placed Under Review for Possible Downgrade

Cl. AF-5B, Downgraded to C (sf); previously on Jan 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Issuer: GSAA Home Equity Trust 2006-8

Cl. 1A1, Downgraded to Ca (sf); previously on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade

Cl. 2A1, Downgraded to Ca (sf); previously on Jan 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade

Cl. 2A2, Downgraded to Ca (sf); previously on Jan 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Cl. 2A3A, Downgraded to Caa3 (sf); previously on Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade

Cl. 2A3B, Downgraded to C (sf); previously on Jan 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade

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

Excel: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF230097

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:

For Alt-A pools

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

For Option Arm pools

Excel: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF225686

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, 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 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
Jiwon Park
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Amita Shrivastava
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 $2.9 billion of Alt-A and Option ARM RMBS issued by BCAP, DSLA, and GSAA from 2005 to 2007
No Related Data.
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