New York, July 19, 2011 -- Moody's Investors Service has downgraded the ratings of nine tranches
and confirmed the ratings of 45 tranches from 13 RMBS transactions,
backed by fixed and adjustable loans, issued by RFMSI.
RATINGS RATIONALE
The collateral backing these transactions consists primarily of first-lien,
prime jumbo residential mortgage loans. The actions are a result
of the recent performance review prime jumbo pools and reflect Moody's
updated loss expectations on prime jumbo pools issued from 2005 to 2007.
The principal methodology used in these ratings is described in the Monitoring
and Performance Review section in "Moody's Approach to Rating US
Residential Mortgage-Backed Securities" published in December 2008.
Other factors used in these ratings are described in "2005 -- 2008
US RMBS Surveillance Methodology " published in July 2011, which
accounts for the updated performance and outlook. Please see the
Credit Policy page on www.moodys.com for a copy of these
methodologies.
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 extended foreclosure timelines
by servicers is taken into consideration when assigning ratings.
The above mentioned approach is 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 5% 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 fewer the number of loans remaining
in the pool, the higher the volatility in performance. 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 "2005 -- 2008 US RMBS Surveillance
Methodology " publication.
The above methodology only applies to pools with at least 40 loans and
a pool factor of greater than 5%. Moody's may withdraw
its rating when the pool factor drops below 5% and the number of
loans in the pool declines to 40 loans or lower unless specific structural
features allow for a monitoring of the transaction (such as a credit enhancement
floor).
Certain tranches in transactions serviced by GMAC Mortgage, LLC's
(GMACM), were placed on review for possible downgrade in 2010 due
to two concerns regarding the servicer's practices. Firstly,
GMACM used shared custodial bank accounts for multiple RMBS transactions
and secondly, GMACM had to suspend foreclosures in 25 states due
to irregularities in its foreclosure processes. As GMACM is a subsidiary
of C rated Residential Capital, LLC (RFC), in case of a default,
losses could have been absorbed by the trusts. Since the tranches
were placed on review, GMACM has eliminated the use of a common
bank account across RMBS deals and set up individual accounts for each
transaction. Also, GMACM has reviewed and revamped its foreclosure
process, and has lifted its suspension of foreclosure sales and
evictions on a case by case basis. Today's ratings actions are
based on recent pool performance. Moody's is not keeping these
bond under further review due to the two issues highlighted above as they
have been resolved. However, the state attorneys general
are engaged in ongoing discussions with several servicers regarding loan
modifications and foreclosure procedures. The ultimate settlement
of those discussions may entail fines, loan forgiveness, cash
payments to borrowers or other features that could reduce future cash
flows to RMBS investors. Moody's will continue to monitor the outcome
and assess future credit implications on the ratings as the situation
evolves.
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 the first quarter of 2012,
with a 2% remaining decline between the first quarter of 2011 and
2012, and unemployment rate to start declining by fourth quarter
of 2011.
Complete rating actions are as follows:
Issuer: RFMSI Series 2005-S2 Trust
Cl. A-1, Confirmed at B2 (sf); previously on
Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Financial Guarantor: Financial Guaranty Insurance Company (Insured
Rating Withdrawn Mar 25, 2009)
Issuer: RFMSI Series 2005-S4 Trust
Cl. A-1, Confirmed at B1 (sf); previously on
Sep 27, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. A-P, Confirmed at B3 (sf); previously on
Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. A-V, Confirmed at B1 (sf); previously on
Sep 27, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Issuer: RFMSI Series 2005-S5 Trust
Cl. A-1, Confirmed at B3 (sf); previously on
Dec 10, 2010 Downgraded to B3 (sf) and Remained On Review for Possible
Downgrade
Cl. A-3, Confirmed at B1 (sf); previously on
Dec 10, 2010 Downgraded to B1 (sf) and Remained On Review for Possible
Downgrade
Cl. A-4, Confirmed at B1 (sf); previously on
Dec 10, 2010 Downgraded to B1 (sf) and Remained On Review for Possible
Downgrade
Cl. A-5, Confirmed at A3 (sf); previously on
Dec 10, 2010 Downgraded to A3 (sf) and Remained On Review for Possible
Downgrade
Cl. A-6, Confirmed at B2 (sf); previously on
Dec 10, 2010 Downgraded to B2 (sf) and Remained On Review for Possible
Downgrade
Cl. A-8, Confirmed at B3 (sf); previously on
Dec 10, 2010 Downgraded to B3 (sf) and Remained On Review for Possible
Downgrade
Cl. A-P, Confirmed at B2 (sf); previously on
Dec 10, 2010 Downgraded to B2 (sf) and Remained On Review for Possible
Downgrade
Cl. A-V, Confirmed at A3 (sf); previously on
Dec 10, 2010 Downgraded to A3 (sf) and Remained On Review for Possible
Downgrade
Issuer: RFMSI Series 2005-S7 Trust
Cl. A-5, Downgraded to Caa1 (sf); previously
on Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. A-1, Confirmed at B1 (sf); previously on
Sep 27, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. A-4, Confirmed at B2 (sf); previously on
Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. A-6, Confirmed at B1 (sf); previously on
Sep 27, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. A-V, Confirmed at B1 (sf); previously on
Sep 27, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Issuer: RFMSI Series 2005-S9 Trust
Cl. A-1, Confirmed at B2 (sf); previously on
Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. A-2, Confirmed at B2 (sf); previously on
Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. A-3, Confirmed at B2 (sf); previously on
Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. A-6, Confirmed at B2 (sf); previously on
Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. A-8, Confirmed at B2 (sf); previously on
Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. A-9, Confirmed at B3 (sf); previously on
Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. A-V, Confirmed at B2 (sf); previously on
Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Issuer: RFMSI Series 2005-SA1 Trust
Cl. III-A, Confirmed at B1 (sf); previously on
Sep 27, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Issuer: RFMSI Series 2005-SA2 Trust
Cl. II-A-1, Confirmed at B2 (sf); previously
on Dec 10, 2010 Downgraded to B2 (sf) and Remained On Review for
Possible Downgrade
Cl. III-A-2, Confirmed at B3 (sf); previously
on Dec 10, 2010 Downgraded to B3 (sf) and Remained On Review for
Possible Downgrade
Cl. III-A-3, Confirmed at B3 (sf); previously
on Dec 10, 2010 Downgraded to B3 (sf) and Remained On Review for
Possible Downgrade
Cl. IV-A, Confirmed at B3 (sf); previously on
Dec 10, 2010 Downgraded to B3 (sf) and Remained On Review for Possible
Downgrade
Issuer: RFMSI Series 2005-SA3 Trust
Cl. II-A-1, Confirmed at B2 (sf); previously
on Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. III-A, Confirmed at B3 (sf); previously on
Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. IV-A, Confirmed at B3 (sf); previously on
Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Issuer: RFMSI Series 2006-S1 Trust
Cl. I-A-3, Confirmed at B2 (sf); previously
on Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. A-V, Confirmed at B2 (sf); previously on
Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Issuer: RFMSI Series 2006-S12 Trust
Cl. I-A-1, Confirmed at B1 (sf); previously
on Sep 27, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. I-A-P, Confirmed at B1 (sf); previously
on Sep 27, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. I-A-V, Confirmed at B1 (sf); previously
on Sep 27, 2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. II-A-2, Confirmed at B2 (sf); previously
on Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. II-A-V, Confirmed at B2 (sf); previously
on Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. III-A-1, Downgraded to B1 (sf); previously
on Sep 27, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. III-A-2, Downgraded to Caa1 (sf);
previously on Sep 27, 2010 B2 (sf) Placed Under Review for Possible
Downgrade
Cl. III-A-3, Downgraded to Caa1 (sf);
previously on Sep 27, 2010 B2 (sf) Placed Under Review for Possible
Downgrade
Cl. III-A-4, Downgraded to Caa1 (sf);
previously on Sep 27, 2010 B3 (sf) Placed Under Review for Possible
Downgrade
Cl. III-A-V, Confirmed at B2 (sf); previously
on Sep 27, 2010 B2 (sf) Placed Under Review for Possible Downgrade
Issuer: RFMSI Series 2006-S5 Trust
Cl. A-3, Downgraded to Caa2 (sf); previously
on Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. A-4, Downgraded to Caa2 (sf); previously
on Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. A-17, Downgraded to C (sf); previously on
Apr 12, 2010 Downgraded to Ca (sf)
Cl. A-V, Downgraded to Caa1 (sf); previously
on Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Issuer: RFMSI Series 2007-S1 Trust
Cl. A-1, Confirmed at B3 (sf); previously on
Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. A-2, Confirmed at B3 (sf); previously on
Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. A-V, Confirmed at B3 (sf); previously on
Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Issuer: RFMSI Series 2007-S6 Trust
Cl. II-A-5, Confirmed at B3 (sf); previously
on Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. II-A-7, Confirmed at B3 (sf); previously
on Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. II-A-10, Confirmed at B3 (sf); previously
on Sep 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF255577
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/page/viewresearchdoc.aspx?docid=PBS_SF196023
For more information please see www.moodys.com.
REGULATORY DISCLOSURES
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 the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's Analytics
information.
Moody's received and took into account one or more third party assessments
on the due diligence performed regarding the underlying assets or financial
instruments in this transaction and the assessments had a neutral impact
on the rating.
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.
New York
Bulat Mustafin
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Deepika Kothari
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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 $937.5 million of Jumbo RMBS issued by RFMSI from 2005 to 2007
