New York, January 27, 2012 -- Moody's Investors Service has downgraded the ratings of 11 manufactured
housing loans-backed securities (MH) aggregating $118 million
from 6 transactions, upgraded the ratings of 3 MH securities aggregating
$18 million from 3 transactions, and confirmed the ratings
of 9 MH securities aggregating $164 million from 7 transactions.
Moody's has also withdrawn the ratings of 20 subordinate tranches
aggregating $233 million from 15 transactions. These tranches
are backed by a corporate guarantee from Vanderbilt's parent,
Clayton Homes Inc, whose rating has recently been withdrawn.
The collateral backing these transactions consists primarily of manufactured
housing mortgage loans issued by Vanderbilt Mortgage and Finance Inc.
RATINGS RATIONALE
The loss projections account for continued weakness in the macro economy
and the recent performance of the sector. Cumulative losses have
increased modestly to approximately 19% and serious delinquencies,
measured as a percentage of outstanding balance, have remained stable
at approximately 3%.
Payment deferrals, a common loss mitigation tool, mask true
delinquencies and can account for up to half of the outstanding pool balance.
Deferments are granted to borrowers who could not pay the full arrears
but have demonstrated the ability to make future installments.
Repayment plans are the capitalization of past due payments to cure the
delinquencies. While deferrals can reduce overall default rates,
deferred accounts that are re-classified as current are still riskier
than loans that have been contractually current. Re-default
rates on deferred accounts are similar to subprime borrowers at 65%.
To estimate losses, Moody's first forecasted losses on the loans
that had a payment deferral based on 65% re-default rates
and 85% severity assumptions. Secondly, losses were
projected on the remaining loans that have not had any payment deferral
based on our annual conditional prepayment rates (CPR), annual constant
default rates (CDR), and 85% severity assumptions.
The CPR rate is derived from the average of actual CPR observed over the
last six months. The CDR rate is based on pipeline defaults --
derived from days-aged delinquencies and Moody's assumptions for
default based on days delinquent or REO (15% for 30 days delinquent
loans, 30% for 60 days delinquent loans, 90%
for more than 90 days delinquent loans, and 100% for loans
in REO). Moody's has further assumed that both CDR and CPR will
remain constant over the life of each deal. A sudden reversal in
the existing trend of projected prepayments, defaults and losses
is not anticipated for these deals as they are well seasoned.
The losses from loans that had a deferral and those from the remaining
loans based on the CPR-CDR approach are weighed to calculate the
total projected loss for the deal.
The Baa1 (sf) ratings on the securities withdrawn today were based on
a corporate guaranty from Vanderbilt's parent, Clayton Homes,
Inc. On November 15, 2011 Moody's withdrew Clayton
Homes' long-term issuer rating of Baa1 due to insufficient or otherwise
inadequate information to support the maintenance of the rating.
As the ratings on the affected Manufactured Housing securities reflected
the strength of the corporate guaranty from Clayton, Moody's has
concluded that with the withdrawal of the long-term rating on Clayton
Homes, it no longer has the ability to assess the value of this
guaranty to these securities. As a result, Moody's
is withdrawing the ratings on these securities. The guaranty is
the primary source of enhancement to these securities. Without
this guaranty many of these securities would see their rating migrate
to Caa1 (sf) or lower.
Moody's has withdrawn the rating because it believes it has insufficient
or otherwise inadequate information to support the maintenance of the
rating. Please refer to the Moody's Investors Service's
Policy for Withdrawal of Credit Ratings, available on its Web site,
www.moodys.com.
Rating Actions
To assess the rating implications, Moody's calculated a deal specific
loss projection and compared it to the tranches' credit enhancement from
subordination; excess spread; and reserve account and third-party
support (if any) and the timing of principal repayment. The actions
for bonds rated Aaa, Aa, A, and Baa considered where
full expected principal repayment exceeds 5, 7, 10,
and 10 years respectively because of uncertainty of cash flows and losses.
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 approximately
3% remaining decline in 2012, and unemployment rate to start
declining, albeit slowly, as the year progresses.
The principal methodology used in these ratings was "Moody's Approach
to Rating US Residential Mortgage-Backed Securities" published
in December 2008. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
For more information please see www.moodys.com.
Complete rating actions are as follows:
Issuer: Manufactured Housing Contract Senior/ Subordinate Pass-Through
Certificates, Series 2001-A
Cl. A-5, Downgraded to A2 (sf); previously on
Mar 30, 2009 Downgraded to A1 (sf)
Cl. B-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Acquisition Loan Trust (VALT) Manufactured Housing
Contract, Series 2002-1
Cl. A-4, Confirmed at Aaa (sf); previously on
Nov 2, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-5, Downgraded to Aa3 (sf); previously on
Nov 2, 2011 Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. M-1, Downgraded to A3 (sf); previously on
Nov 2, 2011 A2 (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance Inc. 1999A
IA-6, Downgraded to A3 (sf); previously on Nov 2,
2011 A2 (sf) Placed Under Review for Possible Downgrade
IM-1, Downgraded to Baa3 (sf); previously on Nov 2,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
IB-2, Withdrawn (sf); previously on Nov 18, 2011
Baa1 (sf) Placed Under Review for Possible Downgrade
IIB-3, Withdrawn (sf); previously on Nov 18, 2011
Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance Senior/Subordinate Pass-Through
Certificates, Series 2002-B
Cl. A-5, Confirmed at A1 (sf); previously on
Nov 2, 2011 A1 (sf) Placed Under Review for Possible Downgrade
Cl. M-1, Confirmed at Baa2 (sf); previously on
Nov 2, 2011 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc. 2000A
Cl. IM-1, Confirmed at A2 (sf); previously on
Nov 2, 2011 A2 (sf) Placed Under Review for Possible Downgrade
Cl. IIA-1, Downgraded to Aa1 (sf); previously
on Nov 2, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. IB-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. IIB-3, Withdrawn (sf); previously on Nov
18, 2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc. 2000-B
Cl. IM-1, Confirmed at Baa2 (sf); previously
on Nov 2, 2011 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. IB-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. IIB-3, Withdrawn (sf); previously on Nov
18, 2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc. 2000-C
Cl. M-1, Upgraded to Ba2 (sf); previously on
Dec 16, 2010 Downgraded to B1 (sf)
Cl. B-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc. 2002-C
Cl. M-1, Upgraded to Ba3 (sf); previously on
Dec 16, 2010 Downgraded to B1 (sf)
Cl. B-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc. Series
1999-C
IA-5, Downgraded to A3 (sf); previously on Nov 2,
2011 Aa3 (sf) Placed Under Review for Possible Downgrade
IM-1, Downgraded to Ba1 (sf); previously on Nov 2,
2011 A2 (sf) Placed Under Review for Possible Downgrade
IB-2, Withdrawn (sf); previously on Nov 18, 2011
Baa1 (sf) Placed Under Review for Possible Downgrade
IIB-3, Withdrawn (sf); previously on Nov 18, 2011
Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc. Series
1999-D
Cl. IA-5, Downgraded to A2 (sf); previously on
Nov 2, 2011 A1 (sf) Placed Under Review for Possible Downgrade
Cl. IIA-1, Downgraded to Aa1 (sf); previously
on Nov 2, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. IM-1, Downgraded to Ba1 (sf); previously
on Nov 2, 2011 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. IB-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. IIB-4, Withdrawn (sf); previously on Nov
18, 2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc. Series
2001-B
Cl. A-4, Confirmed at Aaa (sf); previously on
Nov 2, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc. Series
2001-C
Cl. B-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc. Series
2002-A
Cl. M-1, Upgraded to Ba1 (sf); previously on
Dec 16, 2010 Downgraded to B2 (sf)
Cl. B-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc. Series
2003-A
Cl. M-1, Confirmed at Baa2 (sf); previously on
Nov 2, 2011 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Vanderbilt Mortgage and Finance, Inc.,
Series 2000-D
Cl. A-5, Confirmed at Aa3 (sf); previously on
Nov 2, 2011 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. M-1, Confirmed at Baa1 (sf); previously on
Nov 2, 2011 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. B-2, Withdrawn (sf); previously on Nov 18,
2011 Baa1 (sf) Placed Under Review for Possible Downgrade
A list of these actions including CUSIP identifiers, updated estimated
pool losses, and sensitivity analysis may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF273719
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 31 January 2012.
ESMA may extend the use of credit ratings for regulatory purposes in the
European Community for three additional months, until 30 April 2012,
if ESMA decides that exceptional circumstances arise that may imply potential
market disruption or financial instability. 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, and confidential and proprietary Moody's Investors
Service 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 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.
Ilana Fried
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 $533 million of manufactured housing deals issued by Vanderbilt Mortgage between 1999 and 2003
