Various Rating Actions Taken On 197 Classes From 47 U.S. RMBS Transactions

  • We reviewed 197 ratings from 47 U.S. RMBS transactions issued between 1998 and 2007. All of these transactions are backed by alternative-A, document deficient, Federal Housing Administration, prime jumbo, re-performing, closed-end second-lien, second-lien high loan-to-value, subprime, and negative amortization collateral.
  • Of the 197 ratings, we raised six, lowered 18, affirmed 154, withdrew nine, and discontinued 10.
CENTENNIAL (S&P Global Ratings) March 27, 2020--S&P Global Ratings today completed its review of 197 classes from 47 U.S. RMBS transactions issued between 1998 and 2007. All of these transactions are backed by alternative-A, document deficient, Federal Housing Administration, prime jumbo, re-performing, closed-end second-lien, second-lien high loan-to-value, subprime, and negative amortization collateral. The review yielded six upgrades, 18 downgrades, 154 affirmations, nine withdrawals, and 10 discontinuances.
Additionally, 71 ratings from 38 of the transactions within this review were placed under criteria observation (UCO) on Oct. 18, 2019, following the publication of "Methodology To Derive Stressed Interest Rates In Structured Finance." Today's rating actions resolve the UCO placements and each of the ratings reviewed are based on the application of our updated stressed interest rate assumptions and incorporate any performance changes since last review.
ANALYTICAL CONSIDERATIONS
S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak around midyear, and we are using this assumption in assessing the economic and credit implications. In our view, the measures adopted to contain COVID-19 have pushed the global economy into recession (see our macroeconomic and credit updates here: http://www.spglobal.com/ratings). Our views also consider that the loans supporting the RMBS in today's rating actions are significantly seasoned and are to borrowers that have weathered the Great Recession, a period of significant economic stress. As the situation evolves, we will update our assumptions and estimates accordingly.
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 may include:
  • Factors related to COVID-19;
  • Collateral performance or delinquency trends;
  • Available subordination and/or overcollateralization;
  • Historical interest shortfalls or missed interest payments;
  • Erosion of or increases in credit support; and
  • Expected short duration.
RATING ACTIONS
The rating changes reflect our opinion regarding the associated transaction-specific collateral performance and/or structural characteristics, and/or reflect the application of specific criteria applicable to these classes. See the ratings list below for the specific rationales associated with each of the classes with rating transitions.
The ratings affirmations reflect our opinion that our projected credit support and collateral performance on these classes has remained relatively consistent with our prior projections.
We raised our ratings on classes 1-A-1 and A-X-2 from IndyMac INDX Mortgage Loan Trust 2004-AR1 due to expected short duration. Based on the classes' average recent principal allocation, these classes are projected to pay down in a short period of time relative to projected loss timing, which limits their exposure to potential losses.
In reviewing the classes with observed interest shortfalls, we applied our interest shortfall criteria as stated in "Structured Finance Temporary Interest Shortfall Methodology," published Dec. 15, 2015, which impose a maximum rating threshold on classes that have incurred interest shortfalls resulting from credit or liquidity erosion. In applying the criteria, we looked to see if the applicable class received additional compensation beyond the imputed interest due as direct economic compensation for the delay in interest payment, which these classes did not. Therefore, in these instances, we used the maximum length of time until full interest is reimbursed as part of our analysis to assign the rating on each class. This resulted in our lowering of seven classes from five transactions.
We withdrew our ratings on eight classes from five transactions due to the small number of loans remaining within the related structure. Once a pool has declined to a de minimis amount, we believe there is a high degree of credit instability that is incompatible with any rating level.
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