New York, October 17, 2011 -- Moody's Investors Service announced that it has upgraded the ratings of
19 interest rate swaps and affirmed the ratings of 18 interest rate swaps.
Each of the interest rate swaps in question is part of an RMBS transaction
that has either Deutsche Bank AG or Barclays Bank PLC as its swap counterparty.
RATINGS RATIONALE
The risk of loss to the counterparties of the swaps that have been upgraded
has declined since the last time the swap ratings were reviewed,
while the risk of loss to the counterparties of the swaps that have had
their ratings affirmed has not changed enough to warrant a rating action
since the last time these swaps were reviewed.
Moody's rating addresses the credit risk posed to the swap counterparty.
This rating only addresses the risk attributable to the ability of the
trust to continue to honor its obligations under the swap. The
rating does not address market risk that may be experienced by the party
facing the trust under the swap contract.
The rating takes into account the rating of the swap counterparty (Aa3
for each swap reviewed), the transaction's legal structure
and the characteristics of the collateral mortgage pool of the respective
trust. Because there is relatively limited historical performance
data for the types of instruments, this credit rating may have a
greater potential rating volatility than would ratings for transactions
supported by more historical performance data.
Our rating approach for this counterparty instrument rating (CIR) rests
on three propositions:
- The CIRs are based on an analysis of the payment promise made
by the trust, the position of the instrument in the payment waterfall,
the credit quality of the rated payment flows, the security arrangements
governing the trust's relationship with the counterparty,
the support mechanisms available to the counterparty, the termination
date of the swap and other structural features of the transaction in question.
In this regard, the rating process is similar to that for all other
ratings assigned by Moody's.
- The credit quality and ratings assigned to counterparty instrument
obligations of the trust may differ from those of its payment obligations
to bondholders. As a result, ratings assigned to bonds issued
by the trust may diverge from the CIR and therefore the bond ratings may
offer only a limited guidance on the CIR.
- Although counterparty instrument ratings address payments to
rather than from the counterparty, in certain circumstances the
credit strength of the counterparty itself may have a bearing on the CIR.
For example, where a counterparty's non-performance
under a swap agreement leads to the trust having to make a termination
payment to that counterparty, Moody's will take into account
the likelihood of the counterparty's non-performance occurring
and the position of termination payments in the cash flow waterfall .
Specifically, in the event that the swap counterparty causes a termination
event, any termination payment owed to the swap counterparty may
be paid at the bottom of the cash flow waterfall. As a result,
a default by the swap counterparty, which is currently rated Aa3,
makes payment in full to the counterparty unlikely.
By way of background, for all but one of the swaps, the swap
counterparties receive a fixed rate from, and pay LIBOR to,
the RMBS trusts on a notional amount. The swap counterparty for
the one outlying swap pays LIBOR plus a margin on a notional amount and
receives the monthly pass through rate for one class of certificates issued
by the RMBS trust. For fixed notional swaps, the notional
amount is fixed for each month that the swap is outstanding. For
balance guaranteed swaps the notional amount is calculated as the lesser
of a fixed amount for each month and either the outstanding collateral
balance or outstanding certificate balance. Per the terms of the
deal documents for each of the swaps, the swap counterparty receives
payments prior to bondholders, and is thus in a senior position
to all bonds issued by the trust. To pay the swap counterparty,
the trust also has access to principal payments, liquidation proceeds
and interest collections. This provision strengthens the nature
of senior payment right of the swap counterparty.
For fixed notional swaps and balance guaranteed swaps that are tied to
certificate balances for which losses are not allocated, the primary
risks driving the rating on the swaps is the risk that the collateral
pool amortizes at a rate that exceeds the amortization rate of the swap
notional and the risk of a termination event triggered by a default of
the swap counterparty. As the notional amount for these swaps is
fixed according to a monthly schedule or floored at a bond balance that
is not reduced by losses, it is likely that the collateral balance
would amortize faster than the swap notional in high default scenarios.
For balance guaranteed swaps that are tied to the collateral balance by
either direct reference or reference to bond balances that are reduced
through both principal payments and losses, the primary risk driving
the rating on the swaps is the risk of a termination event triggered by
a default of the swap counterparty. The counterparties in all of
the swaps have Aa3 long term ratings and a P-1 short term ratings
by Moody's.
Our methodology for rating swaps on US RMBS transactions includes running
collateral cashflows for fixed schedule swaps and for the appropriate
balance guaranteed swaps. The methodology also considers the rating
of the swap counterparty. We stress the cashflows by increasing
defaults and prepayments to determine what level of collateral stress
would cause a shortfall in proceeds owed to the swap counterparty.
The cashflows are modeled to reflect the waterfall of the underlying transaction,
which results in all swap payments other than termination payments caused
by a counterparty default coming at the top of the waterfall. Termination
payments owed to the swap counterparty resulting from a default of the
swap counterparty are paid at the bottom of the waterfall. Sensitivity
to a decline in the weighted average interest rate of the collateral pool
is also analyzed as are additional qualitative considerations such as
such as interest rate reduction modifications or more conservative servicer
advancing approaches.
The ratings for the swaps are in line with Moody's existing methodology.
Moody's noted that on September 19, 2011, it released a Request
for Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Counterparty Instrument
Ratings. If the revised methodology is implemented as proposed,
the rating on the swaps may be positively affected. Please refer
to Moody's Request for Comment, titled "Moody's Approach
to Counterparty Instrument Ratings: Request for Comment,"
for further details regarding the implications of the proposed methodology
changes on Moody's ratings.
Complete rating actions are as follows:
For Fixed Schedule Swaps where Barclays Bank PLC is the counterparty:
Issuer: EquiFirst Loan Securitization Trust 2007-1
Swap (Reference Number 1819920B), Upgraded to Aa3 (sf); previously
on Jul 31, 2009 Assigned Baa2 (sf)
Issuer: Securitized Asset Backed Receivables LLC Trust 2007-BR1
Swap (Reference Number 1688728B), Upgraded to Aa3 (sf); previously
on Jul 31, 2009 Assigned Baa2 (sf)
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates,
Series 2007-OH1
Swap (Reference Number 1762254B), Upgraded to Aa3 (sf); previously
on Apr 7, 2009 Assigned A2 (sf)
Issuer: IndyMac INDX Mortgage Loan Trust 2007-FLX1
Swap (Reference Number 1554177B), Upgraded to Aa3 (sf); previously
on Apr 7, 2009 Assigned A3 (sf)
Issuer: IndyMac INDX Mortgage Loan Trust 2007-FLX2
Swap (Reference Number 1615240B), Upgraded to Aa3 (sf); previously
on Apr 10, 2009 Assigned A3 (sf)
Issuer: RALI Series 2007-QH3 Trust
Swap (Reference Number 1683809B), Upgraded to Aa3 (sf); previously
on Apr 7, 2009 Assigned A3 (sf)
Issuer: WaMu Asset-Backed Certificates, WaMu Series
2007-HE3 Trust
Swap (Reference Number 1733274B), Upgraded to Aa3 (sf); previously
on Apr 7, 2009 Assigned Baa1 (sf)
Issuer: WaMu Asset-Backed Certificates, WaMu Series
2007-HE4 Trust
Swap (Reference Number 1789071B), Upgraded to Aa3 (sf); previously
on Apr 7, 2009 Assigned Baa1 (sf)
Issuer: BCAP LLC Trust 2006-AA2
Swap (Reference Number 1439003B), Affirmed at A3 (sf); previously
on Mar 2, 2009 Assigned A3 (sf)
Issuer: RAMP Series 2007-RS2 Trust
Swap (Reference Number 1746031B), Upgraded to Aa3 (sf); previously
on May 8, 2009 Assigned Baa2 (sf)
For Fixed Schedule Swaps Where Deutsche Bank AG is the counterparty:
Issuer: Deutsche Alt-A Securities Mortgage Loan Trust,
Series 2007-2
Swap I (Reference Number N682000N), Affirmed at Baa1 (sf);
previously on Mar 17, 2010 Assigned Baa1 (sf)
Swap II (Reference Number N681996N), Affirmed at Baa1 (sf);
previously on Mar 17, 2010 Assigned Baa1 (sf)
Issuer: Deutsche Alt-A Securities Mortgage Loan Trust,
Series 2007-OA4
Swap (Reference Number N628457N), Upgraded to Aa3 (sf); previously
on Jul 14, 2010 Assigned A2 (sf)
Issuer: Deutsche Alt-A Securities Mortgage Loan Trust,
Series 2007-1
Swap I (Reference Number N641412N), Affirmed at Baa3 (sf);
previously on Jul 14, 2010 Assigned Baa3 (sf)
Swap II (Reference Number N641402N), Affirmed at Baa3 (sf);
previously on Jul 14, 2010 Assigned Baa3 (sf)
Issuer: MortgageIT Securities Corp. Mortgage Loan Trust,
Series 2007-1
Swap I (Reference Number N614219N), Affirmed at A3 (sf); previously
on Jul 28, 2010 Assigned A3 (sf)
Swap II (Reference Number N614223N), Affirmed at A3 (sf); previously
on Jul 28, 2010 Assigned A3 (sf)
Swap III (Reference Number N614227N), Affirmed at A3 (sf);
previously on Jul 28, 2010 Assigned A3 (sf)
Issuer: ACE Securities Corp. Home Equity Loan Trust,
Series 2006-FM1
Swap (Reference Number N503602N), Affirmed at Ba3 (sf); previously
on Nov 3, 2010 Assigned Ba3 (sf)
Issuer: Deutsche Alt-A Securities, Inc. Mortgage
Loan Trust Series 2007-AR3
Swap I (Reference Number N607183N), Upgraded to Aa3 (sf); previously
on Nov 1, 2010 Assigned A2 (sf)
Swap II (Reference Number N607153N), Upgraded to Aa3 (sf);
previously on Nov 1, 2010 Assigned A2 (sf)
Issuer: Ameriquest Mortgage Securities Inc., Series
2006-M3
Swap (Reference Number N509391N), Upgraded to A1 (sf); previously
on Nov 1, 2010 Assigned A3 (sf)
Issuer: Fremont Home Loan Trust 2006-D
Swap (Reference Number N525157N), Upgraded to A1 (sf); previously
on Nov 3, 2010 Assigned Ba2 (sf)
Issuer: PHH Alternative Mortgage Trust, Series 2007-3
Swap (Reference Number N632211N), Affirmed at A3 (sf); previously
on Nov 1, 2010 Assigned A3 (sf)
Issuer: Popular ABS Mortgage Pass-Through Trust 2007-A
Swap (Reference Number N615392N), Upgraded to Baa2 (sf); previously
on Nov 3, 2010 Assigned Ba1 (sf)
Issuer: New Century Home Equity Loan Trust 2006-2
Swap (Reference Number N487723N), Affirmed at Aa3 (sf); previously
on Nov 16, 2010 Assigned Aa3 (sf)
Issuer: Deutsche Alt-A Securities Mortgage Loan Trust,
Series 2007-OA3
Swap (Reference Number N621204N), Upgraded to Aa3 (sf); previously
on Nov 16, 2010 Assigned A1 (sf)
Issuer: ACE Securities Corp. Home Equity Loan Trust,
Series 2006-NC3
Swap (Reference Number N533634N), Affirmed at Aa3 (sf); previously
on Nov 29, 2010 Assigned Aa3 (sf)
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates,
Series 2007-HY8C
Swap (Reference Number N659808N), Upgraded to Aa3 (sf); previously
on Jan 11, 2011 Assigned A1 (sf)
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates,
Series 2007-HY9
Swap I (Reference Number N659812N), Upgraded to Aa3 (sf); previously
on Jan 11, 2011 Assigned A1 (sf)
Swap II (Reference Number N659814N), Upgraded to Aa3 (sf);
previously on Jan 11, 2011 Assigned A1 (sf)
Issuer: Deutsche Alt-A Securities Mortgage Loan Trust,
Series 2007-AR2
Swap (Reference Number N576538N), Affirmed at Aa3 (sf); previously
on Feb 6, 2011 Assigned Aa3 (sf)
Issuer: ACE Securities Corp. HEL Trust 2007-HE4
Swap (Reference Number N606256N), Affirmed at A1 (sf); previously
on Jun 28, 2011 Assigned A1 (sf)
Issuer: Deutsche Alt-A Securities Mortgage Loan Trust,
Series 2007-3
Swap (Reference Number N701945N), Affirmed at Aa3 (sf); previously
on Jun 28, 2011 Assigned Aa3 (sf)
For Balance Guaranteed Swaps where Deutsche Bank AG is the counterparty:
Issuer: MortgageIT Securities Corp. Mortgage Loan Trust,
Series 2007-2
Swap (Reference Number N681806N), Affirmed at Aa3 (sf); previously
on Jul 14, 2010 Assigned Aa3 (sf)
Issuer: Deutsche ALT-A Securities, Inc. Re-Remic
Trust Certificates, Series 2007-RS1
Swap (Reference Number N679784N), Affirmed at Aa3 (sf); previously
on Jul 14, 2010 Assigned Aa3 (sf)
Issuer: IndyMac INDA Mortgage Loan Trust 2007-AR9
Swap (Reference Number N736115N), Affirmed at A1 (sf); previously
on Nov 1, 2010 Assigned A1 (sf)
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are considered EU Qualified
by Extension and therefore available for regulatory use in the EU.
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 credit 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 did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments in this transaction.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
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.
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.
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.
Scott Friedman
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
Kruti Muni
VP - Senior Credit Officer
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 37 swaps in thirty one RMBS transactions issued between 2006 and 2007
