Approximately $764.8 million of asset-backed securities affected
New York, November 22, 2016 -- Moody's Investors Service placed fourteen tranches from four transactions
issued by Bayview Commercial Asset Trust on review for downgrade since
Moody's found that the maturity dates of a number of loans underlying
the four transactions were modified to dates beyond the maturity dates
of the rated tranches. In addition, Moody's upgraded the
ratings on eleven tranches from six transactions, and downgraded
the ratings on sixteen tranches from seven transactions of small business
loans issued by Bayview Commercial Asset Trusts and Bayview Commercial
Mortgage Pass-Through Trusts, reflecting performance of the
transactions. The loans are secured primarily by small commercial
real estate properties in the U.S. owned by small businesses
and investors; the 2006-CAD1 transaction's loans are
secured by small commercial real estate properties located in Canada.
Complete rating actions are as follows:
Issuer: BayView Commercial Asset Trust 2004-1
Cl. M-2, Upgraded to A1 (sf); previously on Jan
14, 2016 Upgraded to A2 (sf)
Cl. B, Upgraded to A3 (sf); previously on Jan 14,
2016 Upgraded to Baa1 (sf)
Issuer: BayView Commercial Asset Trust 2004-2
Cl. B-1, Upgraded to Baa3 (sf); previously on
Jan 14, 2016 Upgraded to Ba1 (sf)
Issuer: Bayview Commercial Asset Trust 2004-3
Cl. B-1, Upgraded to Baa2 (sf); previously on
Jan 14, 2016 Upgraded to Baa3 (sf)
Issuer: Bayview Commercial Asset Trust 2005-1
Cl. B-2, Upgraded to Ba2 (sf); previously on
Mar 28, 2014 Upgraded to Ba3 (sf)
Issuer: BayView Commercial Asset Trust 2005-3
Cl. A-1, Downgraded to Baa3 (sf); previously
on Jan 14, 2016 Downgraded to Baa1 (sf)
Cl. A-2, Downgraded to Baa3 (sf); previously
on Jan 14, 2016 Downgraded to Baa1 (sf)
Cl. M-1, Downgraded to Ba1 (sf); previously on
Jan 14, 2016 Downgraded to Baa3 (sf)
Cl. M-2, Downgraded to Ba2 (sf); previously on
Jan 14, 2016 Downgraded to Ba1 (sf)
Issuer: BayView Commercial Asset Trust 2006-1
Cl. A-1, Downgraded to Baa3 (sf); previously
on Jan 14, 2016 Downgraded to Baa2 (sf)
Cl. A-2, Downgraded to Baa3 (sf); previously
on Jan 14, 2016 Downgraded to Baa2 (sf)
Issuer: Bayview Commercial Asset Trust 2006-4
Cl. A-1, Downgraded to Baa1 (sf); previously
on Jan 14, 2016 Downgraded to A3 (sf)
Cl. A-2, Downgraded to B1 (sf); previously on
Jan 14, 2016 Downgraded to Ba3 (sf)
Issuer: BayView Commercial Asset Trust 2006-CAD1
Cl. B-1, Upgraded to Aaa (sf); previously on
Jan 25, 2016 Upgraded to Aa1 (sf)
Cl. B-2, Upgraded to Aa2 (sf); previously on
Jan 25, 2016 Upgraded to Aa3 (sf)
Cl. B-3, Upgraded to A1 (sf); previously on Jan
25, 2016 Upgraded to A2 (sf)
Issuer: Bayview Commercial Asset Trust 2007-1
Cl. A-1, Downgraded to A3 (sf); previously on
May 31, 2012 Downgraded to A1 (sf)
Issuer: Bayview Commercial Asset Trust 2007-3
Cl. A-1, A3 (sf) Placed Under Review for Possible
Downgrade; previously on Jan 14, 2016 Downgraded to A3 (sf)
Cl. A-2, Ba2 (sf) Placed Under Review for Possible
Downgrade; previously on May 31, 2012 Downgraded to Ba2 (sf)
Cl. M-1, B2 (sf) Placed Under Review for Possible
Downgrade; previously on Jan 23, 2015 Downgraded to B2 (sf)
Cl. M-2, B3 (sf) Placed Under Review for Possible
Downgrade; previously on Jan 23, 2015 Downgraded to B3 (sf)
Cl. M-3, Caa1 (sf) Placed Under Review for Possible
Downgrade; previously on Jan 23, 2015 Downgraded to Caa1 (sf)
Issuer: Bayview Commercial Asset Trust 2007-6
Cl. A-4A, Caa3 (sf) Placed Under Review for Possible
Downgrade; previously on Jan 23, 2015 Downgraded to Caa3 (sf)
Issuer: Bayview Commercial Asset Trust 2008-3
Cl. A-4, B1 (sf) Placed Under Review for Possible
Downgrade; previously on Jan 14, 2016 Downgraded to B1 (sf)
Cl. M-1, Downgraded to Caa1 (sf) and Placed Under
Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded
to B3 (sf)
Cl. M-2, Downgraded to Caa3 (sf) and Placed Under
Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded
to Caa2 (sf)
Issuer: Bayview Commercial Asset Trust 2008-4
Cl. A-4, Ba1 (sf) Placed Under Review for Possible
Downgrade; previously on Oct 31, 2013 Downgraded to Ba1 (sf)
Cl. M-1, Ba3 (sf) Placed Under Review for Possible
Downgrade; previously on Jan 14, 2016 Downgraded to Ba3 (sf)
Cl. M-2, B2 (sf) Placed Under Review for Possible
Downgrade; previously on Jan 14, 2016 Downgraded to B2 (sf)
Cl. M-3, Downgraded to Caa1 (sf) and Placed Under
Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded
to B3 (sf)
Cl. M-4, Downgraded to Caa3 (sf) and Placed Under
Review for Possible Downgrade; previously on Jan 14, 2016 Downgraded
to Caa2 (sf)
Cl. M-5, Downgraded to C (sf); previously on
Jan 14, 2016 Downgraded to Ca (sf)
Issuer: BayView Commercial Mortgage Pass-Through Trust 2006-SP1
Cl. M-2, Upgraded to Aa1 (sf); previously on
Jan 14, 2016 Upgraded to Aa3 (sf)
Cl. M-3, Upgraded to Baa1 (sf); previously on
May 31, 2012 Downgraded to Baa2 (sf)
Cl. M-4, Upgraded to Ba1 (sf); previously on
May 31, 2012 Downgraded to Ba2 (sf)
Issuer: Bayview Commercial Mortgage Pass-Through Trust 2006-SP2
Cl. A, Downgraded to Ba1 (sf); previously on Jan 14,
2016 Downgraded to Baa3 (sf)
Cl. M-1, Downgraded to Ba3 (sf); previously on
Jan 14, 2016 Downgraded to Ba2 (sf)
RATINGS RATIONALE
The review for downgrade actions on the 2007-3, 2007-6,
2008-3, and 2008-4 transactions reflect that over
20% of the current pool balances for these transactions consists
of loans that were modified to have maturity dates in excess of the tranches'
maturity dates. As a result, there is the potential for more
than 5% to 10% of the current collateral pool for each transaction
to be outstanding at the tranches' maturity dates, although
this amount could be reduced by prepayments. Tranches that have
the highest potential impact from this issue have been placed on review
for downgrade based on Moody's initial assessment. Moody's
notes that the Cl. A-1 note in the 2007-3 transaction
is particularly vulnerable to this issue and is likely to be significantly
downgraded, given the transaction's pro rata pay structure
coupled with the high balance of loans (in excess of 50% of outstanding
pool balance) that have been extended past the note final maturity date.
Moody's will use the review period to confirm the dollar amount
of loans in each of the transactions that have loan maturities in excess
of the tranche maturity, and complete an analysis of the expected
impact.
The upgrades related to the 2004-1, 2004-2,
2004-3 and 2005-1 transactions were primarily prompted by
a build-up in credit enhancement due to increasing reserve account
balances relative to outstanding pool balances, availability of
excess spread and stabilizing collateral performance. Available
amounts in reserve accounts for the 2004-1, 2004-2,
2004-3, and 2005-1 transactions increased to 38%,
26%, 23%, and 16% of outstanding pool
balances, respectively, as of the October 2016 distribution
date from 30%, 22%, 18%, and 13%
of the outstanding pool balance as of the December 2015 distribution date,
around which time Moody's last took action on the Bayview transactions.
Upgrades to the 2006-SP1 transaction were prompted by increases
in subordination for the affected tranches, while upgrades to the
2006-CAD1 transaction were prompted by increases in both overcollateralization
and subordination.
The downgrades are primarily due to further realized losses on the underlying
pools in combination with continued low levels of credit enhancement from
reserve accounts, overcollateralization and subordinate tranches.
Over the past year, cumulative net losses for the Bayview 2005-3,
2006-1, 2006-SP2, 2006-4, 2007-1,
2008-3 and 2008-4 transactions increased to a range of 20%
to 33% as of the October 2016 distribution date, from a range
of 18% to 31% as of the December 2015 distribution date,
in each case as a percent of the original pool balance.
In general, for the Bayview small business ABS collateral pools,
excluding the Canadian transaction, delinquencies of 60 days or
more, including loans in foreclosure and REO, have improved
with the average deal experiencing a decrease in delinquencies of 2.0%
on an absolute basis over the past 10 months. Delinquencies of
60 days or more ranged from 8% to 21% of the outstanding
pool balances as of the October 2016 distribution date, versus 11%
to 22% as of the December 2015 distribution date. Average
severities are still high in the 70% to 80% range.
A key factor in Moody's loss projections is its evaluation and treatment
of modified loans. Excluding the Canadian transaction, Bayview
Loan Servicing has modified approximately 50% to 80% of
the loan balance classified as current as of the October 2016 distribution
date in the deals affected by today's rating actions. Most of these
loans were delinquent before modification and are therefore more likely
to become delinquent than non-modified loans in the future.
Moody's evaluation of loan-level data indicates that these current,
modified loans are two to three times as likely to become defaulted compared
to current, non-modified loans. Moody's accounted
for this likelihood in its loss projection methodology described in the
"Methodology" section below.
The current ratings reflect the likelihood of security holders recovering
outstanding credit risk shortfalls for the bonds on which they exist.
Even though available credit enhancement to a tranche may be high,
recovery of interest shortfalls may take several years for rated tranches
with outstanding shortfalls. Transactions with ratings that continue
to be impacted by interest shortfalls include Bayview 2007-4,
2007-5, 2007-6, 2008-2, 2008-3,
and 2008-4.
METHODOLOGY
The principal methodology used in these ratings was "Moody's Global Approach
to Rating SME Balance Sheet Securitizations" published in Ocotober 2015.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Moody's evaluated the sufficiency of credit enhancement by first analyzing
the loans to determine an expected remaining net loss for each collateral
pool. Moody's compared these expected net losses with the available
credit enhancement, consisting of overcollateralization, subordination,
excess spread, and a reserve account if any. For the lower
subordinate tranches, Moody's identified relatively near term future
write-downs by examining the expected losses from loans in foreclosure
and REO in relation to a tranche's available credit enhancement.
To forecast expected losses for the Bayview small business ABS collateral
pools, Moody's evaluated each pool according to the delinquency
and modification status of the underlying loans, applying different
roll rates to default to loans according to each status. In order
to determine the roll rates to default, Moody's assessed historical
roll rate behavior according to their delinquency status.
This approach leads to a wide range of lifetime loan default rates depending
on vintage, modification status and delinquency status. For
modified current loans, the remaining lifetime default rate assumption
was 15% to 20%, two to three times the remaining lifetime
default rate estimate of 5% to 8% for non-modified
current loans. For delinquent loans, the lifetime default
rates range from 30% to 75%. For loans in foreclosure
or REO, the lifetime default rates are roughly 70% to 100%.
For loss severities, Moody's generally applied 75% severities
for both modified and non-modified loans.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to protect
investors against expected losses could drive the ratings up. Losses
below Moody's expectations as a result of a decrease in seriously delinquent
loans or lower severities than expected on liquidated loans. Reimbursement
of interest shortfalls more rapidly than anticipated when applicable.
Down
Levels of credit protection that are insufficient to protect investors
against expected losses could drive the ratings down. Losses above
Moody's expectations as a result of an increase in seriously delinquent
loans and higher severities than expected on liquidated loans.
Reimbursement of interest shortfalls slower than anticipated when applicable.
Further modifications that extend maturities of the underlying collateral
beyond that of the notes.
Other methodologies and factors that Moody's may have considered in the
process of rating these transactions appear on Moody's website.
More information on Moody's analysis of this transaction is available
at www.moodys.com.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Thomas Meehan
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
Amelia (Amy) Tobey
Senior Vice President/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
