New York, February 14, 2012 -- Moody's Investors Service has downgraded the ratings of eight tranches
and upgraded the ratings of two tranches from two RMBS transactions issued
by Citicorp Mortgage Securities Trust and PHH Mortgage Trust.
Complete rating actions are as follows:
Issuer: Citicorp Mortgage Securities Trust, Series 2007-8
Cl. IIA-1, Downgraded to Ba1 (sf); previously
on Jul 15, 2011 Upgraded to Baa2 (sf)
Cl. IIA-IO, Downgraded to Ba1 (sf); previously
on Jul 15, 2011 Upgraded to Baa2 (sf)
Cl. IIIA-1, Upgraded to Ba3 (sf); previously
on Jun 4, 2010 Downgraded to B2 (sf)
Cl. IIIA-IO, Upgraded to Ba3 (sf); previously
on Jun 4, 2010 Downgraded to B2 (sf)
Issuer: PHH Mortgage Trust, Series 2008-CIM2
Cl. 1-A-1, Downgraded to Baa3 (sf); previously
on Jul 18, 2011 Downgraded to Baa1 (sf)
Cl. 2-A-1, Downgraded to Baa3 (sf); previously
on Jul 18, 2011 Downgraded to Baa1 (sf)
Cl. 4-A-1, Downgraded to Baa3 (sf); previously
on May 19, 2010 Downgraded to Aa3 (sf)
Cl. 4-A-X, Downgraded to Baa3 (sf); previously
on May 19, 2010 Downgraded to Aa3 (sf)
Cl. A-PO, Downgraded to Baa3 (sf); previously
on Jul 18, 2011 Downgraded to Baa1 (sf)
Cl. A-X, Downgraded to Baa3 (sf); previously
on Jul 18, 2011 Downgraded to Baa1 (sf)
RATINGS RATIONALE
The collateral backing these transactions consists primarily of first-lien,
fixed and adjustable-rate prime jumbo residential mortgage loans.
The actions are a result of the recent performance review and reflect
Moody's updated loss expectations on prime jumbo pools issued from 2005
to 2008.
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.
To assess the rating implications of the updated loss levels on prime
jumbo 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 extended foreclosure timelines
by servicers 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 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 varies from 10%
to 21% on average. The baseline rates are higher than the
average rate of new delinquencies for larger pools for the respective
vintages.
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 80% 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 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).
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. If the revised methodology is implemented as proposed
the rating on Citicorp Mortgage Securities Trust Series 2007-8
Class IIA-IO, PHH Mortgage Trust Series 2008-CIM2
Class 4-A-X, and PHH Mortgage Trust Series 2008-CIM2
Class A-X will have a negative impact. The rating on Citicorp
Mortgage Securities Trust Series 2007-8 Class IIIA-IO will
have a neutral impact. 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.
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.
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF276481
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/page/viewresearchdoc.aspx?docid=PBS_SF196023
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 each of the ratings 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 did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of these transactions
in the past six months.
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.
Max Sauray
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 $34.7 million of Prime Jumbo RMBS issued in 2007 and 2008
