Fitch Takes Various Actions on U.S. RMBS Re-REMICs

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has taken various actions on 1,800 classes in 208 U.S. RMBS Re-REMIC transactions. A summary of the rating actions on the classes reviewed is as follows:

--1,299 classes affirmed;

--191 classes upgraded;

--8 classes downgraded;

--6 classes remain on Rating Watch Positive;

--5 classes placed on Rating Watch Negative;

--295 classes paid in full.

A spreadsheet detailing Fitch's rating actions can be found at 'www.fitchratings.com' by performing a title search for 'U.S. RMBS Re-REMIC Rating Actions for Feb. 3, 2016', or by using the link provided.

KEY RATING DRIVERS

The underlying collateral has improved moderately since the last review in February of 2015. On average, the percentage of loans 60 or more days delinquent in the underlying transactions has declined by roughly 1.2% since the last review. Additionally, while loans continue to liquidate at a loss, the aggregate loss to date has increased by less than 23 basis points over that same period.

Fitch's U.S. RMBS Loan Loss Model is currently undergoing its annual review. Preliminary indications are that potential model enhancements may result in modestly lower expected losses on average, but a small proportion of pools may see a modest increase in loss expectations. In order to protect against the risk of higher future loss expectations, ratings on classes that were eligible for upgrades of more than one category were limited to one rating category. 32 classes were affected by the one-category upgrade cap.

The model-proposed rating actions for over 96% of the classes with non-distressed ratings were either affirmations or upgrades. Approximately 72% of the total classes under review were affirmed, while 11% were upgraded and 1% were downgraded. Approximately 17% of those upgraded classes were affected by the aforementioned rating cap related to pending model enhancements. Of the total classes under review, 16% have been paid in full since the last review.

Only two investment grade classes were downgraded, driven by collateral pools with low remaining loan counts. Per its RMBS surveillance criteria, for transactions that lack structural mitigants, Fitch implements rating caps wherein minimum loan count thresholds must be met at each rating category. The remaining eight downgraded classes previously held distressed ratings.

Fitch's U.S. RMBS surveillance group currently implements an 'Asf' rating cap for classes with meaningful exposure to Ocwen Loan Servicing, LLC (Ocwen) as a servicer, as Fitch downgraded Ocwen's servicer rating to 'RPS4' from 'RPS3' in 2015 due to weaknesses in the company's corporate governance and operational control framework. Thus, 90 of the 340 classes in this review that are rated 'Asf' were affected by this rating cap.

Roughly 3% of the classes reviewed had their ratings withdrawn immediately following the rating action. The majority of those withdrawn were rated 'Dsf' with no remaining balance and no projected recoveries. A small number of classes were withdrawn due to loan counts of 10 or fewer.

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.

U.S. RMBS reREMIC Review

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=877489

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 Rating Criteria for Single- and Multi-Name Credit-Linked Notes (pub. 09 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863276

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

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

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864368

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. 03 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868923

U.S. RMBS Master Rating Criteria (pub. 21 Jan 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=876378

U.S. RMBS Seasoned and Re-Performing Loan Criteria (pub. 18 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875109

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=998954

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=998954

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/20160203005970/en/

Fitch Ratings
Surveillance Analyst
Ryan O'Loughlin
Associate Director
+1-212-908-0387
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Roelof Slump
Managing Director
+1-212-908-0705
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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