New York, May 21, 2013 -- Moody's Investors Service has downgraded seven tranches and upgraded three
tranches from two RMBS transactions issued by Merrill Lynch. The
collateral backing these deals primarily consists of first-lien,
adjustable-rate prime Jumbo residential mortgages. The actions
impact approximately $76 million of RMBS issued in 2004.
Complete rating actions are as follows:
Issuer: Merrill Lynch Mortgage Investors Trust MLCC 2004-B
Cl. B-1, Upgraded to B2 (sf); previously on Jun
11, 2012 Confirmed at Caa1 (sf)
Cl. B-2, Upgraded to Caa1 (sf); previously on
Jun 11, 2012 Confirmed at Caa3 (sf)
Cl. X-B, Upgraded to Caa1 (sf); previously on
Jun 11, 2012 Confirmed at Caa3 (sf)
Issuer: Merrill Lynch Mortgage Investors Trust MLCC 2004-F
Cl. A-1A, Downgraded to Baa3 (sf); previously
on Jun 11, 2012 Confirmed at Baa2 (sf)
Cl. A-1B, Downgraded to Baa3 (sf); previously
on Jun 11, 2012 Confirmed at Baa2 (sf)
Cl. A-2, Downgraded to Baa3 (sf); previously
on Jun 11, 2012 Confirmed at Baa2 (sf)
Cl. X-A, Downgraded to Baa3 (sf); previously
on Jun 11, 2012 Confirmed at Baa2 (sf)
Cl. X-B, Downgraded to Ca (sf); previously on
Jun 11, 2012 Confirmed at Caa2 (sf)
Cl. B-1, Downgraded to B3 (sf); previously on
Jun 11, 2012 Confirmed at B1 (sf)
Cl. B-2, Downgraded to Caa3 (sf); previously
on Apr 18, 2011 Downgraded to Caa1 (sf)
RATINGS RATIONALE
The actions are a result of the recent performance of the prime jumbo
pools originated before 2005 and reflect Moody's updated loss expectations
on these pools. The downgrades are a result of deteriorating performance
and structural features resulting in higher expected losses for certain
bonds than previously anticipated. The upgrades are due to significant
improvement in collateral performance.
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. 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 and 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 2014.
Small Pool Volatility
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 prime jumbo 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
prime jumbo pools, Moody's first applies a baseline delinquency
rate of 3.5% for 2005, 6.5% for 2006
and 7.5% for 2007. 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 2005 pool
with 75 loans, the adjusted rate of new delinquency is 3.54%.
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 0.20 to 2.0 for current delinquencies that range from
less than 2.5% to greater than 50% 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 bonds, in addition to the approach
described above, Moody's considered the volatility of the projected
losses and timeline of the expected defaults.
The primary sources of assumption uncertainty are our central macroeconomic
forecast and performance volatility as a result of servicer-related
activity such as modifications. The unemployment rate fell from
8.1% in April 2012 to 7.5% in April 2013.
Moody's forecasts a unemployment central range of 7.0% to
8.0% for the 2013 year. Moody's expects housing prices
to continue to rise in 2013. Performance of RMBS continues to remain
highly dependent on servicer activity such as modification-related
principal forgiveness and interest rate reductions. Any change
resulting from servicing transfers or other policy or regulatory change
can also impact the performance of these transactions.
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF329663
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_SF243269
For more information please see www.moodys.com.
REGULATORY DISCLOSURES
Moody's did not receive or take into account a third party assessment
on the due diligence performed regarding the underlying assets or financial
instruments related to the monitoring of these transactions in the past
six months.
In conducting surveillance of these credits, Moody's considered
performance data contained in servicer and remittance reports.
Moody's obtains servicer reports on these transactions on a periodic basis,
at least annually.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit 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
Deepika Kothari
Vice President - Senior Analyst/Manager
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 $76 million of Prime Jumbo RMBS issued by Merrill Lynch in 2004