New York, July 09, 2009 -- Moody's Investors Service has placed on review the ratings of thirty
seven tranches issued in four transactions from the Smart Home Reinsurance
shelf.
The four Smart Home Reinsurance transactions include synthetic securitizations
of mortgage insurance risk associated with a reference portfolio of approximately
$4.89 billion of subprime and Alt-A mortgage loans.
The mortgage insurance is provided by Radian Guaranty Inc. (Radian).
Noteholders are exposed to the risk of future claims under the mortgage
insurance policies. The riskiness of the notes is a function of
the credit performance of the underlying reference portfolio of mortgage
loans and the amount of risk assumed. Credit enhancement for the
notes is provided primarily through subordination.
The actions are triggered by higher than anticipated delinquency levels
and severity of loss as well as well as slower than anticipated voluntary
prepayments for the reference portfolios, resulting in higher updated
loss expectation for the underlying collateral and lower coverage for
the rated debt given available credit enhancement.
The ratings on the securities are monitored by evaluating factors determined
to be applicable to the credit profile of the securities, such as
i) the nature, sufficiency, and quality of historical performance
information regarding the asset class ii) an analysis of the underlying
collateral, iii) an analysis of the transaction's allocation of
cash flow and capital structure, and (iv) a comparison of these
attributes against those of other similar transactions.
General loss estimation methodology for the reference portfolios is outlined
below.
For recent vintages, Moody's calculates estimated losses for residential
mortgage pools in a two-step process. First, serious
delinquencies are projected through late 2009, primarily based upon
recent performance. These projected delinquencies are converted
into projected losses using lifetime roll rates (the probability of transition
to default) averaging 85% for 60-day delinquencies,
90% for delinquencies greater than 90 days, 100% for
loans in foreclosure and REO, and deal specific severity assumptions.
The second step is to determine losses beyond 2009. Depending on
a deal's performance, as well as collateral credit characteristics,
such as loan type, or loan-to-value ratios and geographic
concentrations of remaining current loans, Moody's assumes varying
degrees of slowing in the loss rate (which is measured by loss-to-liquidation)
for the remaining life of the deal. Typical degrees of slowing
in loss rate after late 2009 range from 15 to 25%.
Loss estimates are subject to variability and, as a result,
realized losses could ultimately turn out higher or lower than our current
expectations. Moody's will continue to evaluate performance data
as it becomes available and will assess the pattern of potential future
defaults and adjust loss expectations accordingly if necessary.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found at www.moodys.com
in the Credit Policy & Methodologies directory.
Complete rating actions are as follows:
Smart Home Reinsurance 2004-1 Limited
Cl. M-1, Aa2 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned Aa2
Smart Home Reinsurance 2005-1 Limited
Cl. M-1, Aa1 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned Aa1
Cl. M-2, Aa2 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned Aa2
Cl. M-3, Aa3 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned Aa3
Cl. M-4, A1 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned A1
Cl. M-5, A2 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned A2
Cl. M-6, A2 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned A2
Cl. M-7, A3 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned A3
Cl. M-8, Baa1 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned Baa1
Cl. M-9, Baa2 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned Baa2
Cl. M-10, Baa3 Placed Under Review for Possible Downgrade;
previously on 3/15/2005 Assigned Baa3
Smart Home Reinsurance 2005-2 Limited
Cl. M-2, Aa2 Placed Under Review for Possible Downgrade;
previously on 12/23/2005 Assigned Aa2
Cl. M-3, Aa3 Placed Under Review for Possible Downgrade;
previously on 12/23/2005 Assigned Aa3
Cl. M-3A, Aa3 Placed Under Review for Possible Downgrade;
previously on 3/14/2006 Assigned Aa3
Cl. M-4, A1 Placed Under Review for Possible Downgrade;
previously on 12/23/2005 Assigned A1
Cl. M-4A, A1 Placed Under Review for Possible Downgrade;
previously on 3/14/2006 Assigned A1
Cl. M-5, A1 Placed Under Review for Possible Downgrade;
previously on 12/23/2005 Assigned A1
Cl. M-5A, A1 Placed Under Review for Possible Downgrade;
previously on 3/14/2006 Assigned A1
Cl. M-6, A3 Placed Under Review for Possible Downgrade;
previously on 12/23/2005 Assigned A3
Cl. M-6A, A3 Placed Under Review for Possible Downgrade;
previously on 3/14/2006 Assigned A3
Cl. M-7, Baa1 Placed Under Review for Possible Downgrade;
previously on 12/23/2005 Assigned Baa1
Cl. M-7A, Baa1 Placed Under Review for Possible Downgrade;
previously on 3/14/2006 Assigned Baa1
Cl. M-8, Baa2 Placed Under Review for Possible Downgrade;
previously on 12/23/2005 Assigned Baa2
Cl. M-8A, Baa2 Placed Under Review for Possible Downgrade;
previously on 3/14/2006 Assigned Baa2
Cl. M-9, Baa3 Placed Under Review for Possible Downgrade;
previously on 12/23/2005 Assigned Baa3
Cl. M-9A, Baa3 Placed Under Review for Possible Downgrade;
previously on 3/14/2006 Assigned Baa3
Cl. B-1, Ba1 Placed Under Review for Possible Downgrade;
previously on 12/23/2005 Assigned Ba1
Cl. B-1A, Ba1 Placed Under Review for Possible Downgrade;
previously on 3/14/2006 Assigned Ba1
Smart Home Reinsurance 2006-1 Limited
Cl. M-2, Aa2 Placed Under Review for Possible Downgrade;
previously on 6/12/2006 Assigned Aa2
Cl. M-3, Aa3 Placed Under Review for Possible Downgrade;
previously on 6/12/2006 Assigned Aa3
Cl. M-4, A1 Placed Under Review for Possible Downgrade;
previously on 6/12/2006 Assigned A1
Cl. M-5, A2 Placed Under Review for Possible Downgrade;
previously on 6/12/2006 Assigned A2
Cl. M-6, A3 Placed Under Review for Possible Downgrade;
previously on 6/12/2006 Assigned A3
Cl. M-7, Baa1 Placed Under Review for Possible Downgrade;
previously on 6/12/2006 Assigned Baa1
Cl. M-8, Baa1 Placed Under Review for Possible Downgrade;
previously on 6/12/2006 Assigned Baa1
Cl. M-9, Baa3 Placed Under Review for Possible Downgrade;
previously on 6/12/2006 Assigned Baa3
Cl. B-1, Ba1 Placed Under Review for Possible Downgrade;
previously on 6/12/2006 Assigned Ba1
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/cust/getdocumentByNotesDocId.asp?criteria=PBS_SF171740
For more information please see www.moodys.com.
New York
Debashish Chatterjee
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Odile Grisard Boucher
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's takes action on $561 million of synthetic subprime transactions