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Rating Action:

Moody's takes action on $763 million of Jumbo RMBS issued from 2002 to 2004

02 Mar 2012

New York, March 02, 2012 -- Moody's Investors Service has upgraded 14 tranches, downgraded 31 tranches and confirmed the ratings on eight tranches from 11 RMBS transactions issued by GMACM, Merrill Lynch, Sequoia, and Thornburg Mortgage Loan Trusts. The collateral backing these deals primarily consists of first-lien, fixed and adjustable-rate Jumbo residential mortgages. The actions impact approximately $763 million of RMBS issued from 2002 to 2004.

Complete rating actions are as follows:

Issuer: GMACM Mortgage Loan Trust 2004-AR2

Cl. 1-A, Downgraded to B2 (sf); previously on Jan 31, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade

Cl. 2-A, Downgraded to B2 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade

Cl. 3-A, Downgraded to B3 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade

Cl. 4-A, Downgraded to B2 (sf); previously on Jan 31, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade

Cl. 5-A-I, Downgraded to Baa3 (sf); previously on Jan 31, 2012 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. 5-A-II, Downgraded to Caa1 (sf); previously on Jan 31, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade

Issuer: Merrill Lynch Mortgage Investors Trust MLCC 2004-A

Cl. A-1, Upgraded to A3 (sf); previously on Apr 18, 2011 Downgraded to Baa2 (sf)

Cl. A-2, Upgraded to Baa2 (sf); previously on Dec 22, 2011 Ba1 (sf) Placed Under Review for Possible Upgrade

Cl. X-A-2, Upgraded to Baa1 (sf); previously on Feb 22, 2012 Downgraded to Baa3 (sf)

Cl. B-1, Upgraded to B1 (sf); previously on Jan 31, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade

Issuer: Merrill Lynch Mortgage Investors Trust MLCC 2004-C

Cl. A-1, Downgraded to Baa2 (sf); previously on Apr 18, 2011 Downgraded to A3 (sf)

Cl. A-2, Upgraded to A2 (sf); previously on Dec 22, 2011 Baa2 (sf) Placed Under Review for Possible Upgrade

Cl. A-2A, Upgraded to A1 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade

Cl. A-2B, Upgraded to A3 (sf); previously on Dec 22, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade

Cl. A-3, Downgraded to A3 (sf); previously on Jan 31, 2012 Aa2 (sf) Placed Under Review for Possible Downgrade

Cl. X-A, Upgraded to Baa1 (sf); previously on Feb 22, 2012 Downgraded to Baa2 (sf)

Issuer: Sequoia Mortgage Trust 2003-3

Cl. A-2, Confirmed at Baa2 (sf); previously on Dec 22, 2011 Baa2 (sf) Placed Under Review Direction Uncertain

Cl. B-1, Confirmed at Caa2 (sf); previously on Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade

Cl. B-2, Downgraded to C (sf); previously on Dec 22, 2011 Ca (sf) Placed Under Review for Possible Downgrade

Issuer: Sequoia Mortgage Trust 2003-5

Cl. A-1, Downgraded to Baa3 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade

Cl. A-2, Downgraded to Baa3 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade

Cl. X-1A, Downgraded to Baa3 (sf); previously on Apr 27, 2011 Downgraded to Baa1 (sf)

Cl. X-1B, Downgraded to Baa3 (sf); previously on Apr 27, 2011 Downgraded to Baa1 (sf)

Cl. X-2, Downgraded to Baa3 (sf); previously on Apr 27, 2011 Downgraded to Baa2 (sf)

Issuer: Sequoia Mortgage Trust 2004-11

Cl. A-1, Downgraded to Baa3 (sf); previously on Jan 31, 2012 A1 (sf) Placed Under Review for Possible Downgrade

Cl. A-2, Downgraded to Baa3 (sf); previously on Jan 31, 2012 A1 (sf) Placed Under Review for Possible Downgrade

Cl. A-3, Downgraded to Ba1 (sf); previously on Jan 31, 2012 A2 (sf) Placed Under Review for Possible Downgrade

Cl. X-A1, Downgraded to Baa3 (sf); previously on Apr 27, 2011 Downgraded to A1 (sf)

Cl. X-A2, Downgraded to Ba1 (sf); previously on Apr 27, 2011 Downgraded to A2 (sf)

Cl. X-B, Downgraded to Ca (sf); previously on Feb 22, 2012 Downgraded to B3 (sf)

Cl. B-1, Downgraded to Caa3 (sf); previously on Jan 31, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade

Cl. B-2, Downgraded to C (sf); previously on Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade

Issuer: Sequoia Mortgage Trust 2004-6

Cl. A-1, Upgraded to Baa1 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade

Cl. A-2, Upgraded to A3 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade

Cl A-3-A, Upgraded to Baa1 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade

Cl A-3-B, Upgraded to Baa3 (sf); previously on Jan 31, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade

Cl. X-A, Upgraded to Baa1 (sf); previously on Feb 22, 2012 Downgraded to Baa3 (sf)

Cl. B-1, Upgraded to B2 (sf); previously on Jan 31, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade

Issuer: Thornburg Mortgage Securities Trust 2002-3

Cl. A-1, Downgraded to Baa2 (sf); previously on Apr 20, 2011 Downgraded to A1 (sf)

Cl. A-2, Downgraded to Baa2 (sf); previously on Dec 22, 2011 A1 (sf) Placed Under Review for Possible Upgrade

Cl. A-3, Downgraded to Baa2 (sf); previously on Apr 20, 2011 Downgraded to A3 (sf)

Cl. A-4, Downgraded to Baa2 (sf); previously on Apr 20, 2011 Downgraded to A2 (sf)

Cl. B-1, Downgraded to B3 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade

Issuer: Thornburg Mortgage Securities Trust 2003-3

Cl. A1, Confirmed at Baa2 (sf); previously on Dec 22, 2011 Baa2 (sf) Placed Under Review for Possible Upgrade

Cl. A2, Downgraded to Baa2 (sf); previously on Dec 22, 2011 A3 (sf) Placed Under Review for Possible Upgrade

Cl. A3, Downgraded to Baa2 (sf); previously on Dec 22, 2011 A3 (sf) Placed Under Review for Possible Upgrade

Cl. A4, Downgraded to Baa2 (sf); previously on Jan 31, 2012 A2 (sf) Placed Under Review for Possible Downgrade

Cl. B1, Downgraded to B3 (sf); previously on Apr 20, 2011 Downgraded to B1 (sf)

Issuer: Merrill Lynch Mortgage Investors Trust MLCC 2003-H

Cl. A-1, Confirmed at Baa2 (sf); previously on Dec 22, 2011 Baa2 (sf) Placed Under Review Direction Uncertain

Cl. A-3B, Confirmed at Baa2 (sf); previously on Dec 22, 2011 Baa2 (sf) Placed Under Review Direction Uncertain

Issuer: Mortgage Pass-Through Certificates, MLMI Series 2003-A2

Cl. II-A-2, Confirmed at A1 (sf); previously on Dec 22, 2011 A1 (sf) Placed Under Review Direction Uncertain

Cl. II-A-3, Confirmed at A1 (sf); previously on Dec 22, 2011 A1 (sf) Placed Under Review Direction Uncertain

Cl. II-A-4, Confirmed at A1 (sf); previously on Dec 22, 2011 A1 (sf) Placed Under Review Direction Uncertain

RATINGS RATIONALE

These actions correct an error in the Structured Finance Workstation cash flow model used by Moody's in rating these transactions, specifically in how the model handled cash distribution from prepayments between senior and subordinate certificates. When rating these deals, the error in the model led to some senior certificates not being credited with the appropriate amount of principal prepayments. It should be noted that model-generated output is but one factor considered by Moody's in rating these transactions.

Moody's also assessed deal performance to date and applied its recently updated "Pre-2005 US RMBS Surveillance Methodology" published in January 2012, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Both methodologies impacted the final rating actions. Therefore, certain of the rating downgrades announced today can be attributed to specific deal performance deterioration and the application of these methodologies.

In transactions involving multiple loan pools the cash flow modeling was conservative in determining when some performance triggers would send 100% of prepayments to the senior certificates in deals.

RMBS structures initially allocate cash collections from voluntary prepayments only to the senior certificates. Gradually over time, a portion is then allocated to junior certificates. The amount of cash that senior certificates receive from prepayments starts off at 100%. After a certain number of months, that percentage starts decreasing according to a deal-specific schedule as long as certain conditions are met. However, the share of prepayments to the senior certificates can revert back to 100% at any distribution date if certain performance triggers are breached.

One performance trigger measures whether the current credit protection, expressed as a percentage, to senior bonds from subordination is greater than the percentage of original credit protection. Should the deal perform poorly and absorb losses on the underlying collateral and available credit protection falls below the original level, then 100% of prepayment cash reverts back to the senior certificates.

In cases where a deal has two or more loan pools, the calculation for this performance trigger can be done in one of three ways.

1. "Aggregate level credit protection" Approach: When the percentage of credit protection available for all senior certificates, in aggregate, falls below the original percentage of credit protection, then the prepayment share to all the senior certificates groups reverts back to 100%.

2. "Individual group trigger" Approach: When the percentage of credit protection available for a group of senior certificates falls below the original percentage of group credit protection, then the prepayment share to the senior certificates of that particular group reverts back to 100%. All other senior certificates' share of prepayment remains unchanged.

3. "Combined" Approach: This is a combination of the above two approaches. When the percentage of credit protection available for a senior certificates' group falls below the original percentage of credit protection, then the prepayment share to all senior certificates from all groups reverts back to 100%.

The following transactions included in these rating actions follow the "individual group trigger" approach when calculating performance triggers:

GMACM Mortgage Loan Trust 2004-AR2

Merrill Lynch Mortgage Investors Trust MLCC 2003-H

Mortgage Pass-Through Certificates, MLMI Series 2003-A2

Merrill Lynch Mortgage Investors Trust MLCC 2004-A

Merrill Lynch Mortgage Investors Trust MLCC 2004-C

Sequoia Mortgage Trust 2004-11

Sequoia Mortgage Trust 2004-6

Thornburg Mortgage Securities Trust 2002-3

Thornburg Mortgage Securities Trust 2003-3

The following transactions included in these rating actions follow the "combined" approach when calculating performance triggers:

Sequoia Mortgage Trust 2003-3

Sequoia Mortgage Trust 2003-5

This trigger helps protect senior certificates if credit protection is eroding by reducing principal payments to junior certificates and diverting them to pay the senior certificates instead. While all three approaches described above benefit senior certificates, the third approach benefits senior certificates the most, while the first approach benefits senior certificates the least. The third approach redirects payments to the senior certificates sooner than the other two approaches. For example, consider a deal backed by two distinct pools of mortgages (pool A and pool B) and over time there is a vast difference in performance of two underlying pools. Pool A performs much stronger, with lower losses, while pool B performs much weaker. As per approach 1, the average loss, when pool A and B are combined, will be medium and hence current combined credit protection may be higher than the original credit protection. As a result, payments will not be diverted to the senior certificates. In contrast, approach 3 will test pool A and pool B individually instead of taking the average of the two pools. Since pool B is performing weaker, current credit protection may be lower than the original credit protection. As a result, it will divert payments to the senior certificates backed by both pools A and B. Approach 2 will only revert payments back to senior certificates backed by pool B, so it is beneficial for only one group.

The Pooling and Servicing Agreements for the deals impacted by this rating action require the use of the "combined" and "individual group trigger" approaches as noted above. As Moody's explained when these bonds were placed on review, previous rating actions on these deals mistakenly used the "aggregate level credit protection" approach in their modeling. Under this approach, prepayment allocation to senior certificates was changed back to 100% only when all groups failed the test, with the result that senior certificates received too little credit for prepayments while junior certificates received too much. As a result the pay-down rate of the senior certificates was slower than it should have been, while the reverse was true for the junior certificates. The cash flow models have been corrected to reflect the application of the appropriate approach required in the deals. In resolving the review actions Moody's has taken into account the corrected models as well as the performance of the impacted transactions.

The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, "Pre-2005 US RMBS Surveillance Methodology" published in January 2012, and "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.

The above mentioned approach is also adjusted slightly when estimating losses on pools left with a small number of loans 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. 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 varies from 3% to 10% on average. The baseline rates are higher than the average rate of new delinquencies for larger pools for the respective vintages.

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 volatility of pool performance increases as the number of loans remaining in the pool decreases. 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 with a base rate of new delinquency of 3.00%, the adjusted rate of new delinquency would be 3.03%. In addition, if current delinquency levels 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 0.75 to 2.5 for current delinquencies ranging from less than 2.5% to greater than 10% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the "pre-2005 US RMBS Surveillance Methodology" publication.

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 2012, with a 3% remaining decline in 2012, and unemployment rate to start declining, albeit slowly, as the year progresses.

A list of these actions including CUSIP identifiers may be found at:

Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF275732

A list of updated estimated pool losses and sensitivity analysis 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

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 30 April 2012. 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, public information, and confidential and proprietary Moody's Investors Service information and confidential and proprietary Moody's Analytics information.

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.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings 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.

The person who approved Merrill Lynch Mortgage Investors Trust MLCC 2003-H and Mortgage Pass-Through Certificates, MLMI Series 2003-A2 credit ratings is Amita Shrivastava, VP - Senior Credit Officer, Structured Finance Group, JOURNALISTS: 212-553-0376, SUBSCRIBERS: 212-553-1653.

The person who approved the credit ratings for the other transactions in this rating action is Bruce D. Fabrikant, Senior Vice President, Structured Finance Group, JOURNALISTS: 212-553-0376, SUBSCRIBERS: 212-553-1653.

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.

Maxim Pertsov
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 $763 million of Jumbo RMBS issued from 2002 to 2004
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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