New York, January 27, 2011 -- Moody's Investors Service has downgraded the ratings of 30 tranches and
confirmed the rating of one tranche from four RMBS transactions issued
by Merrill Lynch Alternative Note Asset Trust. The collateral backing
these deals primarily consists of first-lien, adjustable
rate Alt-A residential mortgages that have Prime jumbo RMBS characteristics
and performance.
RATINGS RATIONALE
The actions are a result of the continued performance deterioration in
Jumbo pools in conjunction with home price and unemployment conditions
that remain under duress. The actions reflect Moody's updated loss
expectations on Jumbo pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on prime
jumbo RMBS, each individual pool was run through a variety of 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 variances across the different
pools and the structural features of the transaction including priorities
of payment distribution among the different tranches, average life
of the tranches, current balances of the tranches and future cash
flows under expected and stressed scenarios. The scenarios include
ninety-six different combinations comprising of six loss levels,
four loss timing curves and four prepayment curves. The volatility
in losses experienced by a tranche due to small increments in losses on
the underlying mortgage pool is taken into consideration when assigning
ratings.
The principal methodology used in these ratings was "Prime Jumbo RMBS
Loss Projection Update: January 2010" published in January 2010.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck.
The above mentioned approach " Prime Jumbo RMBS Loss Projection Update:
January 2010" is adjusted slightly when estimating losses on pools left
with a small number of loans. 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 (3.5%, 6.5% and 7.5%
for the 2005, 2006 and 2007 vintage respectively, adjustable
pool by pool). This baseline rate is higher than the average rate
of new delinquencies for the vintage 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. 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 fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. 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 2005 vintage, the adjusted rate of new
delinquency would be 3.535%. If the current delinquency
level 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 0.2 to 1.8
for current delinquencies ranging from less than 2.5% to
greater than 30% respectively. Delinquencies for subsequent
years and ultimate expected losses are projected using the approach described
in the methodology publication.
The primary source of assumption uncertainty is the current macroeconomic
environment, in which unemployment remains at high levels,
and weakness persists in the housing market. Overall, Moody's
assumes a further 5% decline in home prices with stabilization
later in 2011, accompanied by continued stress in national employment
levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or financial
instruments in this transaction and the due diligence reports had a positive
impact on the rating.
Complete rating actions are as follows:
Issuer: Merrill Lynch Mortgage Investors Trust MLCC 2006-3
Cl. I-A, Downgraded to Ba2 (sf); previously on
Jan 14, 2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. II-A-1, Downgraded to B2 (sf); previously
on Jan 14, 2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. II-A-2, Downgraded to Caa3 (sf); previously
on Jan 14, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. M-1, Downgraded to C (sf); previously on
Jan 14, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. M-2, Downgraded to C (sf); previously on
Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Issuer: Merrill Lynch Mortgage Investors Trust MLCC 2007-2
Cl. I-A, Downgraded to Ba3 (sf); previously on
Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. II-A-1, Downgraded to B2 (sf); previously
on Jan 14, 2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. II-A-2, Downgraded to Ca (sf); previously
on Jan 14, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. III-A, Downgraded to Ba3 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. M-1, Downgraded to C (sf); previously on
Jan 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. M-2, Downgraded to C (sf); previously on
Jan 14, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. M-3, Downgraded to C (sf); previously on
Jan 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Issuer: Merrill Lynch Mortgage Investors Trust Series MLCC 2007-1
Cl. I-A-1, Downgraded to Ba3 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. I-A-2, Downgraded to Caa1 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. II-A-1, Downgraded to Baa2 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. II-A-2, Downgraded to Ba2 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. III-A, Downgraded to Caa3 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. IV-A-1, Confirmed at Aaa (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. IV-A-2, Downgraded to Baa2 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. IV-A-3, Downgraded to B1 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. IV-A-4, Downgraded to Caa2 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. IV-A-X, Downgraded to Baa3 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. M-1, Downgraded to C (sf); previously on
Jan 14, 2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. M-2, Downgraded to C (sf); previously on
Jan 14, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. M-3, Downgraded to C (sf); previously on
Jan 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Issuer: Merrill Lynch Mortgage Investors Trust, Series MLCC
2007-3
Cl. I-A-1, Downgraded to Aa3 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. I-A-2, Downgraded to Ba1 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. II-A-1, Downgraded to Aa3 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. II-A-2, Downgraded to Ba1 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. III-A-1, Downgraded to A2 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. III-A-2, Downgraded to Ba2 (sf); previously
on Jan 14, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
A list of updated estimated pool losses and tranche recovery details is
being posted on an ongoing basis for the duration of this review period
and may be found at:
http://v3.moodys.com/page/viewresearchdoc.aspx?docid=PBS_SF196023
A list of these actions including CUSIP identifiers may be found at:
Excel: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF234370
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating 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 Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Yifu Huang
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Bruce D. Fabrikant
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's takes action on $658 million of Alt-A RMBS issued by Merrill Lynch Mortgage Investors Trust in 2006 and 2007