Following a review of 12 Securities sponsored by BV Legacy L.P., formerly known as Bayview Financial, L.P., Fitch Ratings has affirmed 111 classes and downgraded 17 classes. The majority of the downgraded classes held a non-investment grade rating prior to the review and all were previously on Rating Outlook Negative.
The twelve transactions were issued between 2003 and 2007 and are collateralized by fixed- and adjustable-rate senior liens on single-family, commercial, multifamily and mixed-use properties.
A spreadsheet detailing Fitch's rating actions on the affected transactions can be found at 'www.fitchratings.com' by performing a title search for 'BFAT RMBS Rating Actions for July 23, 2012'.
The rating actions reflect Fitch's analysis of expected default and loss from the collateral pool in addition to cash flow analysis of each class. To determine the projected base-case loss, Fitch used vintage-specific average trends prepayment and net-loss rate trends adjusted for each pool's performance. Rating stress-scenario losses were determined applying loss multiples to the base-case consistent with Subprime sector averages. Fitch then performed cash flow analysis to analyze each bond's projected interest and principal recovery in the rating stress-scenarios. Further details can be found in Fitch's July 6, 2012 report 'U.S. RMBS Surveillance Criteria'.
Delinquency increased modestly over the past year and Fitch's average expected mortgage loss assumptions on the remaining pools in aggregate increased as a percentage of the remaining balance from 26% in 2011 to 30% in 2012.
Expected Loss as % of Current Balance/Original Balance
--2003 Vintage: 13% / 5%
--2004 Vintage: 16% / 7%
--2005 Vintage: 26% / 13%
--2006 Vintage: 39% / 26%
--2007 Vintage: 35% / 40%
In addition to higher loss estimates, the downgrades were also driven by a reduction in actual and projected cash flow available to pay bondholders as a result of loan modifications, reduced servicer advancing, and an assumption that interest rates will rise in the future.
The reduced cash flow has increased the risk of both actual and projected interest shortfalls and principal losses. A number of the downgraded classes are projected to be more vulnerable to interest shortfalls than principal losses due to a structural feature which prevents principal collections from being used to pay interest to the bondholders.
Those classes projected to incur interest shortfalls were downgraded despite often having projections of full principal recovery in higher rating stress scenarios.
These actions were reviewed by a committee of Fitch analysts.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria & Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2011);
--'U.S. RMBS Surveillance Criteria' (July 6, 2012);
--'U.S. Residential Mortgage Re-REMIC Criteria' (Aug. 15, 2011);
--'Structured Finance Recovery Estimates for Distressed Securities' (Nov. 18, 2011);
--'Counterparty Criteria for Structured Finance Transactions' (March 12, 2012);
--'Criteria for Rating Caps in Global Structured Finance Transactions' (Aug. 9, 2011).
Applicable Criteria and Related Research: BFAT RMBS Rating Actions for July 23, 2012
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684734
Criteria for Rating Caps in Global Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648672
Counterparty Criteria for Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=678938
U.S. Residential Mortgage Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648588
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923
U.S. RMBS Surveillance Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682865
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