New York, May 24, 2011 -- Moody's Investors Service has downgraded the ratings of 5 tranches and
confirmed the ratings of 2 tranches from 1 RMBS transaction. The
collateral backing the deal primarily consists of first-lien,
fixed and adjustable rate "scratch and dent" residential mortgages.
Scratch and Dent deals are classified outside of our primary categorizations
(Prime Jumbo, Subprime, Option ARMs and Alt-A) for
a number of reasons. The pools may include mortgages that have
been originated outside an originator's program guidelines in some way,
or mortgages where borrowers missed payments in the past. These
pools may also include loans with document defects at origination that
were since rectified. Due to the varied content of Scratch and
Dent mortgage pools, which can range from seasoned prime-like
loans to non-prime loans that were seriously delinquent at the
time of securitization, credit quality of these pools varies considerably.
The actions are a result of deteriorating performance of Scratch and Dent
pools under stressed housing and macroeconomic conditions. The
actions reflect Moody's updated loss expectations on Scratch and Dent
The principal methodology used in these ratings is described in the Monitoring
and Performance Review section in "Moody's Approach to Rating US
Residential Mortgage-Backed Securities" published in December 2008.
Other methodologies used include "US RMBS Surveillance Methodology for
Scratch and Dent" published in May 2011, which accounts for the
deteriorating performance and outlook.
Moody's final rating actions are based on current levels of credit enhancement,
collateral performance and updated pool-level loss expectations.
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 " US RMBS Surveillance Methodology for Scratch
and Dent" 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
ranging from 3% for prime-like loans to 11% for non-prime
loans in Scratch and Dent pools.. The baseline rate is generally
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 near-prime Scratch and Dent pool with 74 loans , the
adjusted rate of new delinquency would be 3.03%.
In addition, 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 0.75 to 2.50 for current delinquencies
ranging from less than 10% 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. 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
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: Citigroup Mortgage Loan Trust, Series 2003-HE4
Cl. A, Confirmed at Aaa (sf); previously on Apr 8,
2010 Aaa (sf) Placed Under Review for Possible Downgrade
Financial Guarantor: Ambac Assurance Corporation (Segregated Account
Underlying Rating: Confirmed at Aaa (sf); previously on Apr
8, 2010 Aaa (sf) Placed Under Review for Possible Downgrade*
Cl. M-1, Confirmed at Aa3 (sf); previously on
Apr 8, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. M-2, Downgraded to Ba2 (sf); previously on
Apr 8, 2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. M-3, Downgraded to B2 (sf); previously on
Apr 8, 2010 A2 (sf) Placed Under Review for Possible Downgrade
Cl. M-4, Downgraded to Ca (sf); previously on
Apr 8, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. M-5, Downgraded to C (sf); previously on
Apr 8, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. M-6, Downgraded to C (sf); previously on
Apr 8, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade
A 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
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's takes action on $32 Million of Scratch and Dent RMBS issued by Citigroup Mortgage Loan Trust Corporation in 2003
250 Greenwich Street
New York, NY 10007