Fitch Ratings has taken various rating actions on 948 classes in 144 U.S. Scratch and Dent RMBS transactions.
The transactions reviewed are generally comprised of residential mortgage loans which were either (a) originated with exceptions to the originator's underwriting guidelines or (b) delinquent, or had been previously delinquent, at the time of issuance. The reviewed transactions were issued between 1996 and 2008.
A spreadsheet detailing Fitch's rating actions can be found using the web link below for 'U.S Scratch & Dent RMBS Rating Actions for Nov. 16, 2012'.
A summary of the rating actions:
--781 classes affirmed;
--167 classes downgraded.
The majority of the rating revisions affected classes that held non-investment grade or distressed ratings prior to the review. Additionally, the majority of the revisions were one rating category, and no rating revision was greater than two categories.
Delinquency trends for the mortgage pools have remained relatively stable over the past year. On average, delinquency percentages improved modestly from 36% to 35%, while realized losses to date increased modestly from 11% to 12%.
The rating revisions primarily reflect revised assumptions for future loan modifications, servicer advancing and liquidation timelines to better reflect recent trends. Additionally, projected default assumptions were revised based on a recently-introduced non-prime loan loss model. The new model incorporates recent performance data and improves the consistency of methodologies across the Prime, Alt-A and Subprime sectors.
For mortgage pools without loan-level information, Fitch used vintage average default assumptions adjusted for each pool's delinquency distribution and performance. The loss-severity assumptions for all pools reflected loss severity trends of loans liquidated over the past 12 months. After determining each underlying pool's projected base-case and stressed scenario mortgage loss assumptions, Fitch performed cash flow analysis to determine the risk of principal loss or interest shortfall for each class.
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 and Related Research:
--'U.S. RMBS Surveillance Criteria' (Oct. 11, 2012);
--'U.S. Residential Mortgage Re-REMIC Criteria' (Aug. 10, 2012);
--'U.S. RMBS Loan Loss Model Criteria' (Aug. 10, 2012);
--'Criteria for Rating Caps in Global Structured Finance Transactions' (Aug. 2, 2012);
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Counterparty Criteria for Structured Finance Transactions' (May 30, 2012);
--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (March 20, 2012);
--'Structured Finance Recovery Estimates for Distressed Securities' (Nov. 18, 2011);
--'Fitch Reviews U.S. Alt-A RMBS Sector' (June 6, 2012).
Applicable Criteria and Related Research: U.S Scratch & Dent RMBS Rating Actions for Nov. 16, 2012
Criteria for Interest Rate Stresses in Structured Finance Transactions
Structured Finance Recovery Estimates for Distressed Securities
U.S. RMBS Surveillance Criteria
U.S. Residential Mortgage Re-REMIC Criteria
U.S. RMBS Loan Loss Model Criteria
Criteria for Rating Caps in Global Structured Finance Transactions
Global Structured Finance Rating Criteria
Counterparty Criteria for Structured Finance Transactions
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