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Rating Action:

Moody's takes rating action on twelve interest rate swaps in 10 US RMBS transactions

26 Jun 2012

New York, June 26, 2012 -- Moody's Investors Service has downgraded the ratings of two interest rate swaps, upgraded the ratings of six interest rate swaps, and confirmed the ratings of four interest rate swaps in 10 US RMBS transactions. Each of the affected swaps is between a US RMBS trust and either Deutsche Bank AG (Deutsche, downgraded to A2, Prime-1 from Aa3, Prime-1) or Barclays Bank, PLC (Barclays, downgraded to A2, Prime -1 from Aa3, Prime-1), as counterparty. The rating on the swaps address the credit exposure of the swap counterparty to the respective RMBS trust's ability to honor its obligations under the swap. The drivers of these swap rating actions are: (1) Moody's rating actions on June 21, 2012, which downgraded the long term ratings of Deutsche and Barclays and (2) the publication of Moody's methodology for rating Counterparty Instrument Ratings, "Moody's Approach to Counterparty Instrument Ratings." on February 23, 2012.

For additional information on Structured Finance ratings, please refer to the webpage containing Moody's related announcements http://www.moodys.com/eusovereign

RATINGS RATIONALE

The two drivers of the rating action work in opposite directions. The application of the new Counterparty Instrument Ratings methodology puts upward pressure on the swap ratings, while Moody's rating actions on the banks put downward pressure on the swap ratings. Our prior methodology capped the rating of each of the swaps at the rating of the counterparty. Applying the new rating methodology puts upward pressure on the ratings as it allows for the rating of these swaps to be one to three notches above the rating of the counterparty. Conversely, the downgrade of the counterparties' ratings puts downward pressure on the ratings, as the swap ratings remain linked to those of the counterparties.

Moody's upgraded those swap ratings that have low linkage to the rating of the counterparty because the upward rating pressure due to application of the new methodology exceeded the downward pressure due to Moody's rating actions on the bank counterparties. Application of the methodology allows for these swaps to have a three notch uplift from the rating of the counterparty because these swaps have low linkage to the rating of their counterparty. The low linkage to the rating of the counterparty is primarily due to the stipulation in the transaction documents that the issuer will use any upfront payment received from a replacement counterparty towards discharging the termination payment owing to the swap counterparty in priority to any other creditors of the issuer, as described in the methodology.

Moody's downgraded those swap ratings that have a high linkage to the rating of the counterparty because the net result of the downward rating pressure due to Moody's rating actions on the bank counterparties exceeded and the upward rating pressure due to application of the new methodology. Application of the methodology only allows for these swaps to have a one notch uplift from the rating of the counterparty because these swaps have high linkage to the rating of their counterparty. The high linkage to the rating of the counterparty is primarily due to the stipulation in the transaction documents that any upfront payment received from a replacement counterparty will pass through the issuer's waterfall and the termination payment owing to the swap counterparty will have a subordinated ranking in that waterfall, as described in the methodology.

Moody's confirmed ratings of four swaps even though they have a high linkage to the rating of the counterparty because each of those swaps are set to expire within the next three months which significantly mitigates the exposure to default of the swap counterparties.

In determining the degree of linkage for these swaps, Moody's believed that uncertainty surrounding the enforceability of contractual provisions allowing for the subordination of swap termination payments will cause RMBS trustees to find replacement swap providers prior to terminating existing swap contracts.

Our methodology for rating swaps on US RMBS transactions includes running collateral cashflows and considers the rating of the swap counterparty. We stress the cashflows by increasing defaults and prepayments to determine what level of collateral stress would cause a shortfall in proceeds owed to the swap counterparty. The cashflows are modeled to reflect the waterfall of the underlying transaction, which results in all swap payments other than termination payments caused by a counterparty default coming at the top of the waterfall. Termination payments owed to the swap counterparty resulting from a default of the swap counterparty are paid at the bottom of the waterfall.

The principal methodology used in these ratings was Moody's Approach to Counterparty Instrument Ratings published in February 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The complete rating action is as follows:

For Swaps where Barclays Bank PLC is the counterparty:

Issuer: BCAP LLC Trust 2006-AA2

Interest Rate Swap (Reference Number 1439003B), Upgraded to Aa2 (sf); previously on Jun 14, 2012 A3 (sf) Placed Under Review for Possible Upgrade

Issuer: RAMP Series 2007-RS2 Trust

Interest Rate Swap (Reference Number 1746031B), Confirmed at Aa3 (sf); previously on Feb 23, 2012 Aa3 (sf) Placed Under Review Direction Uncertain

For Swaps Where Deutsche Bank AG is the counterparty:

Issuer: CWABS Asset-Backed Certificates Trust 2007-8

Interest Rate Swap (Reference Number N616173N), Downgraded to A1 (sf); previously on Feb 23, 2012 Aa3 (sf) Placed Under Review Direction Uncertain

Issuer: CWABS Asset-Backed Certificates Trust 2007-BC3

Interest Rate Swap (Reference Number N638945N), Downgraded to A1 (sf); previously on Feb 23, 2012 Aa3 (sf) Placed Under Review Direction Uncertain

Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series 2007-HY8C

Interest Rate Swap (Reference Number N659808N), Confirmed at Aa3 (sf); previously on Feb 23, 2012 Aa3 (sf) Placed Under Review Direction Uncertain

Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series 2007-HY9

Interest Rate Swap (Certificate Swap) (Reference Number N659812N), Confirmed at Aa3 (sf); previously on Feb 23, 2012 Aa3 (sf) Placed Under Review Direction Uncertain

Interest Rate Swap (Subordinated Certificate Swap) (Reference Number N659814N), Confirmed at Aa3 (sf); previously on Feb 23, 2012 Aa3 (sf) Placed Under Review Direction Uncertain

Issuer: Deutsche Alt-A Securities Mortgage Loan Trust, Series 2007-3

Interest Rate Swap (Reference Number N701945N), Upgraded to Aa2 (sf); previously on Feb 23, 2012 Aa3 (sf) Placed Under Review for Possible Upgrade

Issuer: Deutsche ALT-A Securities, Inc. Re-Remic Trust Certificates, Series 2007-RS1

Interest Rate Swap (Reference Number N679784N), Upgraded to Aa2 (sf); previously on Feb 23, 2012 Aa3 (sf) Placed Under Review for Possible Upgrade

Issuer: MortgageIT Securities Corp. Mortgage Loan Trust, Series 2007-1

Interest Rate Swap II (Reference Number N614223N), Upgraded to Aa2 (sf); previously on Jun 14, 2012 A3 (sf) Placed Under Review for Possible Upgrade

Interest Rate Swap III (Reference Number N614227N), Upgraded to Aa2 (sf); previously on Jun 14, 2012 A3 (sf) Placed Under Review for Possible Upgrade

Issuer: MortgageIT Securities Corp. Mortgage Loan Trust, Series 2007-2

Interest Rate Swap (Reference Number N681806N), Upgraded to Aa2 (sf); previously on Feb 23, 2012 Aa3 (sf) Placed Under Review for Possible Upgrade

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. 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 the rating are the following: parties involved in the ratings, public information, 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 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 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.

Gerard Mazi
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

Kruti Muni
VP - Senior Credit Officer
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 rating action on twelve interest rate swaps in 10 US RMBS transactions
No Related Data.
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