New York, December 16, 2021 -- Moody's Investors Service ("Moody's") has upgraded
the ratings of nine bonds from six US residential mortgage backed transactions
(RMBS), backed by subprime mortgages issued by multiple issuers.
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL460271
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
This link also contains the associated underlying collateral losses.
Complete rating actions are as follows:
Issuer: Chase Funding Trust, Series 2002-2
Cl. IA-5, Upgraded to A2 (sf); previously on
Sep 5, 2018 Upgraded to Baa1 (sf)
Cl. IIA-1, Upgraded to Aa2 (sf); previously on
Apr 23, 2012 Confirmed at A1 (sf)
Issuer: CSFB Home Equity Asset Trust 2005-6
Cl. M-3, Upgraded to Aaa (sf); previously on
May 23, 2018 Upgraded to Aa1 (sf)
Cl. M-4, Upgraded to A2 (sf); previously on May
23, 2018 Upgraded to Baa2 (sf)
Cl. M-5, Upgraded to Caa2 (sf); previously on
May 23, 2018 Upgraded to Ca (sf)
Issuer: CSFB Home Equity Pass-Through Certificates,
Series 2005-1
Cl. M-5, Upgraded to A1 (sf); previously on Jul
11, 2018 Upgraded to A3 (sf)
Issuer: First Franklin Mortgage Loan Trust 2006-FF4
Cl. A-3, Upgraded to Aa3 (sf); previously on
Oct 16, 2018 Upgraded to A2 (sf)
Issuer: First Franklin Mortgage Loan Trust 2006-FF9
Cl. I-A, Upgraded to Aa2 (sf); previously on
Dec 19, 2019 Upgraded to A1 (sf)
Issuer: First NLC Trust 2005-4
Cl. A-4, Upgraded to Aa3 (sf); previously on
Mar 16, 2018 Upgraded to A2 (sf)
RATINGS RATIONALE
Today's rating actions reflect the recent performance as well as Moody's
updated loss expectations on the underlying pools. The rating upgrades
are a result of a buildup in credit enhancement available to the bonds,
which has increased by 5% to 16% over the last year.
In light of the current macroeconomic environment, we revised loss
expectations based on the extent of performance deterioration of the underlying
mortgage loans, resulting from a slowdown in economic activity and
increased unemployment due to the coronavirus outbreak. Specifically,
we have observed an increase in delinquencies, payment forbearance,
and payment deferrals since the start of pandemic, which could result
in higher realized losses.
Our analysis considers the current proportion of loans granted payment
relief in each individual transaction. We identified these loans
based on a review of loan level cashflows over the last few months.
Based on our analysis, the proportion of borrowers that are currently
enrolled in payment relief plans varied greatly, ranging between
approximately 2% and 14% among RMBS transactions issued
before 2009. In our analysis, we assume these loans to experience
lifetime default rates that are 50% higher than default rates on
the performing loans.
In addition, for borrowers unable to make up missed payments through
a short-term repayment plan, servicers will generally defer
the forborne amount as a non-interest-bearing balance,
due at maturity of the loan as a balloon payment. Our analysis
considered the impact of six months of scheduled principal payments on
the loans enrolled in payment relief programs being passed to the trust
as a loss. The magnitude of this loss will depend on the proportion
of the borrowers in the pool subject to principal deferral and the number
of months of such deferral. The treatment of deferred principal
as a loss is credit negative, which could incur write-downs
on bonds when missed payments are deferred.
Our rating actions have factored in the buildup in credit enhancement
of the bonds, especially in an environment of elevated prepayment
rates. The increase in credit enhancement, driven by higher
prepayment rates, has helped offset the impact of the increase in
expected losses spurred by the pandemic.
Today's action reflects the coronavirus pandemic's residual impact on
the ongoing performance of residential mortgage loans as the US economy
continues on the path toward normalization. Economic activity will
continue to strengthen in 2021 because of several factors, including
the rollout of vaccines, growing household consumption and an accommodative
central bank policy. However, specific sectors and individual
businesses will remain weakened by extended pandemic related restrictions.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Principal Methodologies
The principal methodology used in these ratings was "US RMBS Surveillance
Methodology" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1231951.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
In addition, Moody's publishes a weekly summary of structured finance
credit ratings and methodologies, available to all registered users
of our website, www.moodys.com/SFQuickCheck.
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 current expectations of loss could drive the ratings
of the subordinate bonds up. Losses could decline from Moody's
original expectations as a result of a lower number of obligor defaults
or appreciation in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly
on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect investors
against current expectations of loss could drive the ratings down.
Losses could rise above Moody's expectations as a result of a higher number
of obligor defaults or deterioration in the value of the mortgaged property
securing an obligor's promise of payment. Transaction performance
also depends greatly on the US macro economy and housing market.
Other reasons for worse-than-expected performance include
poor servicing, error on the part of transaction parties,
inadequate transaction governance and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing transfers
or other policy or regulatory change can impact the performance of these
transactions. In addition, improvements in reporting formats
and data availability across deals and trustees may provide better insight
into certain performance metrics such as the level of collateral modifications.
For more information please see www.moodys.com.
REGULATORY DISCLOSURES
The List of Affected Credit Ratings announced here are all solicited credit
ratings. Additionally, the List of Affected Credit Ratings
includes additional disclosures that vary with regard to some of the ratings.
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL460271
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Rating Solicitation
• Issuer Participation
• Participation: Access to Management
• Participation: Access to Internal Documents
• Disclosure to Rated Entity
• Endorsement
• Lead Analyst
• Releasing Office
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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 quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
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.
Wenzhao Wu
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Soumya Vasudevan
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
