New York, April 24, 2009 -- Moody's Investors Service has downgraded the ratings of eighty nine
tranches issued in forteen transactions from the Bear Stearns Asset Backed
Securities Trust shelf. The collateral backing each tranche consists
primarily of first lien adjustable-rate and fixed-rate "scratch
and dent" mortgage loans. Scratch and dent loans in this
shelf consist mainly of subprime or Alt-A loans, including
negatively amortizing loans. A majority of the loans represent
either one or more permitted or unintentional underwriting exceptions
to applicable originator's guidelines. The most prevalent
of the exceptions include delinquency history of the borrower, combined
loan-to-value ratios, missing or incomplete documentation,
borrower's debt-to-income ratios or borrower's
credit score.
The actions are triggered by higher than anticipated delinquency levels
and severity of loss as well as slower than anticipated voluntary prepayments,
resulting in higher updated loss expectation for the underlying collateral
and lower coverage for the rated debt given available credit enhancement.
The ratings on the securities are monitored by evaluating factors determined
to be applicable to the credit profile of the securities, such as
i) the nature, sufficiency, and quality of historical performance
information regarding the asset class ii) an analysis of the collateral
being securitized, iii) an analysis of the transaction's allocation
of collateral cash flow and capital structure, and (iv) a comparison
of these attributes against those of other similar transactions.
General loss estimation methodology is outlined below, separately
for recent and for more seasoned vintages.
For recent vintages (2005 and later), Moody's calculates estimated
losses for Scratch and Dent RMBS in a two-step process.
First, serious delinquencies are projected through late 2009,
primarily based upon recent historical performance. These projected
delinquencies are converted into projected losses using lifetime roll
rates (the probability of transition to default) averaging 60%
for 60-day delinquencies, 90% for delinquencies greater
than 90 days, 100% for foreclosure and 100% for REO,
and severity assumptions based on the higher of actual severities and
65%.
The second step is to determine losses beyond 2009. Depending on
a deal's performance, as well as collateral characteristics,
such as loan type, or loan-to-value ratios and geographic
concentrations of remaining current loans, Moody's assumes varying
degrees of slowing in the loss rate (which is measured by loss-to-liquidation)
for the remaining life of the deal. Typical degrees of slowing
in loss rate after late 2009 range from 15% to 35%.
For more seasoned vintages (before 2005), Moody's calculates estimated
losses for Scratch and Dent RMBS as follows:
- Current delinquencies are used to project pipeline losses.
- Annual roll rates are assumed at 0% for 30 days,
15% for 60 days, 30% for 90 days, 65%
for foreclosures and 90% for REO.
- Severities used are higher of 65% or actual historical
severity for each transaction.
- Loss is calculated for the previous year. Expected annual
loss is then derived from a weighted average of previous year loss and
expected pipeline loss. The transaction expected loss is projected
out over the deal's expected remaining life. Depending on a transaction's
time of origination, a 75% weight can be applied to pipeline
loss when it is considered to be more representative of future expected
performance than the previous year's losses.
- Expected loss is finally compared to credit enhancement to derive
a rating.
Loss estimates are subject to variability and, as a result,
realized losses could ultimately turn out higher or lower than our current
expectations. Moody's will continue to evaluate performance data
as it becomes available and will assess the pattern of potential future
defaults and adjust loss expectations accordingly if necessary.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found at www.moodys.com
in the Credit Policy & Methodologies directory.
Complete rating actions are as follows:
Bear Stearns Asset Backed Sec Tr 2005-4
Cl. M-1, Downgraded to Ba3; previously on 1/23/2006
Assigned Aa2
Cl. M-2, Downgraded to Ca; previously on 1/23/2006
Assigned A2
Cl. M-3, Downgraded to C; previously on 1/23/2006
Assigned A3
Cl. M-4, Downgraded to C; previously on 6/25/2008
Downgraded to Baa3
Cl. M-5, Downgraded to C; previously on 6/25/2008
Downgraded to B1
Cl. M-6, Downgraded to C; previously on 6/25/2008
Downgraded to B3 and Placed Under Review for Possible Downgrade
Cl. M-7, Downgraded to C; previously on 6/25/2008
Downgraded to Caa2
Bear Stearns Asset Backed Sec Tr 2006-4
Cl. A-1, Downgraded to A1; previously on 11/20/2006
Assigned Aaa
Cl. A-2, Downgraded to Baa1; previously on 11/20/2006
Assigned Aaa
Cl. A-3, Downgraded to Baa1; previously on 11/20/2006
Assigned Aaa
Cl. M-1, Downgraded to Caa3; previously on 6/25/2008
Downgraded to Ba3
Cl. M-2, Downgraded to C; previously on 6/25/2008
Downgraded to B3 and Placed Under Review for Possible Downgrade
Cl. M-3, Downgraded to C; previously on 6/25/2008
Downgraded to Caa2
Cl. M-4, Downgraded to C; previously on 6/25/2008
Downgraded to Caa3
Cl. M-5, Downgraded to C; previously on 6/25/2008
Downgraded to Ca
Bear Stearns Asset Backed Sec. Trust 2007-2
Cl. A-1, Downgraded to A1; previously on 5/21/2007
Assigned Aaa
Cl. A-2, Downgraded to Baa2; previously on 5/21/2007
Assigned Aaa
Cl. A-3, Downgraded to Baa2; previously on 5/21/2007
Assigned Aaa
Cl. M-1, Downgraded to Caa1; previously on 6/25/2008
Downgraded to A2
Cl. M-2, Downgraded to C; previously on 6/25/2008
Downgraded to Baa2
Cl. M-3, Downgraded to C; previously on 6/25/2008
Downgraded to Caa3
Cl. M-4, Downgraded to C; previously on 6/25/2008
Downgraded to Ca
Cl. M-5, Downgraded to C; previously on 6/25/2008
Downgraded to Ca
Bear Stearns Asset Backed Secs I Tr 2004-BO1
Cl. M-3, Downgraded to A2; previously on 11/24/2004
Assigned A1
Cl. M-4, Downgraded to Baa1; previously on 11/24/2004
Assigned A2
Cl. M-5, Downgraded to Baa2; previously on 11/24/2004
Assigned A3
Cl. M-6, Downgraded to Ba1; previously on 9/4/2007
Downgraded to Baa3
Cl. M-7, Downgraded to Ba3; previously on 8/21/2008
Ba2 Placed Under Review for Possible Downgrade
Cl. M-8, Downgraded to Caa1; previously on 8/21/2008
B3 Placed Under Review for Possible Downgrade
Bear Stearns Asset Backed Secs Tr 2006-1
Cl. M-1, Downgraded to Baa1; previously on 3/13/2006
Assigned Aa2
Cl. M-2, Downgraded to B1; previously on 3/13/2006
Assigned Aa3
Cl. M-3, Downgraded to Ca; previously on 6/25/2008
Downgraded to Baa1
Cl. M-4, Downgraded to C; previously on 6/25/2008
Downgraded to Baa3
Cl. M-5, Downgraded to C; previously on 6/25/2008
Downgraded to B2
Cl. M-6, Downgraded to C; previously on 6/25/2008
Downgraded to B3 and remains on Review for Possible Downgrade
Cl. M-7, Downgraded to C; previously on 6/25/2008
Downgraded to Caa1
Bear Stearns Asset Backed Secs Tr 2006-2
Cl. M-1, Downgraded to A1; previously on 7/25/2006
Assigned Aa2
Cl. M-2, Downgraded to A2; previously on 7/25/2006
Assigned Aa3
Cl. M-3, Downgraded to Ba1; previously on 7/25/2006
Assigned A2
Cl. M-4, Downgraded to B2; previously on 7/25/2006
Assigned A3
Cl. M-5, Downgraded to Caa3; previously on 6/25/2008
Downgraded to Ba1
Cl. M-6, Downgraded to C; previously on 6/25/2008
Downgraded to B2 and remains on Review for Possible Downgrade
Cl. M-7, Downgraded to C; previously on 6/25/2008
Downgraded to Caa1
Bear Stearns Asset Backed Secs Tr 2006-3
Cl. A-2, Downgraded to A1; previously on 9/8/2006
Assigned Aaa
Cl. A-3, Downgraded to A1; previously on 9/8/2006
Assigned Aaa
Cl. M-1, Downgraded to B1; previously on 6/25/2008
Downgraded to A1
Cl. M-2, Downgraded to Caa3; previously on 6/25/2008
Downgraded to Baa1
Cl. M-3, Downgraded to C; previously on 6/25/2008
Downgraded to B3
Cl. M-4, Downgraded to C; previously on 6/25/2008
Downgraded to Caa1
Cl. M-5, Downgraded to C; previously on 6/25/2008
Downgraded to Caa2
Cl. M-6, Downgraded to C; previously on 6/25/2008
Downgraded to Caa3
Cl. M-7, Downgraded to C; previously on 6/25/2008
Downgraded to Ca
Bear Stearns Asset Backed Secs Tr 2007-SD2
Cl. II-A-1, Downgraded to B3; previously
on 3/28/2007 Assigned Aaa
Cl. II-A-2, Downgraded to Ca; previously
on 6/25/2008 Downgraded to A3
Cl. II-M-1, Downgraded to C; previously
on 6/25/2008 Downgraded to Ba1
Cl. II-M-2, Downgraded to C; previously
on 6/25/2008 Downgraded to Caa2
Cl. II-M-3, Downgraded to C; previously
on 6/25/2008 Downgraded to Ca
Bear Stearns Asset Backed Secs Tr 2007-SD3
Cl. A, Downgraded to B3; previously on 6/1/2007 Assigned
Aaa
Cl. M-1, Downgraded to C; previously on 6/25/2008
Downgraded to A1
Cl. M-2, Downgraded to C; previously on 6/25/2008
Downgraded to A3
Cl. M-3, Downgraded to C; previously on 6/25/2008
Downgraded to Baa2
Cl. M-4, Downgraded to C; previously on 6/25/2008
Downgraded to Ba2
Cl. M-5, Downgraded to C; previously on 6/25/2008
Downgraded to B2
Cl. M-6, Downgraded to C; previously on 6/25/2008
Downgraded to Caa3
Cl. M-7, Downgraded to C; previously on 6/25/2008
Downgraded to Ca
Bear Stearns Asset Backed Secs Trust 2007-1
Cl. A-1, Downgraded to A2; previously on 3/1/2007
Assigned Aaa
Cl. A-2, Downgraded to Ba3; previously on 3/1/2007
Assigned Aaa
Cl. A-3, Downgraded to B1; previously on 3/1/2007
Assigned Aaa
Cl. M-1, Downgraded to Ca; previously on 6/25/2008
Downgraded to Ba2
Cl. M-2, Downgraded to C; previously on 6/25/2008
Downgraded to Caa1
Cl. M-3, Downgraded to C; previously on 6/25/2008
Downgraded to Caa2
Cl. M-4, Downgraded to C; previously on 6/25/2008
Downgraded to Caa3
Cl. M-5, Downgraded to C; previously on 6/25/2008
Downgraded to Ca
Bear Stearns Asset Bkd Sec Trust 2003-SD2
Cl. B-5, Downgraded to Caa2; previously on 11/17/2003
Assigned B2
Bear Stearns Asset Bkd Sec Trust 2005-SD1
Cl. I-A-3, Downgraded to Aa3; previously
on 2/20/2005 Assigned Aaa
Cl. II-M-1, Downgraded to Aa3; previously
on 2/20/2005 Assigned Aa2
Cl. II-M-2, Downgraded to Baa1; previously
on 2/20/2005 Assigned A2
Cl. II-M-3, Downgraded to Ba1; previously
on 2/20/2005 Assigned Baa2
Cl. I-M-1, Downgraded to A2; previously
on 2/20/2005 Assigned Aa2
Cl. I-M-2, Downgraded to Baa1; previously
on 2/20/2005 Assigned A2
Cl. I-M-3, Downgraded to Baa2; previously
on 2/20/2005 Assigned A3
Cl. I-M-4, Downgraded to Ba1; previously
on 2/20/2005 Assigned Baa1
Cl. I-M-5, Downgraded to B1; previously
on 2/20/2005 Assigned Baa2
Cl. I-M-6, Downgraded to Caa3; previously
on 2/20/2005 Assigned Baa3
Bear Stearns Asset-Backed Sec Trust 2004-SD2
Cl. B-5, Downgraded to Caa1; previously on 6/18/2004
Assigned B2
Bear Stearns Mtg Sec Inc 1997-06
3-B-4, Downgraded to B1; previously on 12/30/1997
Assigned Ba2
3-B-5, Downgraded to Ca; previously on 5/9/2003
Downgraded to Caa2
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/cust/getdocumentByNotesDocId.asp?criteria=PBS_SF163671
For more information please see www.moodys.com.
New York
John Park
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Odile Grisard Boucher
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's takes action on Bear Stearns scratch and dent transactions