Various Rating Actions Taken On 83 Classes From 12 U.S. RMBS Transactions

  • We reviewed 83 ratings on 12 U.S. RMBS transactions issued between 2003 and 2007. All of these transactions are backed by alternative-A and negative amortization loans.
  • Of the 83 ratings, we raised 25, lowered 11, and affirmed 47.
CENTENNIAL (S&P Global Ratings) Dec. 19, 2018--S&P Global Ratings today 
completed its review of 83 classes from 12 U.S. residential mortgage-backed 
securities (RMBS) transactions issued between 2003 and 2007. All of these 
transactions are backed by alternative-A and negative amortization loans. The 
review yielded 25 upgrades, 11 downgrades, and 47 affirmations.

We incorporate various considerations into our decisions to raise, lower, or 
affirm ratings when reviewing the indicative ratings suggested by our 
projected cash flows. These considerations are based on transaction-specific 
performance or structural characteristics (or both) and their potential 
effects on certain classes. Some of these considerations include: 
  • Collateral performance/delinquency trends;
  • Historical interest shortfalls;
  • Priority of principal payments;
  • Proportion of reperforming loans in the pool; and
  • Available subordination and/or overcollateralization.
Please see the ratings list for the rationales for classes with rating 
transitions. The affirmations of ratings reflect our opinion that our 
projected credit support and collateral performance on these classes have 
remained relatively consistent with our prior projections.

We raised our ratings on 23 classes as a result of increased credit support. 
These classes have benefited from the failure of performance triggers and/or 
reduced subordinate-class principal distribution amounts, which has built 
credit support for these classes as a percent of their respective deal 
balance. Ultimately, we believe these classes have credit support that is 
sufficient to withstand losses at higher rating levels.

We raised our ratings on classes 15-PO and 30-PO from MASTR Alternative Loan 
Trust 2004-4. These two classes are principal-only securities that receive 
principal from stripped portions of discount loans. Per our criteria, 
"Methodology For Surveilling U. S. RMBS Principal-Only Strip Securities For 
Pre-2009 Originations," published Oct. 11, 2016, the creditworthiness of these 
types of classes is typically commensurate with the creditworthiness of the 
weakest principal and interest (P&I) senior securities in their related 
structures. Classes 15-PO and 30-PO have superior creditworthiness compared to 
the weakest P&I senior class 9-A-1. Class 9-A-1 has greater default risk as a 
result of two term-extended modified loans that are currently delinquent, but 
neither of these loans are discount loans. Therefore, classes 15-PO and 30-PO 
do not face the risk of the two loans defaulting and, ultimately, we de-linked 
their ratings from that of class 9-A-1.

We lowered our ratings on classes M-3 and B from MASTR Adjustable Rate 
Mortgages Trust 2004-2 after assessing the impact of missed interest payments 
on these classes. These downgrades are based on our cash flow projections used 
in determining the likelihood that the missed interest payments would be 
reimbursed under various scenarios because these classes receive additional 
compensation for outstanding missed interest payments.

We lowered our rating on class 9-A-1 from MASTR Alternative Loan Trust 2004-4 
as a result of increased delinquencies. This class was originally expected to 
mature no later than 15 years from issuance, but two loans were modified with 
significant term extensions. Both of these loans have maturities well beyond 
class 9-A-1's original expected maturity. Both of these loans are currently 
delinquent, and the total balance of all other loans in group nine is 
insufficient to fully pay down class 9-A-1. As a result, this creates the risk 
of back-end defaults, and we believe class 9-A-1 has credit support that is 
insufficient to withstand losses at higher rating levels.

We lowered our rating on class 2A1C from Harborview Mortgage Loan Trust 
2006-CB1 due to reduced interest payments resulting from loan modifications in 
the collateral loan pool. Of the total loans in the related pool, 65.7% have 
been modified, and many were modified with rate reductions. In turn, these 
credit events have resulted in lessened interest to class 2A1C. Per table one 
in our criteria, "Methodology For Incorporating Loan Modifications And 
Extraordinary Expenses Into U.S. RMBS Ratings," April 17, 2015, the cumulative 
interest reduction amount (CIRA) has exceeded the max potential rating 
threshold at the prior rating level, which requires a rating downgrade. 
Although timely payments of interest due and the ultimate payment of principal 
to class 2A1C are guaranteed by Freddie Mac, the amount of interest that was 
lost due to modifications is not guaranteed.
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