Fitch Reviews 7 U.S. RMBS Re-Performing Loan Transactions

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has reviewed 175 classes from seven U.S. RMBS transactions backed by re-performing loans (RPL) collateral.

Rating Action Summary:

--135 classes affirmed;

--40 classes upgraded;

--98 classes with Rating Outlooks revised to Positive from Stable.

A spreadsheet detailing Fitch's rating actions can be found at 'www.fitchratings.com' by performing a title search for 'U.S. RMBS Rating Actions for November 22, 2016', or by using the link provided.

KEY RATING DRIVERS

The rating affirmations reflect transaction performance within initial expectations. The transactions under review are seasoned between five and 23 months and serious delinquencies range from 0.6% to 4.7%, which is better than initially expected for peak-vintage RPL collateral. No deal has more than 33 basis points (bps) of realized loss to date, as a percentage of the closing pool balance. If performance continues along the early trendline, the affirmed ratings will likely experience positive rating pressure in the future.

The upgrades and Positive Outlooks reflect improvement in the relationship between credit enhancement (CE) and expected losses significant enough to result in positive rating pressure. The deals have steadily delevered since issuance, with three-month CPR averaging approximately 13%. The average CE of upgraded investment grade classes and those with a Positive Outlook has increased from 28% at issuance to 33% today.

A detailed list of Fitch's updated probability of default, loss severity, and loss expectations can be found by performing a title search for 'U.S. RMBS Loss Metrics' at www.fitchratings.com. The report provides a summary of base-case and stressed scenario projections.

RATING SENSITIVITIES

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 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.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Sources of Information:

As identified in Fitch's report 'US RMBS Surveillance and Re-REMIC Criteria', the sources of information used to assess these ratings include data provided by trustees, servicers, CoreLogic LoanPerformance and Intex Solutions, Inc.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 26 Oct 2016)

https://www.fitchratings.com/site/re/888492

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/site/re/882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

Rating Criteria for U.S. Residential and Small Balance Commercial Mortgage Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/site/re/864368

U.S. RMBS Cash Flow Analysis Criteria (pub. 15 Apr 2016)

https://www.fitchratings.com/site/re/880006

U.S. RMBS Loan Loss Model Criteria (pub. 12 May 2016)

https://www.fitchratings.com/site/re/880673

U.S. RMBS Master Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/882350

U.S. RMBS Seasoned and Re-Performing Loan Criteria (pub. 12 May 2016)

https://www.fitchratings.com/site/re/880720

U.S. RMBS Surveillance and Re-REMIC Criteria (pub. 15 Nov 2016)

https://www.fitchratings.com/site/re/888698

Related Research

U.S. RMBS Rating Actions for November 22, 2016

https://www.fitchratings.com/site/re/890978

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1015192

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015192

Endorsement Policy

https://www.fitchratings.com/regulatory

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Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.

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Fitch Ratings
Surveillance Analyst
Christine Yan
Director
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Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
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Roelof Slump
Managing Director
+1-212-908-0705
or
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Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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