New York, August 17, 2012 -- Moody's Investors Service has upgraded 20 tranches from eight RMBS transactions
issued by Washington Mutual. The collateral backing these deals
primarily consists of first-lien, adjustable-rate
Option ARM residential mortgages. The actions impact approximately
$2.4 billion of RMBS issued from 2005 to 2006.
Complete rating actions are as follows:
Issuer: WaMu Mortgage Pass-Through Certificates Series 2005-AR6
Trust
Cl. 2-A-1A, Upgraded to Ba3 (sf); previously
on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2005-AR11
Cl. A-1A, Upgraded to Ba1 (sf); previously on
May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade
Cl. A-1B2, Upgraded to Caa3 (sf); previously
on Dec 3, 2010 Downgraded to Ca (sf)
Cl. A-1B3, Upgraded to Caa3 (sf); previously
on Dec 3, 2010 Downgraded to Ca (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2005-AR13
Cl. A-1A1, Upgraded to Baa2 (sf); previously
on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade
Cl. A-1A2, Upgraded to Baa2 (sf); previously
on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade
Cl. A-1A3, Upgraded to Baa2 (sf); previously
on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade
Cl. A-1B2, Upgraded to Caa1 (sf); previously
on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade
Cl. A-1B3, Upgraded to Caa1 (sf); previously
on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade
Cl. X, Upgraded to Caa2 (sf); previously on Dec 3,
2010 Downgraded to Caa3 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2005-AR2
Cl. 2-A-1A, Upgraded to Ba3 (sf); previously
on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2005-AR9
Cl. A-1A, Upgraded to Baa1 (sf); previously on
May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade
Cl. A-1B, Upgraded to B2 (sf); previously on
May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade
Cl. X, Upgraded to Caa2 (sf); previously on Dec 3,
2010 Downgraded to Caa3 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2006-AR1
Cl. 2A-1A, Upgraded to Ba3 (sf); previously on
May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2006-AR3
Cl. A-1A, Upgraded to B3 (sf); previously on
May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade
Issuer: WaMu Mortgage Pass-Through Certificates, Series
2005-AR8
Cl. 1-A-1A, Upgraded to Ba1 (sf); previously
on Dec 3, 2010 Downgraded to B1 (sf)
Cl. 2-A-1A, Upgraded to Baa3 (sf); previously
on May 30, 2012 B1 (sf) Placed Under Review for Possible Upgrade
Cl. 2-A-1B2, Upgraded to Caa2 (sf); previously
on Dec 3, 2010 Downgraded to Caa3 (sf)
Cl. 2-A-1B3, Upgraded to Caa2 (sf); previously
on Dec 3, 2010 Downgraded to Caa3 (sf)
RATINGS RATIONALE
The actions are a result of the recent performance of Option ARM pools
originated on or after 2005 and reflect Moody's updated loss expectations
on these pools.
Today's rating action consists of a number of upgrades. The upgrades
are due to significant improvement in collateral performance.
The methodologies used in these ratings were "Moody's Approach to Rating
US Residential Mortgage-Backed Securities" published in December
2008, and "2005 -- 2008 US RMBS Surveillance Methodology"
published in July 2011. The methodology used in rating Interest-Only
Securities was "Moody's Approach to Rating Structured Finance Interest-Only
Securities" published in February 2012. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
Moody's adjusts the methodologies noted above for 1) Moody's current view
on loan modifications 2) small pool volatility
Loan Modifications
As a result of an extension of the Home Affordable Modification Program
(HAMP) to 2013 and an increased use of private modifications, Moody's
is extending its previous view that loan modifications will only occur
through the end of 2012. It is now assuming that the loan modifications
will continue at current levels until the end of 2013.
Small Pool Volatility
The above RMBS approach only applies to structures with at least 40 loans
and pool factor of greater than 5%. Moody's can withdraw
its rating when the pool factor drops below 5% and the number of
loans in the deal declines to 40 loans or lower. If, however,
a transaction has a specific structural feature, such as a credit
enhancement floor, that mitigates the risks of small pool size,
Moody's can choose to continue to rate the transaction. Please
refer further to Moody's Investors Service's Withdrawal Policy,
which can be found on our website, www.moodys.com.
For pools with loans less than 100, Moody's adjusts its projections
of loss to account for the higher loss volatility of such pools.
For small pools, a few loans becoming delinquent would greatly increase
the pools' delinquency rate.
To project losses on Option ARM pools with fewer than 100 loans,
Moody's first calculates an annualized delinquency rate based on vintage,
number of loans remaining in the pool and the level of current delinquencies
in the pool. For Option ARM pools, Moody's first applies
a baseline delinquency rate of 10% for 2005, 19% for
2006 and 21% for 2007. Once the loan count in a pool falls
below 76, this rate of delinquency is increased by 1% for
every loan fewer than 76. For example, for a 2005 pool with
75 loans, the adjusted rate of new delinquency is 10.1%.
Further, to account for the actual rate of delinquencies in a small
pool, Moody's multiplies the rate calculated above by a factor ranging
from 0.20 to 1.8 for current delinquencies that range from
less than 2.5% to greater than 50% respectively.
Moody's then uses this final adjusted rate of new delinquency to project
delinquencies and losses for the remaining life of the pool under the
approach described in the methodology publication.
When assigning the final ratings to bonds, in addition to the approach
described above, Moody's considered the volatility of the projected
losses and timeline of the expected defaults.
The primary source of assumption uncertainty is the uncertainty in our
central macroeconomic forecast and performance volatility due to servicer-related
issues. The unemployment rate fell from 9.0% in April
2011 to 8.3% in July 2012. Moody's forecasts a further
drop to 7.8% for 2013. Moody's expects house prices
to drop another 1% from their 4Q2011 levels before gradually rising
towards the end of 2013. 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.
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF294822
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/viewresearchdoc.aspx?docid=PBS_SF225686
For more information please see www.moodys.com.
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 each of the ratings 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 these transactions and the assessments had a neutral impact
on the rating.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings 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.
Max Sauray
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
Amita Shrivastava
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 upgrades $2.4 billion of Option ARM RMBS issued by Washington Mutual from 2005 to 2006
