New York, May 04, 2012 -- Moody's Investors Service has downgraded the ratings of 11 tranches,
upgraded the rating of one tranche, and confirmed the ratings of
seven tranches from six RMBS transactions backed by Subprime loans issued
by New Century Home Equity Loan Trust.
RATINGS RATIONALE
The actions are a result of the recent performance review of Subprime
pools originated before 2005 and reflect Moody's updated loss expectations
on these pools.
The methodologies used in these ratings were "Moody's Approach to Rating
US Residential Mortgage-Backed Securities" published in December
2008, and "Pre-2005 US RMBS Surveillance Methodology" published
in January 2012.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
Today's rating actions reflect recent collateral performance,
our updated loss timing curves and detailed analysis of timing and amount
of credit enhancement released due to step-down. We capture
structural nuances by running each individual pool through a variety of
loss and prepayment 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 variations
across the different pools and the structure of the transaction.
The above mentioned approach "Pre-2005 US RMBS Surveillance Methodology"
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 is dependent on the vintage of loan origination (11%
for all vintages 2004 and prior). 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 volatility of pool performance increases
as the number of loans remaining in the pool decreases. 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 2004 vintage, the adjusted rate
of new delinquency would be 11.11%. 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 0.85
to 2.25 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 listed above.
When assigning the final ratings to senior bonds, in addition to
the methodologies described above, we considered the volatility
of the projected losses and timeline of the expected defaults.
For bonds backed by small pools, we also considered the current
pipeline composition as well as any specific loss allocation rules that
could preserve or deplete the overcollateralization available for the
senior bonds at different pace.
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).
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 Macroeconomic
Board and Moody's Analytics (MA) still expect a below-trend
growth for the US economy for 2012, with the unemployment rate remaining
high between 8% to 9% and home prices dropping another 2-3%
from the levels seen in 1Q 2011.
Complete rating actions are as follows:
Issuer: New Century Home Equity Loan Trust, Series 2003-2
Cl. M-1, Upgraded to Aa3 (sf); previously on
Jan 31, 2012 A2 (sf) Placed Under Review for Possible Upgrade
Issuer: New Century Home Equity Loan Trust, Series 2003-3
CL. M-1, Confirmed at Ba1 (sf); previously on
Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade
CL. M-2, Downgraded to Caa3 (sf); previously
on Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: New Century Home Equity Loan Trust, Series 2003-4
Cl. M-1, Downgraded to Baa3 (sf); previously
on Jan 31, 2012 A2 (sf) Placed Under Review for Possible Downgrade
Cl. M-2, Downgraded to B3 (sf); previously on
Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. M-3, Downgraded to Caa3 (sf); previously
on Jan 31, 2012 B2 (sf) Placed Under Review for Possible Downgrade
Cl. M-4, Downgraded to Ca (sf); previously on
Mar 18, 2011 Downgraded to Caa3 (sf)
Issuer: New Century Home Equity Loan Trust, Series 2003-B
Cl. M-1, Downgraded to Ba1 (sf); previously on
Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. M-3, Downgraded to C (sf); previously on
Mar 18, 2011 Downgraded to Ca (sf)
Issuer: New Century Home Equity Loan Trust, Series 2004-2
Cl. A-1, Confirmed at Aaa (sf); previously on
Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-2, Confirmed at Aaa (sf); previously on
Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. M-3, Downgraded to B3 (sf); previously on
Jan 31, 2012 B2 (sf) Placed Under Review for Possible Downgrade
Cl. A-4, Confirmed at Aaa (sf); previously on
Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. M-4, Confirmed at Caa1 (sf); previously on
Jan 31, 2012 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. M-5, Confirmed at Caa2 (sf); previously on
Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. M-8, Downgraded to C (sf); previously on
Mar 18, 2011 Downgraded to Ca (sf)
Cl. M-9, Downgraded to C (sf); previously on
Mar 18, 2011 Downgraded to Ca (sf)
Issuer: New Century Home Equity Loan Trust, Series 2004-3
Cl. M-1, Downgraded to Baa2 (sf); previously
on Jan 31, 2012 A2 (sf) Placed Under Review for Possible Downgrade
Cl. M-2, Confirmed at B3 (sf); previously on
Jan 31, 2012 B3 (sf) Placed Under Review for Possible Downgrade
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF283843
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/viewresearchdoc.aspx?docid=PBS_SF237255
For more information please see www.moodys.com.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's Investors
Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
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, 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 neutral impact
on the rating.
Moody's considers the quality of information available on the rated entities,
obligations or credits satisfactory for the purposes of issuing these
ratings.
Moody's adopts all necessary measures so that the information it uses
in assigning the ratings 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.
Edward Hou
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
Amita Shrivastava
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 $389 million of Subprime RMBS issued by New Century from 2003 to 2004
