$6 million of securities affected
New York, July 11, 2012 -- Moody's Investors Service has confirmed the ratings of two tranches from
one RMBS transaction, backed by Option ARM loans, issued by
HarborView Mortgage Loan Trust.
RATINGS RATIONALE
The actions are a result of the recent performance review of Alt-A
and Option ARM pools originated before 2005 and reflect Moody's updated
loss expectations on these pools.
The methodologies used in this rating 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. The methodology used in rating Interest-Only
Securities was "Moody's Approach to Rating Structured Finance
Interest-Only Securities" published in February 2012.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
Moody's adjusts the methodologies noted above for 1) Moody's current view
on loan modifications 2) small pool volatility
Loan Modifications
As a result of an extension of the Home Affordable Modification Program
(HAMP) to 2013 and an increased use of private modifications, Moody's
is extending its previous view that loan modifications will only occur
through the end of 2012. It is now assuming that the loan modifications
will continue at current levels until the end of 2013.
Small Pool Volatility
The above RMBS approach only applies to structures with at least 40 loans
and a pool factor of greater than 5%. Moody's can withdraw
its rating when the pool factor drops below 5% and the number of
loans in the deal declines to 40 loans or lower. If, however,
a transaction has a specific structural feature, such as a credit
enhancement floor, that mitigates the risks of small pool size,
Moody's can choose to continue to rate the transaction. Please
refer further to Moody's Investors Service's Withdrawal Policy,
which can be found on our website, www.moodys.com.
For pools with loans less than 100, Moody's adjusts its projections
of loss to account for the higher loss volatility of such pools.
For small pools, a few loans becoming delinquent would greatly increase
the pools' delinquency rate.
To project losses on Alt-A pools with fewer than 100 loans,
Moody's first calculates an annualized delinquency rate based on vintage,
number of loans remaining in the pool and the level of current delinquencies
in the pool. For Alt-A and Option Arm pools, Moody's
first applies a baseline delinquency rate of 10% for 2004,
5% for 2003 and 3% for 2002 and prior. Once the loan
count in a pool falls below 76, this rate of delinquency is increased
by 1% for every loan fewer than 76. For example, for
a 2004 pool with 75 loans, the adjusted rate of new delinquency
is 10.1%. Further, to account for the actual
rate of delinquencies in a small pool, Moody's multiplies the rate
calculated above by a factor ranging from 0.50 to 2.0 for
current delinquencies that range from less than 2.5% to
greater than 30% respectively. Moody's then uses this final
adjusted rate of new delinquency to project delinquencies and losses for
the remaining life of the pool under the approach described in the methodology
publication.
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 primary source of assumption uncertainty is the uncertainty in our
central macroeconomic forecast and performance volatility due to servicer-related
issues. The unemployment rate fell from 9.0% in April
2011 to 8.2% in June 2012. Moody's forecasts a further
drop to 7.8% for 2013. Moody's expects house prices
to drop another 1% from their 4Q2011 levels before gradually rising
towards the end of 2013. Performance of RMBS continues to remain
highly dependent on servicer procedures. Any change resulting from
servicing transfers or other policy or regulatory change can impact the
performance of these transactions.
Complete rating actions are as follows
Issuer: HarborView Mortgage Loan Trust 2003-3
Cl. 2A-2, Confirmed at Aaa (sf); previously on
Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-X, Confirmed at Caa2 (sf); previously on
Feb 22, 2012 Caa2 (sf) Placed Under Review Direction Uncertain
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF291308
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://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237256
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.
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.
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?J?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
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 $6 million of Option ARM RMBS issued by HarborView Mortgage Loan Trust 2003-3