Rating Action Summary
--9,747 classes (98%) affirmed;
--153 classes (1.5%) upgraded;
--25 classes (<1%) downgraded;
--5 classes placed on Rating Watch Negative.
In addition, all classes with a rating of 'Dsf', a balance of 0, and a projected recovery estimate of 0 had their ratings affirmed at 'Dsf' and subsequently withdrawn.
A spreadsheet detailing the actions can be found on Fitch's website by performing a title search for 'U.S. RMBS Rating Actions for
KEY RATING DRIVERS
Collateral performance has continued to improve modestly since the last review. The serious delinquency rate improved nearly 2% since
The decrease in delinquency led to a similar improvement in Fitch's average loss assumptions. Probability of default fell by at least 2% to 75% of outstanding loans across all vintages. Total projected losses fell roughly 2% since November to 43% in the base case scenario.
The slight improvement in collateral contributed to a number of rating upgrades. Of the classes upgraded, 75% involved investment-grade ratings. Only 8% of all upgrades were two categories. These classes were previously rated 'BBsf' or below. Additional classes are expected to recover full principal in higher rating stresses but were constrained by rating caps due to additional risks. These rating caps are listed for the bonds affected in 'RMBS Loss Metrics.'
Less than 1% of all classes were downgraded during this review. Of the 25 classes downgraded only two were investment grade prior to the review. Both of those downgrades were classes that were previously on Rating Watch Negative and had growing interest shortfalls. Half of all downgrades were from 'CCsf' to 'Csf'. All classes downgraded to 'Csf' have a high probability of defaulting within the next 12 months.
Fitch recently announced a modest revision in the economic rating stress scenarios for transactions issued prior to 2006. Previously, Fitch applied less severe scenarios to pools securitized prior to 2006 than to those securitized after 2006. Fitch will now apply consistent economic rating stress scenarios across all vintages. Fitch identified 10 classes expected to have model-proposed downgrades due to the revision. Five of the classes are placed on Rating Watch Negative and will be reassessed in the coming months. The remaining five classes are affirmed due to positive trends in the relationship of credit enhancement to delinquency.
A detailed list of Fitch's updated probability of default, loss severity, and expected loss can be found by performing a title search for 'RMBS Loss Metrics' at www.fitchratings.com. The report provides a summary of base-case and stressed scenario projections.
Fitch's analysis includes rating stress scenarios from 'CCCsf' to 'AAAsf'. The 'CCCsf' scenario is intended to be the most-likely base-case scenario. Rating scenarios above 'CCCsf' are increasingly more stressful and less likely to occur. Although many variables are adjusted in the stress scenarios, the primary driver of the loss scenarios is the home price forecast assumption. In the 'Bsf' scenario, Fitch assumes home prices decline 10% below their long-term sustainable level. The home price decline assumption is increased by 5% at each higher rating category up to a 35% decline in the 'AAAsf' scenario.
In addition to increasing mortgage pool losses at each rating category to reflect increasingly stressful economic scenarios, Fitch analyzes various loss-timing, prepayment, loan modification, servicer advancing, and interest rate scenarios as part of the cash flow analysis. Each class is analyzed with 43 different combinations of loss, prepayment and interest rate projections.
Classes currently rated below 'Bsf' are at-risk to default at some point in the future. As default becomes more imminent, bonds currently rated 'CCCsf' and 'CCsf' will migrate towards 'Csf' and eventually 'Dsf'.
The ratings of bonds currently rated 'Bsf' or higher will be sensitive to future mortgage borrower behavior, which historically has been strongly correlated with home price movements. Despite recent positive trends, Fitch currently expects home prices to decline further in some regions before reaching a sustainable level. While Fitch's ratings reflect this home price view, the ratings of outstanding classes may be subject to revision to the extent actual home price and mortgage performance trends differ from those currently projected by Fitch.
The spreadsheet 'U.S. RMBS Rating Actions for
Additional information is available at 'www.fitchratings.com'.
--'U.S. RMBS Surveillance Criteria' (
--'Global Structured Finance Rating Criteria' (
--'U.S. RMBS Loan Loss Model Criteria' (
--'U.S. RMBS Cash Flow Analysis Criteria' (
--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (
--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (
--'Counterparty Criteria for Structured Finance and Covered Bonds' (
--'Structured Finance Recovery Estimates for Distressed Securities' (
Structured Finance Recovery Estimates for Distressed Securities
Counterparty Criteria for Structured Finance and Covered Bonds
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions
Criteria for Interest Rate Stresses in Structured Finance Transactions
U.S. RMBS Cash Flow Analysis Criteria
U.S. RMBS Loan Loss Model Criteria
Global Structured Finance Rating Criteria
U.S. RMBS Surveillance and Re-REMIC Criteria
Source: Fitch Ratings
Most Popular Stories
- Americans Still Pessimistic Despite Economic Growth
- Labor Day Travel Up, Gas Prices Down
- Bogdanovitch Delivers Laughs With 'She's Funny'
- U.K. Raises Terror Threat Level to 'Severe'
- Nintendo Launching 'Amiibo' Toy-game Franchise
- Canada, Russia Go to War (on Twitter)
- Parra Joins Exclusive Club of Hispanic CEOs
- Apple to Unveil New Items on Sept. 9
- Axxis Solutions Appoints Benites as CEO
- Obama Puts Ukraine Violence on Russia