Fitch Reviews U.S. Small-Balance CMBS Transactions

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has taken various actions on 398 classes from 47 U.S. structured finance transactions. The transactions reviewed consisted of 31 Small Balance Commercial (SBC) transactions and 17 transactions sponsored by affiliated entities of Bayview Asset Management, LLC (Bayview). The Bayview transactions include re-securitization and revolving trust transactions primarily collateralized with small-balance commercial and mixed-use loans.

Approximately 93% of the classes reviewed had their ratings affirmed, while 6% were upgraded and 1% downgraded. A spreadsheet detailing Fitch's rating actions can be found at 'www.fitchratings.com' by performing a title search for 'US Small-Balance CMBS Rating Actions for June 19, 2015'.

KEY RATING DRIVERS

The rating affirmations reflect the stable performance of the collateral. Since the prior review in November 2014 the average serious delinquency rate declined a modest 20 basis points. The limited upgrades reflect an improvement in the relationship between credit enhancement and expected loss. Among the small number of classes that were downgraded, all previously were rated 'Bsf' or lower, and the rating changes reflect either a higher likelihood or greater imminence of default.

Since loan level information is generally not available for these transactions, projected losses are derived based on pool-level performance data. The probability of default (PD) assumptions are based on average output from Fitch's US RMBS Loan Loss Model, specific to sector, vintage and delinquency status. The majority of deals reviewed used average model default levels from the Alt-A sector due to similarities with Alt-A loan attributes and performance. Only two transactions used subprime sector averages. Default expectations were generally lower than the prior review due to enhancements made to the US RMBS Loan Loss Model in late 2014.

The base-case loss severity (LS) projections are determined by issuer-level 12-month historical LS averages, and typically range from 65% - 80%. Stressed loss severity assumptions are based off average LS multiples from the US RMBS Loan Loss Model.

Fitch's cashflow analysis assumes prepayment, loss-timing, and servicer advancing behavior consistent with Alt-A sector vintage averages. For transactions where cash flow analysis is not available, Fitch compared the current bond credit enhancement (CE) to the remaining expected pool loss in each rating stress.

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 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.

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.

US Small-Balance CMBS

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867740

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 28 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

Global Structured Finance Rating Criteria (pub. 31 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

U.S. RMBS Cash Flow Analysis Criteria (pub. 06 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863973

U.S. RMBS Loan Loss Model Criteria (pub. 17 Nov 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=810788

U.S. RMBS Master Rating Criteria (pub. 12 Jun 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866607

U.S. RMBS Surveillance and Re-REMIC Criteria (pub. 01 Jun 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866259

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=986776

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=986776

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150622006344/en/

Fitch Ratings
Surveillance Analyst
Roger Lin
Director
+1-212-908-0778
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Grant Bailey
Managing Director
+1-212-908-0544
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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