Various Rating Actions Taken On 26 Classes From Eight U.S. RMBS Mid-State Transactions

  • We reviewed 26 ratings from eight U.S. RMBS Mid-State transactions issued between 1998 and 2010. All of these transactions are backed by a mix of subprime mortgage loans and residential retail installment contracts.
  • Of the 26 ratings, we raised three, lowered eight, and affirmed 15.
CENTENNIAL (S&P Global Ratings) March 27, 2020--S&P Global Ratings today completed its review of 26 ratings from eight U.S. RMBS transactions issued by various Mid-State Trust, Mid-State Capital Trust, and Mid-State Capital Corp. entities between 1998 and 2010. All of these transactions are backed by a mix of subprime mortgage loans and residential retail installment contracts. The review yielded three upgrades, eight downgrades, and 15 affirmations.
Four of the transactions within this review had at least one class that was 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 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: 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/delinquency trends; and
  • Available subordination or overcollateralization.
RATING ACTIONS
The rating changes reflect our opinion regarding the associated transaction-specific collateral performance and structural characteristics and/or reflect the application of specific criteria applicable to these classes. Please see the ratings list below for the specific rationales associated with each of the classes with rating transitions.
The affirmations of ratings reflect our opinion that our projected credit support and collateral performance on these classes has remained relatively consistent with our prior projections.
APPLICATION OF U.S. RMBS PRE-2009 CRITERIA FOR TRANSACTIONS THAT CONTAIN RESIDENTIAL RETAIL INSTALLMENT CONTRACTS
A portion of the collateral for each of the reviewed transactions consists of residential retail installment contracts, which we consider subprime collateral. As such, for this surveillance review, we applied our "U.S. RMBS Surveillance Credit And Cash Flow Analysis For Pre-2009 Originations" criteria published March 2, 2016, which address the surveillance methodology for subprime collateral originated before 2009.
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