/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/090802.mbx T R O U B L E D C O M P A N Y R E P O R T E R Sunday, August 2, 2009, Vol. 13, No. 212 Headlines ACE SECURITIES: Moody's Cuts Ratings on Three 2003-HS1 Securities ANCHOR NATIONAL: Fitch Affirms Ratings on Two 1994-1 Notes BANC OF AMERICA: Moody's Affirms Ratings on 20 2004-2 Certs. BANC OF AMERICA: Moody's Reviews Ratings on 14 2005-2 Certs. BANC OF AMERICA: Fitch Downgrades Ratings on 16 2007-3 Certs. BANK OF AMERICA: Fitch Downgrades Ratings on 2004-1 Securities BELLE HAVEN: Moody's Does Not Take Rating Actions on Notes BXG RECEIVABLES: Moody's Downgrades Ratings on 21 Classes CALLIDUS DEBT: Moody's Downgrades Ratings on Three Classes CALLIDUS DEBT PARTNERS: Moody's Cuts Ratings on Three Classes CANYON CAPITAL: Moody's Downgrades Ratings on 2004-1 Notes CANYON CAPITAL: Moody's Downgrades Ratings on 2006-1 Notes CAPITALSOURCE REAL: Moody's Reviews Ratings on 12 2006-A Notes CASTLE GARDEN: Moody's Downgrades Ratings on Various Classes C-BASS MORTGAGE: Moody's Downgrades Ratings on 2007-CB4 Tranche CHARLIE MAC: Moody's Downgrades Ratings on Five 2004-2 Tranches CHASE FUNDING: Moody's Downgrades Ratings on Five 2004-OPT1 Notes CHL MORTGAGE: Moody's Downgrades Ratings on Two 2007-4 Tranches CIFC FUNDING: Moody's Downgrades Ratings on Two 2007-III Notes CITIGROUP COMMERCIAL: Moody's Affirms Ratings on 2005-EMG Certs. COAST FUNDING: Fitch Downgrades Ratings on Four Classes of Notes COMMERCIAL MORTGAGE: Moody's Takes Rating Actions on 1999-C1 Notes CONNECTICUT VALLEY: Moody's Downgrades Ratings on Five Classes COPPER RIVER: Moody's Takes Rating Actions on Various Classes CORTS TRUST: S&P Affirms 'BB+' Rating on $25 Mil. Certificates COUNTRYWIDE FHA: Moody's Downgrades Ratings on 97 Tranches CREDIT SUISSE: Moody's Downgrades Ratings on 140 Tranches CSFB 2007-TFL2: Moody's Reviews Ratings on 10 Pooled Classes CREDIT SUISSE: Moody's Takes Rating Actions on 2005-C2 Certs. CREDIT SUISSE: Moody's Takes Rating Actions on 2005-C3 Certs. CSAM FUNDING: Moody's Downgrades Ratings on 10 Classes CSAM FUNDING: Moody's Downgrades Ratings on Eight Classes CSAM FUNDING: Moody's Downgrades Ratings on Two Classes CSAM FUNDING: Moody's Downgrades Ratings on Various Classes E*TRADE RV: Moody's Downgrades Ratings on Three Tranches FIFTH THIRD: Moody's Downgrades Ratings on Two 2002-FTB1 Certs. FIRST UNION: Moody's Confirms Ratings on Six 2001-C1 Certificates FIRSTPLUS HOME: Moody's Upgrades Ratings on 1996-A Certificate FOOTHILL CLO: Moody's Downgrades Ratings on Various Classes FRANKLIN CLO: Moody's Downgrades Ratings on Four Classes of Notes FREMONT HOME: Moody's Downgrades Ratings on Class SL-A to 'C' GALAXY V: Moody's Downgrades Ratings on Various Classes of Notes GALAXY VII: Moody's Downgrades Ratings on Various Classes GALLATIN CLO: Moody's Downgrades Ratings on Three Classes GMAC INC: Moody's Reviews Ratings on 13 Classes of Securities GOLDENTREE MULTISTRATEGY: S&P Affirms Ratings on Four Tranches GRAYSTON CLO: Moody's Downgrades Ratings on Three Classes of Notes GREENWICH CAPITAL: Fitch Downgrades Ratings on 15 2007-GG9 Certs. GSC GROUP: Moody's Downgrades Ratings on Two Classes of Notes GSMPS MORTGAGE: Moody's Downgrades Ratings on 81 Tranches GULF STREAM: Moody's Downgrades Ratings on Various 2004-1 Notes GULF STREAM-RASHINBAN: Moody's Downgrades Ratings on Three Classes HCA INC: Moody's Assigns 'Ba3' Rating on $750 Million Senior Notes HOME RE: Fitch Affirms Ratings on Various 2005-2 Notes HSBC BANK: S&P Corrects Ratings on 2004-11 Securities From 'BB-' HUNTINGTON CDO: Fitch Downgrades Ratings on Six Classes of Notes ISCHUS CDO: Moody's Downgrades Ratings on Three Classes of Notes IXIS REAL: Moody's Downgrades Ratings on Six 2004-HE4 Securities KKR FINANCIAL: S&P Puts Ratings on 2005-1 Notes on Negative Watch LOCHSONG LTD: S&P Downgrades Ratings on Seven Classes to 'D' LOOMIS SAYLES: Moody's Downgrades Ratings on Three Classes MADISON PARK: Moody's Downgrades Ratings on Three Classes MADISON PARK FUNDING: Moody's Cuts Ratings on 3 Classes of Notes MARATHON FINANCING: Moody's Downgrades Ratings on Various Classes MASTR REPERFORMING: Moody's Downgrades Ratings on 39 Tranches MAX FUNDING: Moody's Downgrades Ratings on Class B Notes to 'B1' MERRILL LYNCH: Moody's Affirms Ratings on Four 1998-C1-CTL Certs. MERRILL LYNCH: Moody's Cuts Ratings on Eight 2005-ACR1 Tranches MERRILL LYNCH: Moody's Reviews Ratings on 11 2005-CIP1 Certs. MESA TRUST: Moody's Downgrades Ratings on Two 2001-2 Certs. MORGAN STANLEY: S&P Affirms 'CCC+' Rating on $3 Million Notes MORGAN STANLEY: S&P Raises Rating on EUR43 Million Notes to 'B' MOUNTAIN VIEW: Moody's Downgrades Ratings on Various 2006-1 Notes NAAC REPERFORMING: Moody's Downgrades Ratings on 26 Tranches NATIONAL COLLEGIATE: Moody's Downgrades Ratings on Class B Notes NAVIGARE FUNDING: Moody's Downgrades Ratings on Two Classes NAVIGARE FUNDING: Moody's Takes Rating Actions on Various Classes OPTION ONE: Moody's Downgrades Ratings on Six 2007-1 Notes PAMCO CAYMAN: Moody's Downgrades Ratings on Class B Notes to 'Ca' PHH MORTGAGE: Moody's Downgrades Ratings on 24 2008-CIM1 Tranches PINNACLE ENTERTAINMENT: Fitch Takes Various Rating Actions PRIMUS CLO: Moody's Downgrades Ratings on Five Classes of Notes PROSPECT PARK: Moody's Takes Rating Actions on Various Notes PRUDENTIAL STRUCTURED: Fitch Affirms Ratings on Four Classes PUNTO VERDE: S&P Puts 'BB' Rating on $40 Million Tax-Exempt Notes RACE POINT: Moody's Downgrades Ratings on Various Classes RAFFLES PLACE: S&P Downgrades Ratings on Five Classes to 'D' RBSGC MORTGAGE: Moody's Downgrades Ratings on 10 2005-RP1 Tranches SACO I: Moody's Downgrades Ratings on Three 2000-3 Certificates SASCO 2005: Moody's Downgrades Ratings on Seven Tranches SASCO FHA: Moody's Downgrades Ratings on 101 Tranches SATURN CLO: Moody's Downgrades Ratings on Four Classes of Notes SAXON MORTGAGE: Moody's Downgrades Ratings on Four Classes SEQUOIA MORTGAGE: Moody's Downgrades Ratings on 121 Tranches SEQUOIA MORTGAGE: Moody's Downgrades Ratings on Class B Tranche SFA CABS: Fitch Affirms Ratings on Two Classes of Notes SHEFFIELD CDO: Moody's Downgrades Ratings on Five Classes SILVERADO CLO: Moody's Downgrades Ratings on Two 2006-II Notes SLATE CDO: Moody's Reviews Ratings on Seven Classes of Notes SMART HOME: Moody's Downgrades Ratings on Nine 2006-1 Tranches SOLSTICE ABS: Moody's Downgrades Ratings on Three Classes STRUCTURED ADJUSTABLE: Moody's Cuts Ratings on Six 2005-4 Certs. SUPERIOR WHOLESALE: Fitch Puts Low-B Ratings on Class C & D Notes SUPERIOR WHOLESALE INENTORY: Fitch Puts Low-B Ratings on 2 Classes SVO 2005-A: Moody's Downgrades Ratings on Six Classes of Notes SWIFT MASTER: Fitch Puts Low-B Ratings on Class C & D Notes SYMPHONY CLO: Moody's Downgrades Ratings on Three Classes of Notes T2 INCOME: Moody's Upgrades Ratings on Three Classes of Notes TABERNA PREFERRED: Fitch Downgrades Ratings on Five Notes TERRA CDO: S&P Junks Ratings on Class A1 2007-2 Notes TERRA CDO: S&P Withdraws Ratings on Three Classes of 2007-5 Notes TERWIN MORTGAGE: Moody's Downgrades Rating on 2004-EQR1 Cert. USAA CREDIT: Moody's Assigns 'Ba3' Rating on Class D Notes VELOCITY CLO: Moody's Downgrades Ratings on Four Classes of Notes WAMU MORTGAGE: Moody's Downgrades Ratings 14 2004-RP1 Tranches WAMU MORTGAGE-BACKED: Moody's Downgrades Ratings on 115 Tranches WASI FINANCE: Fitch Downgrades Ratings on Various 2006-HES1 Notes * Moody's Assigns Ratings on Two Participation Interests * Moody's Downgrades Ratings on Nine Certs. by Resecuritizations * S&P Downgrades Ratings on 47 Classes From Seven RMBS Deals * S&P Downgrades Ratings on 52 Tranches From 26 CDO Transactions * S&P Downgrades Ratings on 62 Classes From Six Alt-A Transactions * S&P Downgrades Ratings on 166 Classes From 10 Alt-A RMBS Deals * S&P Downgrades Ratings on 6,198 Classes From 611 RMBS Deals ********* ACE SECURITIES: Moody's Cuts Ratings on Three 2003-HS1 Securities ----------------------------------------------------------------- Moody's Investors Service has downgraded the rating of three securities issued by ACE Securities Corp. Home Equity Loan Trust, Series 2003-HS1. These actions are part of an ongoing review of subprime RMBS transactions. The rating actions are the result of an analysis of credit enhancement relative to updated collateral loss projections. The revised loss projections generally result from deterioration in collateral performance in recent months. Moody's approach to analyzing seasoned subprime pools (i.e. prior to 2H 2005) takes into account the annualized loss rate from last 12 months and the projected loss rate over next 12 months, and then translates these measures into lifetime losses based on a deal's expected remaining life. Recent Losses are calculated by assessing cumulative losses incurred over the past 12-months as a percentage of the average pool factor in the last year. For Pipeline Losses, Moody's uses an annualized roll rate of 15%, 30%, 65% and 90% for loans that are delinquent 60-days, 90+ days, are in foreclosure, and REO respectively. Moody's then applies deal- specific severity assumptions. The results of these two calculations -- Recent Losses and Pipeline Losses -- are weighted to arrive at the lifetime cumulative loss projection. Complete rating actions are: Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2003- HS1 -- Cl. M-4, Downgraded to Baa2; previously on 5/31/2007 Upgraded to A2 -- Cl. M-5, Downgraded to Baa3; previously on 10/1/2003 Assigned Baa2 -- Cl. M-6, Downgraded to Caa2; previously on 12/20/2007 Baa3 Placed Under Review for Possible Downgrade ANCHOR NATIONAL: Fitch Affirms Ratings on Two 1994-1 Notes ---------------------------------------------------------- Fitch Ratings has affirmed these classes of Anchor National Life Insurance 1994-1. The classes represent a beneficial ownership interest in separate trust funds. Anchor National Life Insurance 1994-1 -- $55.4 million class A at 'C/RR6'; -- $101,919 class G at 'BBB'; Outlook Negative. The rating actions were taken as part of Fitch's ongoing surveillance process of existing transactions. Fitch reviewed the performance of the remaining underlying securities which consist of Daiwa Mortgage Acceptance Corporation 1991-A C, which is the collateral for class A, and a pool of residential mortgage loans which is the collateral for class G. In addition, consideration was given to the limited guaranty provided by AIG with a remaining balance of $9.5 million. The limited guaranty provided by AIG provides credit protection for both class A and class G. In addition to the long-term rating for each bond, Fitch assigns Recovery Ratings for bonds rated below 'B'. The Recovery Rating scale is based upon the expected relative recovery characteristics of an obligation. BANC OF AMERICA: Moody's Affirms Ratings on 20 2004-2 Certs. ------------------------------------------------------------ Moody's Investors Service affirmed the ratings of 20 classes of Banc of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2004-2 due to increased subordination due to principal amoritization payoffs and overall stable pool performance. The pool has paid down by 13% since Moody's last review in June 2008. The action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the July 10, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 27% to $833.1 million from $1.1 billion at securitization. The Certificates are collateralized by 62 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten non- defeased loans representing 50% of the pool. The pool includes one loan, representing 5% of the pool, with an investment grade underlying rating. The PPG Place Loan ($108.4 million -- 13%) formerly had an investment grade underlying rating, but due to a decline in performance it is now analyzed as part of the conduit pool. Thirteen loans, representing 17% of the pool, have defeased and are collateralized with U.S. Government securities. Moody's was provided with partial or full-year 2008 operating results for 98% of the pool, excluding defeased loans. Moody's weighted average loan to value ratio is 87%, essentially the same as at Moody's prior review in June 2008. Moody's stressed debt service coverage ratio for the conduit component is 1.23X compared to 1.14X at last review. Moody's stressed DSCR is based on Moody's net cash flow and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of the Herfindahl index to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool, excluding defeased loans and loans with underlying ratings, has a Herf score of 16 compared to 24 at last review. Nine loans, representing 8% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. There have been no realized losses since securitization. Currently three of pool's top ten loans, representing 20% of the pool, are in special servicing. Moody's estimates an $8.2 million loss (18% loss severity) from one of the specially serviced loans. The largest specially serviced loan is the Eden Prairie Mall Loan ($78.8 million -- 9.6%), which is secured by the borrower's interest in a 1.1 million square foot regional mall located in suburban Minneapolis, Minnesota. The mall is owned by an affiliate of General Growth Properties, Inc. The in-line space was 99% occupied as of March 2009, similar to last review. Anchor tenants include Sears, Target, Von Maur and Kohl's. The loan was transferred to special servicing due to GGP's bankruptcy filing on April 16, 2009. Property performance has been stable, but Moody's analysis reflects a stressed cash flow due to Moody's concerns about the weak retail environment and the potential negative impact of GPP's bankruptcy on property performance. Moody's LTV and stressed DSCR are 82% and 1.22X, respectively, compared to 79% and 1.20X at last review. The second specially serviced loan is the Broward Financial Loan ($46.5 million -- 5.6%), which is secured by a 325,500 square foot Class A office tower located in downtown Fort Lauderdale, Florida. The loan was transferred to special servicing for maturity default in March 2009. The borrower's efforts to refinance the loan have been hampered by the short lease term remaining for the property's largest tenant, Franklin Templeton, which leases 42% of the building through June 2011. The property was 79% occupied in April 2009 compared to 77% at last review. The Borrower has requested an extension of maturity to provide time to secure refinancing. Moody's LTV and stressed DSCR are 121% and 0.90X, respectively, compared to 99% and 1.03X at last review. The third specially serviced loan is Prince Kuhio Plaza Loan ($37.8 million -- 4.5%), which is secured by the borrower's interest in a 504,000 square foot regional mall located in Hilo, Hawaii. The mall is owned by an affiliate of General Growth Properties, Inc. The loan was transferred to special servicing due a maturity default and GGP's bankruptcy filing on April 16, 2009. The loan matured on April 1, 2009. The mall was 85% occupied as of March 2009 compared to 89% at last review. Anchor tenants include Sears, Macy's, Safeway and Long's Drugs. Property performance has declined since last review. Moody's analysis of this loan reflects a stressed cash flow and tranching adjustments due to Moody's concerns about the weak retail environment, the property's declining performance trend and the potential negative impact of GPP's bankruptcy on property performance. Moody's current underlying rating and stressed DSCR are Baa3 and 1.39X, respectively, compared to Baa1 and 1.34X at last review. The loan which formerly had an underlying rating was the PPG Place Loan ($108.3 million -- 13.0%), which is secured by a 1.5 million square foot office complex located in downtown Pittsburgh, Pennsylvania. The property was 88% occupied as of May 2008, the same as at last review. The largest tenant is PPG Industries, Inc. (25% NRA; lease expiration June 2021; Moody's senior unsecured rating A3 -- stable outlook). Property performance has declined since last review due to increased operating expenses. Moody's LTV and stressed DSCR are 73% and 1.33X, respectively, compared to 68% and 1.44X at last review. The three largest conduit loans, excluding the specially serviced loans, represent 10.3% of the outstanding pool balance. The largest conduit loan is the MHC Portfolio-Waterford Estates Loan ($30.0 million -- 3.6%), which is secured by a 731-pad manufactured housing community located approximately ten miles south of Wilmington in Bear, Delaware. The property was 93% occupied as of December 2008 compared to 96% at last review. Performance has been stable. Moody's LTV and stressed DSCR are 96% and 0.99X, respectively, compared to 95% and 0.97X at last review. The second largest conduit loan is MHC Portfolio-Lake Fairways Country Club ($29.5 million -- 3.5%), which is secured by an 896- pad manufactured housing community located in North Fort Myers, Florida. The property was 93% occupied as of December 2008, essentially the same as at last review. Performance has been stable. Moody's LTV and stressed DSCR are 87% and 1.09X, respectively, compared to 85% and 1.08X at last review. The third largest conduit loan is MHC Portfolio- The Meadows at Countrywood/The Lakes at Countrywood ($26.2 million -- 3.1%), which is secured by two adjacent manufactured housing communities totaling 1,159-pads. The properties are located approximately 20 miles northeast of downtown Tampa in Plant, Florida. The overall occupancy was 97% as of December 2008, essentially the same as at last review. Performance has improved due to increased rental revenues. Moody's LTV and stressed DSCR are 83% and 1.14X, respectively, compared to 90% and 1.04X at last review. Moody's rating actions is: -- Class A-2, $7,667,143, affirmed at Aaa; previously affirmed at Aaa on 6/26/2008 -- Class A-3, $283,402,000, affirmed at Aaa; previously affirmed at Aaa on 6/26/2008 -- Class A-4, $125,682,000, affirmed at Aaa; previously affirmed at Aaa on 6/26/2008 -- Class A-5, $254,120,181, affirmed at Aaa; previously affirmed at Aaa on 6/26/2008 -- Class XC, Notional, affirmed at Aaa; previously affirmed at Aaa on 6/26/2008 -- Class XP, Notional, affirmed at Aaa; previously affirmed at Aaa on 6/26/2008 -- Class B, $27,045,564, affirmed at Aaa; previously upgraded to Aaa from Aa1 on 6/26/2008 -- Class C, $12,811,056, affirmed at Aaa; previously upgraded to Aaa from Aa2 on 6/26/2008 -- Class D, $24,198,662, affirmed at A1; previously upgraded to A1 from A2 on 6/26/2008 -- Class E, $11,387,606, affirmed at A3; previously affirmed at A3 on 6/26/2008 -- Class F, $15,657,957, affirmed at Baa1; previously affirmed at Baa1 on 6/26/2008 -- Class G, $9,964,155, affirmed at Baa2; previously affirmed at Baa2 on 6/26/2008 -- Class H, $15,657,958, affirmed at Baa3; previously affirmed at Baa3 on 6/26/2008 -- Class J, $4,270,352, affirmed at Ba1; previously affirmed at Ba1 on 6/26/2008 -- Class K, $5,693,803, affirmed at Ba2; previously affirmed at Ba2 on 6/26/2008 -- Class L, $5,693,803, affirmed at Ba3; previously affirmed at Ba3 on 6/26/2008 -- Class M, $7,117,253, affirmed at B1; previously affirmed at B1 on 6/26/2008 -- Class N, $2,846,901, affirmed at B2; previously affirmed at B2 on 6/26/2008 -- Class O, $2,846,901, affirmed at B3; previously affirmed at B3 on 6/26/2008 BANC OF AMERICA: Moody's Reviews Ratings on 14 2005-2 Certs. ------------------------------------------------------------ Moody's Investors Service placed 14 classes of Banc of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through, Series 2005-2 on review for possible downgrade due to higher expected losses for the pool resulting from anticipated losses from loans in special servicing, increased leverage from the remainder of the pool and a decline in the pool's diversity. Since Moody's prior review in June 2007, three loans, representing 4% of the pool, have transferred to special servicing. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the July 10, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 11% to $1.4 billion from $1.6 billion at securitization. The Certificates are collateralized by 85 mortgage loans ranging in size from less than 1% to 8% of the pool, with the top 10 loans representing 47% of the pool. Fifteen loans, representing 10% of the pool, are on the master servicer's watch-list. The watch-list includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watch-list to assess which loans have material issues that could impact performance. The pool has not experienced any losses to date. Three loans, representing 4% of the pool, are currently in special servicing. The specially serviced loans are secured by two office properties and one multifamily property. Based on Moody's preliminary analysis, the pool's weighted average loan to value ratio has increased since last review due to a decline in performance of a portion of the pool. Moody's review will focus on potential losses from specially serviced loans and the performance of the overall pool. Moody's rating action is: -- Class A-J, $108,805,000, currently rated Aaa, on review for possible downgrade; previously affirmed at Aaa on 6/11/2007 -- Class B, $43,111,000, currently rated Aa2, on review for possible downgrade; previously affirmed at Aa2 on 6/11/2007 -- Class C, $16,423,000, currently rated Aa3, on review for possible downgrade; previously affirmed at Aa3 on 6/11/2007 -- Class D, $28,741,000, currently rated A2, on review for possible downgrade; previously affirmed at A2 on 6/11/2007 -- Class E, $16,423,000, currently rated A3, on review for possible downgrade; previously affirmed at A3 on 6/11/2007 -- Class F, $20,530,000, currently rated Baa1, on review for possible downgrade; previously affirmed at Baa1 on 6/11/2007 -- Class G, $18,477,000, currently rated Baa2, on review for possible downgrade; previously affirmed at Baa2 on 6/11/2007 -- Class H, $18,476,000, currently rated Baa3, on review for possible downgrade; previously affirmed at Baa3 on 6/11/2007 -- Class J, $8,212,000, currently rated Ba1, on review for possible downgrade; previously affirmed at Ba1 on 6/11/2007 -- Class K, $6,159,000, currently rated Ba2, on review for possible downgrade; previously affirmed at Ba2 on 6/11/2007 -- Class L, $6,159,000, currently rated Ba3, on review for possible downgrade; previously affirmed at Ba3 on 6/11/2007 -- Class M, $4,106,000, currently rated B1, on review for possible downgrade; previously affirmed at B1 on 6/11/2007 -- Class N, $2,053,000, currently rated B2, on review for possible downgrade; previously affirmed at B2 on 6/11/2007 -- Class P, $10,265,000, currently rated B3, on review for possible downgrade; previously affirmed at B3 on 6/1/2007 BANC OF AMERICA: Fitch Downgrades Ratings on 16 2007-3 Certs. ------------------------------------------------------------- Fitch Ratings downgrades and removes from Rating Watch Negative 16 classes and revises Rating Outlooks on 15 classes of commercial mortgage pass-through certificates from Banc of America Commercial Mortgage Securities, Inc., series 2007-3. The downgrades are the result of loss expectations and reflect Fitch's prospective views regarding commercial real estate market value and cash flow declines. Fitch forecasts potential losses of 10.9% for this transaction, should market conditions not recover. The rating actions are based on losses of 8.6%, including 100% of the losses associated with term defaults and any losses associated with maturities within the next five years. Given the significant term to maturity, Fitch's actions only account for 25% of the losses associated with maturities beyond five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for loans representing 67.6% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Approximately 24.9% of the mortgages mature within the next five years: 20.8% in 2012, 0.5% in 2013, and 3.5% in 2014. In 2017, 70% of the pool is scheduled to mature. Fitch identified 27 Loans of Concern (36.7%) within the pool, 10 of which (15.1%) are specially serviced. Of the specially serviced loans, five (10.8% of the pool) are current. Seven of the Fitch Loans of Concern (29.8%) are within the transaction's top 15 loans (60.2%) by unpaid principal balance, one of which is 90 days delinquent. The delinquent specially serviced loan is the Metropolis Shopping Center loan (2.5% of the pool) which transferred to special servicing in December 2008. A recent appraisal indicated a value significantly below the debt amount. The occupancy has remained stable at 88%, however, the initial sponsor filed for bankruptcy in 2008 and a receiver is in place in order to stabilize the property. Ten of the loans within the top 15 (36.2%) are expected to default at maturity, with loss severities ranging from 6% to 40%. The largest contributors to loss are: One Park Avenue (5.3% of the pool), Rockwood Ross Multifamily Portfolio (5%), Second & Seneca (5%) and Pacifica Tower (4.7%). Both the Rockwood Ross Multifamily Portfolio loan and Second & Seneca loans are current and in special servicing. The pari passu One Park Avenue loan is secured by a 924,501 square foot (sf) office property in New York, NY. At issuance, the issuer underwrote to a stabilized cash flow based on the expectation that below market leases expiring during the term of the loan would be re-signed at higher rates, providing for potential upside in future cash flows. Based on YE 2008 performance, the property is behind the stabilization schedule. The servicer reported YE 2008 debt service coverage ratio was 0.88 times (x) with a reported May 2009 occupancy of 97.9%. However, a tenant representing approximately 19% of the net rentable area is expected to vacate its space at lease expiration in December 2009. Issuer underwritten DSCR and occupancy at issuance was 1.16x and 98%, respectively. Based on current performance and anticipated declines, losses are expected upon the loan's maturity in 2012. At closing, the loan was structured with an $18 million debt service reserve to cover interest shortfalls for the first three years of the loan term. As of June 2009, the balance of the debt service reserve is approximately $4.5 million. The Rockwood Ross Multifamily Portfolio (5%) and Second & Seneca property (5%) are the two largest specially serviced assets in the pool. Both loans transferred to special servicing for imminent default, however, they remain current as of July 2009 distribution date. Losses are expected upon each loan's scheduled maturity. The Rockwood Ross Portfolio consists of seven multifamily properties in Maryland and Virginia in counties surrounding Washington, D.C. Occupancy has increased to a combined 90% as of April 2009 with a YE 2008 DSCR of 1.01x and has not met its performance targets from issuance. The borrower is seeking a loan modification in order to stabilize performance of the property. The sponsor is Rockwood VI REIT. There is also a significant amount of mezzanine debt held outside of the trust. The Second & Seneca loan transferred to special servicing June 2009 as the space occupied by Washington Mutual representing 15.1% of the NRA is being vacated as Washington Mutual's receiver, the FDIC, has rejected the lease after Washington Mutual was seized by federal regulators in 2008. The property consists of a 497,271 sf two-building office complex located in downtown Seattle, WA and the sponsor is Tishman Speyer. The borrower has asked for a loan modification. The special servicer is discussing workout options with the borrower. Limited details are presently available on the workout and current valuation of the asset due to the loan's recent transfer to special servicing. Fitch downgrades and removes from Rating Watch Negative these classes: -- $241.7 million class A-J to 'BBB-' from 'AAA'; Outlook Negative; -- $35.2 million class B to 'BB' from 'AA+'; Outlook Negative; -- $48.3 million class C to 'BB' from 'AA'; Outlook Negative; -- $26.4 million class D to 'BB' from 'AA-'; Outlook Negative; -- $26.4 million class E to 'B' from 'A+'; Outlook Negative; -- $35.2 million class F to 'B-' from 'A'; Outlook Negative; -- $30.8 million class G to 'B-' from 'A-'; Outlook Negative; -- $48.3 million class H to 'B-' from 'BBB+'; Outlook Negative; -- $35.2 million class J to 'B-' from 'BBB'; Outlook Negative; -- $43.9 million class K to 'B-' from 'BBB-'; Outlook Negative; -- $26.4 million class L to 'B-' from 'BB'; Outlook Negative; -- $4.4 million class M to 'B-' from 'BB-'; Outlook Negative; -- $17.6 million class N to 'B-' from 'B+'; Outlook Negative; -- $4.4 million class O to 'B-' from 'B'; Outlook Negative; -- $8.8 million class P to 'CCC/RR6' from 'B-'; -- $13.2 million class Q to 'CCC/RR6' from 'CCC/DR1'. Fitch also affirms these classes: -- $45 million class A-1 at 'AAA'; Outlook Stable; -- $334 million class A-2 at 'AAA'; Outlook Stable; -- $150 million class A-2FL at 'AAA'; Outlook Stable; -- $133 million class A-3 at 'AAA'; Outlook Stable; -- $78.9 million class A-AB at 'AAA'; Outlook Stable; -- $1 billion class A-4 at 'AAA'; Outlook Stable; -- $50 million class A-5 at 'AAA'; Outlook Stable; -- $647.1 million class A-1A at 'AAA'; Outlook Stable; -- Interest-only class XW at 'AAA'; Outlook Stable; -- $116.6 million class A-M at 'AAA'; Outlook to Negative from Stable; -- $100 million class A-MF at 'AAA'; Outlook to Negative from Stable; -- $135 million class A-MFL at 'AAA'; Outlook to Negative from Stable. Fitch does not rate the $57.1 million class S. BANK OF AMERICA: Fitch Downgrades Ratings on 2004-1 Securities -------------------------------------------------------------- Fitch Ratings downgrades and assigns Outlooks to Bank of America Commercial Mortgage Securities, series 2004-1. The downgrades and Negative Outlook assignments are due to expected losses on two of the three loans currently in special servicing, as well as an increased concentration of Fitch Loans of Concern. The Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. As of the July 2009 distribution date, the pool has been reduced 20.4% to $1.05 billion from $1.32 billion at issuance. Nine loans, 7.4% of the pool, have defeased. There are currently three loans (2.9%) in special servicing with losses expected on the two largest loans. The largest loan in special servicing (1.3%), is collateralized by 181,596 square foot office building in Glendale, AZ. The property is fully vacant after losing the single tenant. The property has been real estate owned as of June 12, 2009 and the special servicer is working to increase the occupancy before marketing the property. The second largest specially serviced asset (1.0%) is collateralized by a 76,573 sf office building located in Concord, CA. The asset transferred to the special servicer June 17, 2009 due to imminent default. The third specially serviced loan (0.4%) is secured by a manufactured housing community located in Columbus, IN. The loan was unable to refinance at its scheduled maturity and is in the process of being modified by the special servicer. Exclusive of the three specially serviced loans, an additional 10 loans (5.5%) have been identified as Fitch Loans of Concern. The largest non-specially serviced loan of concern (1.3%) is secured by a retail property in Tracy, CA. The most recent servicer reported debt service coverage ratio is 0.90 times (x), with occupancy at 68%. The property lost a major tenant due to bankruptcy and the borrower is currently negotiating a lease for that vacant space. Fitch maintains investment grade shadow ratings on two loans in the trust: the Leo Burnett Building (11.4%) and the Hines Sumitomo Life Office Portfolio (9.9%) loans. The Leo Burnett Building is a 1.1 million sf class A office building located in Chicago, IL. Occupancy as of year-end 2008 was 99.9% compared to 98.2% at issuance. The Hines Sumitomo Life Office Portfolio is secured by three central business district office buildings containing a total of 1.2 million sf. Two of the office buildings are located in New York, NY, and one is located in Washington, DC. The whole loan consists of two senior pari-passu notes and one junior note. Only the A2 pari-passu note is held in the trust. The A2 note reflects a loan per square foot of $88 with a total A note debt per foot of $223, and total loan debt of $266. As of March 31, 2009, the overall occupancy dropped to 75.1% compared to 97.7% at issuance as a result of the loss of a tenant at one of the New York properties and a major renovation at the Washington, DC property. Renovations at the Washington property included the addition of three floors (approximately 80,000 sf), a green roof, rooftop terrace and a fitness center. The renovations were completed in the second quarter of 2009 and the property is currently leasing up. The DSCR as of December 31, 2008, is 2.52x on the total debt stack down from 2.66x at issuance. The deal has minimal near term maturities with 2.1% of the loans maturing in 2009 through 2011. Fitch Ratings downgrades and assigns Outlooks to Bank of America Commercial Mortgage Securities, series 2004-1: -- $29.9 million class E to 'AA-' from 'AA'; Outlook Stable; -- $18.3 million class F to 'A- from 'A+'; Outlook Stable; -- $11.6 million class G at 'BBB+' from A-'; Outlook Stable -- $19.9 million class H to 'BBB-'from 'BBB'; Outlook Negative; -- $6.6 million class J to 'BB+' from 'BBB-'; Outlook Negative; -- $6.6 million class K to 'BB' from 'BB+'; Outlook Negative; -- $8.3 million class L to 'B' from 'BB'; Outlook Negative. In addition, Fitch downgrades and assigns recovery ratings to these classes: -- $8.3 million class M to 'CCC/RR1' from 'BB-'; -- $3.3 million class N to 'CCC/RR1' from 'B+'; -- $3.3 million class O to 'CC/RR2' from 'B'. Also, Fitch affirms these classes: -- $233.6 million class A-1A at 'AAA'; Outlook Stable; -- $11.9 million class A-2 at 'AAA'; Outlook Stable; -- 100.1 million class A-3 at 'AAA'; Outlook Stable; -- 521.9 million class A-4 at 'AAA'; Outlook Stable; -- Interest-only class X-C at 'AAA'; Outlook Stable; -- Interest-only class X-P at 'AAA'; Outlook Stable; -- $31.5 million class B at 'AAA'; Outlook Stable; -- $13.3 million class C at 'AAA'; Outlook Stable; -- $13.3 million class D at 'AA+'; Outlook Stable. Fitch does not rate the $14.9 million class P. Class A-1 has been paid in full. BELLE HAVEN: Moody's Does Not Take Rating Actions on Notes ---------------------------------------------------------- Moody's Investors Service announced that it has not withdrawn, reduced or taken any other adverse action with respect to its current ratings on these notes issued by Belle Haven ABS CDO, Ltd., as the "Issuer" as a result of the entry into and execution of a novation agreement among Issuer, AIG Financial Products Corp. as "Transferor" and Barclays Bank PLC as "Transferee" on July 22, 2009, as the "Novation Transaction", evidencing Transferor's wish to transfer by novation its rights and responsibilities under two cash flow swap transaction to Transferee: -- US$344,000,000 Class A1ST Senior Secured Floating Rate Notes Due 2044, Currently Rated Caa2; previously on 3/18/09 Downgraded to Caa2 -- US$0 Class A1SB-1 Notes Due November 3, 2044, Currently Rated Caa2; previously on 3/18/09 Downgraded to Caa2 -- US$0 Class A1SB-2 Notes Due November 3, 2044, Currently Rated Caa2; previously on 3/18/09 Downgraded to Caa2 -- US$48,000,000 Class A1J Senior Secured Floating Rate Notes Due 2044, Currently Rated C; previously on 3/18/09 Downgraded to C -- US$35,000,000 Class A2 Senior Secured Floating Rate Notes Due 2044, Currently Rated C; previously on 3/18/09 Downgraded to C -- US$35,000,000 Class A3 Senior Secured Deferrable Interest Floating Rate Notes Due 2044, Currently Rated C; previously on 3/18/09 Downgraded to C -- US$10,000,000 Combination Securities Due 2044, Currently Rated Aaa; previously on 12/14/04 Rated Aaa Moody's analysis relied on review of the related swap and novation documentation as well as an examination of the cash flows in the transaction. Many CDO documents (to which Moody's is never a party) specify that, in order to amend the documents, the issuer must obtain an opinion from the rating agencies that the proposed amendment would not in and of itself result in the related ratings being downgraded or withdrawn at the time of the amendment. This type of provision is typically referred to in the CDO indenture as a "rating agency confirmation" or "RAC". Moody's is never obligated to provide a RAC, and the decision whether or not to issue a RAC lies entirely within Moody's sole discretion. Before providing a RAC for an amendment, the proposal will be reviewed by a Moody's credit committee which will consider, among other things, the performance of the specific CDO and collateral manager and the specifics of the proposed amendment and the particular structure of the CDO. A RAC is purely an opinion, as of the point in time at which the RAC is provided, that the proposed amendment in isolation does not introduce sufficient additional credit risk so as to negatively impact the related ratings. In other words, it does not consider the impact of other factors on the ratings, such as collateral deterioration. Also, the RAC does not address any other, non-credit related impact that the amendment might have. Moody's further emphasizes that a RAC is not a substitute for noteholder consent or for independent analyses by noteholders of the impact on them of any proposed amendment. BXG RECEIVABLES: Moody's Downgrades Ratings on 21 Classes --------------------------------------------------------- Moody's Investors Service downgraded twenty one classes of notes issued by five BXG Receivables Note trusts issued in 2004 through 2008. The ratings of notes were placed under review for possible downgrade in April 2009. The underlying collateral consists of timeshare loan receivables. Moody's analysis primarily focuses on the ratio of credit enhancement to expected gross charge-offs on the remaining pool, which are calculated as the difference between the expected lifetime charge-offs and the actual cumulative gross charge-offs to date. Lifetime gross charge-offs are assessed based on the level and shape of the cumulative gross charge-off curves and cumulative gross charge-off to liquidation curves, with additional consideration given to the current economic environment and the nature of the asset class. The level where the two curves converge will be the lifetime gross charge-offs of the pool. In cases where the gross charge-off to liquidation curve is still above the cumulative charge-off curve, or where the expected convergence point of the curves is not clear, issuer specific loss curves, actual cumulative gross charge-offs on each pool and seasoning of each pool, as well as recent delinquency trends and consideration of the current economic environment, are used to derive the level of expected lifetime gross charge-offs. The representative loss curves for each issuer are generated from their respective historical vintage performance data. The total credit enhancement available to these deals includes overcollateralization, reserve funds and excess spread. The ratio of credit enhancement to expected remaining net losses is then compared with similar timeshare transactions to determine the appropriate ratings. The actions were mainly driven by worse than expected performance of the underlying collateral pools, which is seen in the deals' rising defaults and delinquencies. Additionally, principal distribution of all trusts is expected to remain pro rata among rated classes of notes and the overcollateralization of the trust will continue to be paid down proportionally with the rated notes. As of June 30, 2009, overcollateralization of BXG 2004-B, 2005-A, 2006-B, 2007-A and 2008-A represented 9.00%, 10.00%, 9.00%, 11.50% and 12.50% of the outstanding pool balances, respectively. In addition, 2004-B, 2005-A, and 2006-B each had reserves at their floors of 1.50% of the initial pool balance. 2007-A and 2008-A had reserves at 5% and 7.5% of the initial pool balances, respectively, both of which are expected to decline over time to their reserve floors of 1.50% of initial pool balance. The complete rating actions are: Issuer: BXG Receivables Note Trust 2004-B -- Pool Current Expected Cumulative Gross Charge-offs: 28.5% (as a percentage of the sum of the original loan pool balance and cumulative loan substituion amount to date) -- Class D, Downgraded to Ba1 from Baa3; previously Placed Under Review for Possible Downgrade on 4/23/2009 Issuer: BXG Receivables Note Trust 2005-A -- Pool Current Expected Cumulative Gross Charge-offs: 30% (as a percentage of the sum of the original loan pool balance and cumulative loan substituion amount to date) -- Class B, Downgraded to Aa3 from Aa2; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class C, Downgraded to A3 from A2; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class D, Downgraded to Ba2 from Baa1; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class E, Downgraded to B1 from Baa3; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class F, Downgraded to B2 from Ba2; previously Placed Under Review for Possible Downgrade on 4/23/2009 Issuer: BXG Receivables Note Trust 2006-B -- Pool Current Expected Cumulative Gross Charge-offs: 32% (as a percentage of the sum of the original loan pool balance and cumulative loan substituion amount to date) -- Class B, Downgraded to Aa3 from Aa2; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class C, Downgraded to A3 from A2; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class D, Downgraded to Ba2 from Baa1; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class E, Downgraded to B1 from Baa3; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class F, Downgraded to B2 from Ba2; previously Placed Under Review for Possible Downgrade on 4/23/2009 Issuer: BXG Receivables Note Trust 2007-A -- Pool Current Expected Cumulative Gross Charge-offs: 32% (as a percentage of the sum of the original loan pool balance and cumulative loan substituion amount to date) -- Class C, Downgraded to Baa1 from A3; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class D, Downgraded to Baa3 from Baa1; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class E, Downgraded to Ba2 from Baa2; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class F, Downgraded to B1 from Baa3; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class G, Downgraded to B2 from Ba2; previously Placed Under Review for Possible Downgrade on 4/23/2009 Issuer: BXG Receivables Note Trust 2008-A -- Pool Current Expected Cumulative Gross Charge-offs: 25% (as a percentage of the sum of the original loan pool balance and cumulative loan substituion amount to date) -- Class C, Downgraded to Baa1 from A3; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class D, Downgraded to Baa3 from Baa1; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class E, Downgraded to Ba2 from Baa2; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class F, Downgraded to B1 from Baa3; previously Placed Under Review for Possible Downgrade on 4/23/2009 -- Class G, Downgraded to B2 from Ba2; previously Placed Under Review for Possible Downgrade on 4/23/2009 CALLIDUS DEBT: Moody's Downgrades Ratings on Three Classes ---------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Callidus Debt Partners CLO Fund IV, Ltd. -- US$50,000,000 Class A-1A Revolving Senior Secured Floating Rate Notes Due 2020, Downgraded to Aa1; previously on 5/8/2006 Assigned Aaa; -- US$327,000,000 Class A-1B Senior Secured Floating Rate Notes Due 2020, Downgraded to Aa1; previously on 5/8/2006 Assigned Aaa; -- US$25,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2020, Downgraded to A1; previously on 3/4/2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$26,500,000 Class B Senior Secured Deferrable Floating Rate Notes Due 2020, Confirmed at Ba1; previously on 3/17/2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$25,000,000 Class C Senior Secured Deferrable Floating Rate Notes Due 2020, Confirmed at B1; previously on 3/17/2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$16,000,000 Class D Senior Secured Deferrable Floating Rate Notes Due 2020, Confirmed at Caa2; previously on 3/17/2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade; According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2724 versus a test level of 2705 as of the last trustee report, dated July 7, 2009. Based on the same report, defaulted securities total about $15 million, accounting for roughly 3.09% of the collateral balance, and securities rated Caa1 or lower make up approximately 8.2% of the underlying portfolio. Moody's also notes that a material proportion of the collateral pool includes debt obligations whose credit quality has been assessed through Moody's Credit Estimates. Moody's analysis reflects the application of certain stresses with respect to the default probabilities associated with CEs. These additional stresses reflect the rapid pace of recent changes in credit market conditions and the default rate expectations in the current economic cycle that are higher than the historical averages. Specifically, the default probability stresses include (1) a 1.5 notch-equivalent assumed downgrade for CEs updated between 12-15 months ago; and (2) assuming an equivalent of Caa3 for CEs that were not updated within the last 15 months. Additionally, as CEs do not carry credit indicators such as ratings reviews and outlooks, a stress of a 0.5 notch-equivalent assumed downgrade for CEs is also applied to CEs provided between 6-12 months ago. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Callidus Debt Partners CLO Fund IV, Ltd., issued on April 12, 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CALLIDUS DEBT PARTNERS: Moody's Cuts Ratings on Three Classes ------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Callidus Debt Partners CLO Fund V, Ltd.: -- US$23,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2020, Downgraded to A1; previously on 3/4/2009 Aa2 Placed Under Review for Possible Downgrade; -- US$10,000,000 Class Q-1 Securities Due 2020, Downgraded to Ba3; previously on 3/4/2009 Baa3 Placed Under Review for Possible Downgrade; -- US$3,000,000 Class Q-2 Securities Due 2020, Downgraded to B1; previously on 3/4/2009 Baa3 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$21,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2020, Confirmed at Ba1; previously on 3/17/2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$20,600,000 Class C Senior Secured Deferrable Floating Rate Notes due 2020, Confirmed at B1; previously on 3/17/2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$13,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2020, Confirmed at Caa2; previously on 3/17/2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2814. Based on the last trustee report, dated July 10, 2009, defaulted securities total about $10.7 million, accounting for roughly 2.7% of the collateral balance, and securities rated Caa1 or lower make up approximately 9.1% of the underlying portfolio. Moody's also notes that a material proportion of the collateral pool includes debt obligations whose credit quality has been assessed through Moody's Credit Estimates. Moody's analysis reflects the application of certain stresses with respect to the default probabilities associated with CEs. These additional stresses reflect the rapid pace of recent changes in credit market conditions and the default rate expectations in the current economic cycle that are higher than the historical averages. Specifically, the default probability stresses include (1) a 1.5 notch-equivalent assumed downgrade for CEs updated between 12-15 months ago; and (2) assuming an equivalent of Caa3 for CEs that were not updated within the last 15 months. Additionally, as CEs do not carry credit indicators such as ratings reviews and outlooks, a stress of a 0.5 notch-equivalent assumed downgrade for CEs is also applied to CEs provided between 6-12 months ago. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Callidus Debt Partners CLO Fund V, Ltd., issued on December 6, 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CANYON CAPITAL: Moody's Downgrades Ratings on 2004-1 Notes ---------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Canyon Capital CLO 2004-1 Ltd.: -- US$100,000,000 Class A-1-A Senior Floating Rate Notes Due 2016, Downgraded to Aa1; previously on 7/1/2004 Assigned Aaa; -- US$100,000,000 Class A-1-B Senior Insured Floating Rate Notes Due 2016, Downgraded to Aa1; previously on 7/1/2004 Assigned Aaa; -- Class A-2-A Senior Variable Funding Floating Rate Notes Due 2016 with an aggregate principal amount not to exceed $40,000,000, Downgraded to Aa1; previously on 7/1/2004 Assigned Aaa; -- Class A-2-B Senior Insured Variable Funding Floating Rate Notes Due 2016 with an aggregate principal amount not to exceed $40,000,000, Downgraded to Aa1; previously on 7/1/2004 Assigned Aaa; -- US$16,000,000 Class D Senior Floating Rate Deferrable Notes Due 2016, Downgraded to Caa3; previously on 3/18/2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$36,000,000 Class B Senior Floating Rate Deferrable Notes Due 2016, Confirmed at Baa3; previously on 3/18/2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$29,000,000 Class C Senior Floating Rate Deferrable Notes Due 2016, Confirmed at B1; previously on 3/18/2009 Downgraded to B1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 3106 versus a test level of 2845 as of the last trustee report, dated July 1, 2009. Based on the same report, defaulted securities total about $9.6 million, accounting for roughly 2.4% of the collateral balance, and securities rated Caa1 or lower make up approximately 4.5% of the underlying portfolio. Moody's also observes that the transaction is exposed to mezzanine and junior CLO tranches in the underlying portfolio. Some of these CLO tranches are currently assigned low speculative-grade ratings and carry depressed market valuations that may herald poor recovery prospects in the event of default. Additionally, Moody's noted that the portfolio includes a material concentration in CLO securities that are issued by affiliates of the collateral manager, which Moody's views as potentially exposing the notes to additional correlation risk. Moody's also notes that a material proportion of the collateral pool includes debt obligations whose credit quality has been assessed through Moody's Credit Estimates. Moody's analysis reflects the application of certain stresses with respect to the default probabilities associated with CEs. These additional stresses reflect the rapid pace of recent changes in credit market conditions and the default rate expectations in the current economic cycle that are higher than the historical averages. Specifically, the default probability stresses include (1) a 1.5 notch-equivalent assumed downgrade for CEs updated between 12-15 months ago; and (2) assuming an equivalent of Caa3 for CEs that were not updated within the last 15 months. Additionally, as CEs do not carry credit indicators such as ratings reviews and outlooks, a stress of a 0.5 notch-equivalent assumed downgrade for CEs is also applied to CEs provided between 6-12 months ago. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. In addition, the ratings on Class A-1-B Notes and Class A-2-B Notes reflect the actual underlying rating of the Class A-1-B Notes and Class A-2-B. This underlying rating is based solely on the intrinsic credit quality of these Notes in the absence of the guarantee from Ambac Assurance Corporation, whose insurance financial strength rating was downgraded from Baa1, on Review for Possible Downgrade, to Ba3 on April 13, 2009. The above actions is a result of, and is consistent with, Moody's modified approach to rating structured finance securities wrapped by financial guarantors as described in the press release dated November 10, 2008, titled "Moody's modifies approach to rating structured finance securities wrapped by financial guarantors." Canyon Capital CLO 2004-1, Ltd., issued on June 24, 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CANYON CAPITAL: Moody's Downgrades Ratings on 2006-1 Notes ---------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Canyon Capital 2006-1 Ltd: -- US$226,000,000 Class A-1 Senior Floating Rate Notes due 2020, Downgraded to Aa2; previously on 8/31/2006 Assigned Aaa; -- US$40,000,000 Class A-2 Senior Variable Funding Floating Rate Notes due 2020, Downgraded to Aa2; previously on 8/31/2006 Assigned Aaa; -- US$15,200,000 Class B Floating Rate Notes due 2020, Downgraded to A2; previously on 3/4/2009 Aa2 Placed Under Review for Possible Downgrade; -- US$13,300,000 Class E Floating Rate Notes due 2020, Downgraded to Caa3; previously on 3/17/2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. Additionally, Moody's has confirmed the ratings of these notes: -- US$22,800,000 Class C Floating Rate Deferrable Notes due 2020, Confirmed at Ba1; previously on 3/17/2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$22,800,000 Class D Floating Rate Deferrable Notes due 2020, Confirmed at B1; previously on 3/17/2009 Downgraded to B1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class D Overcollateralization Test and the Class E Overcollateralization Test. The weighted average rating factor has steadily increased over the last year and is currently 3074 versus a test level of 2750 as of the last trustee report, dated July 9, 2009. Based on the same report, defaulted securities total about $15.9 million, accounting for roughly 4.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 20% of the underlying portfolio. Additionally, interest payments on the Class E Notes are presently being deferred as a result of the failure of the Class D Overcollateralization Test. Interest proceeds are diverted to pay the principal balance of the Class A1 and Class A2 Notes as a result of this test failure. Moody's also assessed the collateral pool's elevated concentration risk in a small number of obligors and industries. This includes a significant concentration in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Moody's also observes that the transaction is exposed to mezzanine and junior CLO tranches in the underlying portfolio. The majority of these CLO tranches are currently assigned low speculative-grade ratings and carry depressed market valuations that may herald poor recovery prospects in the event of default. Additionally, Moody's noted that the portfolio includes a material concentration in CLO securities that are issued by affiliates of the collateral manager, which Moody's views as potentially exposing the notes to additional correlation risk. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Canyon Capital 2006-1 Ltd, issued on August 16, 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CAPITALSOURCE REAL: Moody's Reviews Ratings on 12 2006-A Notes -------------------------------------------------------------- Moody's Investors Service placed 12 classes of Notes issued by CapitalSource Real Estate Loan Trust 2006-A on review for possible downgrade: -- Class A-1A, $63,972,269, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to Aa3 from Aaa -- Class A-1R, $200,000,000, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to Aa3 from Aaa -- Class A-2A, $443,137,377, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to Aa1 from Aaa -- Class A-2B, $125,000,000, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to A3 from Aaa -- Class B, $82,875,000, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to Baa3 from Aa2 -- Class C, $62,682,146, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to Ba2 from A1 -- Class D, $30,369,304, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to B1 from A2 -- Class E, $30,376,945, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to B2 from A3 -- Class F, $26,954,903, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to B3 from Baa1 -- Class G, $33,562,432, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to Caa1 from Baa2 -- Class H, $31,627,207, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to Caa2 from Baa3 -- Class J, $49,224,047, Floating Rate Notes Due 2037, on review for possible downgrade; previously on 4/15/2009 downgraded to Caa3 from Ba2 Moody's is placing all rated classes on review for possible downgrade due to deterioration in the credit quality of the underlying portfolio and the occurrence of a Tax Event on June 18, 2009. The Tax Event was due to the decision by CapitalSource Inc., the parent company of the Collateral Manager (CapitalSource Finance LCC), to elect to revoke its Real Estate Investment Trust status. As a consequence, CapitalSource Real Estate Loan Trust 2006-A as the "Issuer" is no longer treated as a qualified REIT subsidiary or other "pass through" entity for federal income tax purposes. The Issuer has become a taxable mortgage pool subject to federal and state income taxes which will be payable by the Issuer for 2009. First and second quarter 2009 taxes due were approximately $7.5 million. The Collateral Manager estimated that third quarter taxes due will be approximately $3.5 million. Based upon the July 14, 2009 Trustee Report, approximately $10.8 million of $14.5 million in Scheduled Interest Receipts were classified as a Tax, Filing, and Registration Fee. As a result of this change in status, all federal and state income taxes are payable pursuant to Article 11, "Application of Monies", per the Indenture dated as of December 20, 2006. As of the July 14, 2009 Trustee Report, the current collateral includes 98% whole loan debt and 2% B-note debt. Deterioration in the credit quality of the underlying portfolio is observed through numerous factors including, but not limited to, the failings of the Class C/D/E Par Value Test and Class F/G/H Par Value Test due to $99.5 million in defaulted collateral, and the failings of the Class A/B Interest Coverage Test, Class C/D/E Interest Coverage Test, and Class F/G/H Interest Coverage Test. The interest coverage tests failed due to the need to pay federal and state income taxes. The action takes into consideration the Issuer's change in its tax status resulting in federal and state income taxes becoming due and payable. This will have a materially adverse impact on the likelihood of the ultimate receipt of principal and interest by the noteholders of each of the rated classes by the legal final maturity date. Moody's monitors transactions on both a monthly basis through a review of the available Trustee Reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated April 15, 2009. CASTLE GARDEN: Moody's Downgrades Ratings on Various Classes ------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Castle Garden Funding: -- $379,000,000 Class A-1 Floating Rate Notes Due 2020, Downgraded to A1; previously on 11/29/2005 Assigned Aaa; -- $150,000,000 Class A-2 Delayed Draw Floating Rate Notes Due 2020, Downgraded to A1; previously on 11/29/2005 Assigned Aaa; -- $105,000,000 Class A-3a Floating Rate Notes Due 2020, Downgraded to Aa1; previously on 11/29/2005 Assigned Aaa; -- $12,000,000 Class A-3b Floating Rate Notes Due 2020, Downgraded to A2; previously on 3/4/2009 Aa1 Placed Under Review for Possible Downgrade; -- $39,500,000 Class A-4 Floating Rate Notes Due 2020, Downgraded to Baa1; previously on 3/4/2009 Aa2 Placed Under Review for Possible Downgrade; -- $25,500,000 Class B-1 Deferrable Floating Rate Notes Due 2020, Downgraded to Ba2; previously on 3/18/2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- $20,000,000 Class B-2 Deferrable Fixed Rate Notes Due 2020, Downgraded to Ba2; previously on 3/18/2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- $22,500,000 Class C-1 Floating Rate Notes Due 2020, Downgraded to Caa1; previously on 3/18/2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- $12,500,000 Class C-2 Fixed Rate Notes Due 2020, Downgraded to Caa1; previously on 3/18/2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- $15,000,000 Class D-1 Floating Rate Notes Due 2020, Downgraded to Ca; previously on 3/18/2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade; -- $1,000,000 Class D-2 Fixed Rate Notes Due 2020, Downgraded to Ca; previously on 3/18/2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade; -- $3,000,000 Class J Combination Notes Due 2020, Downgraded to Ba1; previously on 3/4/2009 A2 Placed Under Review for Possible Downgrade; -- $4,500,000 Class K Combination Notes Due 2020, Downgraded to Ba3; previously on 3/4/2009 Baa2 Placed Under Review for Possible Downgrade; -- $5,000,000 Class L Combination Notes Due 2020, Downgraded to Ba3; previously on 3/4/2009 Baa2 Placed Under Review for Possible Downgrade; -- $12,000,000 Class M Combination Notes Due 2020, Downgraded to Ba1; previously on 3/4/2009 A2 Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2950 versus a test level of 2430 as of the last trustee report, dated June 25, 2009. Based on the same report, defaulted securities total about $77 million, accounting for roughly 9% of the collateral balance, and securities rated Caa1 or lower make up approximately 8.9% of the underlying portfolio. Moody's assessed the collateral pool's elevated concentration risk in a small number of obligors and industries. This includes a significant concentration in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Moody's also observes that the transaction is exposed to 2.4% CLO tranches in the underlying portfolio. The majority of these CLO tranches are currently assigned low speculative-grade ratings and carry depressed market valuations that may herald poor recovery prospects in the event of default. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Castle Garden Funding, issued in October 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. C-BASS MORTGAGE: Moody's Downgrades Ratings on 2007-CB4 Tranche --------------------------------------------------------------- Moody's Investors Service has downgraded the rating of one tranche issued in C-Bass Mortgage Loan Asset Backed Notes, Series 2001-CB4 transaction due to higher expected pool losses in relation to available credit enhancement. Underlying securities' collateral consists primarily of closed-end second lien residential mortgage loans (CES). The ratings on the securities were monitored by evaluating factors Moody's determined to be essential in the analysis of securities backed by such loans. The salient factors include: i) Moody's review of the nature, sufficiency, and quality of historical loan performance information, ii) analysis of the collateral composition and pool credit performance including prepayment, loan delinquency and loss data, iii) consideration of the transaction's capital structure and related allocations of collateral cash flows and losses, and iv) a comparison of current credit enhancement levels to updated Moody's pool loss projections based on present collateral credit performance. When analyzing underlying ratings for CES and HELOC transactions, Moody's projects cumulative losses for each deal based on a collateral analysis of the deal's Constant Prepayment Rate and Constant Default Rate. CPR is based on the average of the last six months 1-month CPR. There are two approaches for determining pool CDR. The first approach calculates CDR based on pool loan losses from the previous twelve months, i.e. recent losses. A second approach is based on pipeline losses -- losses derived from days-aged delinquencies and Moody's assumptions for default based on days delinquent, in foreclosure, or liquidation, and the severity of loss given default. Moody's assumes 100% severity for second liens, including both CES and HELOCs. After the CDR is calculated using the two methods, the effective CDR for loss projection purposes is determined by using a weighted average of the CDRs as determined by the recent loss and pipeline loss approaches -- with weightings determined on a transaction by transaction basis. Moody's assumes that the CDR will not decline for the next two years and will decline subsequently for the life of the deal under a schedule, typically reducing by 50% in year 3 and remaining constant thereafter. Based on calculated CPR and CDR, Moody's calculates projected deal-specific cumulative losses and the weighted average life of the deal. The credit enhancement calculation can also include credit for excess spread, i.e. the aggregate, positive difference in the weighted average loan coupon and the all-inclusive securities' interest and deal fees, including servicing. Excess spread benefit is calculated by multiplying the stressed annualized excess spread by the weighted average life of the deal. Aggregate credit enhancement which combines subordination benefit (including over-collateralization and/or reserve accounts) and excess spread benefit is compared with projected cumulative losses for the deal to derive coverage multiples and associated ratings by deal tranche. Moody's will analyze tranche coverage multiples after consideration of timing of tranche repayment and allocation of losses (if any). Issuer: C-Bass Mortgage Loan Asset Backed Notes, Series 2001-CB4 -- Cl. IIB-1, Downgraded to Ba3; previously on 1/4/2002 Assigned Baa2 CHARLIE MAC: Moody's Downgrades Ratings on Five 2004-2 Tranches --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of five tranches from one RMBS transaction, backed by prime Jumbo loans, issued by Charlie Mac Trust 2004-2. The collateral backing this transaction consists primarily of first-lien, fixed -rate, jumbo residential mortgage loans. These actions are a result of Moody's updated loss expectations on the underlying collateral relative to available credit enhancement. Moody's methodology for rating securities backed by pools of jumbo mortgages originated prior to 2005 takes into account the annualized loss rate from the last 12 months and the projected loss rate over the next 12 months, and then translates these measures into lifetime losses based on a deal's expected remaining life. Recent Losses are calculated by assessing cumulative losses incurred over the past 12-months as a percentage of the average pool factor for the previous year. Pipeline Losses are calculated by using annualized roll rates of 15%, 30%, 65% and 90% for loans that are 60-89 days delinquent, 90 or more days delinquent, in foreclosure, and properties that are held for sale respectively. Moody's then applies loss upon default (severity) assumptions ranging from 25% to 35% on the loans that are projected to default. The roll-rates and severity assumptions mentioned above can vary from deal-to-deal, depending on a deal's specific characteristics. Weights are then applied to Recent Losses and Pipeline Losses. The weights applied depend on the year of loan and RMBS origination -- deals from earlier vintages typically experience higher Recent Losses and, as a result, have higher weights on Recent Losses. The weighted loss is then translated to lifetime projected loss depending on the deal's expected remaining life by which is estimated based the deal's pool factor and prepayment speeds. Moody's final rating actions are based on i) the level of credit enhancement available relative to the updated pool-level loss expectations and ii) current ratings. In addition, Moody's takes into account credit enhancement provided by seniority, cross- collateralization, time tranching, and other structural features within the priority of payments. The A3 rating for the Class L certificates also reflects the credit enhancement provided by a standby letter of credit issued by U.S. Central. U.S. Central (currently rated A3 with a stable outlook) is primarily responsible for the servicing of the mortgage loans. However, Navy Federal Credit Union will be performing the day-to-day servicing functions with respect to the mortgage loans. Wells Fargo Bank, N.A., acts as master servicer. List of actions: Issuer: Charlie Mac Trust 2004-2 -- Cl. A-3, Downgraded to Aa1; previously on 1/6/2005 Assigned Aaa -- Cl. L, Downgraded to A3; previously on 1/6/2005 Assigned Aa1 -- Cl. B-1, Downgraded to A1; previously on 1/6/2005 Assigned Aa2 -- Cl. B-2, Downgraded to Baa1; previously on 1/6/2005 Assigned A2 -- Cl. B-3, Downgraded to B1; previously on 1/6/2005 Assigned Baa2 CHASE FUNDING: Moody's Downgrades Ratings on Five 2004-OPT1 Notes ----------------------------------------------------------------- Moody's Investors Service has downgraded the rating of five securities from Chase Funding Loan Acquisition Trust 2004-OPT1. These actions are part of an ongoing review of subprime RMBS transactions. The rating actions are the result of an analysis of credit enhancement relative to the updated collateral loss projection. The revised loss projection generally results from a deterioration in collateral performance in recent months. Additionally, the affected transaction has, at some point, passed performance triggers and released portions of credit enhancement. Moody's approach to analyzing seasoned subprime pools (i.e. prior to 2H 2005) takes into account the annualized loss rate from last 12 months and the projected loss rate over next 12 months, and then translates these measures into lifetime losses based on a deal's expected remaining life. Recent Losses are calculated by assessing cumulative losses incurred over the past 12-months as a percentage of the average pool factor in the last year. For Pipeline Losses, Moody's uses an annualized roll rate of 15%, 30%, 65% and 90% for loans that are delinquent 60-days, 90+ days, are in foreclosure, and REO respectively. Moody's then applies deal- specific severity assumptions, in this case 80%. The results of these two calculations -- Recent Losses and Pipeline Losses -- are weighted to arrive at the lifetime cumulative loss projection. The complete rating actions: Issuer: Chase Funding Loan Acquisition Trust 2004-OPT1 -- Cl. M-3, Downgraded to Baa3; previously on 12/16/2004 Assigned A3 -- Cl. B-1, Downgraded to Ba1; previously on 12/16/2004 Assigned Baa1 -- Cl. B-2, Downgraded to Ba2; previously on 12/16/2004 Assigned Baa2 -- Cl. B-3, Downgraded to B2; previously on 12/16/2004 Assigned Baa3 -- Cl. B-4, Downgraded to Caa2; previously on 12/16/2004 Assigned Ba1 CHL MORTGAGE: Moody's Downgrades Ratings on Two 2007-4 Tranches --------------------------------------------------------------- Moody's Investors Service has downgraded two tranches from CHL Mortgage Pass-Through Trust 2007-4. The collateral backing this transaction consists primarily of first-lien, fixed-rate, Jumbo mortgage loans. The actions are triggered by the quickly deteriorating performance -- marked by rising delinquencies and loss severities, along with concerns about the continuing drop in housing prices nationwide and the rising unemployment levels. The actions listed below reflect Moody's updated expected losses on the jumbo sector announced in a press release on March 19th, 2009, and are part of Moody's on- going review process. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the senior note waterfalls. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Complete rating actions are: Issuer: CHL Mortgage Pass-Through Trust 2007-4 -- Cl. M-1, Downgraded to C; previously on 3/19/2009 Caa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on 3/19/2009 Ca Placed Under Review for Possible Downgrade The ratings on the notes were assigned after evaluating factors determined applicable to the credit profile of the notes, such as: i) the nature, sufficiency, and quality of historical performance information available for the asset class as well as for the transaction sponsor, ii) collateral analysis, iii) an analysis of the policies, procedures and alignment of interests of the key parties to the transaction, most notably the originator and the servicer, iv) an analysis of the transaction's allocation of collateral cashflow and capital structure, v) an analysis of the transaction's governance and legal structure, and vi) a comparison of these attributes against those of other similar transactions. CIFC FUNDING: Moody's Downgrades Ratings on Two 2007-III Notes -------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of 2 notes and confirmed the ratings of 3 notes issued by CIFC Funding 2007-III, Ltd.: -- US$64,750,000 Class A-1-J Senior Secured Floating Rate Notes due July 2021, Downgraded to Aa1; previously on March 4, 2009 Aaa Placed Under Review for Possible Downgrade; -- US$22,000,000 Class A-2 Senior Secured Floating Rate Notes due July 2021, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; In addition, Moody's has confirmed the ratings of these notes: -- US$35,000,000 Class B Senior Secured Deferrable Floating Rate Notes due July 2021, Confirmed at Ba1; previously on March 13, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$18,250,000 Class C Senior Secured Deferrable Floating Rate Notes due July 2021, Confirmed at B1; previously on March 13, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$17,750,000 Class D Secured Deferrable Floating Rate Notes due July 2021, Confirmed at Caa2; previously on March 13, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 3200 versus a test level of 3100 as of the last trustee report, dated June 10, 2009. Based on the same report, defaulted securities total about $ 25.5 million, accounting for roughly 5.8% of the collateral balance, and securities rated Caa1 or lower make up approximately 14% of the underlying portfolio. Moody's also notes that a material proportion of the collateral pool includes debt obligations whose credit quality has been assessed through Moody's Credit Estimates. Moody's analysis reflects the application of certain stresses with respect to the default probabilities associated with CEs. These additional stresses reflect the rapid pace of recent changes in credit market conditions and the default rate expectations in the current economic cycle that are higher than the historical averages. Specifically, the default probability stresses include (1) a 1.5 notch-equivalent assumed downgrade for CEs updated between 12-15 months ago; and (2) assuming an equivalent of Caa3 for CEs that were not updated within the last 15 months. Additionally, as CEs do not carry credit indicators such as ratings reviews and outlooks, a stress of a 0.5 notch-equivalent assumed downgrade for CEs is also applied to CEs provided between 6-12 months ago. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. CIFC Funding 2007-III, Ltd., issued in July 31, 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CITIGROUP COMMERCIAL: Moody's Affirms Ratings on 2005-EMG Certs. ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 13 classes and downgraded two classes of Citigroup Commercial Mortgage Securities Inc., Commercial Mortgage Pass-Through Certificates, Series 2005- EMG. The downgrades are due to concerns about potential declines in credit quality from non-reporting loans, more significant exposure to New York City and a decline in diversity. At securitization there was no historical or current financial information for approximately 5% of the pool. At this time, Moody's was not provided with current financial information for approximately 9% of the pool. Moody's is concerned that the transaction's credit support may not be sufficient for the current ratings given the stresses on property performance caused by the economic recession. The action is the result of Moody's on-going surveillance of commercial mortgage-backed securities transactions. As of the June 22, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 49% to $371 million from $722 million at securitization. The Certificates are collateralized by 141 seasoned loans, ranging in size from less than 1% to 8% of the pool, with the top ten loans representing 30% of the pool. The pool includes seven loans, representing 31% of the pool, with investment grade underlying ratings. No loans have defeased. Seventeen loans, representing 11% of the pool, are on the master servicer's watch-list. The master servicer's watch-list includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's on-going monitoring of a transaction, Moody's reviews the watch-list to assess which loans have material issues that could impact performance. Not all loans on the watch-list are delinquent or have significant issues. One loan has been liquidated from the trust, resulting in a minimal $12,000 realized loss. Currently, one loan, representing less than 1% of the pool, is in special servicing. Moody's is not estimating a loss from this loan at this time. Moody's was provided with full-year 2008 operating results for 91% of the pool. Moody's weighted average loan to value ratio for the conduit component is 37% compared to 43% at Moody's prior full review in November 2007. Moody's stressed debt service coverage ratio is 3.79X compared to 3.16X at last review. Moody's stressed DSCR is based on Moody's net cash flow and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of the Herfindahl index to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool, excluding loans with underlying ratings, has a Herf score of 62 compared to 90 at last review. The loans with underlying ratings represent 31% of the pool. The 240 Central Park South Loan ($30.0 million - 6.1%) is secured by a 304-unit apartment complex located in New York City. The property was 91% occupied as of December 2008, the same as last review. Property's performance has been stable. The underlying rating and stressed DSCR are Baa3 and 1.38X, respectively, compared to Baa3 and 1.28X at last review. The 17-19 West 34th Street Loan ($17.0 million - 4.6%) is secured by a 224,000 square foot office/retail building located in midtown Manhattan, New York City. The property was 95% occupied as of April 2009 compared to 98% at last review. The underlying rating and stressed DSCR are Aaa and 2.28X, respectively, compared to Aaa and 2.16X at last review. The 52 Vanderbilt Avenue Loan ($17.5 million - 3.5%) is secured by a 184,000 square foot Class B office/retail building located in midtown Manhattan, New York City. The property was 96% leased as of April 2009, essentially the same as at last review. Performance has improved due to increased rental revenues. The underlying rating and stressed DSCR are to Baa1 and 1.71X, respectively, compared to Baa2 and 1.38X at last review. The 50 East 42nd Street Loan ($15.0 million - 4.0%) is secured by a 144,378 square foot mixed use property located in midtown Manhattan. The property was 84% occupied as of December 2008 compared to 96% at last review. Moody's analysis of this loan reflects a stressed cash flow due to Moody's concerns about the decline in occupancy and lease rollover risk during the next year. The underlying rating and stressed DSCR are A2 and 1.59X, respectively, compared to Aa3 and 1.77X at last review. The 1001 Central Park Avenue Loan ($14.0 million; - 3.8%) is secured by a 238,700 square foot retail center located in Scarsdale, New York. The property was 68% occupied as of March 2009 compared to 85% at last review. The increase in vacancy is largely attributable to Linen N' Things vacating the center as a result of its bankruptcy. Moody's analysis of the loan reflects a stressed cash flow due to Moody's concerns about the retail sector in general and the impact of the loss of an anchor tenant on property performance. The underlying rating and stressed DSCR are A3 and 1.95X, respectively, compared to Aa2 and 2.18X at last review. The 6 West 32nd Street Loan ($11.8 million - 3.2%) is secured by a 171-room hotel located in midtown Manhattan. Performance has been stable. The underlying rating and stressed DSCR are Baa1 and 2.28X, respectively, compared to Baa1 and 1.99X at last review. The 295 Park Avenue South Loan ($9.3 million; - 2.5%) is secured by a 179 unit multifamily property located in midtown Manhattan. The property was 99% occupied as of March 2009. Performance has been strong due to increasing rental revenues. The underlying rating and stressed DSCR are Aaa and 4.36X, compared to Aaa and 1.99X at last review. Moody's rating actions is: -- Class A-2, $43,077,040, affirmed at Aaa; previously affirmed at Aaa on 11/13/2007 -- Class A-3, $42,513,000, affirmed at Aaa; previously affirmed at Aaa on 11/13/2007 -- Class A-4, $199,016,000, affirmed at Aaa; previously affirmed at Aaa on 11/13/2007 -- Class A-J, $46,036,000, affirmed at Aaa; previously affirmed at Aaa on 11/13/2007 -- Class X, Notional, affirmed at Aaa; previously affirmed at Aaa on 11/13/2007 -- Class B, $7,222,000; affirmed at Aa1; previously upgraded to Aa1 from Aa2 on 11/13/2007 -- Class C, $2,708,000, affirmed at Aa2; previously upgraded to Aa2 from Aa3 on 11/13/2007 -- Class D, $5,416,000, affirmed at A2; previously affirmed at A2 on 11/13/2007 -- Class E, $1,805,000, affirmed at A3; previously affirmed at A3 on 11/13/2007 -- Class F, $3,611,000, affirmed at Baa1; previously affirmed at Baa1 on 11/13/2007 -- Class G, $1,805,000, affirmed at Baa2; previously affirmed at Baa2 on 11/13/2007 -- Class H, $3,611,000, affirmed at Baa3; previously affirmed at Baa3 on 11/13/2007 -- Class J, $8,124,000, affirmed at Ba1; previously affirmed at Ba1 on 11/13/2007 -- Class K, $2,708,000, downgraded to B1 from Ba2; previously affirmed at Ba2 on 11/13/2007 -- Class L, $1,806,000, downgraded to B2 from Ba3; previously affirmed at Ba3 on 11/13/2007 COAST FUNDING: Fitch Downgrades Ratings on Four Classes of Notes ---------------------------------------------------------------- Fitch Ratings has downgraded four classes of notes issued by South Coast Funding VI, Ltd., and assigned Loss Severity ratings. These rating actions are the result of continued credit deterioration experienced since Fitch's last rating action. Approximately 69.8% of the portfolio carries a Fitch derived rating below investment grade, with 50.1% rated in the 'CCC' category or lower. These are up from 30% rated below investment grade and 8% rated 'CCC' and lower at the last review. Beginning with the December 2008 payment date, interest proceeds available for distribution in the interest waterfall have been insufficient to fully pay the interest due the class B notes. Since that time, a portion of the class B interest payment has been made using principal proceeds, and as of the July 7, 2009 payment date, $102,047 of the $169,889 interest payment due to the class B notes was paid through principal proceeds. All remaining principal proceeds are being used to pay down the class A-1 notes. The class A-1 notes have paid down approximately 75.7% since closing. As of the June 26, 2009 trustee report, the class A/B overcollateralization ratio was at 91.8%, failing its covenant of 104%. Fitch expects the class A-1 notes to continue to receive interest and full principal repayment. The class A-2 notes have been downgraded to 'CCC' as they continue to receive interest payments but eventual principal impairment is expected. The class B notes have been downgraded to 'CC' as they continue to receive interest payments, but Fitch does not expect any principal recovery. The class C notes are receiving interest paid in kind whereby the principal amount of the notes is written up by the amount of interest due. The class C notes have been downgraded to 'C' as Fitch does not expect this class to receive any future payments. The class A-1 notes were assigned a Stable Rating Outlook reflecting Fitch's expectation that the rating will remain stable over the next one to two years. The class A-1 notes were also assigned a 'LS3' Loss Severity Rating. A rating of 'LS3' indicates that a tranche has a medium risk of severe loss severity given default, as evidenced by the ratio of tranche size to the base case loss expectation for the collateral in the range of 1.1 to 4. The LS rating should always be considered in conjunction with probability of default indicated by a class' long-term credit rating. Fitch does not assign Rating Outlooks and LS ratings to classes rated 'CCC' and lower. South Coast VI is a cash flow collateralized debt obligation (CDO) that closed on Sept. 29, 2004 and is managed by TCW Investment Management Company. The reinvestment period ended in September 2007. The reference portfolio is composed of 68.1% residential mortgage-backed securities (RMBS), 17.6% commercial mortgage- backed securities (CMBS), 7.8% CDOs and, 6.5% asset-backed securities (ABS). Fitch downgrades four classes of notes issued by South Coast Funding VI, Ltd., and assigns Loss Severity ratings: -- $50,929,156 class A-1 notes to 'BB/LS3' from 'AAA'; Outlook Stable; -- $36,000,000 class A-2 notes to 'CCC' from 'A'; -- $30,000,000 class B notes to 'CC' from 'B'; -- $ 12,355,223 class C notes to 'C' from 'CCC'. COMMERCIAL MORTGAGE: Moody's Takes Rating Actions on 1999-C1 Notes ------------------------------------------------------------------ Moody's Investors Service affirmed the rating of six classes, upgraded one class and downgraded four classes of Commercial Mortgage Acceptance Corp, Commercial Mortgage Pass-Through Certificates 1999-C1. The upgrade is due to increased credit enhancement due to loan payoffs and amortization. The pool has paid down 84% since Moody's last full review in May 2007. The downgrades are due to higher expected losses for the pool resulting from increased leverage, a decrease in pool diversity and realized and anticipated losses from loans in special servicing. The action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the July 15, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 88% to $86.8 million from $733.6 million at securitization. The Certificates are collateralized by 39 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top 10 loans representing 54% of the pool. The average loan size is $2.3 million. Five loans, representing 9% of the pool, have defeased and are collateralized with U.S. Government securities. Eight loans, representing 29% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Nine loans have been liquidated from the pool, resulting in an aggregate $5.4 million realized loss. There are sixteen loans, representing 49% of the pool, currently in special servicing, including five of the pool's top ten loans. The largest specially serviced loan is The Place Apartments ($7.6 million -- 8.8%), which is secured by 230-unit multifamily property in Fort Myers, Florida. Although the property has been well occupied, its performance has been negatively impacted by increased expenses. The loan matured on June 1, 2009. The property was transferred to special servicing in December 2008 and is in the process of foreclosure. The second largest specially serviced loan is The Piers ($6.7 million -- 7.7%), which is secured by a 103,294 square foot retail property in Port Richey, Florida. The property is currently only 31% leased as a result of several major tenants leaving the property in 2008. The loan was transferred to special servicing in February 2009 and it matured on June 1, 2009. The third largest specially serviced loan is Plaza De Colores ($4.7 million -- 5.4%), which is secured by a 43,500 square foot retail property in Las Vegas, Nevada. The loan transferred to special servicing in February 2009 and it matured on May 1, 2009. The remainder of the specially serviced loans are a secured by a mix of property types, including retail (5 loans - 17%) multifamily (6 - 7%) and office or mixed use (2 - 3%). The majority of these loans were transferred to special servicing due to maturity defaults. Moody's estimates a $17.4 million aggregate loss (41% loss severity on average) for all of the specially serviced loans. Moody's was provided with partial or full-year 2008 operating results for 86% of the pool, excluding defeased loans. Moody's weighted average loan to value ratio, excluding the specially serviced loans, is 91% compared to 73% at Moody's prior review. Moody's stressed debt service coverage ratio is 1.66X compared to 1.80X at Moody's prior review. Moody's stressed DSCR is based on Moody's net cash flow and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of the Herfindahl index to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool's Herf, excluding defeased loans, is 21 compared to 105 at Moody's prior review. The three largest non-defeased performing loans comprise 15.7% of the pool. The largest loan is the Holiday Inn Express and Suites Loan ($5.8 million - 6.7%), which is secured by a 120 key hotel located in Eagan, Minnesota. The loan has been on the master servicer's watchlist since February 2006 due to low DSCR. Performance has weakened since last review due to lower occupancy rates and increased expenses. Moody's LTV and stressed DSCR are 156% and 0.83X, respectively, compared to 104% and 1.23X at last review. The second largest loan is the Avenue C Apartments Loan ($4.3 million -- 4.9%), which is secured by several multifamily properties located in the East Village of New York City and totaling 28 units. As of June 2009, the properties were 100% leased. The loan is on the master servicer's watchlist because it has passed its June 1, 2009 Anticipated Repayment Date ("ARD"). Moody's LTV and stressed DSCR are 66% and 1.43X, respectively, compared to 60% and 1.53X at last review. The third largest loan is the Monarch Beach Plaza Loan ($3.5 million -- 4.1%), which is secured by a 31,377 square foot retail property located in Dana Point, California. The property was 86% occupied as of March 2009 by a mix of local and regional tenants. The loan is on the master servicer's watchlist because it has passed it had an ARD of April 1, 2009. Moody's LTV and stressed DSCR are 56% and 1.76X, respectively, compared to 58% and 2.00X at last review. Moody's rating action is: -- Class X, Notional, affirmed at Aaa; previously affirmed at ] Aaa on 5/24/2007 -- Class E, $4,158,721, affirmed at Aaa; previously upgraded to Aaa from A1 on 5/24/2007 -- Class F, $12,842,000, affirmed at Aaa; previously upgraded to Aaa from A3 on 5/24/2007 -- Class G, $1,834,000, affirmed at Aaa; previously upgraded to Aaa from Aa1 on 12/20/2007 -- Class H, $12,842,000, upgraded to Aa2 from Aa3; previously upgraded to Aa3 from A1 on 9/25/2008 -- Class J, $20,179,000, affirmed at Baa3; previously upgraded to Baa3 from Ba2 on 5/24/2007 -- Class K, $5,504,000, affirmed at Ba2; previously upgraded to Ba2 from Ba3 on 5/24/2007 -- Class L, $7,338,000, downgraded to Caa1 from B1; previously affirmed at B1 on 5/24/2007 -- Class M, $9,172,000, downgraded to Caa2 from B2; previously affirmed at B2 on 5/24/2007 -- Class N, $5,504,000, downgraded to Ca from Caa1; previously affirmed at Caa1 on 5/24/2007 -- Class O, $3,669,000, downgraded to Ca from Caa3; previously affirmed at Caa3 on 5/24/2007 CONNECTICUT VALLEY: Moody's Downgrades Ratings on Five Classes -------------------------------------------------------------- Moody's Investors Service announced that it has downgraded ratings of five classes of notes issued by Connecticut Valley CLO Funding IV, Ltd., Limited and left on review for possible further downgrade the ratings of two of these classes. The notes affected by the rating action are: -- US$225,000,000 Class A-1 Floating Rate Notes Due 2027, Downgraded to Caa1 and remains on Review for Possible Downgrade; previously on 3/12/2009 Downgraded to Baa3 and remains on Review for Possible Downgrade -- US$43,000,000 Class A-2 Floating Rate Notes Due 2027, Downgraded to Caa3 and remains on Review for Possible Downgrade; previously on 3/12/2009 Downgraded to B1 and remains on Review for Possible Downgrade -- US$50,000,000 Class A-3 Floating Rate Notes Due 2027, Downgraded to Ca; previously on 3/12/2009 Downgraded to B3 and remains on Review for Possible Downgrade -- US$28,000,000 Class B Floating Rate Notes Due 2027, Downgraded to C; previously on 3/12/2009 Downgraded to Caa3 and remains on Review for Possible Downgrade -- US$29,500,000 Class C Floating Rate Notes Due 2027, Downgraded to C; previously on 3/12/2009 Downgraded to Ca Connecticut Valley CLO Funding IV, Ltd. is a collateralized debt obligation backed primarily by a portfolio of collateralized loan obligations. CLOs consist approximately 70% of the portfolio. The rating downgrade actions reflect deterioration in the credit quality of the underlying portfolio. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor, an increase in the proportion of securities rated Caa1 and below, an increase in dollar amount of defaulted assets and failure of the coverage tests, among other measures. More than 78% of its assets have been downgraded since Moody's last review of the transaction in March 2009. According to the Trustee, the deal has a WARF of 4146 as of June 25, 2009. Securities rated Caa1 or lower make up approximately 16% of the underlying portfolio. The trustee reports 61 million defaulted assets. In addition, the Trustee reports that the transaction is currently failing one or more coverage tests, including the Class A Par Value Ratio. Moody's also observes that the transaction is exposed to a significant concentration of mezzanine and junior CLO tranches in the underlying portfolio. Since the last review of this transaction in April 2009, Moody's has completed the first stage of its two-stage review of U.S. and EMEA CLOs. Some of the underlying securities in the portfolio experienced more severe rating action than was anticipated at the time of last review. Moody's is currently in Stage II of its CLO review and performing comprehensive analysis by modeling each CLO individually. Additional rating actions will be taken as necessary for all rated liabilities. As a result, the ratings assigned to Class A-1 and Class A-2 remain on watch for possible downgrade. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. COPPER RIVER: Moody's Takes Rating Actions on Various Classes ------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Copper River CLO Ltd: -- US$49,000,000 Class B Senior Secured Floating Rate Notes Due 2021, Downgraded to Aa3; previously on January 16, 2009 Aa2 Placed Under Review for Possible Downgrade. Moody's has also upgraded the ratings of these notes: -- US$47,600,000 Class C Secured Deferrable Floating Rate Notes Due 2021, Upgraded to Baa3; previously on March 13, 2009 Downgraded to Ba1and Placed Under Review for Possible Downgrade; -- US$35,000,000 Class D Secured Deferrable Floating Rate Notes Due 2021, Upgraded to Ba3; previously on March 13, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$23,800,000 Class E Secured Deferrable Floating Rate Notes Due 2021, Upgraded to B3; previously on March 13, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$18,330,000 Class A-2B Senior Secured Floating Rate Notes Due 2021, confirmed at Aa1; previously on January 16, 2009 Aa1 Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through an increase in the dollar amount of defaulted securities and an increase in the proportion of securities from issuers rated Caa1 and below. As of the last trustee report, dated June 19, 2009, defaulted securities total about $28.6 million, accounting for roughly 3.98% of the collateral balance, and securities rated Caa1 or lower make up approximately 20.55% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Moody's notes that the rating action on the Classes C, D, and E Notes is the result of a comprehensive deal-level analysis including an in-depth assessment of results from Moody's quantitative CLO rating model along with an evaluation of deal- specific qualitative factors. By way of comparison, rating actions taken by Moody's in its Stage I CLO surveillance sweep were largely based on a parameter-based approach. Copper River CLO Ltd. issued in January of 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CORTS TRUST: S&P Affirms 'BB+' Rating on $25 Mil. Certificates -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB+' rating on CorTS Trust For PECO Energy Capital Trust III's $25 million certificates and removed it from CreditWatch, where it was placed with negative implications on October 22, 2008. The rating on the certificates is dependent solely on the rating on the underlying security, PECO Energy Capital Trust III's 7.38% capital trust pass-through securities due April 6, 2028 ('BB+'). The rating action reflects the July 22, 2009, affirmation of S&P's 'BB+' rating on the underlying security and its removal from CreditWatch with negative implications. COUNTRYWIDE FHA: Moody's Downgrades Ratings on 97 Tranches ---------------------------------------------------------- Moody's Investors Service has downgraded 97 tranches and confirmed 7 tranches from 11 Countrywide FHA - VA deals issued from 2002 to 2007 due to higher expected pool losses in relation to available credit enhancement. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable rate, mortgage loans guaranteed by the FHA or the VA (typically 80% FHA and 20% VA.) As economic conditions have deteriorated; performance of these loans have worsened with serious delinquencies (that is, loans more than 60 days past due, in foreclosure or held for sale) as a percentage of current balance increasing from 33.5% 12 months ago, to 35.6% as of May 2009 for FHA -- VA pools issued in 2006. While for FHA -- VA pools issued in 2007, serious delinquencies as a percentage of current balance have risen from 41.0% 12 months ago, to 44.5% as of May 2009. Cumulative losses on FHA -- VA pools, however, are low in absolute terms due to the FHA - VA guarantee. Nevertheless, for FHA - VA pools issued in 2006, cumulative losses have risen from 0.31% in May 2008 to 0.45% one year later. For FHA - VA pools issued in 2007, cumulative losses have more than doubled from 0.16% a year earlier to 0.34% as of May 2009. Moody's expects loss levels on FHA -- VA pools to rise further as the general level of remaining delinquencies remain elevated and loss severities increase. Due to the FHA - VA guarantee, loss severities on these pools have been historically low at 2.0% -- 4.0%. However, with recent house price depreciation, increase in foreclosure costs and timelines and change in the debenture rate applied by FHA to pay interest claims, future loss severities on these pools are expected to be higher. Moody's now expects loss severities on FHA loans originated before 2004 to average 5.0% and on FHA loans originated in 2004 and after to average 6.5% (this is due to change in debenture rate application by FHA for loans originated after 2004 which results in a lower interest expense being paid by the FHA and a higher severity to the trust). Loss severities on VA loans are expected to average 20%. As a result, Moody's now projects cumulative losses on FHA -- VA pools issued between 2002 and 2007 to average 1.42% as a percentage of original balance securitized (3.00% as a percentage of current balance) versus Moody's original expected loss estimates of 0.40% - 0.50%. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the priority of payments. Complete rating actions are: CWMBS Re-Performing Loan REMIC Trust Certificates, Series 2002-1 -- Cl. 1A-4, Confirmed at Aaa; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A, Confirmed at Aaa; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-IO, Confirmed at Aaa; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 3A, Confirmed at Aaa; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 3A-IO, Confirmed at Aaa; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Confirmed at Aa2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Confirmed at A2; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ba1; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to B1; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade CWMBS Reperforming Loan REMIC Trust Certificates, Series 2004-R1 -- Cl. 1A-F, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-S, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 3A, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. PT, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1M, Downgraded to Ba2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. 2M, Downgraded to Ba2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. 1B-1, Downgraded to B2; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. 1B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. 1B-3, Downgraded to C; previously on 5/15/2009 Caa2 Placed Under Review for Possible Downgrade -- Cl. 1B-4, Downgraded to C; previously on 5/15/2009 Ca Placed Under Review for Possible Downgrade -- Cl. 2B-1, Downgraded to Caa1; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. 2B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. 2B-3, Downgraded to C; previously on 5/15/2009 Caa1 Placed Under Review for Possible Downgrade -- Cl. 2B-4, Downgraded to C; previously on 5/15/2009 Ca Placed Under Review for Possible Downgrade CWMBS Reperforming Loan REMIC Trust Certificates, Series 2004-R2 -- Cl. 1A-F1, Downgraded to Ba1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-F2, Downgraded to Ba1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-S, Downgraded to Ba1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to B2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 Baa3 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to C; previously on 5/15/2009 B3 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 Ca Placed Under Review for Possible Downgrade CWMBS Reperforming Loan REMIC Trust Certificates, Series 2005-R1 -- Cl. 1A-F1, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-F2, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-S, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-1, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-2, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-IO, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-PO, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to C; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade CWMBS Reperforming Loan REMIC Trust Certificates, Series 2005-R2 -- Cl. 1A-F1, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-F2, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-S, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-1, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-2, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-3, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-4, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-IO, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade CWMBS Reperforming Loan REMIC Trust Certificates, Series 2005-R3 -- Cl. A-F, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. A-S, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to B2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade CWMBS Reperforming Loan REMIC Trust Certificates, Series 2006-R1 -- Cl. A-F-1, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. A-F-2, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. A-S, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade CWMBS Reperforming Loan REMIC Trust Certificates, Series 2006-R2 -- Cl. A-F-1, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. A-F-2, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. A-S, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade CWMBS, Inc. Structured pass-Through Certificates Series 2003-R3. -- Cl. M, Downgraded to Baa2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to B1; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to Ca; previously on 5/15/2009 B1 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 Caa3 Placed Under Review for Possible Downgrade Reperforming Loan REMIC Trust 2003-R2 -- Cl. M, Downgraded to Ba1; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to B2; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 Caa3 Placed Under Review for Possible Downgrade Reperforming Loan REMIC Trust 2003-R4 -- Cl. 1A-1X, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-2S, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-3, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-4, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-IO, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A-PO, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A-IO, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to Baa3; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to B1; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 Ca Placed Under Review for Possible Downgrade CREDIT SUISSE: Moody's Downgrades Ratings on 140 Tranches --------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 140 tranches from 21 RMBS transactions, backed by prime Jumbo and Alt- A loans, issued by CSFB. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable-rate, Jumbo and Alt-A residential mortgage loans. These actions are a result of Moody's updated loss expectations on the underlying collateral relative to available credit enhancement. Moody's methodology for rating securities backed by pools of Jumbo or Alt-A mortgages originated prior to 2005 takes into account the annualized loss rate from the last 12 months and the projected loss rate over the next 12 months, and then translates these measures into lifetime losses based on a deal's expected remaining life. Recent Losses are calculated by assessing cumulative losses incurred over the past 12-months as a percentage of the average pool factor for the previous year. Pipeline Losses are calculated by using annualized roll rates of 15%, 30%, 65% and 90% for loans that are 60-89 days delinquent, 90 or more days delinquent, in foreclosure, and properties that are held for sale (REO) respectively. Moody's then applies loss upon default (severity) assumptions ranging from 25% to 35% for Jumbo transactions and severity assumptions ranging from 40% to 55% for Alt-A transactions on the loans that are projected to default,. The roll-rates and severity assumptions mentioned above can vary from deal-to-deal, depending on a deal's specific characteristics. Weights are then applied to Recent Losses and Pipeline Losses. The weights applied depend on the year of loan and RMBS origination -- deals from earlier vintages typically experience higher Recent Losses and, as a result, have higher weights on Recent Losses. The weighted loss is then translated to lifetime projected loss depending on the deal's expected remaining life by which is estimated based the deal's pool factor and prepayment speeds. Moody's final rating actions are based on i) the level of credit enhancement available relative to the updated pool-level loss expectations and ii) current ratings. In addition, Moody's takes into account credit enhancement provided by seniority, cross- collateralization, time tranching, and other structural features within the priority of payments. These pools consist of Jumbo mortgages: Credit Suisse First Boston Mortgage Securities Corp. Pass-Through Certificates, 2002-P1 * CSFB Mortgage-Backed Pass-Through Certificates, Series 2002-26/ Group I * CSFB Mortgage-Backed Pass-Through Certificates, Series 2002-34 * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-1/ Group III * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-17/ Group I-30 II--15 Year Jumbo A * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-19 * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-21/ Group I II * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-21/ Group III * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-27 * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-8/ Group I II III IV Mortgage Loans * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003- AR12/ Group I II III Mortgage Loans * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003- AR18/ Group I II III * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-AR2/ Group I II III IV * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003- AR20/ Group I II III * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003- AR22/ Group I II III * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003- AR24/ Group I II III IV V * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003- AR28/ Group I II III IV V * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003- AR30/ Group I II III IV V * CSFB Mortgage-Backed Pass-Through Certificates, Series 2004-1 * CSFB Mortgage-Backed Pass-Through Certificates, Series 2004-4/ Group II III * CSFB Mortgage-Backed Pass-Through Certificates, Series 2004-AR2/ Group I II III IV V Mortgage mortgage Loans These pools consist of Alt-A loans: * CSFB Mortgage-Backed Pass-Through Certificates, Series 2002-26/ Group III * CSFB Mortgage-Backed Pass-Through Certificates, Series 2002-26/ Group IV * CSFB Mortgage-Backed Pass-Through Certificates, Series 2002-5/ Group IV * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-1/ Group I II * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-17/ Group V-Alt. VI-Alt. A * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-17/ Group III-Alt. IV VII A * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-21/ Group IV V * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-8/ Group V VI Mortgage Loans * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-AR2/ Group V * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003- AR28/ Group VI * CSFB Mortgage-Backed Pass-Through Certificates, Series 2003- AR30/ Group VI * CSFB Mortgage-Backed Pass-Through Certificates, Series 2004-4/ Group I * CSFB Mortgage-Backed Pass-Through Certificates, Series 2004-4/ Group IV V * CSFB Mortgage-Backed Pass-Through Certificates, Series 2004-AR2/ Group VI Mortgage Loans List of actions: Credit Suisse First Boston Mortgage Securities Corp. Pass-Through Certificates, 2002-P1 -- Cl. B-4, Downgraded to Ca; previously on 8/25/2008 Downgraded to Ba3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2002-26 -- Cl. III-M-3, Downgraded to Caa1; previously on 10/24/2006 Downgraded to Ba1 -- Cl. III-B, Downgraded to C; previously on 10/24/2006 Downgraded to Ca -- Cl. IV-B-2, Downgraded to Aa2; previously on 1/7/2005 Upgraded to Aaa -- Cl. IV-B-3, Downgraded to Ba2; previously on 1/7/2005 Upgraded to A2 -- Cl. IV-B-4, Downgraded to Ca; previously on 1/7/2005 Upgraded to Baa2 CSFB Mortgage-Backed Pass-Through Certificates, Series 2002-34 -- Cl. D-B-3, Downgraded to Baa2; previously on 1/7/2005 Upgraded to Baa1 -- Cl. D-B-4, Downgraded to Ca; previously on 1/24/2003 Assigned Ba3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2002-5 -- Cl. IV-B-1, Downgraded to A3; previously on 3/18/2002 Assigned Aa2 -- Cl. IV-B-2, Downgraded to B3; previously on 3/18/2002 Assigned A2 -- Cl. IV-B-3, Downgraded to Ca; previously on 11/13/2007 Downgraded to Ba1 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-1 -- Cl. III-B-2, Downgraded to Aa3; previously on 12/1/2006 Upgraded to Aaa -- Cl. III-B-3, Downgraded to A3; previously on 12/1/2006 Upgraded to Aa3 -- Cl. D-B-2, Downgraded to Aa3; previously on 12/1/2006 Upgraded to Aa2 -- Cl. D-B-3, Downgraded to B3; previously on 12/1/2006 Upgraded to A2 -- Cl. D-B-4, Downgraded to Ca; previously on 12/1/2006 Upgraded to Baa2 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-17 -- Cl. D-B-2, Downgraded to Ba3; previously on 12/1/2006 Upgraded to Aa3 -- Cl. D-B-3, Downgraded to Caa3; previously on 12/1/2006 Upgraded to A3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-19 -- Cl. I-A-2, Downgraded to Aa1; previously on 11/25/2003 Assigned Aaa -- Cl. I-A-14, Downgraded to Aa2; previously on 11/25/2003 Assigned Aaa -- Cl. I-A-15, Downgraded to Aa1; previously on 11/25/2003 Assigned Aaa -- Cl. I-A-19, Downgraded to Aa2; previously on 11/25/2003 Assigned Aaa -- Cl. I-A-23, Downgraded to Aa2; previously on 11/25/2003 Assigned Aaa -- Cl. I-A-4, Downgraded to Aa2; previously on 11/25/2003 Assigned Aaa -- Cl. I-P, Downgraded to Aa2; previously on 11/25/2003 Assigned Aaa -- Cl. I-X, Downgraded to Aa2; previously on 11/25/2003 Assigned Aaa -- Cl. II-A-1, Downgraded to Aa2; previously on 11/25/2003 Assigned Aaa -- Cl. II-P, Downgraded to Aa2; previously on 11/25/2003 Assigned Aaa -- Cl. II-X, Downgraded to Aa2; previously on 11/25/2003 Assigned Aaa CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-21 -- Cl. D-B-1, Downgraded to A1; previously on 12/1/2006 Upgraded to Aa1 -- Cl. D-B-2, Downgraded to Ba1; previously on 12/1/2006 Upgraded to Aa3 -- Cl. D-B-3, Downgraded to Caa3; previously on 3/1/2004 Assigned Baa1 -- Cl. D-B-4, Downgraded to C; previously on 3/1/2004 Assigned Ba2 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-27 -- Cl. C-B-3, Downgraded to Ba1; previously on 2/16/2004 Assigned Baa3 -- Cl. C-B-4, Downgraded to B1; previously on 2/16/2004 Assigned Ba2 -- Cl. D-B-3, Downgraded to B1; previously on 12/1/2006 Upgraded to A3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-8 -- Cl. D-B-2, Downgraded to Baa1; previously on 12/1/2006 Upgraded to Aa2 -- Cl. D-B-3, Downgraded to Caa3; previously on 12/1/2006 Upgraded to Baa1 -- Cl. D-B-4, Downgraded to C; previously on 4/29/2003 Assigned Ba3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-AR12 -- Cl. I-A-1, Downgraded to Aa2; previously on 5/27/2003 Assigned Aaa -- Cl. I-A-2, Downgraded to Aa2; previously on 9/27/2006 Upgraded to Aaa -- Cl. II-A-1, Downgraded to Aa2; previously on 5/27/2003 Assigned Aaa -- Cl. II-A-2, Downgraded to Aa2; previously on 5/27/2003 Assigned Aaa -- Cl. II-A-3, Downgraded to Aa2; previously on 5/27/2003 Assigned Aaa -- Cl. III-A-1, Downgraded to Aa2; previously on 5/27/2003 Assigned Aaa -- Cl. III-X-A-1, Downgraded to Aa2; previously on 5/27/2003 Assigned Aaa -- Cl. C-B-1, Downgraded to A3; previously on 9/27/2006 Upgraded to Aaa -- Cl. C-B-2, Downgraded to Ba1; previously on 9/27/2006 Upgraded to Aa3 -- Cl. C-B-3, Downgraded to B3; previously on 9/27/2006 Upgraded to A3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-AR18 -- Cl. C-B-1, Downgraded to Aa1; previously on 9/27/2006 Upgraded to Aaa -- Cl. C-B-2, Downgraded to A3; previously on 9/27/2006 Upgraded to Aa3 -- Cl. C-B-3, Downgraded to Ba2; previously on 9/27/2006 Upgraded to A3 -- Cl. C-B-4, Downgraded to Ca; previously on 9/27/2006 Upgraded to Baa3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-AR2 -- Cl. V-A-1, Downgraded to A3; previously on 2/24/2003 Assigned Aaa CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-AR20 -- Cl. C-B-1, Downgraded to Aa1; previously on 9/27/2006 Upgraded to Aaa -- Cl. C-B-2, Downgraded to A2; previously on 9/27/2006 Upgraded to Aa3 -- Cl. C-B-3, Downgraded to Baa3; previously on 9/27/2006 Upgraded to A3 -- Cl. C-B-4, Downgraded to B2; previously on 9/27/2006 Upgraded to Baa3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-AR22 -- Cl. C-B-1, Downgraded to Aa2; previously on 9/27/2006 Upgraded to Aaa -- Cl. C-B-2, Downgraded to A3; previously on 9/27/2006 Upgraded to A1 -- Cl. C-B-3, Downgraded to B1; previously on 12/29/2003 Assigned Baa2 -- Cl. C-B-4, Downgraded to Ca; previously on 12/29/2003 Assigned Ba2 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-AR24 -- Cl. I-A-1, Downgraded to Aa1; previously on 11/25/2003 Assigned Aaa -- Cl. II-A-4, Downgraded to Aa1; previously on 11/25/2003 Assigned Aaa -- Cl. III-A-1, Downgraded to Aa1; previously on 11/25/2003 Assigned Aaa -- Cl. IV-A-1, Downgraded to Aa1; previously on 11/25/2003 Assigned Aaa -- Cl. V-A-1, Downgraded to Aa1; previously on 11/25/2003 Assigned Aaa -- Cl. C-B-1, Downgraded to A3; previously on 9/27/2006 Upgraded to Aaa -- Cl. C-B-2, Downgraded to Ba1; previously on 9/27/2006 Upgraded to Aa3 -- Cl. C-B-3, Downgraded to Caa1; previously on 9/27/2006 Upgraded to A3 -- Cl. C-B-4, Downgraded to Ca; previously on 9/27/2006 Upgraded to Baa3 -- Cl. C-B-5, Downgraded to Ca; previously on 11/25/2003 Assigned B2 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-AR28 -- Cl. I-A-1, Downgraded to Aa3; previously on 3/22/2004 Assigned Aaa -- Cl. II-A-1, Downgraded to A1; previously on 3/22/2004 Assigned Aaa -- Cl. III-A-1, Downgraded to A1; previously on 3/22/2004 Assigned Aaa -- Cl. IV-A-1, Downgraded to A1; previously on 3/22/2004 Assigned Aaa -- Cl. V-A-1, Downgraded to A1; previously on 3/22/2004 Assigned Aaa -- Cl. VI-M-3, Downgraded to Baa1; previously on 3/22/2004 Assigned A3 -- Cl. C-B-1, Downgraded to Baa3; previously on 9/27/2006 Upgraded to Aaa -- Cl. C-B-2, Downgraded to B3; previously on 9/27/2006 Upgraded to Aa3 -- Cl. C-B-3, Downgraded to Ca; previously on 3/22/2004 Assigned Baa1 -- Cl. C-B-4, Downgraded to Ca; previously on 3/22/2004 Assigned Ba1 -- Cl. C-B-5, Downgraded to Ca; previously on 3/22/2004 Assigned B3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2003-AR30 -- Cl. VI-M-2, Downgraded to Ba1; previously on 9/27/2006 Downgraded to A3 -- Cl. C-B-1, Downgraded to Aa3; previously on 9/27/2006 Upgraded to Aaa -- Cl. C-B-2, Downgraded to Baa1; previously on 9/27/2006 Upgraded to Aa3 -- Cl. C-B-3, Downgraded to Ba3; previously on 9/27/2006 Upgraded to A2 -- Cl. C-B-4, Downgraded to Ca; previously on 9/27/2006 Upgraded to Baa3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2004-1 -- Cl. I-A-1, Downgraded to Aa1; previously on 3/31/2004 Assigned Aaa -- Cl. I-A-2, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. I-A-3, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. I-P, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. I-X, Downgraded to Aa1; previously on 3/31/2004 Assigned Aaa -- Cl. II-A-1, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. II-A-2, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. III-A-1, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. IV-A-1, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. V-A-1, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. D-P-1, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. D-P-2, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. D-X-1, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. D-X-2, Downgraded to Aa2; previously on 3/31/2004 Assigned Aaa -- Cl. D-B-2, Downgraded to Baa3; previously on 3/31/2004 Assigned A3 -- Cl. D-B-3, Downgraded to B3; previously on 3/31/2004 Assigned Baa3 CSFB Mortgage-Backed Pass-Through Certificates, Series 2004-4 -- Cl. I-A-3, Downgraded to Aa3; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-4, Downgraded to Aa3; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-5, Downgraded to Aa3; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-6, Downgraded to Aa1; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-7, Downgraded to Aa3; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-8, Downgraded to Aa2; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-9, Downgraded to Aa3; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-10, Downgraded to Aa3; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-11, Downgraded to Aa2; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-12, Downgraded to Aa3; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-13, Downgraded to Aa3; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-14, Downgraded to Aa2; previously on 9/28/2004 Assigned Aaa -- Cl. I-A-15, Downgraded to Aa2; previously on 9/28/2004 Assigned Aaa -- Cl. I-X, Downgraded to Aa1; previously on 9/28/2004 Assigned Aaa -- Cl. IV-A-1, Downgraded to Aa2; previously on 9/28/2004 Assigned Aaa -- Cl. V-A-1, Downgraded to Aa2; previously on 9/28/2004 Assigned Aaa -- Cl. V-A-2, Downgraded to Aa3; previously on 9/28/2004 Assigned Aaa -- Cl. V-A-3, Downgraded to Aa2; previously on 9/28/2004 Assigned Aaa -- Cl. V-A-4, Downgraded to Aa2; previously on 9/28/2004 Assigned Aaa -- Cl. A-P, Downgraded to Aa2; previously on 9/28/2004 Assigned Aaa -- Cl. D-X, Downgraded to Aa2; previously on 9/28/2004 Assigned Aaa -- Cl. D-B-2, Downgraded to Baa3; previously on 9/28/2004 Assigned A3 -- Cl. D-B-3, Downgraded to Ba1; previously on 9/28/2004 Assigned Baa1 -- Cl. D-B-4, Downgraded to B2; previously on 9/28/2004 Assigned Baa3 -- Cl. D-B-5, Downgraded to Caa2; previously on 9/28/2004 Assigned Ba2 CSFB Mortgage-Backed Pass-Through Certificates, Series 2004-AR2 -- Cl. I-A-1, Downgraded to Aa3; previously on 3/31/2004 Assigned Aaa -- Cl. II-A-1, Downgraded to Aa3; previously on 3/31/2004 Assigned Aaa -- Cl. III-A-1, Downgraded to Aa3; previously on 3/31/2004 Assigned Aaa -- Cl. IV-A-1, Downgraded to Aa3; previously on 3/31/2004 Assigned Aaa -- Cl. V-A-1, Downgraded to Aa3; previously on 3/31/2004 Assigned Aaa -- Cl. VI-M-2, Downgraded to Baa3; previously on 3/31/2004 Assigned A1 -- Cl. VI-M-3, Downgraded to Ca; previously on 12/27/2007 Downgraded to Ba1 -- Cl. C-B-1, Downgraded to Baa2; previously on 3/31/2004 Assigned Aa2 -- Cl. C-B-2, Downgraded to Caa1; previously on 3/31/2004 Assigned A2 -- Cl. C-B-3, Downgraded to Ca; previously on 3/31/2004 Assigned Baa2 -- Cl. C-B-4, Downgraded to C; previously on 3/31/2004 Assigned Ba2 CSFB 2007-TFL2: Moody's Reviews Ratings on 10 Pooled Classes ------------------------------------------------------------ Moody's Investors Service placed ten pooled classes and two rake classes of CSFB 2007-TFL2 on review for possible downgrade due to increased risk of default on the pool's largest loan and increased loss severities associated with two other loans, which combined represent 61.7% of the pool's outstanding loan balance. The largest loan, Planet Hollywood, is secured by a hotel-casino in Las Vegas which has experienced declining performance due to significant market deterioration. Additionally, the loan's debt service reserve account has recently been depleted. The other troubled loans are the Resorts Atlantic City (hotel-casino) and Biscanye Landing (land) which are both anticipated to become real estate owned in the near future. Moody's rating action is: -- Class B, $45,700,000, Placed Under Review for Possible Downgrade; previously downgraded to A2 from Aa1 on March 4, 2009; -- Class C, $42,600,000, Placed Under Review for Possible Downgrade; previously downgraded to A3 from Aa2 on March 4, 2009; -- Class D, $33,500,000, Placed Under Review for Possible Downgrade; previously downgraded to Baa1 from Aa3 on March 4, 2009; -- Class E, $36,600,000, Placed Under Review for Possible Downgrade; previously downgraded to Baa3 from A1 on March 4, 2009; -- Class F, $36,500,000, Placed Under Review for Possible Downgrade; previously downgraded to Ba1 from A2 on March 4, 2009; -- Class G, $33,500,000, Placed Under Review for Possible Downgrade; previously downgraded to Ba2 from A3 on March 4, 2009; -- Class H, $39,600,000, Placed Under Review for Possible Downgrade, previously downgraded to B1 from Baa1 on March 4,2009; -- Class J, $36,600,000, Placed Under Review for Possible Downgrade, previously downgraded to B2 from Baa2 on March 4, 2009; -- Class K, $39,600,000, Placed Under Review for Possible Downgrade, previously downgraded to Caa1 from Baa3 on March 4,2009; -- Class L, $33,467,897, Placed Under Review for Possible Downgrade; previously downgraded to Caa3 from Ba3 on March 4, 2009; -- Class BSL-A, $8,900,000, Placed Under Review for Possible Downgrade; previously downgraded to Caa2 from Ba1 on March 4, 2009; -- Class BSL-B, $9,000,000, Placed Under Review for Possible Downgrade; previously downgraded to Caa3 from Ba2 on March 4, 2009. The largest loan, Planet Hollywood Resort and Casino ($460.0 million -- 38.1% of the pooled trust balance) is secured by a 40-story hotel-casino property, with 2,519 rooms on the Strip in Las Vegas, Nevada. The property was constructed in 2000 as the Aladdin Hotel and Casino. The current sponsors (Robert Earl, Bay Harbor, and Starwood) completed a $178.4 million renovation and transformation project to re-brand the property as the Planet Hollywood Hotel & Casino in 2006. However, the slowing U.S. economy has led to reduced convention bookings and leisure/gaming demand. As a result, initial cash flow projections have not been reached. For the trailing twelve months ending March 2009, the net cash flow was $28.9 million with a debt service coverage ratio of 0.59x. The asset's debt service reserve became fully depleted in July 2009. The Resorts Atlantic City Loan ($175.0 million -- 14.5% of the pooled trust balance) is secured by a hotel-casino with 310 feet of Boardwalk frontage at the northern end of the Atlantic City Boardwalk. On November 11 2008, the master servicer sent a notice of monetary default to the borrower with a cure date of November 26, 2008. The borrower subsequently indicated that it would not cure the monetary default and the loan was transferred to special servicing on December 1, 2008. It is anticipated that the loan will become REO in the near future. Biscayne Landing ($110.0 million - 9.1% of the pooled trust balance and six rake classes) is secured by a 188-acre site located in North Miami, Florida and was intended to fund pre- development of the site to accommodate a mixed-use project encompassing condominiums, multifamily, hotel, office, and retail development. The original plan called for a heavy residential component with completion prior to a smaller commercial component. In December 2007, the borrower, Boca Developers, failed to make a $20.0 million amortization payment which was required if release proceed targets were not met. In March of 2008, the loan was moved to special servicing. Since the monetary default, the borrower explored a revised plan calling for a much larger commercial development followed by a smaller residential component when market conditions improve. However, the Borrower's revised strategy was unsuccessful and the lender group is now preparing for foreclosure. In the coming weeks, Moody's will conduct a detailed review of the Planet Hollywood Hotel & Casino, Resorts Atlantic City, Biscayne Landing and the recent financial performance of the remaining assets in the pool. CREDIT SUISSE: Moody's Takes Rating Actions on 2005-C2 Certs. ------------------------------------------------------------- Moody's Investors Service confirmed the ratings of two classes, affirmed eight classes, and downgraded 14 classes of Credit Suisse First Boston Mortgage Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 2005-C2. The downgrades are due to higher expected losses for the pool resulting from increased credit quality dispersion, realized and anticipated losses from loans in special servicing. On May 26, 2009, the pool's third largest loan, Washington Mutual Irvine Campus, was transferred to special servicing. On June 16, 2009, Moody's placed 16 classes on review for possible downgrade. This action concludes the review. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the July 17, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 4% to $1.54 billion from $1.61 billion at securitization. The Certificates are collateralized by 168 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top 10 non- defeased loans representing 45% of the pool. Sixteen loans, representing 10% of the pool, have defeased and are collateralized by U.S. government securities. Forty-one loans, representing 26% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. One loan has been liquidated from the trust resulting in a loss of $4.0 million. Seven loans, representing 12% of the pool, are currently in special servicing. The largest specially serviced loan is Washington Mutual Irvine Campus Loan ($106.0 million -- 6.9%), which is secured by a 415,000 square foot office complex located in Irvine, California. The loan was transferred to special servicing for imminent default. At securitization the property was 100% leased to Washington Mutual through November 2014. Upon acquiring Washington Mutual in September 2008, JPMorgan Chase reached an agreement with regulators to reject two leases representing 58% of the net rentable area. The property is currently 42% leased, including a short term lease with JPMorgan for 29% of the NRA through November 2009, with a one-year renewal option. The loan sponsors, Macquarie and Maguire Properties LP, have indicated that they are not prepared to invest additional capital and will pursue a cooperative sale of the property with the special servicer. Moody's is estimating a loss of approximately $45 million (42% severity) for this loan. The remaining five specially serviced loans are either 90+ days delinquent or in foreclosure. Moody's estimates an aggregate loss of $40 million (49% severity on average) for these loans. Moody's was provided with full year 2008 and partial year 2009 operating results for 99% and 65% of the pool, respectively, excluding the defeased loans. Moody's loan to value ratio, excluding the specially serviced loans, is 102% compared to 100% at Moody's last full review in July 2007. In addition to the increase in overall LTV, credit quality dispersion has increased since last review. Based on Moody's analysis, 10% of the pool has an LTV in excess of 120% compared to 1.5% at last review. Moody's stressed debt service coverage ratio for the conduit component is 1.00X compared to 0.99X at last review. Moody's stressed DSCR is based on Moody's net cash flow and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of the Herfindahl index to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple-notch downgrades under adverse circumstances. The credit neutral herf score is 40. The pool, excluding defeased loans, has a Herf score of 28 compared to 36 at last review. The top three performing loans represent 22% of the pool. The largest loan is the Tri-County Mall Loan ($144.7 million -- 9.4%), which is secured by the borrower's interest in a 1.1 million square foot regional mall (595,600 square feet of collateral) located in Cincinnati, Ohio. There is also a junior non-pooled loan of $8.7 million included in the trust and $12.0 million of mezzanine debt held outside the trust. Total mall occupancy as of March 2009 was 92% compared to 90% at last review. In-line occupancy as of March 2009 was 81%. Comparable in-line sales for the 12-month period ending June 2009 were $290 per square foot, down 5% from the prior period. Moody's analysis of the loan incorporates a higher capitalization rate to reflect current market conditions. Moody's LTV and stressed DSCR are 117% and 0.83X, respectively, compared to 110% and 0.84X at last review. The second largest loan is the 390 Park Avenue Loan ($108.1 million -- 7.1%), which is secured by a 234,000 square foot office building located in New York City. The property was 100% occupied as of February 2009 compared to 96% at last review. Property performance has improved due to the lease-up of vacant space as well as increased rental revenues. Moody's LTV and stressed DSCR are 107% and 0.86X, respectively, compared to 115% and 0.79X at last review. The third largest loan is the Spectrum Office Portfolio Loan ($84.2 million -- 5.5%), which is secured by six office properties located in the North Rivers submarket of Chicago. The portfolio was 85% occupied as of March 2009, the same as at last review. Portfolio performance has been stable. Moody's LTV and stressed DSCR are 104% and 0.99X, respectively, compared to 105% and 0.95X at last review. Moody's rating action is: -- Class A-1, $9,116,522, affirmed at Aaa; previously affirmed at Aaa on 7/23/2007 -- Class A-2, $75,897,000, affirmed at Aaa; previously affirmed at Aaa on 7/23/2007 -- Class A-3, $107,275,000, affirmed at Aaa; previously affirmed at Aaa on 7/23/2007 -- Class A-4, $365,026,000, affirmed at Aaa; previously affirmed at Aaa on 7/23/2007 -- Class A-AB, $74,464,000, affirmed at Aaa; previously affirmed at Aaa on 7/23/2007 -- Class A-1-A, $424,249,343, affirmed at Aaa; previously affirmed at Aaa on 7/23/2007 -- Class A-X, Notional, affirmed at Aaa; previously affirmed at Aaa on 7/23/2007 -- Class A-SP, Notional, affirmed at Aaa; previously affirmed at Aaa on 7/23/2007 -- Class A-MFL, $80,000,000, confirmed at Aaa; previously placed on review for possible downgrade on 6/16/2009 -- Class A-MFX, $80,508,000, confirmed at Aaa; previously placed on review for possible downgrade on 6/16/2009 -- Class A-J, $110,350,000, downgraded to Aa3 from Aaa; previously placed on review for possible downgrade on 6/16/2009 -- Class B, $30,095,000, downgraded to A2 from Aa2; previously placed on review for possible downgrade on 6/16/2009 -- Class C, $16,051,000, downgraded to A3 from Aa3; previously placed on review for possible downgrade on 6/16/2009 -- Class D, $28,089,000, downgraded to Baa3 from A2; previously placed on review for possible downgrade on 6/16/2009 -- Class E, $18,057,000, downgraded to Ba1 from A3; previously placed on review for possible downgrade on 6/16/2009 -- Class F, $20,064,000, downgraded to Ba3 from Baa1; previously placed on review for possible downgrade on 6/16/2009 -- Class G, $16,050,000, downgraded to B1 from Baa2; previously placed on review for possible downgrade on 6/16/2009 -- Class H, $20,064,000, downgraded to B2 from Baa3; previously placed on review for possible downgrade on 6/16/2009 -- Class J, $8,025,000, downgraded to Caa1 from Ba1; previously placed on review for possible downgrade on 6/16/2009 -- Class K, $8,026,000, downgraded to Caa2 from Ba2; previously placed on review for possible downgrade on 6/16/2009 -- Class L, $8,025,000, downgraded to Caa3 from Ba3; previously placed on review for possible downgrade on 6/16/2009 -- Class M, $2,007,000, downgraded to Ca from B1; previously placed on review for possible downgrade on 6/16/2009 -- Class N, $6,019,000, downgraded to Ca from B2; previously placed on review for possible downgrade on 6/16/2009 -- Class O, $6,019,000, downgraded to Ca from B3; previously placed on review for possible downgrade on 6/16/2009 CREDIT SUISSE: Moody's Takes Rating Actions on 2005-C3 Certs. ------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 15 classes and downgraded nine classes of Credit Suisse First Boston Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2005-C3. The downgrades are due to higher expected losses for the pool resulting from increased leverage, increased credit quality dispersion and realized and anticipated losses from specially serviced loans. On July 14, 2009, Moody's placed nine classes on review for possible downgrade. The action concludes that review. The action is the result of Moody's on- going surveillance of commercial mortgage backed securities transactions. As of the July 17, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 4% to $1.57 billion from $1.64 billion at securitization. The Certificates are collateralized by 198 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top 10 loans representing 35% of the pool. The pool includes 53 loans, representing 12% of the outstanding loan balance, which are secured by residential co-ops. These loans have underlying ratings of Aaa. Nine loans, representing 5% of the pool, have defeased and are collateralized by U.S. Government securities. Twenty-seven loans, representing 13% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. One loan has been liquidated from the pool, resulting in a $3.6 million loss. Seven loans, representing 9% of the pool, are currently in special servicing. The largest specially serviced loan, Southland Center Mall ($108.4 million -- 7%), is secured by a mall owned by an affiliate of General Growth Properties, Inc. (GGP). This loan was transferred to special servicing due to GGP's bankruptcy filing on April 16, 2009. The second largest specially serviced loan is Longford Plaza ($18.1 million -- 1.1%), which is secured by a 101,000 square foot office property building located in Las Vegas, Nevada. The loan was transferred to special servicing in December 2008 due to monetary default. The property's performance has declined since securitization due to increased vacancy caused by lease rollovers. Moody's does not anticipate a loss from the Southland Center Mall loan but estimates a $19.3 million aggregate loss (51% loss severity on average) from the remaining specially serviced loans. Moody's was provided with partial or full-year 2008 operating results for 71% of the pool, excluding defeased loans and loans secured by residential co-ops. Moody's weighted average loan to value ratio, excluding the specially serviced loans with anticipated losses, is 105% compared to 98% at Moody's prior review in June 2007. In addition to the higher overall LTV, the pool has experienced increased credit quality dispersion. Based on Moody's analysis, 63% of the conduit pool has an LTV in excess of 100% compared to 50% at last review. Approximately 10% of the conduit pool has an LTV in excess of 120% compared to 0.0% at last review. Moody's stressed debt service coverage ratio for the conduit component is 1.29X compared to 1.38X at last review. Moody's stressed DSCR is based on Moody's net cash flow and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of the Herfindahl index to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool, excluding defeased loans and loans with underlying ratings, has a Herf of 32 compared to 38 at last review. At securitization, one loan, 635 Madison Avenue ($8.3 million -- 0.5%), had an underlying rating. The loan has defeased and is collateralized by U.S. Government Securities. The three largest conduit loans represent 17.6% of the outstanding pool balance. The largest conduit loan is the San Diego Office Park Loan ($133.0 million -- 8.5%), which is secured by an 11- building Class A office complex totaling 645,000 square feet located in San Diego, California. The loan is interest only for the entire term. The largest tenant is Sony Computer Entertainment which occupies 40% of net rentable area through December 2014. The property was 97% occupied as of December 2008, the same as at last review. Moody's LTV and stressed DSCR are 117% and 0.81X, respectively, compared to 116% and 0.74X at last review. The second largest conduit loan is the 80-90 Maiden Lane Loan ($92.9 million -- 5.7%), which is secured by two Class B office buildings totaling 545,000 square feet. The properties are located in the Insurance submarket in New York City. The properties were 99% occupied as of September 2008 compared to 97% at last review. Performance has improved due to increased rental revenues. Moody's LTV and stressed DSCR are 104% and 0.94X, respectively, compared to 112% and 0.84X at last review. The third largest conduit loan is the Och Ziff Portfolio ($52.9 million -- 3.4%), which is secured by eight limited-service hotels located in Columbus, Ohio and Covington, Kentucky. Performance has declined since last review due to lower revenues and increased expenses. Moody's LTV and stressed DSCR are 117% and 0.97X, respectively, compared to 81% and 1.43X at last review. Moody's rating action is: -- Class A-1, $7,245,373, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class A-2, $176,757,000, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class A-3, $79,635,000, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class A-AB, $61,470,000, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class A-4, $372,531,000, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class A-1-A, $385,036,000, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class A-J, $135,048,000, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class A-M, $163,695,000, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class A-X, Notional, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class A-Y, Notional, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class A-SP, Notional, affirmed at Aaa; previously affirmed at Aaa on 6/14/2007 -- Class B, $34,785,000, affirmed at Aa2; previously affirmed at Aa2 on 6/14/2007 -- Class C, $16,370,000, affirmed at A1; previously affirmed at A1 on 6/14/2007 -- Class D, $14,323,000, affirmed at A2; previously affirmed at A2 on 6/14/2007 -- Class E, $16,370,000, affirmed at A3; previously affirmed at A3 on 6/14/2007 -- Class F, $20,462,000, downgraded to Baa2 from Baa1; previously Baa1, placed on review for possible downgrade on 7/14/2009 -- Class G, $16,369,000, downgraded to Baa3 from Baa2; previously Baa2, placed on review for possible downgrade on 7/14/2009 -- Class H, $18,416,000, downgraded to Ba2 from Baa3; previously Baa3, placed on review for possible downgrade on 7/14/2009 -- Class J, $6,138,000, downgraded to B1 from Ba1; previously Ba1, placed on review for possible downgrade on 7/14/2009 -- Class K, $8,185,000, downgraded to B2 from Ba2; previously Ba2, placed on review for possible downgrade on 7/14/2009 -- Class L, $6,139,000, downgraded to B3 from Ba3; previously Ba3, placed on review for possible downgrade on 7/14/2009 -- Class M, $4,092,000, downgraded to Caa1 from B1; previously B1, placed on review for possible downgrade on 7/14/2009 -- Class N, $4,092,000, downgraded to Caa2 from B2; previously B2, placed on review for possible downgrade on 7/14/2009 -- Class O, $6,139,000, downgraded to Caa3 from B3; previously B3, placed on review for possible downgrade on 7/14/2009 CSAM FUNDING: Moody's Downgrades Ratings on 10 Classes ------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by CSAM Funding IV: -- US$319,000,000 Class A-1 Floating Rate Notes Due 2016, Downgraded to Aa3; previously on June 14, 2004 Assigned Aaa; -- US$100,000 Class A-1V Floating Rate Notes Due 2016, Downgraded to Aa3; previously on June 14, 2004 Assigned Aaa; -- US$129,900,000 Class A-1NV Floating Rate Notes Due 2016, Downgraded to Aa3; previously on June 14, 2004 Assigned Aaa; -- US$32,500,000 Class A-2 Floating Rate Notes Due 2016, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$19,000,000 Class B-1 Deferrable Floating Rate Notes Due 2016, Downgraded to Ba2; previously on March 18, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$14,000,000 Class B-2 Deferrable Floating Rate Notes Due 2016, Downgraded to Ba2; previously on March 18, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$16,500,000 Class C-1 Floating Rate Notes Due 2016, Downgraded to Caa1; previously on March 18, 2009 Downgraded to B2 and Placed Under Review for Possible Downgrade; -- US$7,500,000 Class C-2 Fixed Rate Notes Due 2016, Downgraded to Caa1; previously on March 18, 2009 Downgraded to B2 and Placed Under Review for Possible Downgrade; -- US$6,750,000 Class D-1 Floating Rate Notes Due 2016, Downgraded to Ca; previously on March 18, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade; -- US$4,250,000 Class D-2 Fixed Rate Notes Due 2016, Downgraded to Ca; previously on March 18, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class D Par Value Test. The weighted average rating factor has steadily increased over the last year and is currently 2806 versus a test level of 2340 as of the last trustee report, dated July 3, 2009. Based on the same report, defaulted securities total about $43.5 million, accounting for roughly 7.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 11.3% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. CSAM Funding IV, issued in 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CSAM FUNDING: Moody's Downgrades Ratings on Eight Classes --------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by CSAM Funding I: -- US$10,500,000 Class A-1 Notes, Downgraded Aa3; previously on March 29, 2001 Assigned Aaa; -- US$563,500,000 Class A-2 Notes, Downgraded Aa3; previously on March 29, 2001 Assigned Aaa; -- US$22,500,000 Class B-1 Notes, Downgraded to Ba1; previously on March 20, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$40,000,000 Class B-2 Notes, Downgraded to Ba1; previously on March 20, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$18,000,000 Class C-1 Notes, Downgraded to B3; previously on March 20, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$11,700,000 Class C-2 Notes, Downgraded to B3; previously on March 20, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$11,800,000 Class D-1 Notes, Downgraded to Ca; previously on March 20, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade; -- US$12,000,000 Class D-2 Notes, Downgraded to Ca; previously on March 20, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2944 versus a test level of 2719 as of the last trustee report, dated Jun 23, 2009. Based on the same report, defaulted securities total about $75.13 million, accounting for roughly 11.78% of the collateral balance, and securities rated Caa1 or lower make up approximately 17.7% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in a small number of obligors and industries. This includes a significant concentration in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Moody's also notes that a material proportion of the collateral pool includes debt obligations whose credit quality has been assessed through Moody's Credit Estimates. Moody's analysis reflects the application of certain stresses with respect to the default probabilities associated with CEs. These additional stresses reflect the rapid pace of recent changes in credit market conditions and the default rate expectations in the current economic cycle that are higher than the historical averages. Specifically, the default probability stresses include (1) a 1.5 notch-equivalent assumed downgrade for CEs updated between 12-15 months ago; and (2) assuming an equivalent of Caa3 for CEs that were not updated within the last 15 months. Additionally, as CEs do not carry credit indicators such as ratings reviews and outlooks, a stress of a 0.5 notch-equivalent assumed downgrade for CEs is also applied to CEs provided between 6-12 months ago. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. CSAM Funding I, issued in March 29, 2001, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CSAM FUNDING: Moody's Downgrades Ratings on Two Classes ------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by CSAM Funding III: -- US$292,000,000 Class A-1 Floating Rate Notes Due 2015, Downgraded to Aa2; previously on July 30, 2003 Assigned Aaa; -- US$26,250,000 Class A-2 Fixed Rate Notes Due 2015, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. Additionally, Moody's has confirmed the ratings of these notes: -- US$20,850,000 Class B Fixed Rate Notes Due 2015, Confirmed at Ba1; previously on March 20, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$18,900,000 Class C Floating Rate Notes Due 2015, Confirmed at B1; previously on March 20, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2900 versus a test level of 2330 as of the last trustee report, dated July 7, 2009. Based on the same report, defaulted securities total about $25.75 million, accounting for roughly 6.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 13.8% of the underlying portfolio. Finally, Moody's noted that the portfolio includes a number of investments in securities that mature after the maturity date of the notes. These investments potentially expose the notes to market risk in the event of liquidation at the time of the notes' maturity. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. CSAM Funding III, issued in 2003, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CSAM FUNDING: Moody's Downgrades Ratings on Various Classes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by CSAM Funding II: -- US$346,000,000 Class A Floating Rate Notes Due October 2016, Downgraded A1; previously on May 28, 2002 Assigned Aaa; -- US$24,000,000 Class B-1 Fixed Rate Notes Due October 2016, Downgraded to Ba2; previously on March 20, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$15,250,000 Class B-2 Floating Rate Notes Due October 2016, Downgraded to Ba2; previously on March 20, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$6,000,000 Class C-1 Fixed Rate Notes Due October 2016, Downgraded to Caa2; previously on March 20, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$11,000,000 Class C-2 Floating Rate Notes Due October 2016, Downgraded to Caa2; previously on March 20, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$13,000,000 Class D-1 Fixed Rate Notes Due October 2016, Downgraded to Ca; previously on March 20, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade; -- US$10,000,000 Class K Blended Securities due 2016, Downgraded to Ba2; previously on May 29, 2002 Assigned Baa1. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2898 versus a test level of 2450 as of the last trustee report, dated July 8, 2009. Based on the same report, defaulted securities total about $51.78 million, accounting for roughly 13.61% of the collateral balance, and securities rated Caa1 or lower make up approximately 15.3% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in a small number of obligors and industries. This includes a significant concentration in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. CSAM Funding II, issued in May 28, 2002, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. E*TRADE RV: Moody's Downgrades Ratings on Three Tranches -------------------------------------------------------- Moody's downgraded the Class A-5 and three subordinate tranches from E*Trade RV and Marine Trust 2004-1 transaction. The downgrade was prompted by the deterioration in performance of the collateral pool over and above Moody's original expectations. The weak performance of the Marine and RV transactions have coincided with the challenging economic environment that has put pressure on the performance of the pools of loans related to luxury and non- essential goods in general. Moody's currently anticipates that the collateral pool will incur lifetime cumulative net losses of 8.50%, up from approximately 2.00%-to-3.00% at the time of closing. The rating action concludes the evaluation of the securities that were previously placed on review for possible downgrade on April 2, 2009. Complete rating actions are: Issuer: E* Trade RV and Marine Trust 2004-1 Pool Current Expected Cumulative Net Losses: 8.50% (as a percentage of the original loan pool balance) -- Class A-5, Downgraded to A2 from Aaa; previously on April 2, 2009, Aaa Placed Under Review for Possible Downgrade -- Cl. B, Downgraded to Baa2 from Aa2; previously on April 2, 2009, Aa2 Placed Under Review for Possible Downgrade -- Cl. C, Downgraded to Ba2 from A2; previously on April 2, 2009, A2 Placed Under Review for Possible Downgrade -- Cl. D, Downgraded to B3 from Baa3; previously on April 2, 2009, Baa3 Placed Under Review for Possible Downgrade FIFTH THIRD: Moody's Downgrades Ratings on Two 2002-FTB1 Certs. --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of two certificates issued by Fifth Third Mortgage Loan Trust 2002-FTB1 due to higher expected pool losses in relation to remaining tranche-specific credit protection. The transaction is backed by less than 50 loans. The ratings are based on the methodology applied to all transactions with small pool factors. Moody's defines low pool factor deals as those that meet one of these two criteria: (1) the outstanding collateral balance is less than $1 million, and the pool factor is less than 5% or (2) the pool has fewer than 50 loans remaining. Moody's uses these methodology to estimate losses on low pool factor deals. First, gross defaults are determined by applying assumed lifetime roll-rates (probabilities of transition to default) to the transactions' current delinquency buckets ("delinquency pipeline") and a pipeline multiplier. The pipeline multiplier accounts for further possible defaults that might arise from borrowers that are current. The pipeline multiplier differs for each deal based on the number of loans remaining in the pool -- greater the number of loans remaining the higher the multiplier. The estimated defaults are subject to a floor -- a minimum default. The minimum default also differs based on the number loans remaining in the pool. The fewer the number of loans remaining in the pool the higher the minimum default since each loan represents a higher percentage of the pool. The final default number is then multiplied by expected loss severity to arrive at Moody's expected loss estimate. Loss severity also differs by transaction and is higher for more recent vintages. Complete rating action: Issuer: Fifth Third Mortgage Loan Trust 2002-FTB1 (Loans Remaining: 46) -- Cl. C-B-2, Current Balance: $529,132, Downgraded to Ca; previously on 3/9/2009 Downgraded to Caa1 -- Cl. C-B-3, Current Balance: $462,992, Downgraded to C; previously on 3/9/2009 Downgraded to Ca FIRST UNION: Moody's Confirms Ratings on Six 2001-C1 Certificates ----------------------------------------------------------------- Moody's Investors Service confirmed the ratings on six classes, affirmed the ratings on six classes, and downgraded the ratings on six classes of First Union National Bank - Bank of America, N.A. Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2001-C1. The downgrades are due to higher expected losses for the pool resulting from increased credit quality dispersion and realized and anticipated losses from specially serviced loans. On June 17, 2009, Moody's placed the ratings of twelve classes on review for possible downgrade. The action concludes that review. The action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the June 17, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 23% to $1.0 billion from $1.31 billion at securitization. The Certificates are collateralized by 154 mortgage loans ranging in size from less than 1% to 8% of the pool, with the top 10 loans non-defeased loans representing 24% of the pool. Fifty-nine loans, representing 37% of the pool, have defeased and are collateralized by U.S. Government securities. Thrirty-three loans, representing 16% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Thirteen loans have been liquidated from the pool, resulting in a $30.2 million loss. Seven loans, representing 9% of the pool, are currently in special servicing. The largest loan in special servicing is EmeryTech ($37.0 million -- 3.6%), which is secured by a 224,000 square foot office building located in Emeryville, California. The loan was transferred to special servicing in June 2009 due to imminent default resulting from a decline in occupancy. The property was only 67% occupied as of March 2009 due to several large tenants vacating the building, including Washington Mutual (18% net rentable area) and LV Sensor (6%). The Borrower has indicated that he has a potential tenant for some of Washington Mutual's former space, however, the prospective tenant would not move in until next year. The second largest specially serviced loan is Midway Mall ($21.8 million -- 2.2%), which is secured by a 471,000 square foot retail center located in Sherman, Texas. The loan was transferred to special servicing in July 2008. The property has suffered from the loss of several major tenants. Moody's estimates a $45.6 million aggregate loss (50% loss severity on average) from the specially serviced loans. Moody's was provided with partial or full-year 2008 operating results for 80% of the pool, excluding the defeased loans. Moody's weighted average loan to value ratio, excluding the specially serviced loans with anticipated losses, is 79% compared to 83% at Moody's prior review. Moody's stressed debt service coverage ratio is 1.46X compared to 1.36X at last review. Moody's stressed DSCR is based on Moody's net cash flow and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of the Herfindahl index to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool, excluding defeased loans and loans with underlying ratings, has a Herf of 42 compared to 49 at last review. The three largest performing loans represent 9.3% of the outstanding pool balance. The largest loan is the Crystal Square Four Loan ($45.7 million -- 4.5%), which is secured by a 354,000 square foot office building located in Arlington, Virginia. The property is largely occupied by government agencies and was 97% occupied as of February 2009, similar to last review. The property's performance has been stable, however, Moody's stressed the cash flow due to concerns about near-term lease rollover risk in the current environment. Moody's LTV and stressed DSCR are 89% and 1.25X, respectively, compared to 75% and 1.45X at last review. The second largest loan is the Sierra III Office Building Loan ($24.9 million -- 2.5%), which is secured by a 248,000 square foot office building located in Irving, Texas. The property was 100% leased to Temerlin McClain, a subsidiary of True North Communications, through January 2010. However, the tenant vacated in 2007 and a new tenant, TXU Energy Retail Company, LLC, only occupies 73% of the total net rentable area. The decline in occupancy has negatively impacted performance. Moody's LTV and stressed DSCR are 105% and 1.03X, respectively, compared to 74% and 1.43X at last review. The third largest loan is Brown & Williamson Tower Loan ($23.3 million -- 2.3%) which is secured by an office tower located in Louisville, Kentucky. The property is part of the Galleria mixed-use complex and is connected to the Hyatt Regency Hotel. The property was 100% occupied as of January 2009 to two major tenants -- R.J. Reynolds Tobacco Company and Fifth Third Bank of Kentucky. Performance has been stable. Moody's LTV and stressed DSCR are 84% and 1.35X, respectively, compared to 84% and 1.36X at last review. Moody's rating action is: -- Class A-2, $700,546,233, affirmed at Aaa; previously affirmed at Aaa on 8/13/2007 -- Class A-2F, $52,989,190, affirmed at Aaa; previously affirmed at Aaa on 8/13/2007 -- Class IO-I, Notional, affirmed at Aaa; previously affirmed at Aaa on 8/13/2007 -- Class IO-II, Notional, affirmed at Aaa; previously affirmed at Aaa on 8/13/2007 -- Class IO-III, Notional, affirmed at Aaa; previously affirmed at Aaa on 8/13/2007 -- Class B, $52,331,000, affirmed at Aaa; previously affirmed at Aaa on 8/13/2007 -- Class C, $26,166,000, confirmed at Aaa; previously Aaa, placed on review for possible downgrade on 6/17/2009 -- Class D, $26,165,000, confirmed at Aa1; previously Aa1, placed on review for possible downgrade on 6/17/2009 -- Class E, $16,354,000, confirmed at Aa3; previously Aa3, placed on review for possible downgrade on 6/17/2009 -- Class F, $13,082,000, confirmed at A1; previously A1, placed on review for possible downgrade on 6/17/2009 -- Class G, $26,166,000, confirmed at Baa1; previously Baa1, placed on review for possible downgrade on 6/17/2009 -- Class H, $16,354,000, confirmed at Baa3; previously Baa3, placed on review for possible downgrade on 6/17/2009 -- Class J, $19,624,000, downgraded to Ba3 from Ba1; previously Ba1, placed on review for possible downgrade on 6/17/2009 -- Class L, $13,083,000, downgraded to Caa1 from Ba3; previously Ba3, placed on review for possible downgrade on 6/17/2009 -- Class M, $6,541,000, downgraded to Caa2 from B1; previously B1, placed on review for possible downgrade on 6/17/2009 -- Class N, $9,812,000, downgraded to Ca from B3; previously B3, placed on review for possible downgrade on 6/17/2009 -- Class O, $13,083,000, downgraded to Ca from Caa3; previously Caa3, placed on review for possible downgrade on 6/17/2009 -- Class P, $2,480,935, downgraded to C from Ca; previously Ca, placed on review for possible downgrade on 6/17/2009 FIRSTPLUS HOME: Moody's Upgrades Ratings on 1996-A Certificate -------------------------------------------------------------- Moody's Investors Service has upgraded the rating of a certificate issued by FirstPlus Home Improvement Loan Trust 1996-A due to 100% cash collateralization in the form of the reserve fund supporting the certificate. The security is also supported by an insurance policy issued by MBIA Insurance Corporation. The current ratings on the securities are consistent with Moody's practice of rating insured securities at the higher of (1) the guarantor's insurance financial strength rating and (2) the underlying rating, based on Moody's modified approach to rating structured finance securities wrapped by financial guarantors. As part of evaluating the current ratings for the securities, Moody's Investors Service also reviewed the underlying rating. The underlying rating reflects the intrinsic credit quality of the security in the absence of the guarantee. The underlying rating on the security is based on the methodology applied to all transactions with small pool factors. Moody's defines low pool factor deals as those that meet one of these two criteria: (1) the outstanding collateral balance is less than $1 million, and the pool factor is less than 5% or (2) the pool has fewer than 50 loans remaining Moody's uses these methodology to estimate losses on low pool factor deals First, gross defaults are determined by applying assumed lifetime roll-rates (probabilities of transition to default) to the transactions' current delinquency buckets ("delinquency pipeline") and a pipeline multiplier. The pipeline multiplier accounts for further possible defaults that might arise from borrowers that are current. The pipeline multiplier differs for each deal based on the number of loans remaining in the pool -- greater the number of loans remaining the higher the multiplier. The estimated defaults are subject to a floor -- a minimum default. The minimum default also differs based on the number loans remaining in the pool. The fewer the number of loans remaining in the pool the higher the minimum default since each loan represents a higher percentage of the pool. The final default number is then multiplied by expected loss severity to arrive at Moody's expected loss estimate. Loss severity also differs by transaction and is higher for more recent vintages. Complete rating action follows: Issuer: FirstPlus Home Improvement Loan Trust 1996-A (Loans remaining: 3) -- Cl. A, Current Balance: $3,940, Upgraded to Aaa; previously on 11/16/2008 A2 Placed Under Review Direction Uncertain -- Financial Guarantor: MBIA Insurance Corporation (B3, previously on 2/18/2009 downgraded from Baa1) FOOTHILL CLO: Moody's Downgrades Ratings on Various Classes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Foothill CLO I, Ltd: -- US$30,000,000 Class B Senior Secured Floating Rate Notes, Due 2021, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$6,000,000 Type I Class Q Notes, Due 2021; Downgraded to B2; previously on March 4, 2009 Baa3 Placed Under Review for Possible Downgrade; -- US$9,000,000 Type II Class Q Notes, Due 2021; Downgraded to Caa3; previously on March 4, 2009 Ba2 Placed Under Review for Possible Downgrade; -- US$3,000,000 Type IV Class Q Notes, Due 2021; Downgraded to B1; previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$28,000,000 Class C Senior Secured Deferrable Floating Rate Notes, Due 2021; Confirmed at Ba1; previously on March 13, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$25,000,000 Class D Secured Deferrable Floating Rate Notes, Due 2021; Confirmed at B1; previously on March 13, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$19,000,000 Class E Secured Deferrable Floating Rate Notes, Due 2021; Confirmed at Caa2; previously on March 13, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 3104 versus a test level of 2710 as of the last trustee report, dated June 30, 2009. Based on the same report, defaulted securities total about $36 million, accounting for roughly 7.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 16.3% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Foothill CLO I, Ltd., issued in February 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. FRANKLIN CLO: Moody's Downgrades Ratings on Four Classes of Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Franklin CLO IV, Ltd.: -- US$25,000,000 Class B Floating Rate Senior Secured Notes due 2015, Downgraded to A3; previously on March 20, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$18,500,000 Class C Floating Rate Deferrable Interest Senior Secured Notes due 2015, Downgraded to Ba2; previously on March 20, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$15,250,000 Class D Floating Rate Deferrable Interest Senior Secured Notes due 2015, Downgraded to Caa3; previously on March 20, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$8,000,000 Class E Floating Rate Deferrable Interest Senior Secured Notes due 2015, Downgraded to C; previously on March 20, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class D OC and Class E OC Ratio Tests. The weighted average rating factor has steadily increased over the last year and is currently 2507 versus a test level of 2300 as of the last trustee report, dated June 11, 2009. Based on the same report, defaulted securities total about $17 million, accounting for roughly 6% of the collateral balance, and securities rated Caa1 or lower make up approximately 6% of the underlying portfolio. Additionally, interest payments on the Class E Notes are presently being deferred as a result of the failure of the Class D OC Ratio test. Moody's also assessed the collateral pool's elevated concentration risk in a small number of obligors and industries. This includes a significant concentration in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Franklin CLO IV, Ltd., issued on August 28, 2003 is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. FREMONT HOME: Moody's Downgrades Ratings on Class SL-A to 'C' ------------------------------------------------------------- Moody's Investors Service has downgraded the rating of one tranche issued in Fremont Home Loan Trust 2006-B transaction due to higher expected losses in relation to available credit enhancement. Underlying securities' collateral consists primarily of closed-end second lien residential mortgage loans (CES). The ratings on the securities were monitored by evaluating factors Moody's determined to be essential in the analysis of securities backed by such loans. The salient factors include: i) Moody's review of the nature, sufficiency, and quality of historical loan performance information, ii) analysis of the collateral composition and pool credit performance including prepayment, loan delinquency and loss data, iii) consideration of the transaction's capital structure and related allocations of collateral cash flows and losses, and iv) a comparison of current credit enhancement levels to updated Moody's pool loss projections based on present collateral credit performance. When analyzing underlying ratings for CES and HELOC transactions, Moody's projects cumulative losses for each deal based on a collateral analysis of the deal's Constant Prepayment Rate and Constant Default Rate. CPR is based on the average of the last six months 1-month CPR. There are two approaches for determining pool CDR. The first approach calculates CDR based on pool loan losses from the previous twelve months, i.e. recent losses. A second approach is based on pipeline losses -- losses derived from days-aged delinquencies and Moody's assumptions for default based on days delinquent, in foreclosure, or liquidation, and the severity of loss given default. Moody's assumes 100% severity for second liens, including both CES and HELOCs. After the CDR is calculated using the two methods, the effective CDR for loss projection purposes is determined by using a weighted average of the CDRs as determined by the recent loss and pipeline loss approaches -- with weightings determined on a transaction by transaction basis. Moody's assumes that the CDR will not decline for the next two years and will decline subsequently for the life of the deal under a schedule, typically reducing by 50% in year 3 and remaining constant thereafter. Based on calculated CPR and CDR, Moody's calculates projected deal-specific cumulative losses and the weighted average life of the deal. The credit enhancement calculation can also include credit for excess spread, i.e. the aggregate, positive difference in the weighted average loan coupon and the all-inclusive securities' interest and deal fees, including servicing. Excess spread benefit is calculated by multiplying the stressed annualized excess spread by the weighted average life of the deal. Aggregate credit enhancement which combines subordination benefit (including over-collateralization and/or reserve accounts) and excess spread benefit is compared with projected cumulative losses for the deal to derive coverage multiples and associated ratings by deal tranche. Moody's will analyze tranche coverage multiples after consideration of timing of tranche repayment and allocation of losses (if any). Issuer: Fremont Home Loan Trust 2006-B -- Cl. SL-A, Downgraded to C; previously on 2/26/2009 Caa2 Placed Under Review for Possible Downgrade GALAXY V: Moody's Downgrades Ratings on Various Classes of Notes ---------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Galaxy V CLO Ltd.: -- US$270,000,000 Class A-1 Senior Term Notes Due 2017, Downgraded to Aa3; previously on September 8, 2005 Assigned Aaa; -- US$110,000,000 Class A-2 Senior Delayed Draw Notes Due 2017, Downgraded to Aa3; previously on September 8, 2005 Assigned Aaa; -- US$29,000,000 Class B Senior Floating Rate Notes Due 2017, Downgraded to Baa1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$32,000,000 Class C Deferrable Mezzanine Floating Rate Notes Due 2017, Downgraded to Ba2; previously on March 18, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$20,500,000 Class D Deferrable Mezzanine Floating Rate Notes Due 2017, Downgraded to Caa2; previously on March 18, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$4,500,000 Class D Deferrable Mezzanine Fixed Rate Notes Due 2017, Downgraded to Caa2; previously on March 18, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$5,000,000 Class W Combination Notes Due 2017, Downgraded to Ba1; previously on March 4, 2009 A1 Placed Under Review for Possible Downgrade; -- US$3,000,000 Class Y Combination Notes Due 2017, Downgraded to Ba2; previously on March 4, 2009 A2 Placed Under Review for Possible Downgrade; -- US$5,500,000 Class Z Combination Notes Due 2017, Downgraded to Caa1; previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2954 versus a test level of 2586 as of the last trustee report, dated June 9, 2009. Based on the same report, defaulted securities total about $30 million, accounting for roughly 6% of the collateral balance, and securities rated Caa1 or lower make up approximately 12% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Galaxy V CLO Ltd., issued on September 8, 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GALAXY VII: Moody's Downgrades Ratings on Various Classes --------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Galaxy VII CLO, Ltd.: -- $270,500,000 Class A-1 Senior Term Notes Due 2018, Downgraded to Aa1; previously on September 12, 2006 Assigned Aaa; -- $60,000,000 Class A-2 Senior Delayed Draw Notes Due 2018, Downgraded to Aa1; previously on September 12, 2006 Assigned Aaa; -- $29,500,000 Class B Senior Floating Rate Notes Due 2018, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- Class X Combination Notes, Downgraded to A2; previously on March 4, 2009 A1 Placed Under Review for Possible Downgrade; -- Class Y Combination Notes, Downgraded to B1; previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- $26,000,000 Class C Deferrable Mezzanine Floating Rate Notes Due 2018, Confirmed at Ba1; previously on March 17, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- $19,000,000 Class D Deferrable Mezzanine Floating Rate Notes Due 2018, Confirmed at B1; previously on March 17, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- $13,500,000 Class E Deferrable Junior Floating Rate Notes Due 2018, Confirmed at Caa2; previously on March 17, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has increased over the last year and is currently 2995 as of the last trustee report, dated July 1, 2009. Based on the same report, defaulted securities total about $18.8 million, accounting for roughly 4.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 11.7% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Galaxy VII CLO, Ltd., issued in September of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GALLATIN CLO: Moody's Downgrades Ratings on Three Classes --------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Gallatin CLO II 2005-1, Limited: -- US$365,000,000 Class A-1L Floating Rate Notes Due August 2017, Downgraded to Aa1; previously on September 22, 2005 Assigned Aaa; -- US$36,000,000 Class A-2L Floating Rate Notes Due August 2017, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$14,000,000 Class B-2L Floating Rate Notes Due August 2017, Downgraded to Caa3; previously on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$26,000,000 Class A-3L Floating Rate Notes Due August 2017, Confirmed at Baa3; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$26,000,000 Class B-1L Floating Rate Notes Due August 2017, Confirmed at B1; previously on March 18, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class B-2L Overcollateralization Test. The weighted average rating factor has steadily increased over the last year and is currently 2776 versus a test level of 2500 as of the last trustee report, dated June 2, 2009. Based on the same report, defaulted securities total about $41.8 million, accounting for roughly 8.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 10.9% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Gallatin CLO II 2005-1, Limited, issued in September 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GMAC INC: Moody's Reviews Ratings on 13 Classes of Securities ------------------------------------------------------------- Moody's Investors Service has placed ratings of thirteen classes of securities from nine auto lease transactions sponsored by GMAC Inc. on review for possible upgrade. The actions reflect the improving trend in vehicle residual value recoveries, including no observed material adverse impact to date of "old" General Motors Corporation's bankruptcy on residual values; a swift and successful emergence of "new" General Motors Company from bankruptcy; reduced uncertainty of disruption in servicing operations resulting from the U.S. government's support and partial ownership of GMAC that have improved its liquidity and capital positions; and build up in credit enhancement available to the rated notes relative to the remaining securitized residual value. The affected securities had previously been downgraded due to concern over the unprecedented volatility in residual values, particularly during the latter half of 2008, as well as the broader macroeconomic environment and the deteriorating financial condition of the auto industry. Conversely, the current actions were motivated by the continued improvement in vehicle residual values for the sector, including those values realized on vehicles backing the affected transactions. Moody's believe the improving trends are not a result of seasonality, but a combination of increased consumer demand for used vehicles as a cheaper alternative to buying a new vehicle and the swift emergence of General Motors Company and Chrysler from their respective bankruptcy filings on June 1, 2009, and April 30, 2009. Support from the U.S. government seems to have mitigated downward pressure on industry residual values which have rebounded from historical lows. During the review, Moody's will continue to monitor residual value performance as well as further developments in the sector. The complete rating actions are: Issuer: Capital Auto Receivables Asset Trust 2007-SN2 -- Cl. A-3, Baa1 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Baa1 from Aa3; -- Cl. A-4 Baa1 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Baa1 from Aa3; -- Cl. B, Baa3 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Baa3 from A1; -- Cl. C, Ba3 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Ba3 from A3; -- Cl. D, B3 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to B3 from Ba1; Issuer: Capital Auto Receivables Asset Trust 2007-SNE -- Cl. A, Baa1 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Baa1 from Aa3; Issuer: Capital Auto Receivables Asset Trust 2007-SNG -- Cl. A, Baa1 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Baa1 from Aa3; Issuer: Capital Auto Receivables Asset Trust 2008-SNA -- Cl. A, Baa1 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Baa1 from Aa3; Issuer: Capital Auto Receivables Asset Trust 2008-SNB -- Cl. A, Baa1 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Baa1 from Aa3; Issuer: Capital Auto Receivables Asset Trust 2008-SND -- Cl. A, Baa1 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Baa1 from Aa3; Issuer: Capital Auto Receivables Asset Trust 2008-SNE -- Cl. A, Baa1 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Baa1 from Aa3; Issuer: Capital Auto Receivables Asset Trust 2008-SNF -- Cl. A, Baa1 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to Baa1 from Aa3; Issuer: Capital Auto Receivables Asset Trust 2008-SNH -- Cl. A, A2 Placed on Review for Possible Upgrade; previously on 1/28/2009, Downgraded to A2 from Aa2; GMAC Inc. provides wholesale, retail, and lease financing, primarily to GM dealers and is one of the world's largest auto finance companies. GMAC's senior unsecured rating was upgraded from C to Ca on June 10, 2009. The rating remains under review for further possible upgrade. The upgrade reflects the firm's lower bankruptcy risk resulting from the U.S. government's support of the firm, including significant capital injections that have improved its liquidity and capital positions, partial U.S. government ownership, and GMAC's role in the U.S. government's efforts to reinvigorate the U.S. domestic auto industry. Of continuing concern, GMAC must yet raise substantial additional equity to comply with the requirements of the recently concluded stress tests under the U.S. government's Supervisory Capital Assessment Program. General Motors Company, headquartered in Detroit, Michigan, is one the world's largest auto manufacturers. GOLDENTREE MULTISTRATEGY: S&P Affirms Ratings on Four Tranches -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on four tranches from two market value collateralized debt obligation transactions and removed them from CreditWatch negative. At the same time, S&P withdrew one rating on a tranche from GoldenTree MultiStrategy Financing Ltd. following the complete paydown of the tranche balance. The rating actions follow S&P's monthly review of market value CDO performance. The CreditWatch removals reflect several months of stable or improving overcollateralization ratios for these classes as a result of pay downs to the senior notes. S&P affirmed the ratings on the corresponding senior classes from these transactions. S&P will continue to monitor these transactions through its monthly review process. S&P will take negative rating actions when appropriate if S&P sees declines in the O/C levels, and S&P will remove the ratings from CreditWatch if tranches reestablish an appropriate cushion above the minimum O/C requirement for several consecutive months. Rating Actions Rating ------ Transaction Class To From ----------- ----- -- ---- GoldenTree MultiStrategy Financing Ltd. A-1 NR AAA Sankaty High Yield Partners II L.P. B Fixed BB BB/Watch Neg Sankaty High Yield Partners II L.P. B Float BB BB/Watch Neg Sankaty High Yield Partners III B B B/Watch Neg Sankaty High Yield Partners III B B B/Watch Neg Ratings Affirmed Transaction Class Rating ----------- ----- ------ Sankaty High Yield Partners II L.P. A-2 Fixed AA Sankaty High Yield Partners II L.P A-2 Float AA Sankaty High Yield Partners II L.P. C Fixed CCC- Sankaty High Yield Partners II L.P. C Float CCC- Sankaty High Yield Partners II L.P. D Fixed CCC- Sankaty High Yield Partners II L.P. D Float CCC- Sankaty High Yield Partners II L.P. E Float CC Sankaty High Yield Partners III A-2 A Sankaty High Yield Partners III Sr Sec Ln A Sankaty High Yield Partners III C CCC Sankaty High Yield Partners III C CCC Sankaty High Yield Partners III D CCC- Sankaty High Yield Partners III D CCC- Sankaty High Yield Partners III E CC GRAYSTON CLO: Moody's Downgrades Ratings on Three Classes of Notes ------------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Grayston CLO II 2004-1 Ltd.: -- US$283,750,000 Class A-1L Floating Rate Notes Due August 2016, Downgraded to Aa2; previously on June 30, 2004 Assigned Aaa; -- US$20,000,000 Class A-2L Floating Rate Notes Due August 2016, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$16,750,000 Class B-1LA Floating Rate Notes Due August 2016, Downgraded to B3; previously on March 18, 2009 Downgraded B1 and Placed under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$24,500,000 Class A-3L Floating Rate Notes Due August 2016, Confirmed at Ba1; previously on March 18, 2009 Downgraded to Ba1 and Placed under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2935 versus a test level of 2065 as of the last trustee report, dated July 2, 2009. Based on the same report, defaulted securities total about $14.5 million, accounting for roughly 4% of the collateral balance, and securities rated Caa1 or lower make up approximately 8% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Grayston CLO II 2004-1 Ltd., issued in June 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GREENWICH CAPITAL: Fitch Downgrades Ratings on 15 2007-GG9 Certs. ----------------------------------------------------------------- Fitch Ratings has downgraded, removed from Rating Watch Negative, and assigned Rating Outlooks to 15 classes of commercial mortgage pass-through certificates from Greenwich Capital Commercial Funding Corp. series 2007-GG9. A detailed list of rating actions follows at the end of this release. The downgrades are the result of loss expectations and reflect Fitch's prospective views regarding commercial real estate market value and cash flow declines. Fitch foresees potential losses could reach as high as 8.8% for this transaction should market conditions not recover. The rating actions are based on losses of 6.8%, including 100% of the term losses and 25% of the losses anticipated to occur at maturity; the 6.8% recognizes all of the losses anticipated in the next five years. Given the significant remaining term to maturity, Fitch's actions do not account for the full magnitude of possible maturity losses. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for certain loans representing 52.1% of the pool and, in some cases, revised based on additional information and/or property characteristics. Approximately 23% of the mortgages mature within the next five years: 0.1% in 2010, 5.3% in 2011, 14.3% in 2012, 2.1% in 2013, and 1.4% in 2014. All losses associated with these loans are fully recognized in the rating actions. Fitch identified 18 Loans of Concern (12.4%) within the pool, four of which (1.6%) are specially serviced. Of the specially serviced loans, two (1.2%) are current. None of the specially serviced loans are within the transaction's top 15 loans (50.6%) by unpaid principal balance. Two of the Loans of Concern (7.8%) within the top 15 loans are expected to default during the term, with loss severities ranging from 1% to 32%. The largest contributors to loss are: Schron Industrial Portfolio (4.7%), Peachtree Center (3.2%), and Apollo Portfolio (0.66%). The Schron Industrial Portfolio is collateralized by a diversified pool of 36 industrial/flex properties located on Long Island, New York. The Portfolio contains approximately 3.5 million square feet of rentable space, occupied by 269 tenants. Three of the 36 properties are single tenant buildings and most properties have three to eight tenants. At issuance, the loan was underwritten to a stabilized cash flow based on the expectation that below market leases expiring during the term of the loan would be re-signed at higher rates, providing for potential upside in future cash flows. Based on year-end 2008 performance, the property is behind the stabilization schedule. The servicer reported YE 2008 debt service coverage ratio and occupancy were 1.13 times (x) and 89% respectively. Based on current performance and anticipated declines, losses are expected prior to the loan's maturity in 2016. Peachtree Center is located in downtown Atlanta, Georgia. The collateral includes six office buildings totaling approximately 2.4 million SF, three parking garages, and a 134,000 SF retail center. The project spans three blocks along the east side of Peachtree Street. The properties had an overall occupancy of 65.5% at issuance. To mitigate the vacancy, $26.6 million was held in escrow as a leasing reserve, $8.6 million for a debt service reserve and $9.3 million for a capital improvement reserve. Currently the reserve accounts have these balances: Capital Improvement $4.6 million; Debt Service $8.8 million; Leasing Reserve $11.1 million. The sponsors purchased the properties with the intent of implementing an aggressive lease-up strategy and eventually selling off the various properties to outside investors upon each property's stabilization. Current economic conditions have negatively impacted leasing velocity and the property is behind its stabilization schedule. The servicer reported YE 2008 DSCR and occupancy were 0.88x and 65%, respectively. Based on current performance and anticipated declines, losses are expected prior to the loan's maturity in 2012. The Apollo Portfolio is collateralized by a 557 unit apartment complex located in Los Angeles, California. At issuance, the loan was underwritten to a stabilized cash flow based on the expectation that renovations to the units would result in increased rental rates, providing for potential upside in future cash flows. Turnover rates at the property were higher than anticipated which accelerated the pace of unit renovations but also was more disruptive to property cash flows. At issuance an $11 million capital improvement reserve was established. This reserve currently has an $8.5 million balance. The servicer reported YE 2008 DSCR and occupancy were 0.22x and 67%, respectively. The sponsor has indicated that it is no longer able to fund the operational shortfall at the property and is seeking a loan modification. Fitch considers it likely that this loan will transfer to the special servicer in the near future. Based on current performance, losses are expected prior to the loan's maturity in 2014. Fitch has downgraded, removed from Rating Watch Negative and assigned Rating Outlooks to these classes: -- $575.3 million class A-J to 'BBB' from 'AAA'; Outlook Negative; -- $32.9 million class B to 'BBB-' from 'AA+'; Outlook Negative; -- $98.6 million class C to 'BB' from 'AA'; Outlook Negative; -- $41.1 million class D to 'BB' from 'AA-'; Outlook Negative; -- $41.1 million class E to 'BB' from 'A+'; Outlook Negative; -- $57.5 million class F to 'B' from 'A'; Outlook Negative; -- $57.5 million class G to 'B-' from 'A-'; Outlook Negative; -- $82.2 million class H to 'B-' from 'BBB+'; Outlook Negative; -- $65.8 million class J to 'B-' from 'BBB'; Outlook Negative; -- $65.8 million class K to 'B-' from 'BBB-'; Outlook Negative; -- $32.9 million class L to 'B-' from 'BB+'; Outlook Negative; -- $16.4 million class M to 'B-' from 'BB'; Outlook Negative; -- $24.7 million class N to 'B-' from 'BB-'; Outlook Negative; -- $16.4 million class O to 'B-' from 'B+'; Outlook Negative; -- $16.4 million class P to 'B-' from 'B'; Outlook Negative. Fitch has affirmed this class, removed it from Rating Watch Negative and assigned a Rating Outlook as indicated: -- $8.2 million class Q at 'B-'; Outlook Negative. Additionally, Fitch has affirmed these classes and Rating Outlooks as indicated: -- $64.4 million class A-1 at 'AAA'; Outlook Stable; -- $1.18 billion class A-2 at 'AAA'; Outlook Stable; -- $86 million class A-3 at 'AAA'; Outlook Stable; -- $88 million class A-AB at 'AAA'; Outlook Stable; -- $2.67 billion class A-4 at 'AAA'; Outlook Stable; -- $493.5 million class A-1A at 'AAA'; Outlook Stable; -- $557.6 million class A-M at 'AAA'; Outlook Stable; -- $100 million class A-MFL at 'AAA'; Outlook Stable; -- Interest-only class X at 'AAA'; Outlook Stable. Fitch does not rate the $82.2 million class S. GSC GROUP: Moody's Downgrades Ratings on Two Classes of Notes ------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by GSC Group CDO Fund VIII, Limited: -- US$267,000,000 Class A-1 Floating Rate Senior Notes Due 2021, Downgraded to Aa1; previously on March 28, 2007 Assigned Aaa; -- US$14,000,000 Class A-2 Floating Rate Senior Notes Due 2021, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; In addition, Moody's has confirmed the ratings of these notes: -- US$19,400,000 Class B Deferrable Floating Rate Notes Due 2021, Confirmed at Ba1; previously on March 13, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$17,000,000 Class C Deferrable Floating Rate Notes Due 2021, Confirmed at B1; previously on March 13, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$13,000,000 Class D Deferrable Floating Rate Notes Due 2021, Confirmed at Caa2; previously on March 13, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade; According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class C Overcollateralization Test and the Class D Overcollateralization Test . The weighted average rating factor has steadily increased over the last year and is currently 3199 versus a test level of 2457 as of the last trustee report, dated June 19, 2009. Based on the same report, defaulted securities total about $30 million, accounting for roughly 8.5% of the collateral balance, and securities rated Caa1 or lower make up approximately 20% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Moody's also notes that a material proportion of the collateral pool includes debt obligations whose credit quality has been assessed through Moody's Credit Estimates. Moody's analysis reflects the application of certain stresses with respect to the default probabilities associated with CEs. These additional stresses reflect the rapid pace of recent changes in credit market conditions and the default rate expectations in the current economic cycle that are higher than the historical averages. Specifically, the default probability stresses include (1) a 1.5 notch-equivalent assumed downgrade for CEs updated between 12-15 months ago; and (2) assuming an equivalent of Caa3 for CEs that were not updated within the last 15 months. Additionally, as CEs do not carry credit indicators such as ratings reviews and outlooks, a stress of a 0.5 notch-equivalent assumed downgrade for CEs is also applied to CEs provided between 6-12 months ago. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. GSC Group CDO Fund VIII, Limited, issued in March 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GSMPS MORTGAGE: Moody's Downgrades Ratings on 81 Tranches --------------------------------------------------------- Moody's Investors Service has downgraded 81 tranches and confirmed 3 tranches from 9 GSMPS Mortgage Loan Trust FHA - VA deals issued from 2002 to 2006 due to higher expected pool losses in relation to available credit enhancement. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable rate, mortgage loans guaranteed by the FHA or the VA (typically 80% FHA and 20% VA.) As economic conditions have deteriorated; performance of these loans have worsened with serious delinquencies (that is, loans more than 60 days past due, in foreclosure or held for sale) as a percentage of current balance increasing from 33.5% 12 months ago, to 35.6% as of May 2009 for FHA -- VA pools issued in 2006. While for FHA -- VA pools issued in 2007, serious delinquencies as a percentage of current balance have risen from 41.0% 12 months ago, to 44.5% as of May 2009. Cumulative losses on FHA -- VA pools, however, are low in absolute terms due to the FHA - VA guarantee. Nevertheless, for FHA - VA pools issued in 2006, cumulative losses have risen from 0.31% in May 2008 to 0.45% one year later. For FHA - VA pools issued in 2007, cumulative losses have more than doubled from 0.16% a year earlier to 0.34% as of May 2009. Moody's expects loss levels on FHA -- VA pools to rise further as the general level of remaining delinquencies remain elevated and loss severities increase. Due to the FHA - VA guarantee, loss severities on these pools have been historically low at 2.0% -- 4.0%. However, with recent house price depreciation, increase in foreclosure costs and timelines and change in the debenture rate applied by FHA to pay interest claims, future loss severities on these pools are expected to be higher. Moody's now expects loss severities on FHA loans originated before 2004 to average 5.0% and on FHA loans originated in 2004 and after to average 6.5% (this is due to change in debenture rate application by FHA for loans originated after 2004 which results in a lower interest expense being paid by the FHA and a higher severity to the trust). Loss severities on VA loans are expected to average 20%. As a result, Moody's now projects cumulative losses on FHA -- VA pools issued between 2002 and 2007 to average 1.42% as a percentage of original balance securitized (3.00% as a percentage of current balance) versus Moody's original expected loss estimates of 0.40% - 0.50%. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the priority of payments. Complete rating actions are: GSMPS Mortgage Loan Trust 2002-1 -- Cl. B1, Downgraded to Aa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to A3; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ba2; previously on 5/15/2009 Baa1 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 Caa3 Placed Under Review for Possible Downgrade GSMPS Mortgage Loan Trust 2003-1 -- Cl. B1, Downgraded to Baa1; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ba2; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Caa1; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba3 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 Ca Placed Under Review for Possible Downgrade GSMPS Mortgage Loan Trust 2004-4 -- Cl. 1A2, Downgraded to A2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A3, Downgraded to A2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A4, Downgraded to A2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AF, Downgraded to A2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AS, Downgraded to A2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to A2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AX, Downgraded to A2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ba1; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to B1; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade GSMPS Mortgage Loan Trust 2005-LT1 -- Cl. A-1, Confirmed at Aaa; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Confirmed at Aa2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-2, Confirmed at A2; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to B1; previously on 5/15/2009 Baa3 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to C; previously on 5/15/2009 Caa1 Placed Under Review for Possible Downgrade GSMPS Mortgage Loan Trust 2005-RP1 -- Cl. 1A2, Downgraded to Baa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A3, Downgraded to Baa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A4, Downgraded to Baa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AF, Downgraded to Baa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AS, Downgraded to Baa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to Baa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AX, Downgraded to Baa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to B2; previously on 5/15/2009 A1 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A3 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa3 Placed Under Review for Possible Downgrade GSMPS Mortgage Loan Trust 2005-RP2 -- Cl. 1A2, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A3, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A4, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AF, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AS, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AX, Downgraded to Baa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ba2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to B1; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade GSMPS Mortgage Loan Trust 2005-RP3 -- Cl. 1A2, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A3, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A4, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AF, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AS, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AX, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ba2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to B1; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade GSMPS Mortgage Loan Trust 2006-RP1 -- Cl. 1A2, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A3, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A4, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AF1, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AF2, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AS, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AX, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to B2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade GSMPS Mortgage Loan Trust 2006-RP2 -- Cl. 1AF1, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AF2, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AS1, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1AS2, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade GULF STREAM: Moody's Downgrades Ratings on Various 2004-1 Notes --------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Gulf Stream - Compass CLO 2004-1, Ltd.: -- US$320,000,000 Class A Floating Rate Notes due 2016, Downgraded to A2; previously on March 18, 2009 Aaa Placed Under Review for Possible Downgrade; -- US$34,000,000 Class C Floating Rate Notes due 2016, Downgraded to Ba3; previously on March 18, 2009 Downgraded to Bal and Placed Under Review for Possible Downgrade; -- US$20,000,000 Class D Floating Rate Deferrable Notes due 2016, Downgraded to Ca; previously on March 18, 2009 Downgraded to Bl and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2836 versus a test level of 2400 as of the last trustee report, dated July 8, 2009. Based on the same report, defaulted securities total about $30 million, accounting for roughly 8% of the collateral balance, and securities rated Caa1 or lower make up approximately 18% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Gulf Stream - Compass CLO 2004-1, Ltd., issued in August of 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GULF STREAM-RASHINBAN: Moody's Downgrades Ratings on Three Classes ------------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Gulf Stream-Rashinban CLO 2006-I, Ltd.: -- US$20,000,000 Class A-1 Senior Secured Variable Funding Floating Rate Notes due 2020, Downgraded to Aa2; previously on November 30, 2006 Assigned Aaa; -- US$284,000,000 Class A-2 Senior Secured Floating Rate Notes due 2020, Downgraded to Aa2; previously on November 30, 2006 Assigned Aaa; -- US$12,000,000 Class B Senior Secured Floating Rate Notes due 2020, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. Additionally, Moody's has confirmed the ratings of these notes: -- US$26,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2020, Confirmed at Ba1; previously on March 17, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$12,000,000 Class D Secured Deferrable Floating Rate Notes due 2020, Confirmed at B1; previously on March 17, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook", and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2703 as of the last trustee report, dated June 15, 2009. Based on the same report, defaulted securities total about $18.3 million, accounting for roughly 4.7% of the collateral balance, and securities rated Caa1 or lower make up approximately 8.5% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Gulf Stream-Rashinban CLO 2006-I, Ltd., issued in November 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. HCA INC: Moody's Assigns 'Ba3' Rating on $750 Million Senior Notes ------------------------------------------------------------------ Moody's Investors Service assigned a Ba3 (LGD3, 32%) rating to HCA Inc.'s proposed offering of $750 million of first lien senior secured notes. Moody's also affirmed the existing ratings of HCA, including the B2 Corporate Family and Probability of Default Ratings. The outlook for the ratings is stable. "The current transaction continues the company's efforts to proactively address the considerable amount of bank debt scheduled to mature in the 2012 and 2013 time frame," said Dean Diaz, Vice President -- Senior Credit Officer at Moody's. As such, the proposed issuance is not expected to result in any change in the company's leverage as the proceeds of the notes will be used to prepay a like amount of first lien bank debt. Additionally, while the current offering and the April 2009 issuance of secured notes is expected to increase interest expense, it is not expected to materially affect cash flow and interest coverage metrics. HCA's B2 Corporate Family Rating continues to reflect the significant leverage of the company resulting from the November 2006 leveraged buyout. The considerable interest cost associated with the debt load continues to constrain interest coverage metrics and limits free cash flow. The rating also reflects the anticipation that HCA's scale, market strength and recent focus on cost containment should aid in weathering the unfavorable trends in bad debt expense and weak volumes that have been and are expected to continue to plague the industry as a whole. Additionally, the company is expected to maintain good liquidity over the next year. Moody's rating actions are summarized below. Ratings assigned: * $750 million first lien secured notes due 2020, Ba3 (LGD3, 32%) Ratings affirmed: * $2,000 million ABL Revolver due 2012, Ba2 (LGD2, 12%) * $2,000 million Revolving Credit Facility due 2012, Ba3 (LGD3, 32%) * $2,750 million Term Loan A due 2012, Ba3 (LGD3, 32%) * $8,800 million Term Loan B due 2013, to Ba3 (LGD3, 32%) * $1,250 million Euro Term Loan due 2013, Ba3 (LGD2, 23%) * $1,500 million first lien secured notes due 2019, Ba3 (LGD3, 32%) * $1,000 million Second Lien Notes due 2014, B2 (LGD4, 57%) * $3,200 million Second Lien Notes due 2016, B2 (LGD4, 57%) * $1,500 million Second Lien PIK Notes due 2016, B2 (LGD4, 57%) Senior unsecured notes (various), Caa1 (LGD6, 90%) * Corporate Family Rating, B2 * Probability of Default Rating, B2 * Speculative Grade Liquidity Rating, SGL-2 Moody's last rating action was on April 14, 2009, when Moody's assigned a Ba3 rating to HCA's first lien senior secured notes offering and affirmed the existing ratings of the company. Headquartered in Nashville, Tennessee, HCA is the nation's largest acute care hospital company with 163 hospitals and 105 freestanding surgery centers (including eight hospitals and eight freestanding surgery centers that are accounted for using the equity method) as of June 30, 2009. For the twelve months ended June 30, 2009, the company recognized revenue in excess of $29 billion. HOME RE: Fitch Affirms Ratings on Various 2005-2 Notes ------------------------------------------------------ Fitch Ratings affirms these classes of Home Re 2005-2 Limited: -- Class M2 at 'AA'; Outlook Stable; -- Class M3 at 'AA-'; Outlook Stable; -- Class M4 at 'A+'; Outlook Stable; -- Class M5 at 'A'; Outlook Stable; -- Class M6 at 'A-'; Outlook Stable; -- Class M7 at 'BBB+'; Outlook Negative; -- Class M8 at 'BBB'; Outlook Negative; -- Class M9 at 'BBB-'; Outlook Negative; -- Class B1 at 'BB+'; Outlook Negative; -- Class B2 at 'BB'; Rating Watch Negative. In addition, Fitch places class B2 on Rating Watch Negative. Home RE 2005-2 is a synthetic transaction which references the mortgage insurance provided by Mortgage Guaranty Insurance Corporation on a static pool of first lien, fixed- and adjustable- rate fully-amortizing residential mortgage loans. Home RE Limited and Home RE Credit Limited as the Issuers and MGIC entered into a reinsurance agreement reinsuring loss amounts incurred by MGIC relating to the mortgage insurance on the mortgage loans. The actions taken are based on an analysis of the exposure to claims on the mortgage insurance policies on the underlying pool relative to each notes enhancement. Fitch calculated the claims exposure by assigning performance adjusted pre-2005 vintage average subprime frequency of foreclosure percentage to the portfolio. Fitch then assumed that 100% of the exposure would be realized as impairment to the notes. Losses are allocated to the notes in reverse order of priority. The notes are not written down by losses, however an impairment amount is calculated for each note equal to the amount of losses that have been allocated to it. The ratings on the notes address the timely payment of interest and ultimate repayment of principal upon maturity. HSBC BANK: S&P Corrects Ratings on 2004-11 Securities From 'BB-' ---------------------------------------------------------------- Standard & Poor's Ratings Services corrected its rating on the Tranched Investment-Grade Enhanced Return Securities 2004-11 credit-linked notes issued by HSBC Bank USA N.A., a synthetic corporate investment-grade collateralized debt obligation ransaction, by raising it to 'BBB+' from 'BB-'. Due to an administrative error, Standard & Poor's lowered its rating on the notes on June 26, 2009, after S&P analyzed the transaction using a lower subordination level than what was reported to us by the manager of the transaction. The current rating reflects S&P's revised analysis, which applies the correct current subordination level as reported to us by the manager. Rating Corrected HSBC Bank USA N.A. Tranched Investment-Grade Enhanced Return Securities 2004-11 Rating ------ Class To From ----- -- ---- Notes BBB+ BB- HUNTINGTON CDO: Fitch Downgrades Ratings on Six Classes of Notes ---------------------------------------------------------------- Fitch Ratings has downgraded six classes of notes issued by Huntington CDO Ltd./Inc., and assigned Loss Severity ratings. These rating actions are the result of continued credit deterioration experienced since Fitch's rating action in July 2008. Approximately 58.1% of the portfolio carries a Fitch derived rating below investment grade, with 42.9% rated 'CCC' or lower. This is up from 25.1% rated below investment grade and 10.3% rated 'CCC' and lower at the last review. As of the June 30, 2009 trustee report, the class A/B overcollateralization (OC) ratio was at 86.6% and is failing the covenant of 103.7%. Consequently, interest proceeds that would otherwise pay classes C-1 and C-2 (class C) interest are being diverted to pay down the class A-1 notes. Class A-1 has paid down approximately 20% since closing. At the last payment date in May 2009, approximately $1.5 million in excess spread was diverted from class C in the interest waterfall to pay down class A-1 principal in an attempt to cure the failing OC test. Additionally, all principal proceeds are being exhausted to pay down the class A-1 notes also due to the failing OC test. Fitch expects the class A-1 notes to continue to receive interest and full principal repayment. The class A-2 notes have been downgraded to 'CCC' as they continue to receive interest payments but minimal principal recovery is expected. The class B notes have been downgraded to 'CC' as they continue to receive interest payments, but Fitch does not expect any principal recovery. The class C notes are receiving interest paid in kind (PIK) whereby the principal amount of the notes is written up by the amount of interest due. The class C notes have been downgraded to 'C' as Fitch does not expect this class to receive any future payments. The classes A-1A and A-1B notes were assigned a Stable Outlook reflecting Fitch's expectation that the rating will remain stable over the next one to two years. The classes A-1A and A-1B notes were also assigned a Loss Severity Rating of LS3. An LS3 Rating indicates that a tranche has a medium risk of severe loss severity given default, as evidenced by the ratio of tranche size to the base case loss expectation for the collateral in the range of 1.1 to 4. The LS rating should always be considered in conjunction with probability of default indicated by a class's long-term credit rating. Fitch does not assign Rating Outlooks and LS ratings to classes rated 'CCC' and lower. Huntington is a cash flow collateralized debt obligation (CDO) that closed on March 29, 2005, and is managed by Western Asset Management Company. The reinvestment period ended in May 2008. The reference portfolio is composed of 87.3% residential mortgage backed securities, 8.3% asset backed securities (ABS), 3.3% commercial mortgage backed securities, and 1.1% CDOs. Fitch will continue to monitor and review this transaction for future rating adjustments. Fitch has downgraded and assigned LS ratings: -- $369,494,614 class A-1A to 'B/LS3' from 'AAA'; Outlook Stable; -- $200,051 class A-1B to 'B/LS3' from 'AAA'; Outlook Stable; -- $112,000,000 class A-2 to 'CCC' from 'BB+'; -- $70,000,000 class B notes to 'CC' from 'BB-'; -- $16,289,390 class C-1 notes to 'C' from 'B-'; -- $5,273,568 class C-2 notes to 'C' from 'B-'. ISCHUS CDO: Moody's Downgrades Ratings on Three Classes of Notes ---------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of three classes of notes issued by Ischus CDO I, Limited. The notes affected by the rating action are: -- Class A-1 First Priority Senior Secured Floating Rate Notes, Due 2040-1, Downgraded to B1; previously on 2/6/2009 A3 -- Class A-2 Second Priority Senior Secured Floating Rate Notes, Due 2040, Downgraded to Caa3; previously on 2/6/2009 Ba3 -- Class B Third Priority Senior Secured Floating Rate Notes, Due 2040, Downgraded to Ca; previously on 2/6/2009 Caa3 Ischus CDO I, Limited is a collateralized debt obligation backed primarily by a portfolio of Residential ABS securities. Residential ABS Securities attribute to approximately 98% of the outstanding portfolio, of which the majority are from a 2004 vintage. The rating downgrade actions reflect deterioration in the credit quality of the underlying portfolio due to the recent actions taken upon seasoned (pre-2005) RMBS deals. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor, an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities rated Caa1 and below, among other measures. More than 43% of its assets have been downgraded since Moody's last review of the transaction in February 2009. The trustee reported the WARF of the portfolio is 2310 as of June 29, 2009. The Trustee currently reports defaulted assets in the amount of $55.9 million. Securities rated Caa1 or lower make up approximately 23% of the underlying portfolio. The deal is currently failing a variety of coverage tests including the Class A/B Overcollateralization Ratio Test. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. IXIS REAL: Moody's Downgrades Ratings on Six 2004-HE4 Securities ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of six securities issued by IXIS Real Estate Capital Trust 2004-HE4. These actions are part of an ongoing review of subprime RMBS transactions. The rating actions are the result of an analysis of credit enhancement relative to updated collateral loss projections. The revised loss projections generally result from deterioration in collateral performance in recent months. Additionally, the affected transaction continues to pass performance triggers and released portions of credit enhancement. Moody's approach to analyzing seasoned subprime pools i.e. prior to 2H 2005 takes into account the annualized loss rate from last 12 months and the projected loss rate over next 12 months, and then translates these measures into lifetime losses based on a deal's expected remaining life. Recent Losses are calculated by assessing cumulative losses incurred over the past 12-months as a percentage of the average pool factor in the last year. For Pipeline Losses, Moody's uses an annualized roll rate of 15%, 30%, 65% and 90% for loans that are delinquent 60-days, 90+ days, are in foreclosure, and REO respectively. Moody's then applies deal- specific severity assumptions, in this case 75-80%. The results of these two calculations -- Recent Losses and Pipeline Losses -- are weighted to arrive at the lifetime cumulative loss projection. Complete list of rating actions follows: Issuer: IXIS Real Estate Capital Trust 2004-HE4 -- Cl. M-1, Downgraded to A2; previously on 12/6/2004 Assigned Aa2 -- Cl. M-2, Downgraded to Ba2; previously on 4/9/2008 Downgraded to Baa2 -- Cl. M-3, Downgraded to Ca; previously on 4/9/2008 Downgraded to Baa3 -- Cl. B-1, Downgraded to C; previously on 4/9/2008 Downgraded to Ba3 -- Cl. B-2, Downgraded to C; previously on 4/9/2008 Downgraded to B1 -- Cl. B-3, Downgraded to C; previously on 4/9/2008 Downgraded to Caa2 KKR FINANCIAL: S&P Puts Ratings on 2005-1 Notes on Negative Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on 13 classes of notes issued by KKR Financial CLO 2005-1 Ltd., KKR Financial CLO 2005-2 Ltd., and KKR Financial CLO 2006-1 Ltd. on CreditWatch with negative implications following the decision by KKR Financial Holdings LLC, an affiliate of the transaction's collateral manager, to deliver certain rated notes to the trustee for cancellation without payment. In addition, S&P had previously placed S&P's ratings on nine other classes of notes from these transactions on CreditWatch negative in light of credit deterioration S&P observed in the underlying collateral; these ratings remain on CreditWatch negative. The CreditWatch placements indicate a significant likelihood that S&P will take negative rating actions on these classes of notes. KKR Financial Advisors II LLC is the collateral manager for the three transactions. S&P understands, based on the information contained in the most recent trustee report and other relevant transaction documents, that the note cancellations have resulted in an increase in the subordinate overcollateralization ratios for the three transactions, which had previously been failing their subordinate O/C ratio tests but are now passing. Based on S&P's understanding of the transaction structure, this may result in excess spread being distributed to equity and subordinate noteholders rather than being used to pay down the balance of the senior notes, thereby reducing the credit enhancement available to support the senior notes. S&P will be reviewing the impact of the note cancellations on these transactions to determine whether, in S&P's view, the ratings currently assigned to the notes remain consistent with the level of creditworthiness of each class. Ratings Placed On Creditwatch Negative KKR Financial CLO 2005-1 Ltd. Rating ------ Class To From ----- -- ---- Class A-1 Notes AAA/Watch Neg AAA Class A-2 Notes AAA/Watch Neg AAA Class B Notes AA/Watch Neg AA Class C Notes A/Watch Neg A Class D Notes BBB-/Watch Neg BBB- KKR Financial CLO 2005-2 Ltd. Rating ------ Class To From ----- -- ---- Class A-1 Notes AAA/Watch Neg AAA Class A-2 Notes AAA/Watch Neg AAA Class B Notes AA/Watch Neg AA Class C Notes A/Watch Neg A Class D Notes BBB-/Watch Neg BBB- KKR Financial CLO 2006-1 Ltd. Rating ------ Class To From ----- -- ---- Class A-1 Notes AAA/Watch Neg AAA Class A-2a Notes AAA/Watch Neg AAA Class A-2b Notes AAA/Watch Neg AAA Ratings Previously Placed On Creditwatch Negative KKR Financial CLO 2005-1 Ltd. Class Rating ----- ------ Class E Notes BB-/Watch Neg Class F Notes B-/Watch Neg KKR Financial CLO 2005-2 Ltd. Class Rating ----- ------ Class E Notes BB-/Watch Neg Class F Notes B-/Watch Neg KKR Financial CLO 2006-1 Ltd. Class Rating ----- ------ Class B Notes AA/Watch Neg Class C Notes A/Watch Neg Class D Notes BBB/Watch Neg Class E Notes BB/Watch Neg Class F Notes B/Watch Neg LOCHSONG LTD: S&P Downgrades Ratings on Seven Classes to 'D' ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings to 'D' on seven classes of notes issued by Lochsong Ltd., a hybrid collateralized debt obligation transaction, following the liquidation of the collateral in the portfolio. S&P subsequently withdrew its ratings on these tranches. S&P lowered its ratings to 'D' because the transaction did not have sufficient proceeds to pay back par payments to the noteholders after making the termination payments on the credit default swap contract. The deal had triggered an event of default, after which the controlling noteholders voted to accelerate the maturity of the notes and liquidate the collateral assets. The current rating actions follow notice from the trustee that the liquidation of the portfolio assets is complete and that the available proceeds have been distributed to the noteholders. Rating Actions Lochsong Ltd. Rating ------ Class To Interim From ----- -- ------- ---- Super Sr. NR Dsrp CCsrp S NR D CCC/Watch Neg A NR D CC B NR D CC C NR D CC D NR D CC E NR D CC NR - Not rated. LOOMIS SAYLES: Moody's Downgrades Ratings on Three Classes ---------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Loomis Sayles CLO I, Ltd.: -- US$296,000,000 Class A Floating Rate Notes, Due 2020, Downgraded to Aa1; previously on October 26, 2006 Assigned Aaa; -- US$20,000,000 Class B Floating Rate Notes, Due 2020, Downgraded to A2, previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$15,000,000 Class E Deferrable Floating Rate Notes, Due 2020, Downgraded to Caa3, previously on March 17, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$20,000,000 Class C Deferrable Floating Rate Notes, Due 2020, Confirmed at Ba1; previously on March 17, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$21,000,000 Class D Deferrable Floating Rate Notes, Due 2020, Confirmed at B1; previously on March 17, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class D and Class E Par Value Tests. The weighted average rating factor has steadily increased over the last year and is currently 2781 as of the last trustee report, dated June 26, 2009. Based on the same report, defaulted securities total about $15 million, accounting for roughly 4% of the collateral balance, and securities rated Caa1 or lower make up approximately 7.4% of the underlying portfolio. Additionally, interest payments on the Class E Notes are presently being deferred as a result of the failure of the Class D Par Value Test. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Loomis Sayles CLO I, Ltd., issued in October 2006, is a collateralized loan obligation backed primarily by senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. MADISON PARK: Moody's Downgrades Ratings on Three Classes --------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Madison Park Funding VI, Ltd.: -- US$76,000,000 Class A--2 Floating Rate Notes Due 2021, Downgraded to A1; previously on March 4, 2009 Aaa Placed Under Review for Possible Downgrade; -- US$30,000,000 Class B Floating Rate Notes Due 2021, Downgraded to Baa1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$17,500,000 Class E Deferrable Floating Rate Notes Due 2021, Downgraded to Caa3; previously on March 13, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$28,500,000 Class C Deferrable Floating Rate Notes Due 2021, Confirmed at Ba1; previously on March 13, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$18,000,000 Class D Deferrable Floating Rate Notes Due 2021, Confirmed at B1; previously on March 13, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2946 versus a test level of 2700 as of the last trustee report, dated June 10, 2009. Based on the same report, defaulted securities total about $36.4 million, accounting for roughly 7% of the collateral balance, and securities rated Caa1 or lower make up approximately 11.8% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Madison Park Funding VI, Ltd., issued in September of 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. MADISON PARK FUNDING: Moody's Cuts Ratings on 3 Classes of Notes ---------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Madison Park Funding II, Ltd.: -- US$509,750,000 Class A-1 Floating Rate Notes Due 2020, Downgraded to Aa2; previously on February 16, 2009 Assigned Aaa; -- US$11,250,000 Class A-2b Floating Rate Notes Due 2020, Downgraded to Aa3; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$38,000,000 Class A-3 Floating Rate Notes Due 2020, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$25,000,000 Class B-1 Deferrable Floating Rate Notes Due 2020, Confirmed at Ba1; previously on March 17, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$25, 000,000 Class B-2 Deferrable Fixed Rate Notes Due 2020, Confirmed at Ba1; previously on March 17, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$25,000,000 Class C-1 Deferrable Floating Rate Notes Due 2020, Confirmed at B1; previously on March 17, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$5,000,000 Class C-2 Deferrable Fixed Rate Notes Due 2020, Confirmed at B1; previously on March 17, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$22,500,000 Class D Deferrable Floating Rate Notes Due 2020, Confirmed at Caa2; previously on March 17, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class D Par Value Test. The weighted average rating factor has steadily increased over the last year and is currently 2929 versus a test level of 2650 as of the last trustee report, dated June 18, 2009. Based on the same report, defaulted securities total about $77 million, accounting for roughly 9.4% of the collateral balance, and securities rated Caa1 or lower make up approximately 9.5% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Madison Park Funding II, Ltd., issued in February of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. MARATHON FINANCING: Moody's Downgrades Ratings on Various Classes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Marathon Financing I, B.V.: -- $245,000,000 Class A-1 First Senior Secured Floating Rate Notes due 2026, Downgraded to Aa2; previously on January 16, 2007 Assigned Aaa; -- EUR75,000,000 Class A-2 First Senior Secured Floating Rate Notes due 2026, Downgraded to Aa2; previously on January 16, 2007 Assigned Aaa; -- $80,000,000 Class A-3 First Senior Secured Floating Rate Notes due 2026, Downgraded to Aa2; previously on January 16, 2007 Assigned Aaa; -- Up to $250,000,000 drawable in U.S. Dollars, Pounds Sterling and Euro Senior Lender Indebtedness, Downgraded to Aa2; previously on January 16, 2007 Assigned Aaa; -- $80,000,000 Class B-1 Second Senior Secured Floating Rate Notes due 2026, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- $20,000,000 Class C-1 Mezzanine Secured Deferrable Floating Rate Notes due 2026, Downgraded to Ba1; previously on March 4, 2009 A2 Placed Under Review for Possible Downgrade; -- $60,000,000 Mezzanine Lender Indebtedness, Downgraded to Ba1; previously on March 4, 2009 A2 Placed Under Review for Possible Downgrade; According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 3394 as of the last trustee report, dated June 22, 2009. Based on the same report, defaulted securities total about $211 million, accounting for roughly 19% of the collateral balance. Moody's notes that a significant proportion of the collateral pool is concentrated in non-U.S. dollar denominated obligations from issuers in a relatively limited number of industries. As a result of failure of the Rating Agency Model Test, certain cash flows have been diverted to pay down the principal balance of the Class A Notes and the Senior Revolving Credit Facility. Moody's also notes that a material proportion of the collateral pool includes debt obligations whose credit quality has been assessed through Moody's Credit Estimates. Moody's analysis reflects the application of certain stresses with respect to the default probabilities associated with CEs. These additional stresses reflect the rapid pace of recent changes in credit market conditions and the default rate expectations in the current economic cycle that are higher than the historical averages. Specifically, the default probability stresses include (1) a 1.5 notch-equivalent assumed downgrade for CEs updated between 12-15 months ago; and (2) assuming an equivalent of Caa3 for CEs that were not updated within the last 15 months. Additionally, as CEs do not carry credit indicators such as ratings reviews and outlooks, a stress of a 0.5 notch-equivalent assumed downgrade for CEs is also applied to CEs provided between 6-12 months ago. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Marathon Financing I, B.V., issued on December 14, 2006, is a multi-currency collateralized loan obligation backed primarily by a portfolio of senior secured loans denominated in U.S. dollars, euros, and pounds sterling. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. MASTR REPERFORMING: Moody's Downgrades Ratings on 39 Tranches ------------------------------------------------------------- Moody's Investors Service has downgraded 39 tranches from 4 MASTR Reperforming Loan Trust FHA - VA deals issued in 2005 and 2006 due to higher expected pool losses in relation to available credit enhancement. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable rate, mortgage loans guaranteed by the FHA or the VA (typically 80% FHA and 20% VA.) As economic conditions have deteriorated; performance of these loans have worsened with serious delinquencies (that is, loans more than 60 days past due, in foreclosure or held for sale) as a percentage of current balance increasing from 33.5% 12 months ago, to 35.6% as of May 2009 for FHA -- VA pools issued in 2006. While for FHA -- VA pools issued in 2007, serious delinquencies as a percentage of current balance have risen from 41.0% 12 months ago, to 44.5% as of May 2009. Cumulative losses on FHA -- VA pools, however, are low in absolute terms due to the FHA - VA guarantee. Nevertheless, for FHA - VA pools issued in 2006, cumulative losses have risen from 0.31% in May 2008 to 0.45% one year later. For FHA - VA pools issued in 2007, cumulative losses have more than doubled from 0.16% a year earlier to 0.34% as of May 2009. Moody's expects loss levels on FHA -- VA pools to rise further as the general level of remaining delinquencies remain elevated and loss severities increase. Due to the FHA - VA guarantee, loss severities on these pools have been historically low at 2.0% -- 4.0%. However, with recent house price depreciation, increase in foreclosure costs and timelines and change in the debenture rate applied by FHA to pay interest claims, future loss severities on these pools are expected to be higher. Moody's now expects loss severities on FHA loans originated before 2004 to average 5.0% and on FHA loans originated in 2004 and after to average 6.5% (this is due to change in debenture rate application by FHA for loans originated after 2004 which results in a lower interest expense being paid by the FHA and a higher severity to the trust). Loss severities on VA loans are expected to average 20%. As a result, Moody's now projects cumulative losses on FHA -- VA pools issued between 2002 and 2007 to average 1.42% as a percentage of original balance securitized (3.00% as a percentage of current balance) versus Moody's original expected loss estimates of 0.40% - 0.50%. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the priority of payments. Complete rating actions are: MASTR Reperforming Loan Trust 2005-1 -- Cl. 1A1, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A2, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A3, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A4, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A5, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AX, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. PO, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to B1; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to C; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade MASTR Reperforming Loan Trust 2005-2 -- Cl. 1A1F, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A1S, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A2, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A3, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A4, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AX, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to B2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade MASTR Reperforming Loan Trust 2006-1 -- Cl. 1A1F, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A1S, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A2, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A3, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1A4, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AX, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to B2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade MASTR Reperforming Loan Trust 2006-2 -- Cl. 1A1, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade MAX FUNDING: Moody's Downgrades Ratings on Class B Notes to 'B1' ---------------------------------------------------------------- Moody's Investors Service announced that it has downgraded ratings of one class of notes issued by Max Funding I, Limited. The notes affected by the rating action are: -- Class B Floating Rate Second Priority Senior Secured Term Notes due January 22, 2013, Downgraded to B1; previously on 2/26/2009 Downgraded to Baa2 and Placed Under Review for Possible Downgrade Max Funding I, Limited is a collateralized debt obligation backed by a portfolio of collateralized loan obligations and ABS CDOs. The rating downgrade actions reflect deterioration in the credit quality of the underlying portfolio. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the proportion of securities rated Ca and below, among other measures. The trustee is currently reporting a WARF of 6876 and approximately 70% of the portfolio is currently rated Ca or C by Moody's. Moody's also observes that the transaction is exposed to mezzanine and junior CLO tranches in the underlying portfolio. Since the last review of this transaction in February 2009, Moody's has completed the first stage of its two-stage review of U.S. and EMEA CLOs. Some of the underlying securities in the portfolio experienced more severe rating action than was anticipated at the time of last review. Moody's is currently in Stage II of its CLO review and performing comprehensive analysis by modeling each CLO individually. Additional rating actions will be taken as necessary for all rated liabilities. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. MERRILL LYNCH: Moody's Affirms Ratings on Four 1998-C1-CTL Certs. ----------------------------------------------------------------- Moody's Investors Service affirmed the ratings of four classes and downgraded the ratings of three classes of Merrill Lynch Mortgage Investors, Inc., Mortgage Pass-Through Certificates, Series 1998- C1-CTL. The downgrades are due to higher expected losses for the pool resulting from an overall decline in the pool's credit quality and anticipated losses from loans in special servicing. The action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the July 16, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 38% to $389.7 million from $630.4 million at securitization. The Certificates are collateralized by 95 mortgage loans ranging in size from less than 1% to 15% of the pool, with the top 10 non- defeased loans representing 34% of the pool. Eighty four of the loans are credit tenant lease loans secured by properties leased to 12 corporate credits. Eleven loans, representing 25% of the pool, have defeased and are collateralized with U.S. Government securities. Forty eight loans, representing 24% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. Forty-seven of the loans on the watchlist are secured by properties leased to Rite Aid. These loans are performing but are on the watchlist due to Rite Aid's low credit rating. Twelve loans have been liquidated from the pool, resulting in an aggregate realized loss of approximately $10.8 million. Eight loans, representing 8% of the pool, are currently in special servicing. All of the specially serviced loans are secured by retail properties previously occupied by Circuit City, which declared bankruptcy in late 2008 and subsequently closed all its stores. Moody's estimates an aggregate loss of $16.4 million (40% loss severity on average) for the specially serviced loans. The pool's largest exposures are Rite Aid Corporation ($93.2 million -- 24%; Moody's senior unsecured rating Caa3/Ca -- stable outlook), Georgia Power Company ($59.1 million -- 15%; Moody's senior unsecured rating A2 -- stable outlook), Circuit City ($41.1 million -- 15%) and Kroger Co. ($31.3 million -- 8%; Moody's senior unsecured rating Baa2 -- stable outlook). Approximately 69% of the pool, excluding defeased loans, has a published Moody's rating. All of the ratings have remained stable since last review except for Rite Aid Corporation, which had a senior unsecured rating of Caa2/Caa3 at last review, one notch higher than its current rating. Moody's rating action is: -- Class A-3, $205,528,295, affirmed at Aaa; previously affirmed at Aaa on 12/16/2008 -- Class A-PO, $1,144,751, affirmed at Aaa; previously affirmed at Aaa on 12/16/2008 -- Class IO, Notional, affirmed at Aaa; previously affirmed at Aaa on 12/16/2008 -- Class B, $38,765,000, affirmed at Aa1; previously affirmed at Aa1 on 12/16/2008 -- Class C, $32,304,000, downgraded to A3 from A2; previously affirmed at A2 on 12/16/2008 -- Class D, $38,765,000, downgraded to Ba2 from Ba1; previously affirmed at Ba1 on 12/16/2008 -- Class E, $9,691,000, downgraded to B3 from B2; previously downgraded to B2 from B1 on 12/16/2008 Moody's prior full review is summarized in a press release dated December 16, 2008. In rating this transaction, Moody's used its credit-tenant lease financing rating methodology for single tenants. Under Moody's CTL approach, the rating of a transaction's certificates is primarily based on the senior unsecured debt rating (or the corporate family rating) of the tenant, usually an investment grade rated company, leasing the real estate collateral supporting the bonds. This tenant's credit rating is the key factor in determining the probability of default on the underlying lease. The lease generally is "bondable", which means it is an absolute net lease, yielding fixed rent paid to the trust through a lock- box, sufficient under all circumstances to pay in full all interest and principal of the loan. The leased property should be owned by a bankruptcy-remote, special purpose borrower, which grants a first lien mortgage and assignment of rents to the securitization trust. The dark value of the collateral, which assumes the property is vacant or "dark", is then examined to determine a recovery rate upon a loan's default. Moody's also considers the overall structure and legal integrity of the transaction. For deals that consist of a pool of credit tenant loans, Moody's currently uses a Gaussian copula model, incorporated in its public CDO rating model CDOROMv2.5 to generate a portfolio loss distribution to assess the ratings. MERRILL LYNCH: Moody's Cuts Ratings on Eight 2005-ACR1 Tranches --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of eight tranches issued by the Merrill Lynch Mortgage Synthetic Credit- Linked Notes Series 2005-ACR1 transaction due to higher expected losses in relation to remaining tranche-specific credit protection. The Merrill Lynch 2005-ACR1 transaction is a synthetic securitization backed by a reference portfolio of approximately $272 million of subprime mortgage loans. The reference portfolio was securitized as FBR Securitization Trust 2005-1, which issued two tranches wrapped by Financial Security Assurance, currently rated Aa3, under review for possible downgrade. The riskiness of the Merrill Lynch 2005-ACR1 credit-linked notes is a function of the credit performance of the underlying reference portfolio of mortgage loans. Credit enhancement for the notes is provided through subordination and excess spread. The actions do not affect the ratings of the two tranches of securities issued by FBR Securitization Trust 2005-1. The actions are triggered by a combination of factors that include increased delinquencies, higher loss severities, slower prepayments and mounting losses in the underlying collateral. The continued deterioration of the housing market has also contributed to the increased loss expectations for subprime pools. The ratings on the securities are monitored by evaluating factors determined to be applicable to the credit profile of the securities, such as i) the nature, sufficiency, and quality of historical performance information regarding the asset class ii) an analysis of the underlying collateral, iii) an analysis of the transaction's allocation of cash flow and capital structure, and (iv) a comparison of these attributes against those of other similar transactions. Loss estimates are subject to variability and, as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly if necessary. Complete rating actions are: Issuer: Merrill Lynch Mortgage Synthetic Credit Linked Notes Series 2005-ACR1 -- Cl. M-2, Downgraded to A2; previously on 9/30/2005 Assigned Aa2 -- Cl. M-3, Downgraded to Baa1; previously on 9/30/2005 Assigned Aa3 -- Cl. M-4, Downgraded to Ba3; previously on 9/30/2005 Assigned A1 -- Cl. M-5, Downgraded to B2; previously on 9/30/2005 Assigned A2 -- Cl. M-6, Downgraded to Ca; previously on 9/30/2005 Assigned A3 -- Cl. B-1, Downgraded to C; previously on 9/30/2005 Assigned Baa1 -- Cl. B-2, Downgraded to C; previously on 9/30/2005 Assigned Baa2 -- Cl. B-3, Downgraded to C; previously on 9/30/2005 Assigned Baa3 MERRILL LYNCH: Moody's Reviews Ratings on 11 2005-CIP1 Certs. ------------------------------------------------------------- Moody's Investors Service placed 11 classes of Merrill Lynch Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2005-CIP1 on review for possible downgrade due to higher expected losses for the pool resulting from anticipated losses from loans in special servicing. Since Moody's prior review in June 2007, five loans, representing 14% of the pool, have transferred to special servicing. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the July 13, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 3% to $1.99 billion from $2.05 billion at securitization. The Certificates are collateralized by 135 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top 10 loans representing 38% of the pool. Four loans, representing 9% of the pool, have defeased and are collateralized by U.S. Government securities. Nineteen loans, representing 8% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. The pool has not experienced any losses to date. Five loans, representing 14% of the pool, are currently in special servicing. Two of the specially serviced loans, comprising 10% of the pool, are secured by retail properties owned by affiliates of General Growth Properties. Glenbrook Square Mall ($176.4 million - 9%) is an 868,000 square foot regional mall located in Fort Wayne, Indiana. Burlington Town Center ($26.0 million -- 1%) is a 223,000 square foot retail property located in Burlington, Vermont. The loans were transferred to special servicing in April 2009 due to GGP's bankruptcy filing. Moody's review will focus on the performance of the overall pool and potential losses from specially serviced loans. Moody's rating action is: -- Class AJ, $138,830,000, currently Aaa, on review for possible downgrade; previously affirmed at Aaa on 6/22/2007 -- Class B, $43,706,000, currently Aa2, on review for possible downgrade; previously affirmed at Aa2 on 6/22/2007 -- Class C, $17,997,000, currently Aa3, on review for possible downgrade; previously affirmed at Aa3 on 6/22/2007 -- Class D, $38,564,000, currently rated A2, on review for possible downgrade; previously affirmed at A2 on 6/22/2007 -- Class E, $25,709,000, currently rated A3, on review for possible downgrade; previously affirmed at A3 on 6/22/2007 -- Class F, $33,423,000, currently rated Baa1, on review for possible downgrade; previously affirmed at Baa1 on 6/22/2007 -- Class G, $20,567,000, currently rated Baa2, on review for possible downgrade; previously affirmed at Baa2 on 6/22/2007 -- Class H, $25,709,000, currently rated Baa3, on review for possible downgrade; previously affirmed at Baa3 on 6/22/2007 -- Class J, $10,284,000, currently rated Ba1, on review for possible downgrade; previously affirmed at Ba1 on 6/22/2007 -- Class K, $5,142,000, currently rated Ba2, on review for possible downgrade; previously affirmed at Ba2 on 6/22/2007 -- Class L, $7,713,000, currently rated Ba3, on review for possible downgrade; previously affirmed at Ba3 on 6/22/2007 MESA TRUST: Moody's Downgrades Ratings on Two 2001-2 Certs. ----------------------------------------------------------- Moody's Investors Service has downgraded the ratings of two certificates issued by MESA Trust 2001-2 due to higher expected pool losses in relation to remaining tranche-specific credit protection. The transaction is backed by less than 50 loans. The ratings are based on the methodology applied to all transactions with small pool factors. Moody's defines low pool factor deals as those that meet one of these two criteria: (1) the outstanding collateral balance is less than $1 million, and the pool factor is less than 5% or (2) the pool has fewer than 50 loans remaining. Moody's uses these methodology to estimate losses on low pool factor deals. First, gross defaults are determined by applying assumed lifetime roll-rates (probabilities of transition to default) to the transactions' current delinquency buckets ("delinquency pipeline") and a pipeline multiplier. The pipeline multiplier accounts for further possible defaults that might arise from borrowers that are current. The pipeline multiplier differs for each deal based on the number of loans remaining in the pool -- greater the number of loans remaining the higher the multiplier. The estimated defaults are subject to a floor -- a minimum default. The minimum default also differs based on the number loans remaining in the pool. The fewer the number of loans remaining in the pool, the higher the minimum default since each loan represents a higher percentage of the pool. The final default number is then multiplied by expected loss severity to arrive at Moody's expected loss estimate. Loss severity also differs by transaction and is higher for more recent vintages. Complete rating action: Issuer: MESA Trust 2001-2 (Loans Remaining: 28) -- Cl. M, Current Balance $1,126,517, Downgraded to Caa1; previously on 2/15/2001 Assigned Baa2 -- Cl. B, Current Balance $273,539, Downgraded to C; previously on 4/23/2007 Downgraded to Caa3 MORGAN STANLEY: S&P Affirms 'CCC+' Rating on $3 Million Notes ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'CCC+' rating on Morgan Stanley ACES SPC's series 2006-8 $3 million class A-7 secured fixed-rate notes and removed it from CreditWatch, where it was placed with negative implications on April 13, 2009. The rating on the class A-7 notes is dependent on the lowest of (i) the rating on the reference obligation, Huntsman International LLC's 7.375% senior subordinated notes due Jan. 1, 2015 ('CCC+'); (ii) the rating on Morgan Stanley (A/Negative/A-1), which acts as the swap payments guarantor; and (iii) the rating on the underlying security, BA Master Credit Card Trust II's series 2001-B class A certificates due Aug. 15, 2013 ('AAA'). The rating action reflects the July 17, 2009, removal of S&P's rating on the reference obligation, Huntsman International LLC, from CreditWatch with negative implications. MORGAN STANLEY: S&P Raises Rating on EUR43 Million Notes to 'B' --------------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on Morgan Stanley Managed ACES SPC's EUR43.0 million notional class IA floating-rate notes series 2006-10 to 'B' from 'CCC-' and removed the rating from CreditWatch with negative implications, where it was placed April 22, 2009. The rating actions reflect the transaction restructuring that increased the class IA notes' subordination level. As a result, the class IA notes' synthetic rated overcollateralization ratio increased to more than 100% (at a 'B' rating level). The two other tranches in this deal, the class IB and IC notes, were not affected by this restructuring. MOUNTAIN VIEW: Moody's Downgrades Ratings on Various 2006-1 Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Mountain View Funding CLO 2006-1, Ltd.: -- US$305,000,000 Class A-1 Floating Rate Notes Due April 2019, Downgraded to A1; previously on May 23, 2006 Assigned Aaa; -- US$40,000,000 Class A-2 Variable Funding Floating Rate Notes Due April 2019, Downgraded to A1; previously on May 23, 2006 Assigned Aaa; -- US$18,000,000 Class B-1 Floating Rate Notes Due April 2019, Downgraded to Baa2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$8,000,000 Class B-2 Fixed Rate Notes Due April 2019, Downgraded to Baa2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$11,000,000 Class C-1 Floating Rate Deferrable Notes Due April 2019, Downgrade to Ba2; previously on March 17, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$12,000,000 Class C-2 Fixed Rate Deferrable Notes Due April 2019, Downgrade to Ba2; previously on March 17, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$19,500,000 Class D Floating Rate Deferrable Notes Due April 2019, Downgrade to Caa2; previously on March 17, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$13,500,000 Class E Floating Rate Deferrable Notes Due April 2019, Downgrade to Ca; previously on March 17, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2722 versus a test level of 2710 as of the last trustee report, dated July 8, 2009. Based on the same report, defaulted securities total about $13.6 million, accounting for roughly 3% of the collateral balance, and securities rated Caa1 or lower make up approximately 8.3% of the underlying portfolio. Additionally, interest payments on the Class E Notes were deferred as a result of the failure of the Class D Par Value Test as of the last payment date in April 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Mountain View Funding CLO 2006-1, Ltd., issued in May 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. NAAC REPERFORMING: Moody's Downgrades Ratings on 26 Tranches ------------------------------------------------------------ Moody's Investors Service has downgraded 26 tranches from 3 NAAC Reperforming Loan Remic Trust deals issued in 2004 due to higher expected pool losses in relation to available credit enhancement. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable rate, mortgage loans guaranteed by the FHA or the VA (typically 80% FHA and 20% VA.) As economic conditions have deteriorated; performance of these loans have worsened with serious delinquencies (that is, loans more than 60 days past due, in foreclosure or held for sale) as a percentage of current balance increasing from 33.5% 12 months ago, to 35.6% as of May 2009 for FHA -- VA pools issued in 2006. While for FHA -- VA pools issued in 2007, serious delinquencies as a percentage of current balance have risen from 41.0% 12 months ago, to 44.5% as of May 2009. Cumulative losses on FHA -- VA pools, however, are low in absolute terms due to the FHA - VA guarantee. Nevertheless, for FHA - VA pools issued in 2006, cumulative losses have risen from 0.31% in May 2008 to 0.45% one year later. For FHA - VA pools issued in 2007, cumulative losses have more than doubled from 0.16% a year earlier to 0.34% as of May 2009. Moody's expects loss levels on FHA -- VA pools to rise further as the general level of remaining delinquencies remain elevated and loss severities increase. Due to the FHA - VA guarantee, loss severities on these pools have been historically low at 2.0% -- 4.0%. However, with recent house price depreciation, increase in foreclosure costs and timelines and change in the debenture rate applied by FHA to pay interest claims, future loss severities on these pools are expected to be higher. Moody's now expects loss severities on FHA loans originated before 2004 to average 5.0% and on FHA loans originated in 2004 and after to average 6.5% (this is due to change in debenture rate application by FHA for loans originated after 2004 which results in a lower interest expense being paid by the FHA and a higher severity to the trust). Loss severities on VA loans are expected to average 20%. As a result, Moody's now projects cumulative losses on FHA -- VA pools issued between 2002 and 2007 to average 1.42% as a percentage of original balance securitized (3.00% as a percentage of current balance) versus Moody's original expected loss estimates of 0.40% - 0.50%. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the priority of payments. Complete rating actions are: NAAC Reperforming Loan Remic Trust 2004-R3 -- Cl. A1, Downgraded to A1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AF, Downgraded to A1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AS, Downgraded to A1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. PT, Downgraded to A1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to Baa1; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ba1; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to B1; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade NAAC Reperforming Loan Remic Trust Certificates, Series 2004-R1 -- Cl. A1, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. A2, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. PT, Downgraded to Aa3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to Baa2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ba3; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Caa2; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 Caa3 Placed Under Review for Possible Downgrade NAAC Reperforming Loan Remic Trust Certificates, Series 2004-R2 -- Cl. A1, Downgraded to A1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. A2, Downgraded to A1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. A3, Downgraded to A1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. PT, Downgraded to A1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. M, Downgraded to Baa2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ba3; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on 5/15/2009 Caa3 Placed Under Review for Possible Downgrade NATIONAL COLLEGIATE: Moody's Downgrades Ratings on Class B Notes ---------------------------------------------------------------- Moody's Investors Service has downgraded Class B note issued by National Collegiate Trust 1997-S1. The underlying collateral consists of private credit student loans that were generated under the First Marblehead's Guaranteed Access to Education program. he loans in the securitization are neither privately nor federally insured. The action concludes the review for downgrade of the note initiated on April 9, 2009. The downgrade of National Collegiate Trust 1997-S1 is primarily driven by negative gross excess spread (i.e. excess spread pre- losses). Gross excess spread in the past six months has been approximately -1.0% (annualized). Excess spread post-losses has decreased parity (i.e. ratio of total assets to total liabilities) to 100.63% as of the May 31, 2009 collection period from 101.66% as of the December 31, 2008 collection period. The continued negative excess spread will result in the trust becoming undercollateralized in the near future, increasing the risk that the outstanding principal balance will not be fully repaid by the legal final maturity date on September 20, 2013. The complete rating action is: Issuer: National Collegiate Trust 1997-S1 Pool Current Expected Cumulative Net Losses: 17.5% (as a percentage of the original loan pool balance) -- Class B, downgraded to Caa3 from Baa2; previously on 4/9/2009 placed under review for possible downgrade NAVIGARE FUNDING: Moody's Downgrades Ratings on Two Classes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Navigare Funding I CLO Ltd.: -- US$16,500,000 Class B Floating Rate Notes Due 2019, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$27,750,000 Class D Deferrable Floating Rate Notes Due 2019, Downgraded to B1; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$9,000,000 Class C Deferrable Floating Rate Notes Due 2019, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has increased over the last year and is currently 2641 as of the last trustee report, dated June 20, 2009. Based on the same report, defaulted securities total about $10.2 million, accounting for roughly 3.6% of the collateral balance, and securities rated Caa1 or lower make up approximately 6.7% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Navigare Funding I CLO Ltd., issued in May 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. NAVIGARE FUNDING: Moody's Takes Rating Actions on Various Classes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the rating of these notes issued by Navigare Funding II CLO Ltd.: -- US$14,000,000 Class B Senior Secured Floating Rate Notes, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$14,000,000 Class D Secured Deferrable Floating Rate Notes, Confirmed at B1; previously on March 13, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$11,250,000 Class E Secured Deferrable Floating Rate Notes, Confirmed at Caa2; previously on March 13, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. Moody's has also upgraded the rating of these notes: -- US$16,500,000 Class C Secured Deferrable Floating Rate Notes, Upgraded to Baa3; previously on March 13, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has increased over the last year and is currently 2690 versus a test level of 2674 as of the last trustee report, dated July 8, 2009. Based on the same report, defaulted securities total about $6.3 million, accounting for roughly 2.2% of the collateral balance, and securities rated Caa1 or lower make up approximately 7% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Moody's notes that the rating action on the Class C Notes is the result of a comprehensive deal-level analysis, including an in- depth assessment of results from Moody's quantitative CLO rating model along with an evaluation of deal-specific qualitative factors. By way of comparison, rating actions taken by Moody's in its Stage I CLO surveillance sweep were largely based on a parameter-based approach. Navigare Funding II CLO Ltd., issued in April 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. OPTION ONE: Moody's Downgrades Ratings on Six 2007-1 Notes ---------------------------------------------------------- Moody's Investors Service has downgraded the ratings of six securities issued by Option One Mortgage Loan Trust 2007-1. Additionally Moody's has confirmed the rating of the Class II-A-1 from this transaction as Aaa. The collateral backing this transactions consists primarily of first-lien, fixed- and adjustable-rate, subprime residential mortgage loans. The actions are triggered by a combination of factors including increased delinquencies, higher loss severities, slower prepayments and mounting losses in the underlying collateral. The actions listed below reflect Moody's updated loss projections for the subprime RMBS sector first announced in a press release on February 29, 2009, and are part of Moody's on- going surveillance process. Moody's final rating actions are based on collateral performance and updated pool-level loss expectations relative to current levels of tranche-specific credit enhancement. Moody's took into account credit enhancement provided by subordination, cross- collateralization, excess spread, time tranching, and other structural features. Complete rating actions are: Issuer: Option One Mortgage Loan Trust 2007-1 -- Cl. I-A-1, Downgraded to B2; previously on 3/17/2009 Downgraded to Ba2 -- Cl. I-A-2, Downgraded to B2; previously on 3/17/2009 Downgraded to Ba2 -- Cl. II-A-1, Confirmed at Aaa; previously on 9/17/2008 Aaa Placed Under Review for Possible Downgrade -- Cl. II-A-2, Downgraded to B3; previously on 10/30/2008 Downgraded to B1 -- Cl. II-A-3, Downgraded to Caa3; previously on 10/30/2008 Downgraded to B2 -- Cl. II-A-4, Downgraded to Caa3; previously on 10/30/2008 Downgraded to B3 -- Cl. M-1, Downgraded to C; previously on 10/30/2008 Downgraded to Ca PAMCO CAYMAN: Moody's Downgrades Ratings on Class B Notes to 'Ca' ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the rating of these notes issued by PAMCO Cayman Ltd: * $90,000,000 Class B Second Senior Secured Notes due August 6, 2009, Downgraded to Ca; previously on March 4, 2009, Caa2 Placed Under Review for Possible Downgrade. PAMCO Cayman Ltd., issued in August 1997, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. As reported by the trustee, on July 22, 2009, the transaction experienced an "Event of Default" caused by a failure of the overcollateralization ratio with respect to the Class A Notes and Class B Notes to be at least equal to 100%, as required under Section 5.1(d) of the Indenture dated August 6, 1997. This Event of Default is continuing. The rating actions taken reflect the occurrence of the Event of Default and consideration of credit deterioration in the underlying portfolio. Based on the latest trustee report dated July 10, 2009, the Class B overcollateralization test stood at 79.08%. The weighted average rating factor as reported by the trustee is 5770 versus a test level of 2720 based on the same report. In addition, the portfolio includes a large number of investments in securities that mature after the maturity date of the notes. These investments potentially expose the notes to market risk in the event of liquidation at the time of the notes' maturity. As provided in Article V of the Indenture, during the occurrence and continuance of an Event of Default, the Holders of at least 66-2/3% of the Aggregate Outstanding Amount of each Class of Notes may direct the trustee to proceed with the sale and liquidation of the collateral. The severity of losses may depend on the timing and choice of remedy to be pursued following the Event of Default. The rating action reflects increased concerns about potential losses arising from liquidation. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. PHH MORTGAGE: Moody's Downgrades Ratings on 24 2008-CIM1 Tranches ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 24 tranches and confirmed the rating of 1 tranche issued by PHH Mortgage Trust, Series 2008-CIM1. The collateral backing this transaction consists primarily of first-lien, fixed and adjustable-rate, Jumbo mortgage loans. The actions are triggered by the quickly deteriorating performance -- marked by rising delinquencies and loss severities, along with concerns about the continuing drop in housing prices nationwide and the rising unemployment levels. The actions listed below reflect Moody's updated expected losses on the jumbo sector announced in a press release on March 19th, 2009, and are part of Moody's on-going review process. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the senior note waterfalls. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Complete rating actions are: PHH Mortgage Trust, Series 2008-CIM1 -- Cl. I-1A-1, Confirmed at Aaa; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-1A-2, Downgraded to A1; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-2A-1, Downgraded to Aa1; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-2A-2, Downgraded to A2; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-3A-1, Downgraded to Aa1; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-3A-2, Downgraded to A2; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-4A-1, Downgraded to Aa1; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-4A-2, Downgraded to A2; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-B-1, Downgraded to Baa2; previously on 3/19/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. I-B-2, Downgraded to Ba3; previously on 3/19/2009 A2 Placed Under Review for Possible Downgrade -- Cl. I-B-3, Downgraded to B3; previously on 3/19/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. I-B-4, Downgraded to Ca; previously on 3/19/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. I-B-5, Downgraded to C; previously on 3/19/2009 B2 Placed Under Review for Possible Downgrade -- Cl. II-1A-1, Downgraded to Aa2; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. II-1A-2, Downgraded to A2; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. II-1-AX, Downgraded to Aa2; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. II-1-PO, Downgraded to A2; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. II-2A-1, Downgraded to Aa2; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. II-2A-2, Downgraded to A2; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. II-2-AX, Downgraded to Aa2; previously on 3/19/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. II-B-1, Downgraded to Baa1; previously on 3/19/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. II-B-2, Downgraded to Ba1; previously on 3/19/2009 A2 Placed Under Review for Possible Downgrade -- Cl. II-B-3, Downgraded to B1; previously on 3/19/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. II-B-4, Downgraded to Ca; previously on 3/19/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. II-B-5, Downgraded to C; previously on 3/19/2009 B2 Placed Under Review for Possible Downgrade The ratings on the notes were assigned after evaluating factors determined applicable to the credit profile of the notes, such as: i) the nature, sufficiency, and quality of historical performance information available for the asset class as well as for the transaction sponsor, ii) collateral analysis, iii) an analysis of the policies, procedures and alignment of interests of the key parties to the transaction, most notably the originator and the servicer, iv) an analysis of the transaction's allocation of collateral cashflow and capital structure, v) an analysis of the transaction's governance and legal structure, and vi) a comparison of these attributes against those of other similar transactions. PINNACLE ENTERTAINMENT: Fitch Takes Various Rating Actions ---------------------------------------------------------- Following the company's second quarter 2009 (Q2'09) results, the amendment to its bank debt agreement, the increased senior debt availability, and the proposed issuance of $375 million of senior unsecured notes due 2017, Fitch Ratings has taken these rating actions for Pinnacle Entertainment, Inc.: -- Issuer Default Rating affirmed at 'B'; -- Bank facility affirmed at 'BB/RR1'; -- Senior unsecured notes rated 'BB/RR1'; -- Subordinated notes downgraded to 'B-/RR5' from 'BB-/RR2'. The ratings apply to its $531 million bank credit facility, the proposed $375 million senior unsecured notes, and to $795 million of subordinated notes. The Rating Outlook is revised to Stable from Negative. Proceeds from the $375 million senior unsecured issuance will fund a tender offer of its $135 million 8.75% subordinated notes due 2013 and repay $206 million in revolver borrowings. The company's bank debt amendment and improved liquidity were final factors related to Fitch's Outlook revision to Stable from Negative and affirmation of the 'B' IDR. The 'BB/RR1' rating on the proposed $375 million senior unsecured note issuance and the downgrade of the subordinated notes reflects the changes in the capital structure and senior debt availability, which impacts estimated recovery levels in the event of default. Fitch's previous revision of Pinnacle's Outlook to Negative in October 2008 was based primarily on these factors: -- The deepening of the U.S. recession. -- Fitch's expectation that following a surge in energy prices supporting the regional economy, Louisiana operating results would weaken as energy prices retreated. -- The slower-than-expected ramp up of Lumiere Place. -- The shutdown of credit markets raising concern about debt covenant violations and tight liquidity prior to the River City opening. Fitch's Outlook revision to Stable reflects: -- Better-than-expected performance in Louisiana. -- The acceleration of Lumiere Place's ramp up, fueled by regulatory changes that removed restrictive loss limits. -- The completion of an amendment to its bank facility providing covenant relief through the opening of River City. -- Increased liquidity that supports the completion of River City and the development pipeline. Pinnacle's Q2'09 consolidated adjusted EBITDA increased 18% to $48.9 million, due primarily to the ramp up of Lumiere Place fueled by the Missouri loss limit removal. On a latest 12 months basis as of June 30, 2009, adjusted EBITDA was $189 million compared to nearly $975 million in debt for a leverage ratio of 5.2 times, which is solid for the 'B' IDR. Leverage may increase slightly as spending continues toward the completion of River City in the first half 2010 (1H'10). Pinnacle's free cash flow profile should improve by mid-2010 following the River City opening, but the additional capital and increased liquidity also moves the company closer to progressing on Sugarcane Bay, which is the next project in its development pipeline. Through June 30, 2009, Pinnacle has spent roughly $202 million of River City's total budget of around $390 million-$395 million (including capitalized interest and operating cash). So the company will spend another $190 million to complete the project over the next 9-12 months. The company's cash balance was $134 million as of June 30, 2009, consisting of roughly $64 million of available cash and $70 million of cage cash. The reclassification of roughly $200 million of credit facility debt noted below, allows the company to access significantly more of its $531 million credit facility, which had $206 million outstanding as of July 23, 2009, but will be paid down with the unsecured issuance. As a result, any concerns related to tight liquidity around the River City completion have been removed. In addition, Pinnacle amended its credit agreement that provided for relaxed financial covenants, removing concern that financial covenants could be breached prior to the River City opening. Changes in Capital Structure and Senior Debt Availability Impact Recovery Waterfall Analysis: Fitch had previously indicated that a change in capital structure and senior debt availability was likely to occur at some point, and would result in a downgrade to the subordinated debt rating. Senior debt availability had been limited largely due to a $350 million covenant in the 8.75% subordinated notes due 2013, which is being taken out with the senior unsecured issuance. Based on improved operational performance and the recent inclusion of the company's Argentina's operations into the restricted group, Pinnacle announced on July 24, 2009, that it reclassified roughly $200 million of bank debt as 2:1 debt rather than permitted senior debt. As a result, Pinnacle's senior debt availability with respect to the covenant increased by roughly $200 million as result of the reclassification, prior to the transactions announced. Based on the transactions announced, senior debt availability will increase further. The tender for the 8.75% subordinated notes due 2013 will remove the $350 million senior debt limit, which is the most restrictive among the company's three subordinated note issues. The 8.25% subordinated notes due 2012 have a $475 million senior debt limit, which will become the most restrictive after the tender offer is completed. Most of the proposed $375 million senior unsecured issuance will not go against this limit because it is refinancing existing debt. Therefore, nearly all of the $475 million senior debt capacity under that covenant will be available. So accounting for the transactions announced, solidly more than $800 million of higher ranking senior debt (consisting of the $375 million senior unsecured issuance and future availability under the additional senior debt covenant) will be able to sit in front of the subordinated debt, which is reflected in Fitch's revised recovery waterfall analysis. Based on Fitch's revised analysis, and Pinnacle's prudent bottom heavy capital structure, estimated recovery values are solid relative to their ranking in the capital structure. Fitch rates both the bank facility and senior unsecured debt 'BB/RR1', estimating full recovery in the event of default based on the current capital structure. The subordinated debt rating was downgraded to 'B-/RR5' (11%-30% recovery estimate) from 'BB-/RR2' (71%-90% recovery estimate) as a result of the senior unsecured issuance and increased senior debt availability. As senior debt availability increases (i.e. if PNK takes out the 8.25% subordinated notes due 2012, the 7.5% subordinated notes senior debt limit is $1.5 billion), there could be additional rating pressure on the subordinated debt rating, and possibly the senior unsecured rating. PRIMUS CLO: Moody's Downgrades Ratings on Five Classes of Notes --------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Primus CLO II, Ltd.: -- US$302,500,000 Class A Senior Secured Floating Rate Notes Due 2021, Downgraded to A1; previously on July 10, 2007 Assigned Aaa; -- US$8,500,000 Class B Second Priority Floating Rate Notes Due 2021, Downgraded to Baa1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$31,500,000 Class C Third Priority Floating Rate Notes Due 2021, Downgraded to Ba3; previously on March 13, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$10,500,000 Class D Fourth Priority Floating Rate Notes Due 2021, Downgraded to Caa2; previously on March 13, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$15,500,000 Class E Fifth Priority Floating Rate Notes Due 2021, Downgraded to Ca; previously on March 13, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of all OC tests. The weighted average rating factor has increased over the last year and is currently 2772 versus a test level of 2572 as of the last trustee report, dated June 16, 2009. Based on the same report, defaulted securities total about $16 million, accounting for roughly 4.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 16.4% of the underlying portfolio. Additionally, interest payments on the Class D and Class E Notes are presently being deferred as a result of the failure of the Class A/B and Class C overcollateralization tests. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Primus CLO II, Ltd., issued on July 10, 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. PROSPECT PARK: Moody's Takes Rating Actions on Various Notes ------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Prospect Park CDO Ltd.: -- US$373,000,000 Class A Senior Secured Floating Rate Notes Due 2020, Downgraded to Aa1; previously on June 22, 2006 Assigned Aaa. Moody's has also upgraded the rating of these notes: -- US$40,000,000 Class B Second Priority Deferrable Floating Rate Notes Due 2020, Upgraded to Baa3; previously on March 17, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$22,000,000 Class C Third Priority Deferrable Floating Rate Notes Due 2020, Confirmed at B1; previously on March 17, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook" and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Moderate credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor is currently 2398 as of the last trustee report, dated as of July 6, 2009. Based on the same report, defaulted securities total about $24 million, accounting for roughly 5% of the collateral balance, and securities rated Caa1 or lower make up approximately 7.16% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Moody's notes that the rating action on the Class B Notes is the result of a comprehensive deal-level analysis including an in- depth assessment of results from Moody's quantitative CLO rating model along with an evaluation of deal-specific qualitative factors. By way of comparison, rating actions previously taken by Moody's in its Stage I CLO surveillance sweep were largely based on a parameter-based approach. Prospect Park CDO Ltd, issued on June 22, 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. PRUDENTIAL STRUCTURED: Fitch Affirms Ratings on Four Classes ------------------------------------------------------------ Fitch Ratings has downgraded one and affirmed four classes of notes issued by Prudential Structured Finance CBO I, Ltd., and assigned a Loss Severity rating. A detailed list of rating actions follows at the end of this press release. The rating actions reflect the continued credit deterioration experienced by the portfolio since Fitch's last rating action. As a result of the negative rating migration, assets with a Fitch derived rating below investment grade comprise 59.6% of the current portfolio, of which 52.0% is rated 'CCC' or lower. Additionally, as of the June 2009 trustee report, 29.2%, or $5.7 million, of the current portfolio is now considered defaulted per the transaction's governing documents. The negative credit migration of the portfolio has also caused each of the overcollateralization ratios to further decline, triggering an event of default in November 2007 when the class B OC ratio fell below 90%. The class A OC test continues to fail the required condition, which as defined in the transaction's governing documents, is met when the class A OC ratio is equal to at least 105.0% and when the difference between the numerator and the denominator of the class A OC ratio equal to at least $10.0 million. On the June 2, 2009 measurement date, this difference was equal to $9.0 million. As the most senior class outstanding, the class A-2L is the only class of notes that is currently receiving interest and principal payments. Since the class A OC test failure, all available excess interest and principal proceeds have been used to reduce the outstanding balance of the class A-2L notes. To date, approximately 50% of the notes' original principal balance has paid down. The benefit of the delevering of the class A-2L notes is countered by increased defaults and negative credit migration of the underlying portfolio. Based on the composition and vintage of the portfolio, Fitch expects the class A-2L notes to be the only class of notes to receive full repayment of principal. Interest due to the class B-1 and B-1L (class B-1) notes has been deferring since the February 2008 payment date. As of the May 2009 payment date, the cumulative deferred interest on the class B-1 notes was $1.3 million. Fitch expects the class B-1 notes to receive some interest payments but minimal principal recovery. Similarly, interest payments due to the class B-2 and B-2L (class B-2) notes continue to defer. Given their positioning in payment priority, Fitch does not expect the class B-2 notes to receive any payments in the future. The class A-2L notes were assigned a Stable Outlook reflecting Fitch's expectation that the rating will remain stable over the next one to two years. The class A notes were also assigned a Loss Severity Rating (LS) of 'LS3'. An 'LS3' rating indicates that a tranche has a medium risk of severe loss severity given default, as evidenced by the ratio of tranche size to the base case loss expectation for the collateral in the range of 1.1 to 4. The LS rating should always be considered in conjunction with probability of default indicated by a class's long-term credit rating. Fitch does not assign Rating Outlooks and LS ratings to classes rated 'CCC' and lower. Prudential SF CBO I is a cash flow collateralized debt obligation, which closed on Oct. 26, 2000 and is managed by the Prudential Investment Corporation. The reinvestment period ended in November 2005. The current portfolio is comprised of: 53.6% of subprime and manufactured housing residential mortgage-backed securities issued between 1996 and 2005, 30.1% commercial asset-backed securities and 16.3% of consumer ABS. Payments are made quarterly in February, May, August and November of each year. Fitch will continue to monitor and review this transaction for future rating adjustments. Fitch downgrades, assigns Outlook and a Loss Severity rating: -- $10,154,809 class A-2L notes downgraded to 'B' from 'BB+'; Outlook Stable; assigned 'LS3'. Additionally, Fitch affirms these classes: -- $4,200,000 class B-1 notes affirmed at 'C', withdrew 'DR3'; -- $8,000,000 class B-1L notes affirmed at 'C', withdrew 'DR3'; -- $2,500,000 class B-2 notes affirmed at 'C', withdrew 'DR5'; -- $5,000,000 class B-2L notes affirmed at 'C', withdrew 'DR5'. PUNTO VERDE: S&P Puts 'BB' Rating on $40 Million Tax-Exempt Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB' rating on Punto Verde Grantor Trust 2006-1's $40 million secured tax-exempt class A notes on CreditWatch with negative implications. The rating on the class A notes is dependent on the lower of the rating on the two underlying securities: (i) Morgan Stanley ACES SPC's 6.92% notes series 2006-19 due Aug. 2, 2021 ('BB/Watch Neg') and (ii) Fannie Mae's $6.47 million interest strip due May 15, 2021, which is an interest payment that has been stripped from Fannie Mae's $4.25 billion global notes due May 15, 2029 ('AAA'). The rating action reflects the July 20, 2009, placement of S&P's 'BB' rating on Morgan Stanley ACES SPC's 6.92% notes series 2006- 19 on CreditWatch with negative implications. RACE POINT: Moody's Downgrades Ratings on Various Classes --------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Race Point III CLO: -- US$451,200,000 Class A Senior Secured Floating Rate Notes Due 2020, Downgraded to A3; previously on April 27, 2006 assigned Aaa; -- US$25,200,000 Class B Senior Secured Floating Rate Notes Due 2020, Downgraded to Baa3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$42,000,000 Class C Secured Deferrable Floating Rate Notes Due 2020, Downgraded to B2; previously on March 4, 2009 A2 Placed Under Review for Possible Downgrade; -- US$31,200,000 Class D Secured Floating Rate Notes Due 2020, Downgraded to Caa3; previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade; -- US$10,800,000 Class E Secured Floating Rate Notes Due 2020, Downgraded to Ca; previously on March 4, 2009 Ba2 Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 3172 versus a test level of 2945 as of the last trustee report, dated June 16, 2009. Based on the same report, defaulted securities total about $54.89 million, accounting for roughly 9.0% of the collateral balance, and securities rated Caa1 or lower make up approximately 19.69% of the underlying portfolio. Moody's notes that a significant proportion of the collateral pool is concentrated in non-U.S. dollar denominated obligations from issuers in a relatively limited number of industries. Moody's also notes that a material proportion of the collateral pool includes debt obligations whose credit quality has been assessed through Moody's Credit Estimates. Moody's analysis reflects the application of certain stresses with respect to the default probabilities associated with CEs. These additional stresses reflect the rapid pace of recent changes in credit market conditions and the default rate expectations in the current economic cycle that are higher than the historical averages. Specifically, the default probability stresses include (1) a 1.5 notch-equivalent assumed downgrade for certain CEs updated between 12-15 months ago; and (2) assuming an equivalent of Caa3 for certain CEs that were not updated within the last 15 months. Additionally, as CEs do not carry credit indicators such as ratings reviews and outlooks, a stress of a 0.25-0.5 notch- equivalent assumed downgrade was applied to certain estimates. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Race Point III CLO, issued on April 13, 2006, is a multi-currency collateralized loan obligation backed primarily by a portfolio of senior secured loans denominated in U.S. dollars, euros, and pounds sterling. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. RAFFLES PLACE: S&P Downgrades Ratings on Five Classes to 'D' ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings to 'D' on five classes of notes from Raffles Place Funding Ltd., a cash flow collateralized debt obligation transaction, and on six classes from Tower Hill CDO Ltd., a hybrid CDO transaction, following the liquidation of the collateral in their portfolios. The affected tranches have a combined issuance amount of $1.38 billion. S&P lowered its ratings on Raffles Place Funding Ltd. to 'D' because the proceeds from the liquidation have not been sufficient to make par payments to the rated notes. S&P lowered S&P's ratings on Tower Hill CDO Ltd. to 'D' because the transaction did not have proceeds to pay back par payments to the noteholders after making the termination payment on the credit default swap contract. Tower Hill CDO Ltd. was backed predominantly by synthetic investment-grade corporate CDOs, and Raffles Place Funding Ltd. was backed predominantly by high-grade residential mortgage-backed securities. Both deals triggered events of default, after which the controlling noteholders voted to accelerate the maturity of the notes and liquidate the collateral assets. The rating actions follow notice from the trustees that the liquidation of the portfolio assets is complete and that the available proceeds have been distributed to the noteholders. Rating Actions Rating ------ Transaction Class To Interim From ----------- ----- -- ------- ---- Tower Hill CDO Ltd. A-1 NR D B-/Watch Neg Tower Hill CDO Ltd. A-2 NR D CCC- Tower Hill CDO Ltd. B NR D CC Tower Hill CDO Ltd. C NR D CC Tower Hill CDO Ltd. D NR D CC Tower Hill CDO Ltd. Sub notes NR D CC Raffles Place Funding Ltd. CP notes NR D/NR CCC/C Raffles Place Funding Ltd. A-1a NR D CC Raffles Place Funding Ltd. A-1b NR D CC Raffles Place Funding Ltd. A-2 NR D CC Raffles Place Funding Ltd. B NR D CC NR - Not rated. RBSGC MORTGAGE: Moody's Downgrades Ratings on 10 2005-RP1 Tranches ------------------------------------------------------------------ Moody's Investors Service has downgraded 10 tranches and confirmed 4 tranches issued by RBSGC Mortgage Loan Trust 2005-RP1 due to higher pool losses in relation to remaining tranche-specific credit protection. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable rate, mortgage loans guaranteed by the FHA or the VA (typically 80% FHA and 20% VA.) As economic conditions have deteriorated; performance of these loans have worsened with serious delinquencies (that is, loans more than 60 days past due, in foreclosure or held for sale) as a percentage of current balance increasing from 33.5% 12 months ago, to 35.6% as of May 2009 for FHA -- VA pools issued in 2006. While for FHA -- VA pools issued in 2007, serious delinquencies as a percentage of current balance have risen from 41.0% 12 months ago, to 44.5% as of May 2009. Cumulative losses on FHA -- VA pools, however, are low in absolute terms due to the FHA - VA guarantee. Nevertheless, for FHA - VA pools issued in 2006, cumulative losses have risen from 0.31% in May 2008 to 0.45% one year later. For FHA - VA pools issued in 2007, cumulative losses have more than doubled from 0.16% a year earlier to 0.34% as of May 2009. Moody's expects loss levels on FHA -- VA pools to rise further as the general level of remaining delinquencies remain elevated and loss severities increase. Due to the FHA - VA guarantee, loss severities on these pools have been historically low at 2.0% -- 4.0%. However, with recent house price depreciation, increase in foreclosure costs and timelines and change in the debenture rate applied by FHA to pay interest claims, future loss severities on these pools are expected to be higher. Moody's now expects loss severities on FHA loans originated before 2004 to average 5.0% and on FHA loans originated in 2004 and after to average 6.5% (this is due to change in debenture rate application by FHA for loans originated after 2004 which results in a lower interest expense being paid by the FHA and a higher severity to the trust). Loss severities on VA loans are expected to average 20%. As a result, Moody's now projects cumulative losses on FHA -- VA pools issued between 2002 and 2007 to average 1.42% as a percentage of original balance securitized (3.00% as a percentage of current balance) versus Moody's original expected loss estimates of 0.40% - 0.50%. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the priority of payments. Complete rating actions are: RBSGC Mortgage Loan Trust 2005-RP1 -- Cl. I-F, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-SB, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-SF, Downgraded to Baa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. II-A, Confirmed at Aaa; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-B-1, Downgraded to Ba2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. I-B-2, Downgraded to B2; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. I-B-3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. I-B-4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. I-B-5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade -- Cl. II-B-1, Confirmed at Aa2; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. II-B-2, Confirmed at A2; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. II-B-3, Confirmed at Baa2; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. II-B-4, Downgraded to Ba3; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. II-B-5, Downgraded to Ca; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade SACO I: Moody's Downgrades Ratings on Three 2000-3 Certificates --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of three certificates issued by SACO I Inc. Series 2000-3 due to higher expected pool losses in relation to remaining tranche-specific credit protection. These actions are part of an ongoing review of subprime RMBS transactions. Moody's approach to analyzing seasoned subprime pools (i.e. prior to 2H 2005) takes into account the annualized loss rate from last 12 months and the projected loss rate over next 12 months, and then translates these measures into lifetime losses based on a deal's expected remaining life. Recent Losses are calculated by assessing cumulative losses incurred over the past 12-months as a percentage of the average pool factor in the last year. For Pipeline Losses, Moody's uses an annualized roll rate of 15%, 30%, 65% and 90% for loans that are delinquent 60-days, 90+ days, are in foreclosure, and REO respectively. Moody's then applies deal- specific severity assumptions, in this case 65%. The results of these two calculations -- Recent Losses and Pipeline Losses -- are weighted to arrive at the lifetime cumulative loss projection. Additionally, one pool in this transaction is backed by less than 50 loans. Moody's therefore used these methodology to estimate losses on the low pool factor pool. First, gross defaults are determined by applying assumed lifetime roll-rates (probabilities of transition to default) to the transactions' current delinquency buckets ("delinquency pipeline") and a pipeline multiplier. The pipeline multiplier accounts for further possible defaults that might arise from borrowers that are current. The pipeline multiplier differs for each deal based on the number of loans remaining in the pool -- greater the number of loans remaining the higher the multiplier. The estimated defaults are subject to a floor -- a minimum default. The minimum default also differs based on the number loans remaining in the pool. The fewer the number of loans remaining in the pool, the higher the minimum default since each loan represents a higher percentage of the pool. The final default number is then multiplied by expected loss severity to arrive at Moody's expected loss estimate. Loss severity also differs by transaction and is higher for more recent vintages. Complete rating action follows: Issuer: SACO I Inc. Series 2000-3 (Loans Remaining: Group 2 -- 42) -- Cl. 1-B-3, Current Balance: $1,254,970, Downgraded to Ba1; previously on 9/1/2000 Assigned Baa2 -- Cl. 2-B-2, Current Balance: $1,243,598, Downgraded to Baa1; previously on 9/1/2000 Assigned A2 -- Cl. 2-B-3, Current Balance: $428,373, Downgraded to B3; previously on 9/1/2000 Assigned Baa2 SASCO 2005: Moody's Downgrades Ratings on Seven Tranches -------------------------------------------------------- Moody's Investors Service has downgraded 7 tranches from SASCO 2005 - RF2 FHA - VA due to higher expected pool losses in relation to available credit enhancement. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable rate, mortgage loans guaranteed by the FHA or the VA (typically 80% FHA and 20% VA.) As economic conditions have deteriorated; performance of these loans have worsened with serious delinquencies (that is, loans more than 60 days past due, in foreclosure or held for sale) as a percentage of current balance increasing from 33.5% 12 months ago, to 35.6% as of May 2009 for FHA -- VA pools issued in 2006. While for FHA -- VA pools issued in 2007, serious delinquencies as a percentage of current balance have risen from 41.0% 12 months ago, to 44.5% as of May 2009. Cumulative losses on FHA -- VA pools, however, are low in absolute terms due to the FHA - VA guarantee. Nevertheless, for FHA - VA pools issued in 2006, cumulative losses have risen from 0.31% in May 2008 to 0.45% one year later. For FHA - VA pools issued in 2007, cumulative losses have more than doubled from 0.16% a year earlier to 0.34% as of May 2009. Moody's expects loss levels on FHA -- VA pools to rise further as the general level of remaining delinquencies remain elevated and loss severities increase. Due to the FHA - VA guarantee, loss severities on these pools have been historically low at 2.0% -- 4.0%. However, with recent house price depreciation, increase in foreclosure costs and timelines and change in the debenture rate applied by FHA to pay interest claims, future loss severities on these pools are expected to be higher. Moody's now expects loss severities on FHA loans originated before 2004 to average 5.0% and on FHA loans originated in 2004 and after to average 6.5% (this is due to change in debenture rate application by FHA for loans originated after 2004 which results in a lower interest expense being paid by the FHA and a higher severity to the trust). Loss severities on VA loans are expected to average 20%. As a result, Moody's now projects cumulative losses on FHA -- VA pools issued between 2002 and 2007 to average 1.42% as a percentage of original balance securitized (3.00% as a percentage of current balance) versus Moody's original expected loss estimates of 0.40% - 0.50%. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the priority of payments. Structured Asset Securities Corp 2005-RF2 -- Cl. A, Downgraded to B2; previously on 9/17/2008 Aaa Placed Under Review for Possible Downgrade -- Cl. A-IO, Downgraded to B2; previously on 9/17/2008 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ca; previously on 9/17/2008 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 9/17/2008 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 9/17/2008 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to C; previously on 9/17/2008 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 9/17/2008 B2 Placed Under Review for Possible Downgrade SASCO FHA: Moody's Downgrades Ratings on 101 Tranches ----------------------------------------------------- Moody's Investors Service has downgraded 101 tranches from 11 SASCO FHA - VA deals issued from 2002 to 2007 due to higher expected pool losses in relation to available credit enhancement. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable rate, mortgage loans guaranteed by the FHA or the VA (typically 80% FHA and 20% VA.) As economic conditions have deteriorated; performance of these loans have worsened with serious delinquencies (that is, loans more than 60 days past due, in foreclosure or held for sale) as a percentage of current balance increasing from 33.5% 12 months ago, to 35.6% as of May 2009 for FHA -- VA pools issued in 2006. While for FHA -- VA pools issued in 2007, serious delinquencies as a percentage of current balance have risen from 41.0% 12 months ago, to 44.5% as of May 2009. Cumulative losses on FHA -- VA pools, however, are low in absolute terms due to the FHA - VA guarantee. Nevertheless, for FHA - VA pools issued in 2006, cumulative losses have risen from 0.31% in May 2008 to 0.45% one year later. For FHA - VA pools issued in 2007, cumulative losses have more than doubled from 0.16% a year earlier to 0.34% as of May 2009. Moody's expects loss levels on FHA -- VA pools to rise further as the general level of remaining delinquencies remain elevated and loss severities increase. Due to the FHA - VA guarantee, loss severities on these pools have been historically low at 2.0% -- 4.0%. However, with recent house price depreciation, increase in foreclosure costs and timelines and change in the debenture rate applied by FHA to pay interest claims, future loss severities on these pools are expected to be higher. Moody's now expects loss severities on FHA loans originated before 2004 to average 5.0% and on FHA loans originated in 2004 and after to average 6.5% (this is due to change in debenture rate application by FHA for loans originated after 2004 which results in a lower interest expense being paid by the FHA and a higher severity to the trust). Loss severities on VA loans are expected to average 20%. As a result, Moody's now projects cumulative losses on FHA -- VA pools issued between 2002 and 2007 to average 1.42% as a percentage of original balance securitized (3.00% as a percentage of current balance) versus Moody's original expected loss estimates of 0.40% - 0.50%. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the priority of payments. Structured Asset Securities Corp 2005-RF1 -- Cl. A, Downgraded to B1; previously on 5/28/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AIO, Downgraded to B1; previously on 5/28/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ca; previously on 5/28/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/28/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to Ca; previously on 5/28/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to Ca; previously on 5/28/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-5, Downgraded to C; previously on 5/28/2009 B2 Placed Under Review for Possible Downgrade Structured Asset Securities Corp 2007-RF1 -- Cl. 1-A, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1-AIO, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2-A, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade Structured Asset Securities Corp Tr 2005-RF3 -- Cl. 1-A, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1-AIO, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2-A, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade Structured Asset Securities Corp Tr 2005-RF4 -- Cl. A, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AIO, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to C; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade Structured Asset Securities Corp Tr 2005-RF5 -- Cl. 1-A, Downgraded to Ba3; previously on 9/17/2008 Aaa Placed Under Review for Possible Downgrade -- Cl. 1-AIO, Downgraded to Ba3; previously on 9/17/2008 Aaa Placed Under Review for Possible Downgrade -- Cl. 2-A, Downgraded to Ba3; previously on 9/17/2008 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Caa3; previously on 9/17/2008 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 9/17/2008 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 9/17/2008 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 9/17/2008 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 9/17/2008 B2 Placed Under Review for Possible Downgrade -- Cl. 1-X, Downgraded to B3; previously on 9/17/2008 Aaa Placed Under Review for Possible Downgrade Structured Asset Securities Corp Tr 2006-RF1 -- Cl. 1-A, Downgraded to B2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1-AIO, Downgraded to B2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2-A, Downgraded to B2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade Structured Asset Securities Corp. 2005-RF6 -- Cl. A, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AIO, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade Structured Asset Securities Corp. 2005-RF7 -- Cl. A, Downgraded to B2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AIO, Downgraded to B2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to C; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade Structured Asset Securities Corp. 2006-RF2 -- Cl. A, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. AIO, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade Issuer: Structured Asset Securities Corp 2006-RF3 -- Cl. 1-A1, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1-A2, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1-A3, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1-A4, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1-AX, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1-AP, Downgraded to Caa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2-A, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 3-A1, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 3-A2, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 3-AX, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 3-AP, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 4-A, Downgraded to B1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1-I, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B1-II, Downgraded to Caa1; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2-I, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B2-II, Downgraded to Caa3; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3-I, Downgraded to C; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B3-II, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4-I, Downgraded to C; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B4-II, Downgraded to C; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5-I, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade -- Cl. B5-II, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade Issuer: Structured Asset Securities Corp 2006-RF4 -- Cl. 1-A1, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 1-AIO, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2-A1, Downgraded to Ba3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2-A2, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2-AX, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 2-AP, Downgraded to Caa1; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. 3-A1, Downgraded to B3; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ca; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. B5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade SATURN CLO: Moody's Downgrades Ratings on Four Classes of Notes --------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Saturn CLO, Ltd.: -- US$135,000,000 Class A-1 Senior Secured Floating Rate Notes due 2022, Downgraded to Aa3; previously on May 23, 2007 Assigned Aaa; -- US$24,000,000 Class A-1-J Senior Secured Floating Rate Notes due 2022, Downgraded to A1; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$27,500,000 Class A-2 Senior Secured Floating Rate Notes due 2022, Downgraded to Baa1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$20,000,000 Class D Secured Deferrable Floating Rate Notes due 2022, Downgraded to Caa3; previously on March 13, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. Moody's has also confirmed the rating of these notes: -- US$25,000,000 Class B Secured Deferrable Floating Rate Notes due 2022, Confirmed at Ba1; previously on March 13, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$20,000,000 Class C secured Deferrable Floating Rate Notes due 2022, Confirmed at B1; previously on March 13, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook" and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Moody's also assessed the collateral pool's concentration risk in debt obligations of companies in the finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class D Overcollateralization Test and the Interest Reinvestment Test. The weighted average rating factor has steadily increased over the last year and is currently 3064 versus the test level of 2850 as of the last trustee report, dated as of July 1, 2009. Based on the same report, defaulted securities total about $19.48 million, accounting for roughly 4% of the collateral balance, and securities rated Caa1/CCC+ or lower make up approximately 14.24% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Saturn CLO, Ltd. issued on May 23, 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. SAXON MORTGAGE: Moody's Downgrades Ratings on Four Classes ---------------------------------------------------------- Moody's Investors Service has downgraded the ratings of four classes of notes from three transactions issued by Saxon Mortgage Securities due to higher expected pool losses in relation to available credit enhancement. Moody's has also confirmed the ratings of one class of notes from a Saxon Mortgage Securities transaction. These transactions are currently backed by small number of loans. Should a default occur on any of the loans in the 1992-1 or the 1992-6 transactions, protection from loss to the notes is completely dependant on payments made from pool policies provided by Genworth Mortgage Insurance Corporation (Baa2) and PMI Mortgage Insurance Company (Ba3). Due to the low likelihood of default given the long pay history of the remaining borrowers, Moody's concludes that the joint probability of default and loss given default is consistent with the Ba1 rating. The Notes in the 1992- 3 transaction do not have protection from the Genworth and PMI pool policies. The current ratings on the securities issued by the Saxon Mortgage Securities 1992-03 transaction are consistent with Moody's practice of rating insured securities at the higher of (1) the guarantor's insurance financial strength rating and (2) the underlying rating, based on Moody's modified approach to rating structured finance securities wrapped by financial guarantors. The ratings are based on the methodology applied to all transactions with small pool factors. Moody's defines low pool factor deals as those that meet one of these two criteria: (1) the outstanding collateral balance is less than $1 million, and the pool factor is less than 5% or (2) the pool has fewer than 50 loans remaining Moody's uses these methodology to estimate losses on low pool factor deals. First, gross defaults are determined by applying assumed lifetime roll-rates (probabilities of transition to default) to the transactions' current delinquency buckets ("delinquency pipeline") and a pipeline multiplier. The pipeline multiplier accounts for further possible defaults that might arise from borrowers that are current. The pipeline multiplier differs for each deal based on the number of loans remaining in the pool -- greater the number of loans remaining the higher the multiplier. The estimated defaults are subject to a floor -- a minimum default. The minimum default also differs based on the number loans remaining in the pool. The fewer the number of loans remaining in the pool the higher the minimum default since each loan represents a higher percentage of the pool. The final default number is then multiplied by expected loss severity to arrive at Moody's expected loss estimate. Loss severity also differs by transaction and is higher for more recent vintages. Complete rating action: Issuer: Saxon Mortgage Securities 1992-01(Loans Remaining: 19) -- Cl. B-1, Current Balance $2,103,791, Downgraded to Ba1; previously on 8/26/1992 Assigned Aa2 -- Cl. B-2, Current Balance $338,931, Downgraded to Ba1; previously on 8/26/1992 Assigned Aa2 Issuer: Saxon Mortgage Securities 1992-03 (Loans Remaining: 15) -- Cl. R, Current Balance $23,368, Confirmed at Aaa; previously on 7/21/2008 Aaa Placed Under Review for Possible Downgrade -- Financial Guarantor: Financial Security Assurance Inc. (Aa3, under review for possible downgrade, previously on 11/21/2008 downgraded from Aaa) -- Cl. B, Current Balance $2,059,525, Downgraded to Aa3; previously on 7/21/2008 Aa2 Placed Under Review for Possible Downgrade -- Financial Guarantor: Financial Security Assurance Inc. (Aa3, under review for possible downgrade, previously on 11/21/2008 downgraded from Aaa) Issuer: Saxon Mortgage Securities 1992-06 (Loans Remaining: 14) -- Cl. B, Current Balance $1,088,961, Downgraded to Ba1; previously on 12/30/1992 Assigned Aa2 SEQUOIA MORTGAGE: Moody's Downgrades Ratings on 121 Tranches ------------------------------------------------------------ Moody's Investors Service has downgraded the ratings of 121 tranches from 19 RMBS transactions, backed by prime Jumbo loans, issued by Sequoia. The collateral backing these transactions consists primarily of first-lien, adjustable-rate, jumbo residential mortgage loans. These actions are a result of Moody's updated loss expectations on the underlying collateral relative to available credit enhancement. Moody's methodology for rating securities backed by pools of jumbo mortgages originated prior to 2005 takes into account the annualized loss rate from the last 12 months and the projected loss rate over the next 12 months, and then translates these measures into lifetime losses based on a deal's expected remaining life. Recent Losses are calculated by assessing cumulative losses incurred over the past 12-months as a percentage of the average pool factor for the previous year. Pipeline Losses are calculated by using annualized roll rates of 15%, 30%, 65% and 90% for loans that are 60-89 days delinquent, 90 or more days delinquent, in foreclosure, and properties that are held for sale (REO) respectively. Moody's then applies loss upon default (severity) assumptions ranging from 25% to 35% on the loans that are projected to default. The roll-rates and severity assumptions mentioned above can vary from deal-to-deal, depending on a deal's specific characteristics. Weights are then applied to Recent Losses and Pipeline Losses. The weights applied depend on the year of loan and RMBS origination -- deals from earlier vintages typically experience higher Recent Losses and, as a result, have higher weights on Recent Losses. The weighted loss is then translated to lifetime projected loss depending on the deal's expected remaining life by which is estimated based the deal's pool factor and prepayment speeds. Moody's final rating actions are based on i) the level of credit enhancement available relative to the updated pool-level loss expectations and ii) current ratings. In addition, Moody's takes into account credit enhancement provided by seniority, cross- collateralization, time tranching, and other structural features within the priority of payments. List of actions: Sequoia Mortgage Trust 10 -- Cl. X-B, Downgraded to Aa3; previously on 9/30/2002 Assigned Aaa -- Cl. B-1, Downgraded to Aa3; previously on 9/30/2002 Assigned Aa2 -- Cl. B-2, Downgraded to A3; previously on 9/30/2002 Assigned A2 -- Cl. B-3, Downgraded to Ba1; previously on 9/30/2002 Assigned Baa2 -- Cl. B-4, Downgraded to B2; previously on 9/30/2002 Assigned Ba2 -- Cl. B-5, Downgraded to Caa3; previously on 9/30/2002 Assigned B2 Sequoia Mortgage Trust 11 -- Cl. X-B, Downgraded to A1; previously on 11/5/2002 Assigned Aaa -- Cl. B-1, Downgraded to A1; previously on 11/5/2002 Assigned Aa2 -- Cl. B-2, Downgraded to Ba3; previously on 2/23/2009 Downgraded to Baa1 Sequoia Mortgage Trust 2003-1 -- Cl. X-B, Downgraded to Aa2; previously on 3/18/2003 Assigned Aaa -- Cl. B-3, Downgraded to Ba1; previously on 3/18/2003 Assigned Baa2 -- Cl. B-4, Downgraded to B3; previously on 3/18/2003 Assigned Ba2 -- Cl. B-5, Downgraded to Caa3; previously on 3/18/2003 Assigned B2 Sequoia Mortgage Trust 2003-3 -- Cl. A-1, Downgraded to Aa3; previously on 7/16/2003 Assigned Aaa -- Cl. A-2, Downgraded to Aa3; previously on 7/16/2003 Assigned Aaa -- Cl. X-1A, Downgraded to Aa3; previously on 7/16/2003 Assigned Aaa -- Cl. X-1B, Downgraded to Aa3; previously on 7/16/2003 Assigned Aaa -- Cl. X-2, Downgraded to Aa3; previously on 7/16/2003 Assigned Aaa -- Cl. X-B, Downgraded to Baa2; previously on 7/16/2003 Assigned Aaa -- Cl. B-1, Downgraded to Baa2; previously on 7/16/2003 Assigned Aa2 -- Cl. B-2, Downgraded to B1; previously on 7/16/2003 Assigned A2 -- Cl. B-3, Downgraded to Caa2; previously on 7/16/2003 Assigned Baa2 -- Cl. B-4, Downgraded to Caa3; previously on 7/16/2003 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 7/16/2003 Assigned B2 Sequoia Mortgage Trust 2003-4 -- Cl. 1-X-B, Downgraded to Aa2; previously on 8/18/2003 Assigned Aaa -- Cl. 2-X-B, Downgraded to Aa2; previously on 8/18/2003 Assigned Aaa Sequoia Mortgage Trust 2003-5 -- Cl. X-B, Downgraded to Aa2; previously on 10/1/2003 Assigned Aaa -- Cl. B-3, Downgraded to Ba2; previously on 10/1/2003 Assigned Baa2 -- Cl. B-4, Downgraded to Caa1; previously on 10/1/2003 Assigned Ba2 -- Cl. B-5, Downgraded to Caa3; previously on 10/1/2003 Assigned B2 Sequoia Mortgage Trust 2003-8 -- Cl. A-1, Downgraded to Aa2; previously on 1/23/2004 Assigned Aaa -- Cl. A-2, Downgraded to Aa2; previously on 1/23/2004 Assigned Aaa -- Cl. X-2, Downgraded to Aa2; previously on 1/23/2004 Assigned Aaa -- Cl. X-B, Downgraded to A2; previously on 1/23/2004 Assigned Aaa -- Cl. B-1, Downgraded to A2; previously on 1/23/2004 Assigned Aa2 -- Cl. B-2, Downgraded to Ba1; previously on 1/23/2004 Assigned A2 -- Cl. B-3, Downgraded to Caa1; previously on 1/23/2004 Assigned Baa2 -- Cl. B-4, Downgraded to Caa3; previously on 1/23/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 1/23/2004 Assigned B2 Sequoia Mortgage Trust 2004-1 -- Cl. A1, Downgraded to A2; previously on 2/26/2004 Assigned Aaa -- Cl. X-2, Downgraded to A2; previously on 2/26/2004 Assigned Aaa -- Cl. B-1, Downgraded to Ba1; previously on 2/26/2004 Assigned Aa2 -- Cl. B-2, Downgraded to Caa1; previously on 2/26/2004 Assigned A2 -- Cl. B-3, Downgraded to Caa3; previously on 2/26/2004 Assigned Baa2 -- Cl. B-4, Downgraded to Ca; previously on 2/26/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 2/26/2004 Assigned B2 Sequoia Mortgage Trust 2004-10 -- Cl. A-1B, Downgraded to Aa1; previously on 11/29/2004 Assigned Aaa -- Cl. A-3B, Downgraded to Aa1; previously on 11/29/2004 Assigned Aaa -- Cl. X-B, Downgraded to A2; previously on 11/29/2004 Assigned Aaa -- Cl. B-1, Downgraded to A2; previously on 12/3/2007 Upgraded to Aa1 -- Cl. B-2, Downgraded to Baa3; previously on 11/29/2004 Assigned A2 -- Cl. B-3, Downgraded to B3; previously on 11/29/2004 Assigned Baa2 Sequoia Mortgage Trust 2004-11 -- Cl. A-1, Downgraded to Aa3; previously on 1/10/2005 Assigned Aaa -- Cl. A-2, Downgraded to Aa3; previously on 1/10/2005 Assigned Aaa -- Cl. A-3, Downgraded to Aa3; previously on 1/10/2005 Assigned Aaa -- Cl. X-A1, Downgraded to Aa3; previously on 1/10/2005 Assigned Aaa -- Cl. X-A2, Downgraded to Aa3; previously on 1/10/2005 Assigned Aaa -- Cl. X-B, Downgraded to Baa1; previously on 1/10/2005 Assigned Aaa -- Cl. B-1, Downgraded to Baa1; previously on 1/10/2005 Assigned Aa2 -- Cl. B-2, Downgraded to Ba3; previously on 1/10/2005 Assigned A2 -- Cl. B-3, Downgraded to Caa3; previously on 1/10/2005 Assigned Baa2 -- Cl. B-4, Downgraded to Ca; previously on 1/10/2005 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 1/10/2005 Assigned B2 Sequoia Mortgage Trust 2004-12 -- Cl. A-1, Downgraded to A1; previously on 1/10/2005 Assigned Aaa -- Cl. A-2, Downgraded to A1; previously on 1/10/2005 Assigned Aaa -- Cl. A-3, Downgraded to A1; previously on 1/10/2005 Assigned Aaa -- Cl. X-A1, Downgraded to A1; previously on 1/10/2005 Assigned Aaa -- Cl. X-A2, Downgraded to A1; previously on 1/10/2005 Assigned Aaa -- Cl. X-B, Downgraded to Baa1; previously on 1/10/2005 Assigned Aa2 -- Cl. B-1, Downgraded to Baa1; previously on 1/10/2005 Assigned Aa2 -- Cl. B-2, Downgraded to B1; previously on 1/10/2005 Assigned A2 -- Cl. B-3, Downgraded to Caa3; previously on 1/10/2005 Assigned Baa2 -- Cl. B-4, Downgraded to Ca; previously on 1/10/2005 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 1/10/2005 Assigned B2 Sequoia Mortgage Trust 2004-4 -- Cl. X-B, Downgraded to A2; previously on 5/21/2004 Assigned Aaa -- Cl. B-1, Downgraded to A2; previously on 12/3/2007 Upgraded to Aa1 -- Cl. B-2, Downgraded to Ba2; previously on 5/21/2004 Assigned A2 -- Cl. B-3, Downgraded to Caa1; previously on 5/21/2004 Assigned Baa2 -- Cl. B-4, Downgraded to Caa3; previously on 5/21/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 5/21/2004 Assigned B2 Sequoia Mortgage Trust 2004-5 -- Cl. X-B, Downgraded to Aa3; previously on 7/30/2004 Assigned Aaa -- Cl. B-1, Downgraded to Aa3; previously on 12/3/2007 Upgraded to Aa1 -- Cl. B-2, Downgraded to Baa1; previously on 7/30/2004 Assigned A2 -- Cl. B-3, Downgraded to Ba3; previously on 7/30/2004 Assigned Baa2 -- Cl. B-4, Downgraded to Caa1; previously on 7/30/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Caa3; previously on 7/30/2004 Assigned B2 Sequoia Mortgage Trust 2004-6 -- Cl. X-B, Downgraded to A1; previously on 7/30/2004 Assigned Aaa -- Cl. B-1, Downgraded to A1; previously on 7/30/2004 Assigned Aa2 -- Cl. B-2, Downgraded to Baa2; previously on 7/30/2004 Assigned A2 -- Cl. B-3, Downgraded to B3; previously on 7/30/2004 Assigned Baa2 -- Cl. B-4, Downgraded to Caa2; previously on 7/30/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Caa3; previously on 7/30/2004 Assigned B2 Sequoia Mortgage Trust 2004-7 -- Cl. X-B, Downgraded to Aa3; previously on 9/3/2004 Assigned Aaa -- Cl. B-1, Downgraded to Aa3; previously on 9/3/2004 Assigned Aa2 -- Cl. B-2, Downgraded to A3; previously on 9/3/2004 Assigned A2 -- Cl. B-3, Downgraded to Ba2; previously on 9/3/2004 Assigned Baa2 -- Cl. B-4, Downgraded to B3; previously on 9/3/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Caa3; previously on 9/3/2004 Assigned B2 Sequoia Mortgage Trust 2004-8 -- Cl. X-B, Downgraded to A2; previously on 10/26/2004 Assigned Aaa -- Cl. B-1, Downgraded to A2; previously on 10/26/2004 Assigned Aa2 -- Cl. B-2, Downgraded to Ba2; previously on 10/26/2004 Assigned A2 -- Cl. B-3, Downgraded to Caa1; previously on 10/26/2004 Assigned Baa2 -- Cl. B-4, Downgraded to Caa3; previously on 10/26/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 10/26/2004 Assigned B2 Sequoia Mortgage Trust 2004-9 -- Cl. A-1, Downgraded to Aa2; previously on 12/15/2004 Assigned Aaa -- Cl. A-2, Downgraded to Aa2; previously on 12/15/2004 Assigned Aaa -- Cl. X-A, Downgraded to Aa2; previously on 12/15/2004 Assigned Aaa -- Cl. X-B, Downgraded to A3; previously on 12/15/2004 Assigned Aaa -- Cl. B-1, Downgraded to A3; previously on 12/15/2004 Assigned Aa2 -- Cl. B-2, Downgraded to Ba2; previously on 12/15/2004 Assigned A2 -- Cl. B-3, Downgraded to Caa1; previously on 12/15/2004 Assigned Baa2 -- Cl. B-4, Downgraded to Caa2; previously on 12/15/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Caa3; previously on 12/15/2004 Assigned B2 Sequoia Mortgage Trust 5 -- Cl. A, Downgraded to Aa3; previously on 10/31/2001 Assigned Aaa -- Cl. B-1, Downgraded to A3; previously on 10/31/2001 Assigned Aa2 -- Cl. B-2, Downgraded to Ba2; previously on 10/31/2001 Assigned A2 -- Cl. B-3, Downgraded to Caa1; previously on 10/31/2001 Assigned Baa2 Sequoia Mortgage Trust 9 -- Cl. X-B, Downgraded to Aa3; previously on 9/5/2002 Assigned Aaa -- Cl. B-1, Downgraded to Aa3; previously on 9/5/2002 Assigned Aa2 -- Cl. B-2, Downgraded to A3; previously on 9/5/2002 Assigned A2 -- Cl. B-3, Downgraded to Ba2; previously on 9/5/2002 Assigned Baa2 SEQUOIA MORTGAGE: Moody's Downgrades Ratings on Class B Tranche --------------------------------------------------------------- Moody's Investors Service has downgraded the rating of the Class B tranche from the Sequoia Mortgage Trust 2000-4. The collateral backing this transaction consists primarily of first-lien, adjustable-rate, Alt-A residential mortgage loans. This action is a result of updated loss expectations on the underlying collateral relative to available credit enhancement. Moody's methodology for rating securities for more seasoned Alt-A pools, takes into account the annualized loss rate from last 12 months and the projected loss rate over next 12 months, and then translates these measures into lifetime losses based on a deal's expected remaining life. Recent Losses are calculated by assessing cumulative losses incurred over the past 12-months as a percentage of the average pool factor in the last year. For Pipeline Losses, Moody's uses an annualized roll rate of 15%, 30%, 65% and 90% for loans that are delinquent 60-days, 90+ days, are in foreclosure, and REO respectively. Moody's then applies deal- specific severity assumptions ranging from 35% to 45%. The results of these two calculations -- Recent Losses and Pipeline Losses -- are weighted to arrive at the lifetime cumulative loss projection. Once expected losses have been determined, Moody's assesses available credit enhancement from subordination, overcollateralization, excess spread and any external support (mortgage insurance, pool policy, etc.). The available enhancement is weighed against projected future losses to ultimately arrive at an updated rating. List of actions: Issuer: Sequoia Mortgage Trust 4 -- Cl. B, Downgraded to B3; previously on 3/21/2000 Assigned Ba2 SFA CABS: Fitch Affirms Ratings on Two Classes of Notes ------------------------------------------------------- Fitch Ratings has affirmed two classes and assigned Loss Severity ratings to one class of notes issued by SFA CABS II CDO, Ltd. The affirmations are a result of the continued delevering of the class A notes offset by negative credit migration of the underlying portfolio. A detailed list of rating actions follows at the end of this press release. To date, approximately 88% of the class A original principal balance has paid down, thereby increasing the credit support provided by the subordinate classes to the class A notes, as this class becomes a smaller portion of the overall capital structure. The benefit of the delevering of the class A notes is countered by increased defaults and negative credit migration of the underlying portfolio. Since the last rating action, 38.1% of the portfolio was downgraded, resulting in 56.9% of the portfolio rated below investment grade. Per the governing documents of the transaction, 37.3% of the portfolio is deemed to be defaulted. The class A/B overcollateralization test continues to fail. As of the trustee report dated July 1, 2009, the class A/B ratio was 61.9%, significantly below the trigger of 105%. As a result of the failing OC test, all interest proceeds available after payments of transaction related fees, the interest rate swap payment, and distributions of current interest to the class A and B notes, have been used to amortize the class A notes. The transaction entered an event of default in February 2004, as a result of the total collateral balance falling below the aggregate outstanding balance of the notes. As of July 24, the controlling class has not accelerated the maturity of the notes. Based on the composition, vintage and amortization profiles of the portfolio's assets, Fitch expects eventual full repayment of principal on the class A notes. Additionally, the expiration of the existing interest rate swap in September 2009 will result in more interest proceeds available to pay down class A notes. The class B notes continue to receive their timely interest payments due to their positioning in the payment waterfall ahead of the class A/B OC test. Although the class B notes have not received any payments of principal to date, Fitch expects this class of notes to receive some repayments in the future, after the class A notes are paid in full. The class A notes were assigned a Stable Outlook reflecting Fitch's expectation that the rating will remain stable over the next one to two years. The class A notes were also assigned a Loss Severity Rating of LS4. An LS4 Rating indicates that a tranche has a medium to high risk of severe loss severity given default, as evidenced by the ratio of tranche size to the base case loss expectation for the collateral in the range of 0.51 to 1. The LS rating should always be considered in conjunction with probability of default indicated by a class's long-term credit rating. Fitch does not assign Rating Outlooks and LS ratings to classes rated 'CCC' and lower. SFA CABS II is a cash flow collateralized debt obligation (CDO), which closed on May 21, 2001, and is managed by Structured Finance Advisors. The portfolio is comprised of: 34.0% commercial and consumer asset-backed securities, 31.7% of residential mortgage- backed securities, including 16.5% subprime RMBS bonds. The remaining 28.8% is invested in commercial mortgage-backed securities. Fitch has take these rating actions: -- $21,454,684 class A notes affirmed at 'A'; Outlook Stable; assigned 'LS4'; -- $50,000,000 class B notes affirmed at 'CCC'. SHEFFIELD CDO: Moody's Downgrades Ratings on Five Classes --------------------------------------------------------- Moody's Investors Service announced that it has downgraded ratings of five classes of notes issued by Sheffield CDO II, Limited. The notes affected by the rating action are: -- US$9,000,000 Class S Senior Secured Floating Rate Notes Due 2051, Downgraded to B1; previously on February 24, 2009 Aa2 Under Review for Possible Downgrade -- US$169,300,000 Class A-1 Variable Funding Notes Due 2051, Downgraded to Caa1; previously on February 24, 2009 Ba2 Under Review for Possible Downgrade -- US$32,500,000 Class A-2 Senior Secured Floating Rate Notes Due 2051, Downgraded to Ca; previously on February 24, 2009 B1 Under Review for Possible Downgrade -- US$32,500,000 Class A-3 Senior Secured Floating Rate Notes Due 2051, Downgraded to Ca; previously on February 24, 2009 B2 Under Review for Possible Downgrade -- US$31,600,000 Class B Senior Secured Floating Rate Notes Due 2051, Downgraded to C; previously on February 24, 2009 B3 Under Review for Possible Downgrade Sheffield CDO II, Limited is a collateralized debt obligation backed primarily by a portfolio of structured finance securities, the majority of which are Collateralized Loan Obligations originated in 2006. The rating downgrade actions reflect deterioration in the credit quality of the underlying portfolio. Credit deterioration of the collateral pool is observed through a decline in the average credit rating, as measured by the weighted average rating factor (WARF), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities rated Caa1 and below, and failure of the coverage tests, among other measures. More than 80% of the assets in the portfolio have been downgraded since Moody's last review of the transaction in February 2009. The Trustee reported WARF of the portfolio is 2706 as of July 10, 2009. Also, the Trustee reports a total $81.5 million of non- performing assets. Securities rated Caa1 or lower make up approximately 23.5% of the underlying portfolio. In addition, the Trustee reports that the transaction is currently failing one or more coverage tests, including the Senior Overcollateralization Test. The actions also take into consideration the occurrence on July 21, 2009, as reported by the Trustee, of an Event of Default described in Section 10.a (viii) of theTrust Deed dated December 16, 2006. As provided in Article X of the Trust Deed, during the occurrence and continuance of an Event of Default, certain parties to the transaction may direct the Trustee to take particular actions with respect to the Collateral Debt Securities and the Notes. The actions also take into consideration the risk that liquidation of the Collateral may be selected as the post-Event of Default remedy. The liquidation of the CDO collateral may result in a probability of repayment and a severity of loss that are inconsistent with an investment-grade rating. Moody's observes that the transaction is exposed to a significant concentration of mezzanine and junior CLO tranches in the underlying portfolio. Since the last review of this transaction in February 2009, Moody's has completed the first stage of its two-stage review of U.S. and EMEA CLOs. Some of the underlying securities in the portfolio experienced more severe rating action than was anticipated at the time of last review. Moody's is currently in Stage II of its CLO review and performing comprehensive analysis by modeling each CLO individually. Additional rating actions will be taken as necessary for all rated liabilities. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. SILVERADO CLO: Moody's Downgrades Ratings on Two 2006-II Notes -------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Silverado CLO 2006-II Limited: -- US$15,000,000 Class A-1-J Senior Secured Floating Rate Notes due 2020, Downgraded to Aa2; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$16,000,000 Class A-2 Senior Secured Floating Rate Notes due 2020, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$20,750,000 Class B Senior Secured Floating Rate Notes due 2020, Confirmed at Ba1; previously on March 17, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$17,500,000 Class C Senior Secured Floating Rate Notes due 2020, Confirmed at B2; previously on March 17, 2009 Downgraded to B2 and Placed Under Review for Possible Downgrade; -- US$12,250,000 Class D Secured Deferrable Floating Rate Notes due 2020, Confirmed at Caa2; previously on March 17, 2009 Downgraded to B2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook" and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2810 versus a test level of 2432 as of the last trustee report, dated as of June 11, 2009. Based on the same report, defaulted securities total about $13 million, accounting for roughly 3.8% of the collateral balance, and securities rated Caa1 or lower make up approximately 11.7% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Silverado CLO 2006-II Limited, issued on October 30, 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. SLATE CDO: Moody's Reviews Ratings on Seven Classes of Notes ------------------------------------------------------------ Moody's Investors Service placed seven classes of Notes issued by Slate CDO 2007-1, Ltd. on review for possible downgrade: -- Class A1SA, $267,327,116, Floating Rate Notes Due 2052, on review for possible downgrade; previously on 3/30/2009 downgraded to Baa1 from Aaa -- Class A1SB, $130,693,257, Floating Rate Notes Due 2052, on review for possible downgrade; previously on 3/30/2009 downgraded to Baa1 from Aaa -- Class A1J, $67,500,000, Floating Rate Notes Due 2052, on review for possible downgrade; previously on 3/30/2009 downgraded to Ba1 from Aaa -- Class A2, $38,200,000, Floating Rate Notes Due 2052, on review for possible downgrade; previously on 3/30/2009 downgraded to Ba2 from Aa2 -- Class A3, $27,800,000, Floating Rate Notes Due 2052, on review for possible downgrade; previously on 3/30/2009 downgraded to B2 from A2 -- Class B1, $18,000,000, Floating Rate Notes Due 2052, on review for possible downgrade; previously on 3/30/2009 downgraded to Caa1 from Baa2 -- Class B2, $13,500,000, Floating Rate Notes Due 2052, on review for possible downgrade; previously on 3/30/2009 downgraded to Caa3 from Baa3 Moody's is placing all rated classes on review for possible downgrade due to deterioration in the credit quality of the underlying portfolio as well as the occurrence of an Event of Default on March 31, 2009. This EOD was due to the Senior Test (Senior Test Adjusted Credit Ratio) breaching its trigger, as set forth in the indenture. This resulted in the Majority of the Controlling Class directing the Acceleration of Maturity on July 2, 2009, per Section 5.2(a) of the indenture. Slate CDO 2007-1, Ltd., is a collateralized debt obligation backed primarily by a portfolio of CMBS assets and CRE CDOs. CMBS assets comprise approximately 63% of the portfolio and the majority of these securities are 2006 and 2007 vintage. The CRE CDOs constitute approximately 37% of the portfolio. Deterioration in the credit quality of the underlying portfolio is observed through numerous factors including but not limited to a decline in the average credit rating (as measured by an increase in the weighted average rating factor or WARF), an increase in the proportion of securities rated below Baa3, failure of the coverage tests and an increase in dollar amount of defaulted assets. Several key indicators of declining credit quality of the portfolio have become evident since Moody's last review of the transaction in March 2009. The Trustee reports a WARF of 3259 as of June 30, 2009 in contrast to a reported WARF of 2182 at last review. More than 10% of the underlying assets have been downgraded since Moody's last review of the transaction. Securities rated Baa3 or lower now make up approximately 92% of the underlying portfolio resulting in a significant Moody's Haircut amount in the par value which is factored into the calculation of the Overcollateralization Test. The Trustee reports that the transaction is currently failing one or more coverage tests, including the Class A2 and B3 Overcollateralization Test. In addition, The Trustee currently reports that $74.5 million in assets have defaulted. As provided in Article V of the Indenture during the occurrence and continuance of an Event of Default, certain parties to the transaction may be entitled to direct the Trustee to take particular actions with respect to the Collateral Debt Securities and the Notes, including liquidation. Moody's notes that he transaction is exposed to a significant concentration of CMBS assets, the majority of which have low speculative-grade ratings. It is also exposed to CRE CDOs with low speculative-grade ratings. Both types of assets have shown depressed market valuations recently and thus may herald poor recovery prospects in a sale and liquidation of the Collateral. The actions reflect the increased expected loss associated with each tranche. Losses are attributed to diminished credit quality on the underlying portfolio. The severity of losses may vary depending on the timing and outcome of a liquidation of the Collateral, should the Controlling Class direct the Trustee to dispose of the Collateral. The risk that a liquidation of the Collateral may result in a probability of Note principal repayment and a severity of loss that in Moody's view are inconsistent with an investment-grade rating. Moody's monitors transactions on both a monthly basis through a review of the available Trustee Reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated March, 30 2009. SMART HOME: Moody's Downgrades Ratings on Nine 2006-1 Tranches -------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of nine tranches issued by Smart Home Reinsurance 2006-1 Limited due to higher expected losses in relation to remaining tranche-specific credit protection. This transaction is a synthetic securitization backed by mortgage insurance exposure on a reference portfolio of approximately $2.4 billion of subprime and Alt-A mortgage loans. The mortgage insurance is provided by Radian Guaranty Inc. Noteholders are exposed to the risk of future claims under the mortgage insurance policies. The riskiness of the notes is a function of the credit performance of the underlying reference portfolio of mortgage loans and the amount of risk assumed. Credit enhancement for the note is provided primarily through subordination. The actions are triggered by higher than anticipated delinquency levels as well as slower than anticipated voluntary prepayments for the reference portfolio, resulting in higher updated loss expectation for the underlying collateral. This translates into higher expected losses for the synthetic transaction and lower coverage for the rated debt given available credit enhancement. The ratings on the securities are monitored by evaluating factors determined to be applicable to the credit profile of the securities, such as i) the nature, sufficiency, and quality of historical performance information regarding the asset class ii) an analysis of the underlying collateral, iii) an analysis of the transaction's allocation of cash flow and capital structure, and (iv) a comparison of these attributes against those of other similar transactions. General loss estimation methodology for the reference portfolio is outlined below. For recent vintages (2005 and later), Moody's calculates estimated losses for residential mortgage pools in a two-step process. First, serious delinquencies are projected through late 2009, primarily based upon recent performance. These projected delinquencies are converted into projected losses using lifetime roll rates (the probability of transition to default) averaging 85% for 60-day delinquencies, 90% for 90-day or longer delinquencies, 100% for loans in foreclosure and REO, and 100% severity assumption for the mortgage insurance exposure securitized in this transaction. Severity takes into account accrued interest during the liquidation period, rescission rates as well as the effect of modifications on underlying mortgages. The second step is to determine losses beyond 2009. Depending on a deal's performance, as well as collateral credit characteristics, such as loan type, loan-to-value ratios and geographic concentrations of remaining current loans, Moody's assumes varying degrees of slowing in the loss rate (which is measured by loss-to-liquidation) for the remaining life of the deal. Typical degrees of slowing in loss rate after late 2009 range from 15% to 25%. Loss estimates are subject to variability and, as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly if necessary. Complete rating actions are: Issuer: Smart Home Reinsurance 2006-1 Limited -- Cl. M-2, Downgraded to B3; previously on 7/9/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Caa2; previously on 7/9/2009 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Caa3; previously on 7/9/2009 A1 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to Ca; previously on 7/9/2009 A2 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to Ca; previously on 7/9/2009 A3 Placed Under Review for Possible Downgrade -- Cl. M-7, Downgraded to Ca; previously on 7/9/2009 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-8, Downgraded to Ca; previously on 7/9/2009 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-9, Downgraded to Ca; previously on 7/9/2009 Baa3 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on 7/9/2009 Ba1 Placed Under Review for Possible Downgrade SOLSTICE ABS: Moody's Downgrades Ratings on Three Classes --------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of three classes of notes issued by Solstice ABS III, Ltd., and left on review for possible further downgrade the ratings of one of these classes. The notes affected by the rating action are: -- US$346,500,000 Class A-1 Senior Secured Floating Rate Notes due 2033, Downgraded to Ba1 and Placed Under Review for Possible Downgrade; previously on 2/18/2009 Confirmed at Aaa -- US$107,500,000 Class A-2 Senior Secured Floating Rate Notes due 2033, Downgraded to Ca; previously on 2/18/2009 Downgraded to Ba2 -- US$47,500,000 Class B Senior Secured Floating Rate Notes due 2039, Downgraded to C; previously on 2/18/2009 Downgraded to Ca Solstice ABS III, Ltd. is a collateralized debt obligation backed primarily by a portfolio of RMBS assets and CLOs. RMBS assets comprise approximately 47% of the portfolio and the majority of these securities are 2003 vintage. The CLOs constitute approximately 30% of the portfolio. The rating downgrade actions reflect deterioration in the credit quality of the underlying portfolio, as well as the occurrence, as reported by the Trustee on July 20, 2009, of an event of default under Indenture Section 5.1(j) because on a Measurement Date the ratio expressed by dividing (a) the Net Outstanding Portfolio Collateral Balance on the Measurement Date by (b) the Aggregate Outstanding Amount of the Class A Notes on such Measurement Date was less than 100%. Deterioration in the credit quality of the underlying portfolio is observed through numerous factors including but not limited to a decline in the average credit rating (as measured by an increase in the weighted average rating factor or WARF), an increase in the proportion of securities rated Caa1 and below, an increase in dollar amount of defaulted assets and failure of the coverage tests. Several key indicators of declining credit quality of the portfolio have become evident since Moody's last review of the transaction in February 2009. The Trustee reports a WARF of 1830 as of June 28, 2009 in contrast to a reported WARF of 870 as of March 2009. More than 51% of the underlying assets have been downgraded since Moody's last review of the transaction in February 2009. Securities rated Caa1or lower now make up approximately 30% of the underlying portfolio whereas such assets were 23% of the portfolio at the time of Moody's most recent review. The Trustee currently reports that $54 million in assets have defaulted. In addition, the Trustee reports that the transaction is currently failing one or more coverage tests, including the Class A/B Overcollateralization Test. As provided in Article V of the Indenture during the occurrence and continuance of an Event of Default, certain parties to the transaction may be entitled to direct the Trustee to take particular actions with respect to the Collateral Debt Securities and the Notes, including liquidation. Moody's notes that he transaction is exposed to a significant concentration of RMBS assets, the majority of which are currently in default or have low speculative-grade ratings. It is also exposed to mezzanine and junior CLO tranches with low speculative-grade ratings. Both types of assets have shown depressed market valuations recently and thus may herald poor recovery prospects in a sale and liquidation of the Collateral. The actions take into consideration the risk that a liquidation of the Collateral may result in a probability of Note principal repayment and a severity of loss that in Moody's view are inconsistent with an investment-grade rating. The severity of losses of certain tranches may be different, however, depending on the timing and choice of remedy to be pursued following the event of default. Because of this uncertainty, the ratings assigned to the Class A-1 Notes remain on review for possible further action. STRUCTURED ADJUSTABLE: Moody's Cuts Ratings on Six 2005-4 Certs. ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of six certificates issued by Structured Adjustable Rate Mortgage Loan Trust 2005-4 due to higher expected pool losses in relation to remaining tranche-specific credit protection. The transaction is backed by less than 50 loans. The ratings are based on the methodology applied to all transactions with small pool factors. Moody's defines low pool factor deals as those that meet one of these two criteria: (1) the outstanding collateral balance is less than $1 million, and the pool factor is less than 5% or (2) the pool has fewer than 50 loans remaining. Moody's uses these methodology to estimate losses on low pool factor deals. First, gross defaults are determined by applying assumed lifetime roll-rates (probabilities of transition to default) to the transactions' current delinquency buckets ("delinquency pipeline") and a pipeline multiplier. The pipeline multiplier accounts for further possible defaults that might arise from borrowers that are current. The pipeline multiplier differs for each deal based on the number of loans remaining in the pool -- greater the number of loans remaining the higher the multiplier. The estimated defaults are subject to a floor -- a minimum default. The minimum default also differs based on the number loans remaining in the pool. The fewer the number of loans remaining in the pool the higher the minimum default since each loan represents a higher percentage of the pool. The final default number is then multiplied by expected loss severity to arrive at Moody's expected loss estimate. Loss severity also differs by transaction and is higher for more recent vintages. Complete rating action: Issuer: Structured Adjustable Rate Mortgage Loan Trust 2005-4 (Loans Remaining: Pool 6 -- 34) -- Cl. 6-A1, Current Balance: $2,754,390, Downgraded to Baa1; previously on 2/20/2009 Downgraded to A1 -- Cl. 6-A2, Current Balance: $4,394,783, Downgraded to A2; previously on 2/20/2009 Downgraded to Aa3 -- Cl. 6-AX1, IO Class, Downgraded to A2; previously on 2/20/2009 Downgraded to Aa3 -- Cl. 6-AX2, IO Class, Downgraded to A2; previously on 2/20/2009 Downgraded to Aa3 -- Cl. B1-II, Current Balance: $1,408,694, Downgraded to Caa2; previously on 2/20/2009 Downgraded to Ba3 -- Cl. B2-II, Current Balance: $406,536, Downgraded to C; previously on 2/20/2009 Downgraded to B3 SUPERIOR WHOLESALE: Fitch Puts Low-B Ratings on Class C & D Notes ----------------------------------------------------------------- U.S. auto-related dealer floorplan ABS transactions entering early amortization due to manufacturer or finance company bankruptcy are largely performing within expectations, though material concerns remain over valuation declines in a still challenged macro environment, according to Fitch Ratings. Related pressures remain particularly acute for the domestic OEMs with GM and Chrysler continuing to reposition after emergence from bankruptcy. While underlying asset performance has generally remained within expectations, Fitch believes dealer floorplan ABS performance has benefited materially from direct and indirect support as well as the facilitation of new alliances. The deterioration in the financial profile of the domestic auto manufacturers and challenges of working through significant inventory levels has brought into sharper focus the material connections of manufacturers to their dealers and the dealer's material role in this financing chain. Observing the relationship between dealers, the manufacturer and the finance company before and during bankruptcy has demonstrated operating and logistical links uncommon in other structured finance asset classes, according to Senior Director Ravi Gupta. Fitch believes that these linkages will make achieving 'AAA' ratings on dealer floorplan ABS associated with manufacturers with weak credit profiles unattainable. 'Other asset classes commonly feature more granularity of their pools and direct access to the assets, significantly influencing their ability to achieve the highest rating levels,' said Gupta. Positively, the structural triggers tied to the recent bankruptcy filings of General Motors Corp. and Chrysler LLC have resulted in the Superior Wholesale Inventory Financing Trust XI and Master Chrysler Financial Owner Trust transactions entering rapid amortization and paying out monthly collections prior to their scheduled termination dates. In the case of the SWIFT XI trust, which began rapid amortization following the June 1, 2009 bankruptcy filing of General Motors Corp., in accordance with the transaction documentation, principal is being allocated sequentially amongst the outstanding notes. Through the July 2009 distribution period, the class A notes have paid down to approximately $1.05 billion from an original balance of $2 billion. Subordinate notes remain at their original balances and will begin to receive principal following the payout of the class A notes. From a collateral performance perspective, losses have remained low and consistent with historical averages while monthly payment rates, improved to 32.60% for the July 2009 distribution period from 22.7% for June. Even with the improved new vehicle sales demonstrated by the increasing MPRs, evidence of bloated dealer inventories remains. Aging of vehicle inventory over 180 days reached approximately 33% of the portfolio during the July period, the highest levels Fitch has witnessed for this transaction and a material increase from the first quarter 2009 averages of approximately 13%. The MCFOT trust entered rapid amortization following the April 30, 2009 bankruptcy filing of Chrysler LLC. The Class A notes are receiving 100% of the principal allocations and the bonds have paid down to approximately $345 million through the July 2009 distribution period from their original balance of $1 billion. Losses, which trended to their highest levels following the bankruptcy filing, averaging .38% per month for the April through June 2009 distribution periods, still remain low on a nominal basis and have improved through the July period. MPRs showed improvement during the July 2009 distribution period, increasing to 42.6% from 26% in June benefiting materially from the impact of trust balance declines on the MPR calculations. Inventory aging, similar to the General Motors case, remains a concern, with approximately 5% of the pool being supported by vehicle inventory that has aged beyond 360 days. The other remaining transactions continue to revolve in accordance with their transaction documents. Should monthly payment rates and losses not materially deteriorate from current levels, the SWIFT XI and MCFOT transactions should repay full principal within the next few months. Key potential impacts to performance would include new developments that would infringe on the support provided to the sector, disorderly unwinds of dealers that have been targeted for closure or economic conditions deteriorating further and creating additional constraint on consumer interest in automotive purchasing. Fitch currently rates five outstanding U.S. auto-related dealer floorplan ABS transactions, all of which are associated with the three U.S. domestic auto manufacturers and are detailed below. Fitch downgraded all transactions on April 14, 2009 and placed each of them on Rating Watch Negative following continued system- wide deterioration in the domestic auto industry and the heightened financial risk of each of the auto manufacturers. Each transaction remains on Rating Watch Negative. These classes are fixed- and floating-rate notes issued by Chrysler Financial LLC (MCFOT), Ford Motor Credit Company (FCFMOT) and GMAC LLC (SWIFT and SMART) secured by loans made by each company to franchised vehicle dealerships to support their purchase and flooring of vehicles manufactured by the related manufacturer: Master Chrysler Financial Owner Trust: -- Series 2006-A term 'A'. Ford Credit Floorplan Master Owner Trust A: -- Series 2006-4 class A 'AA'; -- Series 2006-4 class B 'BBB'. Superior Wholesale Inventory Financing Trust (SWIFT XI): -- Series 2005-A class A 'AA'; -- Series 2005-A class B 'BBB'; -- Series 2005-A class C 'BB'; -- Series 2005-A class D 'B''. Superior Wholesale Inventory Financing Trust (SWIFT 2007-AE-1): -- Class A notes 'AA'; -- Class B notes 'BBB'; -- Class C notes 'BB'; -- Class D notes 'B''. SWIFT Master Auto Receivables Trust: -- Series 2007-2 class A 'AA'; -- Series 2007-2 class B 'BBB'; -- Series 2007-2 class C 'BB'; -- Series 2007-2 class D 'B'. All transactions remain on Rating Watch Negative by Fitch. SUPERIOR WHOLESALE INENTORY: Fitch Puts Low-B Ratings on 2 Classes ------------------------------------------------------------------ U.S. auto-related dealer floorplan ABS transactions entering early amortization due to manufacturer or finance company bankruptcy are largely performing within expectations, though material concerns remain over valuation declines in a still challenged macro environment, according to Fitch Ratings. Related pressures remain particularly acute for the domestic OEMs with GM and Chrysler continuing to reposition after emergence from bankruptcy. While underlying asset performance has generally remained within expectations, Fitch believes dealer floorplan ABS performance has benefited materially from direct and indirect support as well as the facilitation of new alliances. The deterioration in the financial profile of the domestic auto manufacturers and challenges of working through significant inventory levels has brought into sharper focus the material connections of manufacturers to their dealers and the dealer's material role in this financing chain. Observing the relationship between dealers, the manufacturer and the finance company before and during bankruptcy has demonstrated operating and logistical links uncommon in other structured finance asset classes, according to Senior Director Ravi Gupta. Fitch believes that these linkages will make achieving 'AAA' ratings on dealer floorplan ABS associated with manufacturers with weak credit profiles unattainable. 'Other asset classes commonly feature more granularity of their pools and direct access to the assets, significantly influencing their ability to achieve the highest rating levels,' said Gupta. Positively, the structural triggers tied to the recent bankruptcy filings of General Motors Corp. and Chrysler LLC have resulted in the Superior Wholesale Inventory Financing Trust XI and Master Chrysler Financial Owner Trust transactions entering rapid amortization and paying out monthly collections prior to their scheduled termination dates. In the case of the SWIFT XI trust, which began rapid amortization following the June 1, 2009 bankruptcy filing of General Motors Corp., in accordance with the transaction documentation, principal is being allocated sequentially amongst the outstanding notes. Through the July 2009 distribution period, the class A notes have paid down to approximately $1.05 billion from an original balance of $2 billion. Subordinate notes remain at their original balances and will begin to receive principal following the payout of the class A notes. From a collateral performance perspective, losses have remained low and consistent with historical averages while monthly payment rates, improved to 32.60% for the July 2009 distribution period from 22.7% for June. Even with the improved new vehicle sales demonstrated by the increasing MPRs, evidence of bloated dealer inventories remains. Aging of vehicle inventory over 180 days reached approximately 33% of the portfolio during the July period, the highest levels Fitch has witnessed for this transaction and a material increase from the first quarter 2009 averages of approximately 13%. The MCFOT trust entered rapid amortization following the April 30, 2009 bankruptcy filing of Chrysler LLC. The Class A notes are receiving 100% of the principal allocations and the bonds have paid down to approximately $345 million through the July 2009 distribution period from their original balance of $1 billion. Losses, which trended to their highest levels following the bankruptcy filing, averaging .38% per month for the April through June 2009 distribution periods, still remain low on a nominal basis and have improved through the July period. MPRs showed improvement during the July 2009 distribution period, increasing to 42.6% from 26% in June benefiting materially from the impact of trust balance declines on the MPR calculations. Inventory aging, similar to the General Motors case, remains a concern, with approximately 5% of the pool being supported by vehicle inventory that has aged beyond 360 days. The other remaining transactions continue to revolve in accordance with their transaction documents. Should monthly payment rates and losses not materially deteriorate from current levels, the SWIFT XI and MCFOT transactions should repay full principal within the next few months. Key potential impacts to performance would include new developments that would infringe on the support provided to the sector, disorderly unwinds of dealers that have been targeted for closure or economic conditions deteriorating further and creating additional constraint on consumer interest in automotive purchasing. Fitch currently rates five outstanding U.S. auto-related dealer floorplan ABS transactions, all of which are associated with the three U.S. domestic auto manufacturers and are detailed below. Fitch downgraded all transactions on April 14, 2009 and placed each of them on Rating Watch Negative following continued system- wide deterioration in the domestic auto industry and the heightened financial risk of each of the auto manufacturers. Each transaction remains on Rating Watch Negative. These classes are fixed- and floating-rate notes issued by Chrysler Financial LLC (MCFOT), Ford Motor Credit Company (FCFMOT) and GMAC LLC (SWIFT and SMART) secured by loans made by each company to franchised vehicle dealerships to support their purchase and flooring of vehicles manufactured by the related manufacturer: Master Chrysler Financial Owner Trust: -- Series 2006-A term 'A'. Ford Credit Floorplan Master Owner Trust A: -- Series 2006-4 class A 'AA'; -- Series 2006-4 class B 'BBB'. Superior Wholesale Inventory Financing Trust (SWIFT XI): -- Series 2005-A class A 'AA'; -- Series 2005-A class B 'BBB'; -- Series 2005-A class C 'BB'; -- Series 2005-A class D 'B''. Superior Wholesale Inventory Financing Trust (SWIFT 2007-AE-1): -- Class A notes 'AA'; -- Class B notes 'BBB'; -- Class C notes 'BB'; -- Class D notes 'B''. SWIFT Master Auto Receivables Trust: -- Series 2007-2 class A 'AA'; -- Series 2007-2 class B 'BBB'; -- Series 2007-2 class C 'BB'; -- Series 2007-2 class D 'B'. All transactions remain on Rating Watch Negative by Fitch. SVO 2005-A: Moody's Downgrades Ratings on Six Classes of Notes -------------------------------------------------------------- Moody's Investors Service downgraded six classes of notes issued by SVO 2005-A VOI Mortgage Corp. and SVO 2006-A VOI Mortgage Corp. The ratings of the Class C and D notes from both trusts were placed under review for possible downgrade in April 2009, and were downgraded along with two Class A and Class B notes from SVO 2006- A. The underlying collateral consists of timeshare loan receivables originated by Starwood in relation to their Sheraton and Westin resorts. Moody's analysis primarily focuses on the ratio of credit enhancement to expected gross charge-offs on the remaining pool, which are calculated as the difference between the expected lifetime charge-offs and the actual cumulative gross charge-offs to date. Lifetime gross charge-offs are assessed based on the level and shape of the cumulative gross charge-off curves and cumulative gross charge-off to liquidation curves, with additional consideration given to the current economic environment and the nature of the asset class. The level where the two curves converge will be the lifetime gross charge-offs of the pool. In cases where the gross charge-off to liquidation curve is still above the cumulative charge-off curve, or where the expected convergence point of the curves is not clear, issuer specific loss curves, actual cumulative gross charge-offs on each pool and seasoning of each pool, as well as recent delinquency trends and consideration of the current economic environment, are used to derive the level of expected lifetime gross charge-offs. The representative loss curves for each issuer are generated from their respective historical vintage performance data. The total credit enhancement available to these deals includes overcollateralization, reserve funds and excess spread. The ratio of credit enhancement to expected remaining net losses is then compared with similar timeshare transactions to determine the appropriate ratings. The actions were mainly driven by worse than expected performance of the underlying collateral pools, which is seen in the deals' rising defaults and delinquencies. In addition, principal distribution of both trusts is expected to remain pro rata among rated classes of notes and the overcollateralization of the trust will continue to be paid down proportionally with the rated notes. As of June 30, 2009, SVO 2005-A and 2006-A had overcollateralization of 7.25% and 6% of their outstanding pool balances, respectively. Additionally, 2005-A had a reserve at its floor of 0.50% of the initial pool balance, and 2006-A had a reserve at 1% of the outstanding pool balance, which is expected to decline over time to its floor of 0.50% of initial pool balance. The complete rating actions are: Issuer: SVO 2005-A VOI Mortgage Corp. -- Pool Current Expected Cumulative Gross Charge-offs: 20% (as a percentage of the sum of the original loan pool balance and cumulative loan substitution amount to date) -- Class C, Downgraded to Baa1 from A2; previously Placed Under Review for Possible Downgrade on 4/16/2009 -- Class D, Downgraded to B1 from Baa2; previously Placed Under Review for Possible Downgrade on 4/16/2009 Issuer: SVO 2006-A VOI Mortgage Corp. -- Pool Current Expected Cumulative Gross Charge-offs: 22% (as a percentage of the sum of the original loan pool balance and cumulative loan substitution amount to date) -- Class A, Downgraded to Aa1 from Aaa; previously on 12/04/2006 Assigned Aaa -- Class B, Downgraded to A1 from Aa2; previously on 12/04/2006 Assigned Aa2 -- Class C, Downgraded to Baa2 from A2; previously Placed Under Review for Possible Downgrade on 4/16/2009 -- Class D, Downgraded to B2 from Baa2; previously Placed Under Review for Possible Downgrade on 4/16/2009 SWIFT MASTER: Fitch Puts Low-B Ratings on Class C & D Notes ----------------------------------------------------------- U.S. auto-related dealer floorplan ABS transactions entering early amortization due to manufacturer or finance company bankruptcy are largely performing within expectations, though material concerns remain over valuation declines in a still challenged macro environment, according to Fitch Ratings. Related pressures remain particularly acute for the domestic OEMs with GM and Chrysler continuing to reposition after emergence from bankruptcy. While underlying asset performance has generally remained within expectations, Fitch believes dealer floorplan ABS performance has benefited materially from direct and indirect support as well as the facilitation of new alliances. The deterioration in the financial profile of the domestic auto manufacturers and challenges of working through significant inventory levels has brought into sharper focus the material connections of manufacturers to their dealers and the dealer's material role in this financing chain. Observing the relationship between dealers, the manufacturer and the finance company before and during bankruptcy has demonstrated operating and logistical links uncommon in other structured finance asset classes, according to Senior Director Ravi Gupta. Fitch believes that these linkages will make achieving 'AAA' ratings on dealer floorplan ABS associated with manufacturers with weak credit profiles unattainable. 'Other asset classes commonly feature more granularity of their pools and direct access to the assets, significantly influencing their ability to achieve the highest rating levels,' said Gupta. Positively, the structural triggers tied to the recent bankruptcy filings of General Motors Corp. and Chrysler LLC have resulted in the Superior Wholesale Inventory Financing Trust XI and Master Chrysler Financial Owner Trust transactions entering rapid amortization and paying out monthly collections prior to their scheduled termination dates. In the case of the SWIFT XI trust, which began rapid amortization following the June 1, 2009 bankruptcy filing of General Motors Corp., in accordance with the transaction documentation, principal is being allocated sequentially amongst the outstanding notes. Through the July 2009 distribution period, the class A notes have paid down to approximately $1.05 billion from an original balance of $2 billion. Subordinate notes remain at their original balances and will begin to receive principal following the payout of the class A notes. From a collateral performance perspective, losses have remained low and consistent with historical averages while monthly payment rates, improved to 32.60% for the July 2009 distribution period from 22.7% for June. Even with the improved new vehicle sales demonstrated by the increasing MPRs, evidence of bloated dealer inventories remains. Aging of vehicle inventory over 180 days reached approximately 33% of the portfolio during the July period, the highest levels Fitch has witnessed for this transaction and a material increase from the first quarter 2009 averages of approximately 13%. The MCFOT trust entered rapid amortization following the April 30, 2009 bankruptcy filing of Chrysler LLC. The Class A notes are receiving 100% of the principal allocations and the bonds have paid down to approximately $345 million through the July 2009 distribution period from their original balance of $1 billion. Losses, which trended to their highest levels following the bankruptcy filing, averaging .38% per month for the April through June 2009 distribution periods, still remain low on a nominal basis and have improved through the July period. MPRs showed improvement during the July 2009 distribution period, increasing to 42.6% from 26% in June benefiting materially from the impact of trust balance declines on the MPR calculations. Inventory aging, similar to the General Motors case, remains a concern, with approximately 5% of the pool being supported by vehicle inventory that has aged beyond 360 days. The other remaining transactions continue to revolve in accordance with their transaction documents. Should monthly payment rates and losses not materially deteriorate from current levels, the SWIFT XI and MCFOT transactions should repay full principal within the next few months. Key potential impacts to performance would include new developments that would infringe on the support provided to the sector, disorderly unwinds of dealers that have been targeted for closure or economic conditions deteriorating further and creating additional constraint on consumer interest in automotive purchasing. Fitch currently rates five outstanding U.S. auto-related dealer floorplan ABS transactions, all of which are associated with the three U.S. domestic auto manufacturers and are detailed below. Fitch downgraded all transactions on April 14, 2009 and placed each of them on Rating Watch Negative following continued system- wide deterioration in the domestic auto industry and the heightened financial risk of each of the auto manufacturers. Each transaction remains on Rating Watch Negative. These classes are fixed- and floating-rate notes issued by Chrysler Financial LLC (MCFOT), Ford Motor Credit Company (FCFMOT) and GMAC LLC (SWIFT and SMART) secured by loans made by each company to franchised vehicle dealerships to support their purchase and flooring of vehicles manufactured by the related manufacturer: Master Chrysler Financial Owner Trust: -- Series 2006-A term 'A'. Ford Credit Floorplan Master Owner Trust A: -- Series 2006-4 class A 'AA'; -- Series 2006-4 class B 'BBB'. Superior Wholesale Inventory Financing Trust (SWIFT XI): -- Series 2005-A class A 'AA'; -- Series 2005-A class B 'BBB'; -- Series 2005-A class C 'BB'; -- Series 2005-A class D 'B''. Superior Wholesale Inventory Financing Trust (SWIFT 2007-AE-1): -- Class A notes 'AA'; -- Class B notes 'BBB'; -- Class C notes 'BB'; -- Class D notes 'B''. SWIFT Master Auto Receivables Trust: -- Series 2007-2 class A 'AA'; -- Series 2007-2 class B 'BBB'; -- Series 2007-2 class C 'BB'; -- Series 2007-2 class D 'B'. All transactions remain on Rating Watch Negative by Fitch. SYMPHONY CLO: Moody's Downgrades Ratings on Three Classes of Notes ------------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Symphony CLO I, Ltd.: -- US$60,000,000 Class A-1A Senior Revolving Notes Due 2019, Downgraded to Aa2; previously on November 18, 2005 Assigned Aaa; -- US$250,000,000 Class A-1B Senior Notes Due 2019, Downgraded to Aa2; previously on November 18, 2005 Assigned Aaa; -- US$15,000,000 Class A-2 Senior Notes Due 2019, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$22,000,000 Class B Deferrable Mezzanine Notes Due 2019, Confirmed at Ba1; previously on March 18, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$21,000,000 Class C Deferrable Mezzanine Notes Due 2019, Confirmed at B1; previously on March 18, 2009 Downgraded to B1 and Place Under Review for Possible Downgrade; -- US$13,500,000 Class D Deferrable Mezzanine Notes Due 2019, Confirmed at Caa2; previously on March 18, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has steadily increased over the last year and is currently 2752 versus a test level of 2460 as of the last trustee report, dated June 15, 2009. Based on the same report, defaulted securities total about $14.5 million, accounting for roughly 3.6% of the collateral balance, and securities rated Caa1 or lower make up approximately 7.9% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Symphony CLO I, issued in November 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. T2 INCOME: Moody's Upgrades Ratings on Three Classes of Notes ------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of these notes issued by T2 Income Fund CLO I Ltd.: -- US$22,000,000 Class C Third Priority Subordinated Deferrable Notes Due 2019, Upgraded to Baa3; previously on March 23, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$9,000,000 Class D Fourth Priority Subordinated Deferrable Notes Due 2019, Upgraded to Ba3; previously on March 23, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$12,000,000 Class E Fifth Priority Subordinated Deferrable Notes Due 2019, Upgraded to B3; previously on March 23, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$30,000,000 Class B Second Priority Senior Notes Due 2019, Confirmed at Aa2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. According to Moody's, the rating actions on notes are the result of a comprehensive deal-level analysis including an in-depth assessment of results from Moody's quantitative CLO rating model along with an evaluation of deal-specific qualitative factors. By way of comparison, rating actions previously taken by Moody's on the notes during its Stage I CLO surveillance sweep were largely based on a parameter-based approach. Moody's also notes that the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio as well as Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. The weighted average rating factor has increased over the last year and is currently 3691 versus a test level of 4035 as of the last trustee report, dated July 2, 2009. Based on the same report, defaulted securities total about $7.9 million, accounting for roughly 2.9% of the collateral balance, and securities rated Caa1 or lower make up approximately 25.1% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. T2 Income Fund CLO I Ltd., issued in July 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. TABERNA PREFERRED: Fitch Downgrades Ratings on Five Notes --------------------------------------------------------- Fitch Ratings has downgraded five rated notes from Taberna Preferred Funding II, Ltd/Inc. The downgrades are a result of the decrease in the transaction's spread, coupon and ability to service its debt following $169 million (17.7%) in distressed and other debt exchanges and default on an additional $59.4 million (6.2%) of collateral since January 2009. The average spread and coupon have decreased from 2.03% and 5.39%, respectively, as of January 31, 2009, to 1.78% and 4.72% as of the May 31, 2009 trustee report. The rating on the class B notes reflects Fitch's view that default appears inevitable. Fitch would consider non-payment of accrued interest to the class B notes as a default. These notes are backed primarily by trust preferred securities and subordinated debt issued by real estate investment trusts and financial institutions specializing in mortgage lending. Fitch has downgraded these classes: -- $359,908,299 class A-1A to 'CCC' from 'B'; -- $95,825,583 class A-1B to 'CCC' from 'B'; -- $8,997,708 class A-1C to 'CCC' from 'B'; -- $86,500,000 class A-2 to 'CC' from 'CCC'; -- $120,500,000 class B to 'C' from 'CC'. The class C-1, C-2, C-3, D, E-1, E-2, and F notes are affirmed at 'C'. TERRA CDO: S&P Junks Ratings on Class A1 2007-2 Notes ----------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class A1 notes issued by Terra CDO SPC Ltd.'s series 2007-2 segregated portfolio, a synthetic corporate investment-grade collateralized debt obligation transaction, and removed it from CreditWatch with negative implications. The transaction's credit default swap portfolio was terminated on April 1, 2009. Following the termination, the tranche rating became linked to the rating on the guaranteed investment contract provider, Ambac Assurance Corp. (CC/Developing/--), which S&P lowered on July 28, 2009. Rating Lowered Terra CDO SPC Ltd. Series 2007-2 Segregated Portfolio Rating ------ Class To From ----- -- ---- A1 CC BBB/Watch Neg TERRA CDO: S&P Withdraws Ratings on Three Classes of 2007-5 Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings on the class A, B1, and B2 notes issued by Terra CDO SPC Ltd.'s series 2007-5 segregated portfolio, a synthetic corporate investment- grade collateralized debt obligation transaction. The rating withdrawal follows the noteholders' decision to exercise the option to put the entire principal amount of the notes outstanding to the issuer, pursuant to section 8.07 of the indenture and section 10.01 of the master terms. Ratings Withdrawn Terra CDO SPC Ltd. Series 2007-5 segregated portfolio Rating ------ Class To From ----- -- ---- A NR CCC+ B1 NR CCC- B2 NR CCC- NR - Not rated. TERWIN MORTGAGE: Moody's Downgrades Rating on 2004-EQR1 Cert. ------------------------------------------------------------- Moody's Investors Service has downgraded the rating of a certificate issued by Terwin Mortgage Trust 2004-EQR1 due to higher expected pool losses in relation to remaining tranche- specific credit protection. The transaction is backed by less than 50 loans. The ratings are based on the methodology applied to all transactions with small pool factors. Moody's defines low pool factor deals as those that meet one of these two criteria: (1) the outstanding collateral balance is less than $1 million, and the pool factor is less than 5% or (2) the pool has fewer than 50 loans remaining. Moody's uses these methodology to estimate losses on low pool factor deals. First, gross defaults are determined by applying assumed lifetime roll-rates (probabilities of transition to default) to the transactions' current delinquency buckets ("delinquency pipeline") and a pipeline multiplier. The pipeline multiplier accounts for further possible defaults that might arise from borrowers that are current. The pipeline multiplier differs for each deal based on the number of loans remaining in the pool -- greater the number of loans remaining the higher the multiplier. The estimated defaults are subject to a floor -- a minimum default. The minimum default also differs based on the number loans remaining in the pool. The fewer the number of loans remaining in the pool the higher the minimum default since each loan represents a higher percentage of the pool. The final default number is then multiplied by expected loss severity to arrive at Moody's expected loss estimate. Loss severity also differs by transaction and is higher for more recent vintages. Complete rating action follows: Issuer: Terwin Mortgage Trust 2004-EQR1 (Loans Remaining: 13) -- Cl. M-2, Current Balance: $1,702,602, Downgraded to Caa2; previously on 11/29/2007 Downgraded to B3 and Placed Under Review for Possible Downgrade USAA CREDIT: Moody's Assigns 'Ba3' Rating on Class D Notes ---------------------------------------------------------- Moody's Investors Service has assigned a rating of A3 to the Class B notes of the privately-placed USAA Credit Card Master Owner Trust, VFN Series 2005-A transaction. Moody's assigned ratings of Baa3 and Ba3 to the Class C and Class D notes issued out of the VFN Series 2008-3 transaction in August 2008. The notes are backed by a pool of receivables generated by USAA-originated Visa, MasterCard and American Express credit card accounts. The complete rating action is: Issuer: USAA Credit Card Master Owner Trust * Up to $185,660,920 Class B Asset Backed Notes, VFN Series 2005- A, rated A3 Moody's range of performance expectation for the Trust charge-off rate is 4%-6%, for the principal payment rate is 15%-18%, and for the yield is 10%-13%. The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities were rated. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. On December 19, 2008, Moody's published a report introducing Volatility Scores and Parameter Sensitivities for the global credit card ABS sector. Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. V Scores are intended to rank transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches). The V Score for this transaction is Medium, which is in line with the V score assigned for the U.S. Credit Card ABS sector. In addition, the four broad components underlying the V Score have each been assessed a Medium assumption uncertainty for the USAA Credit Card Master Owner Trust, which are also the same assessments for the U.S. Card ABS sector. The sub-component addressing disclosure of securitization collateral pool characteristics was assessed a Medium assumption uncertainty, as opposed to the baseline credit card ABS assessment of Low/Medium assumption uncertainty. Since USAA's transactions are not publicly registered, they are not held to the higher reporting standards pursuant to Regulation AB. Parameter Sensitivities provide a quantitative, model-indicated calculation of the number of notches that a Moody's-rated structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. It is not intended to measure how the rating of the security might migrate over time, but rather, how the initial rating of the security might differ as certain key parameters vary. In rating US Credit Card ABS, the payment rate, charge-off rate, purchase rate, yield and certain other inputs are used to calculate the median expected loss and the A3 proxy level, which in turn are the two inputs used to determine a new lognormal loss distribution. Three new lognormal loss distributions were calculated by assuming these three principal payment rate and charge-off rate combinations: (1) 14%/6%, (2) 11%/8% and (3) 9%/9% from the base case of 17%/5%. The quantitative/model indicated Parameter Sensitivities for the notes under these three additional scenarios are: two notches (i.e. A3 to Baa2), four notches and six notches, respectively. VELOCITY CLO: Moody's Downgrades Ratings on Four Classes of Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Velocity CLO, Ltd.: -- US$229,000,000 Class A Senior Secured Notes Due August 22, 2016, Downgraded to Aa3; previously on August 31, 2004 Assigned Aaa; -- US$14,000,000 Class C Senior Secured Interest Deferrable Notes Due August 22, 2016, Downgraded to B2; previously on March 18, 2009 Downgraded to B1 and Placed on Review for Possible Downgrade; -- US$8,000,000 Class D Senior Secured Interest Deferrable Notes Due August 22, 2016, Downgraded to Ca; previously on March 18, 2009 Downgraded to Caa2 and Placed on Review for Possible Downgrade; -- US$5,300,000 Class 1 Composite Securities Due August 22, 2016, Downgraded to Ba1; previously on August 31, 2004 Assigned A3. In addition, Moody's has confirmed the ratings of these notes: -- US$22,000,000 Class B Senior Secured Interest Deferrable Notes Due August 22, 2016, Confirmed at Ba1; previously on March 18, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. The actions also reflect Moody's revised assumptions with respect to default probability, the treatment of ratings on "Review for Possible Downgrade" or with a "Negative Outlook," the application of certain stresses with respect to the default probabilities associated with certain Moody's credit estimates, and the calculation of the Diversity Score. The revised assumptions that have been applied to all corporate credits in the underlying portfolio are described in the press release dated February 4, 2009, titled "Moody's updates key assumptions for rating CLOs." Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class C and D overcollateralization tests. The weighted average rating factor has increased over the last year and is currently 2841 as of the last trustee report, dated June 16, 2009. Based on the same report, defaulted securities total about $15.7 million, accounting for roughly 5.8% of the collateral balance, and securities rated Caa1 or lower make up approximately 18% of the underlying portfolio. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, may be different from the trustee's reported numbers. Velocity CLO, Ltd, issued in August 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. WAMU MORTGAGE: Moody's Downgrades Ratings 14 2004-RP1 Tranches -------------------------------------------------------------- Moody's Investors Service has downgraded 14 tranches from WaMu Mortgage Pass-Through Certificates 2004-RP1 deal due to higher expected pool losses in relation to available credit protection. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable rate, mortgage loans guaranteed by the FHA or the VA (typically 80% FHA and 20% VA.) As economic conditions have deteriorated; performance of these loans have worsened with serious delinquencies (that is, loans more than 60 days past due, in foreclosure or held for sale) as a percentage of current balance increasing from 33.5% 12 months ago, to 35.6% as of May 2009 for FHA -- VA pools issued in 2006. While for FHA -- VA pools issued in 2007, serious delinquencies as a percentage of current balance have risen from 41.0% 12 months ago, to 44.5% as of May 2009. Cumulative losses on FHA -- VA pools, however, are low in absolute terms due to the FHA - VA guarantee. Nevertheless, for FHA - VA pools issued in 2006, cumulative losses have risen from 0.31% in May 2008 to 0.45% one year later. For FHA - VA pools issued in 2007, cumulative losses have more than doubled from 0.16% a year earlier to 0.34% as of May 2009. Moody's expects loss levels on FHA -- VA pools to rise further as the general level of remaining delinquencies remain elevated and loss severities increase. Due to the FHA - VA guarantee, loss severities on these pools have been historically low at 2.0% -- 4.0%. However, with recent house price depreciation, increase in foreclosure costs and timelines and change in the debenture rate applied by FHA to pay interest claims, future loss severities on these pools are expected to be higher. Moody's now expects loss severities on FHA loans originated before 2004 to average 5.0% and on FHA loans originated in 2004 and after to average 6.5% (this is due to change in debenture rate application by FHA for loans originated after 2004 which results in a lower interest expense being paid by the FHA and a higher severity to the trust). Loss severities on VA loans are expected to average 20%. As a result, Moody's now projects cumulative losses on FHA -- VA pools issued between 2002 and 2007 to average 1.42% as a percentage of original balance securitized (3.00% as a percentage of current balance) versus Moody's original expected loss estimates of 0.40% - 0.50%. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the priority of payments. Complete rating actions are: WaMu Mortgage Pass-Through Ctfs. 2004-RP1 -- Cl. I-F, Downgraded to A2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-S, Downgraded to A2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-HJ, Downgraded to A2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. I-B-1, Downgraded to Baa3; previously on 5/15/2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. I-B-2, Downgraded to B1; previously on 5/15/2009 A2 Placed Under Review for Possible Downgrade -- Cl. I-B-3, Downgraded to C; previously on 5/15/2009 Baa2 Placed Under Review for Possible Downgrade -- Cl. I-B-4, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade -- Cl. I-B-5, Downgraded to C; previously on 5/15/2009 Caa3 Placed Under Review for Possible Downgrade -- Cl. II-A, Downgraded to Aa2; previously on 5/15/2009 Aaa Placed Under Review for Possible Downgrade -- Cl. II-B-1, Downgraded to A2; previously on 5/15/2009 Aa1 Placed Under Review for Possible Downgrade -- Cl. II-B-2, Downgraded to Baa2; previously on 5/15/2009 Aa3 Placed Under Review for Possible Downgrade -- Cl. II-B-3, Downgraded to Ba2; previously on 5/15/2009 A3 Placed Under Review for Possible Downgrade -- Cl. II-B-4, Downgraded to B2; previously on 5/15/2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. II-B-5, Downgraded to C; previously on 5/15/2009 B2 Placed Under Review for Possible Downgrade WAMU MORTGAGE-BACKED: Moody's Downgrades Ratings on 115 Tranches ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 115 tranches from 21 RMBS transactions, backed by prime Jumbo loans, issued by WaMu Mortgage-Backed Pass-Through Certificates Trusts. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable-rate, jumbo residential mortgage loans. These actions are a result of Moody's updated loss expectations on the underlying collateral relative to available credit enhancement. Moody's methodology for rating securities backed by pools of jumbo mortgages originated prior to 2005 takes into account the annualized loss rate from the last 12 months and the projected loss rate over the next 12 months, and then translates these measures into lifetime losses based on a deal's expected remaining life. Recent Losses are calculated by assessing cumulative losses incurred over the past 12-months as a percentage of the average pool factor for the previous year. Pipeline Losses are calculated by using annualized roll rates of 15%, 30%, 65% and 90% for loans that are 60-89 days delinquent, 90 or more days delinquent, in foreclosure, and properties that are held for sale (REO) respectively. Moody's then applies loss upon default (severity) assumptions ranging from 25% to 35% on the loans that are projected to default. The roll-rates and severity assumptions mentioned above can vary from deal-to-deal, depending on a deal's specific characteristics. Weights are then applied to Recent Losses and Pipeline Losses. The weights applied depend on the year of loan and RMBS origination -- deals from earlier vintages typically experience higher Recent Losses and, as a result, have higher weights on Recent Losses. The weighted loss is then translated to lifetime projected loss depending on the deal's expected remaining life by which is estimated based the deal's pool factor and prepayment speeds. Moody's final rating actions are based on i) the level of credit enhancement available relative to the updated pool-level loss expectations and ii) current ratings. In addition, Moody's takes into account credit enhancement provided by seniority, cross- collateralization, time tranching, and other structural features within the priority of payments. List of actions: WaMu Mortgage Pass-Through Ctfs 2003-AR10 Tr -- Cl. A-6, Downgraded to Aa1; previously on 11/7/2003 Assigned Aaa -- Cl. A-7, Downgraded to Aa1; previously on 11/7/2003 Assigned Aaa -- Cl. B-1, Downgraded to A2; previously on 11/7/2003 Assigned Aa2 -- Cl. B-2, Downgraded to Ba1; previously on 11/7/2003 Assigned A2 -- Cl. B-3, Downgraded to B3; previously on 11/7/2003 Assigned Baa2 -- Cl. B-4, Downgraded to Ca; previously on 11/7/2003 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 11/7/2003 Assigned B2 WaMu Mortgage Pass-Through Ctfs 2003-AR11 Tr -- Cl. B-1, Downgraded to Aa3; previously on 12/1/2003 Assigned Aa2 -- Cl. B-2, Downgraded to Baa1; previously on 12/1/2003 Assigned A2 -- Cl. B-3, Downgraded to Ba2; previously on 12/1/2003 Assigned Baa2 -- Cl. B-4, Downgraded to B2; previously on 12/1/2003 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 12/1/2003 Assigned B2 WaMu Mortgage Pass-Through Ctfs 2004-AR7 Tr -- Cl. B-1, Downgraded to Aa3; previously on 8/23/2004 Assigned Aa2 -- Cl. B-2, Downgraded to Baa1; previously on 8/23/2004 Assigned A2 -- Cl. B-3, Downgraded to Ba3; previously on 8/23/2004 Assigned Baa2 -- Cl. B-4, Downgraded to Caa2; previously on 8/23/2004 Assigned Ba2 WAMU Mortgage Pass-Through Ctfs, 2002-AR18 Trust -- Cl. B-2, Downgraded to A1; previously on 7/27/2005 Upgraded to Aaa -- Cl. B-3, Downgraded to Baa3; previously on 7/27/2005 Upgraded to Aa3 -- Cl. B-4, Downgraded to B2; previously on 7/17/2006 Upgraded to A2 -- Cl. B-5, Downgraded to Ca; previously on 7/27/2005 Upgraded to Ba1 WaMu Mortgage Pass-Through Ctfs, 2002-AR19 Trust -- Cl. A-6, Downgraded to Aa2; previously on 1/24/2003 Assigned Aaa -- Cl. A-7, Downgraded to Aa2; previously on 1/24/2003 Assigned Aaa -- Cl. A-8, Downgraded to Aa2; previously on 1/24/2003 Assigned Aaa -- Cl. B-1, Downgraded to A2; previously on 9/1/2004 Upgraded to Aaa -- Cl. B-2, Downgraded to Ba1; previously on 7/27/2005 Upgraded to Aaa -- Cl. B-3, Downgraded to B3; previously on 7/27/2005 Upgraded to Aa2 -- Cl. B-4, Downgraded to Ca; previously on 7/17/2006 Upgraded to A2 -- Cl. B-5, Downgraded to Ca; previously on 7/27/2005 Upgraded to Ba1 WaMu Mortgage Pass-Through Ctfs, 2003-AR1 Tr. -- Cl. B-1, Downgraded to Aa2; previously on 9/1/2004 Upgraded to Aaa -- Cl. B-2, Downgraded to Baa1; previously on 9/1/2004 Upgraded to Aa2 -- Cl. B-3, Downgraded to B1; previously on 7/27/2005 Upgraded to A2 -- Cl. B-4, Downgraded to Ca; previously on 7/27/2005 Upgraded to Baa1 -- Cl. B-5, Downgraded to Ca; previously on 7/27/2005 Upgraded to Ba2 WaMu Mortgage Pass-Through Ctfs, 2003-AR5 -- Cl. B-1, Downgraded to Aa1; previously on 7/27/2005 Upgraded to Aaa -- Cl. B-2, Downgraded to A2; previously on 7/27/2005 Upgraded to Aa2 -- Cl. B-3, Downgraded to Ba1; previously on 7/27/2005 Upgraded to A2 -- Cl. B-4, Downgraded to B1; previously on 7/27/2005 Upgraded to Baa2 -- Cl. B-5, Downgraded to Ca; previously on 7/17/2007 Upgraded to Ba2 WaMu Mortgage Pass-Through Ctfs. 2004-AR5 Tr -- Cl. A-5, Downgraded to Aa2; previously on 6/17/2004 Assigned Aaa -- Cl. A-6, Downgraded to Aa3; previously on 6/17/2004 Assigned Aaa -- Cl. B-1, Downgraded to A3; previously on 6/17/2004 Assigned Aa2 -- Cl. B-2, Downgraded to Ba2; previously on 6/17/2004 Assigned A2 -- Cl. B-3, Downgraded to Caa2; previously on 6/17/2004 Assigned Baa2 -- Cl. B-4, Downgraded to Ca; previously on 6/17/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 6/17/2004 Assigned B2 WaMu Mortgage Pass-Through Ctfs. 2003-AR12 Tr -- Cl. B-1, Downgraded to Aa2; previously on 7/17/2007 Upgraded to Aaa -- Cl. B-2, Downgraded to A3; previously on 7/17/2007 Upgraded to Aa3 -- Cl. B-3, Downgraded to Ba3; previously on 7/17/2007 Upgraded to A3 -- Cl. B-4, Downgraded to Caa1; previously on 7/17/2007 Upgraded to Baa3 -- Cl. B-5, Downgraded to Ca; previously on 7/17/2007 Upgraded to B1 WaMu Mortgage Pass-Through Ctfs. 2003-AR3 Tr -- Cl. B-1, Downgraded to Aa3; previously on 9/1/2004 Upgraded to Aaa -- Cl. B-2, Downgraded to Baa1; previously on 7/27/2005 Upgraded to Aaa -- Cl. B-3, Downgraded to Ba3; previously on 7/27/2005 Upgraded to A1 -- Cl. B-4, Downgraded to Caa2; previously on 7/17/2007 Upgraded to A3 -- Cl. B-5, Downgraded to Ca; previously on 7/17/2007 Upgraded to Baa3 WaMu Mortgage Pass-Through Ctfs. 2003-AR4 Tr -- Cl. B-1, Downgraded to Aa1; previously on 9/1/2004 Upgraded to Aaa -- Cl. B-2, Downgraded to A1; previously on 9/1/2004 Upgraded to Aa2 -- Cl. B-3, Downgraded to Ba1; previously on 7/27/2005 Upgraded to A2 -- Cl. B-4, Downgraded to B3; previously on 7/27/2005 Upgraded to Baa2 -- Cl. B-5, Downgraded to Ca; previously on 7/27/2005 Upgraded to Ba3 WaMu Mortgage Pass-Through Ctfs. 2003-AR6 Tr -- Cl. B-2, Downgraded to A1; previously on 7/27/2005 Upgraded to Aa2 -- Cl. B-3, Downgraded to Baa1; previously on 7/27/2005 Upgraded to A2 -- Cl. B-4, Downgraded to Ba1; previously on 7/17/2007 Upgraded to Baa1 -- Cl. B-5, Downgraded to B2; previously on 7/27/2005 Upgraded to Ba2 WaMu Mortgage Pass-Through Ctfs. 2003-AR7 Tr -- Cl. B-1, Downgraded to Aa1; previously on 7/27/2005 Upgraded to Aaa -- Cl. B-2, Downgraded to A2; previously on 7/27/2005 Upgraded to Aa2 -- Cl. B-3, Downgraded to Ba1; previously on 7/27/2005 Upgraded to A2 -- Cl. B-4, Downgraded to B1; previously on 7/27/2005 Upgraded to Baa2 -- Cl. B-5, Downgraded to Caa3; previously on 7/27/2005 Upgraded to Ba2 WaMu Mortgage Pass-Through Ctfs. 2003-AR8 Tr -- Cl. B-1, Downgraded to Aa1; previously on 7/17/2007 Upgraded to Aaa -- Cl. B-2, Downgraded to A2; previously on 7/17/2007 Upgraded to Aa3 -- Cl. B-3, Downgraded to Baa3; previously on 7/17/2007 Upgraded to Baa1 -- Cl. B-4, Downgraded to B1; previously on 7/17/2007 Upgraded to Baa3 -- Cl. B-5, Downgraded to Caa3; previously on 8/28/2003 Assigned B2 WaMu Mortgage Pass-Through Ctfs. 2003-AR9 Tr -- Cl. I-A-6, Downgraded to A1; previously on 9/26/2003 Assigned Aaa -- Cl. I-A-7, Downgraded to A1; previously on 9/26/2003 Assigned Aaa -- Cl. I-B-1, Downgraded to Baa1; previously on 9/26/2003 Assigned Aa2 -- Cl. I-B-2, Downgraded to B1; previously on 9/26/2003 Assigned A2 -- Cl. I-B-3, Downgraded to Caa3; previously on 9/26/2003 Assigned Baa2 -- Cl. I-B-4, Downgraded to Ca; previously on 9/26/2003 Assigned Ba2 -- Cl. I-B-5, Downgraded to Ca; previously on 9/26/2003 Assigned B2 -- Cl. II-B-2, Downgraded to A3; previously on 9/26/2003 Assigned A2 -- Cl. II-B-3, Downgraded to Ba1; previously on 9/26/2003 Assigned Baa2 -- Cl. II-B-4, Downgraded to B1; previously on 9/26/2003 Assigned Ba2 -- Cl. II-B-5, Downgraded to Ca; previously on 9/26/2003 Assigned B2 WaMu Mortgage Pass-Through Ctfs. 2004-AR1 Tr -- Cl. A, Downgraded to A3; previously on 2/26/2004 Assigned Aaa -- Cl. B-1, Downgraded to Ba2; previously on 7/17/2007 Upgraded to Aaa -- Cl. B-2, Downgraded to Caa2; previously on 7/17/2007 Upgraded to Aa3 -- Cl. B-3, Downgraded to Ca; previously on 7/17/2007 Upgraded to A3 -- Cl. B-4, Downgraded to Ca; previously on 7/17/2007 Upgraded to Baa3 -- Cl. B-5, Downgraded to Ca; previously on 7/17/2007 Upgraded to B1 WaMu Mortgage Pass-Through Ctfs. 2004-AR11 Tr -- Cl. A, Downgraded to A2; previously on 9/30/2004 Assigned Aaa -- Cl. B-1, Downgraded to Baa3; previously on 9/30/2004 Assigned Aa2 -- Cl. B-2, Downgraded to B3; previously on 9/30/2004 Assigned A2 -- Cl. B-3, Downgraded to Ca; previously on 9/30/2004 Assigned Baa2 WaMu Mortgage Pass-Through Ctfs. 2004-AR3 Tr -- Cl. B-2, Downgraded to A3; previously on 6/11/2004 Assigned A2 -- Cl. B-3, Downgraded to Ba2; previously on 6/11/2004 Assigned Baa2 -- Cl. B-4, Downgraded to B3; previously on 6/11/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 6/11/2004 Assigned B2 WaMu Mortgage Pass-Through Ctfs. 2004-AR4 Tr -- Cl. B-1, Downgraded to A1; previously on 6/17/2004 Assigned Aa2 -- Cl. B-2, Downgraded to Baa1; previously on 6/17/2004 Assigned A2 -- Cl. B-3, Downgraded to Ba3; previously on 6/17/2004 Assigned Baa2 -- Cl. B-4, Downgraded to Caa1; previously on 6/17/2004 Assigned Ba2 -- Cl. B-5, Downgraded to Ca; previously on 6/17/2004 Assigned B2 WaMu Mortgage Pass-Through Ctfs. 2004-AR9 Tr -- Cl. A-1, Downgraded to Aa2; previously on 8/30/2004 Assigned Aaa -- Cl. A-6, Downgraded to Aa1; previously on 8/30/2004 Assigned Aaa -- Cl. A-7, Downgraded to Aa2; previously on 8/30/2004 Assigned Aaa -- Cl. B-1, Downgraded to A2; previously on 8/30/2004 Assigned Aa2 -- Cl. B-2, Downgraded to Baa3; previously on 8/30/2004 Assigned A2 -- Cl. B-3, Downgraded to B3; previously on 8/30/2004 Assigned Baa2 WaMu Mortgage Securities Corp. 2001-AR5 Trust -- Cl. B-1, Downgraded to A1; previously on 7/27/2005 Upgraded to Aaa -- Cl. B-2, Downgraded to Ba1; previously on 7/27/2005 Upgraded to Aaa -- Cl. B-3, Downgraded to Caa1; previously on 7/17/2006 Upgraded to Aa2 -- Cl. B-4, Downgraded to Ca; previously on 7/27/2005 Upgraded to A2 -- Cl. B-5, Downgraded to Ca; previously on 7/27/2005 Upgraded to Ba1 WASI FINANCE: Fitch Downgrades Ratings on Various 2006-HES1 Notes ----------------------------------------------------------------- Fitch Ratings has downgraded and assigned Loss Severity ratings to the securities of WASI Finance Limited Partnership Credit-Linked Notes, Series 2006-HES1 as the issuer: -- $4,783,621,472 class A-1-A to 'A/LS1' from 'AAA'; Outlook Stable (Not Offered); -- $500,000 class A-1-B to 'A/LS5' from 'AAA'; Outlook Stable (Not Offered); -- $227,420,000 class M-1 to 'BBB/LS4' 'AAA'; Outlook Stable (Not Offered); -- $114,198,000 class M-2 to 'BB/LS5' from 'AA+'; Outlook Stable (Not Offered); -- $56,111,000 class M-3-A to 'BB/LS5' from 'AA+'; Outlook Stable (Not Offered); -- $500,000 class M-3-B to 'BB/LS5' from 'AA+'; Outlook Stable (Not Offered); -- $50,754,000 class M-4 Notes to 'B/LS5' from 'AA'; Outlook Negative; -- $39,042,000 class M-5 to 'B/LS5' from 'AA'; Outlook Negative; -- $48,802,000 class M-6 to 'CCC/RR2' from 'A+'; -- $41,306,000 class B-1-A to 'CC/RR2' from 'A'; -- $7,496,000 class B-1-B to 'CC/RR1' from 'A'; -- $105,413,000 class B-2 to 'C/RR2' from 'BBB-' (Not Offered); -- $40,994,000 class B-3 to 'C/RR2' from 'BB' (Not Offered); -- $14,540,000 Class B-4-A to 'C/RR5' from 'BB-' (Not Offered); -- $100,000 class B-4-B to 'C/RR6' from 'BB-' (Not Offered); -- $14,944,121 class B-5 to 'D/RR6 from 'B+' (Not Offered); -- $0 class B-6 to 'D/RR6' from 'B' (Not Offered); -- $0 class B-7 to 'D/RR6' from 'B-' (Not Offered). The transaction is a synthetic balance sheet transaction that references a $5.4 billion diversified portfolio of fixed and adjustable rate, second lien home mortgage loans, all of which are originated and serviced by Wachovia Bank, National Association. The transaction is designed to provide credit protection for realized losses on the reference portfolio through a credit default swap that is documented under an International Swaps and Derivatives Association agreement between the issuer and the swap counterparty. Under the terms of the CDS, the swap counterparty will make premium payments to the issuer in exchange for protection payments on any losses in the portfolio that exceed the subordination of the class B-2 notes. The notes mature on the June 2011 distribution date. Expected losses were determined on this transaction by assigning a frequency of foreclosure to each delinquency bucket in the transaction. Since the reference pool is 100% second lien collateral a severity assumption of 100% was utilized. A cash flow analysis was performed to assess each bond's credit risk. Fitch determined the amount of pool collateral losses that will cause the bond to experience a dollar of impairment. This amount is referred to as the bonds break loss. This analysis takes into account a bond's position in the capital structure, payment priority, and any other structural features that provide loss protection to the bond. The relationship between the bonds' BL and the EL is used to determine the bonds loss coverage ratio. This is used to drive the ratings on the transaction. The ratings on the notes address the timely payment of interest and ultimate repayment of principal upon maturity. In addition to the Long-Term Rating for each bond, Fitch assigns Recovery Ratings for bonds rated below 'B'. The Recovery Rating scale is based upon the expected relative recovery characteristics of an obligation. For structured finance, Recovery Ratings are designed to estimate recoveries on a forward-looking basis while taking into account the time value of money. In conjunction with these rating actions, Fitch Ratings has assigned Loss Severity ratings to eight bonds. Introduced in February, LS ratings are meant to complement the existing Long- Term Credit ratings for structured finance securities. LTC ratings exclusively address the probability of default of a security. The LS ratings provide an indication of the relative degree of risk that a security might suffer a high loss severity in the event that the security defaults. It will always be necessary to consider loss severity (as indicated by the LS rating) in conjunction with probability of default (as indicated by the LTC rating.) The LS rating scale consists of five rating categories from 'LS1' to 'LS5'. LS ratings are only assigned to securities that have corresponding LTC ratings in rating categories 'AAA' through 'B'. The LS rating category to be assigned will be determined through a calculation that measures the size of the tranche (tranche thickness) relative to the base expected loss determined for the asset portfolio underlying the transaction. * Moody's Assigns Ratings on Two Participation Interests -------------------------------------------------------- Moody's Investors Service has assigned ratings to these participation interests: 1. Ba1 to the US$127,287,454.88 Versailles Participation Interest 2009-Z1a allocated pursuant to the Amended and Restated Participation Agreement dated as of June 30, 2009 between Versailles Assets LLC, as seller, and Bleachers Finance 1 Limited (the "Participation Agreement") 2. Caa3 to the US$22,500,000 Versailles Participation Interest 2009-Z1b allocated pursuant to the Participation Agreement The Participation Agreement is creating participation interests in the principal and interest payments received by Versailles Assets LLC, as seller of participation interests, in Versailles's holdings of certain Class A-1 Notes issued by Zohar CDO 2003-1 Limited, a collateralized loan obligation transaction issued in November 2003. Under the terms of the Participation Agreement, Versailles will pass on to the Versailles Participation Interest 2009-Z1a as the "Senior Participation Interest" and the Versailles Participation Interest 2009-Z1b as the "Junior Participation Interest" the interest and principal payments it receives on the Zohar CDO Class A-1 notes. Bleachers Finance 1 Limited is the purchaser under the Participation Agreement of both the Senior and Junior Participations Interests. The Senior Participation Interest represents initially an 84.98% interest and the Junior Participation initially represents a 15.02% interest in the amounts received by Versailles on the Zohar CDO A-1 Notes. The Senior Participation will be senior to the Junior Participation in the receipt of all scheduled interest and principal payments. Moody's ratings on the Senior and Junior Participation Interests address the ultimate cash receipt of all interest and principal payments required by the Participation Agreement and are based on the expected loss posed to holders of the Participation Interests relative to the promise of receiving the present value of such payments. The ratings take into account, among other considerations, (a) the credit quality of the underlying Zohar CDO Class A-1 Notes and (b) the likelihood that Versailles will pass on all interest and principal payments received on the Zohar CDO Class A-1 Notes subject to the participation. No assignment of an ownership interest or grant of a security interest in the Zohar CDO Class A-1 Notes is being made under the Participation Agreement in favor of either the Senior Participation or the Junior Participation. Any downgrade by Moody's of the ratings of the Zohar CDO Class A-1 Notes or of Versailles may result in a downgrade of the ratings of the Participation Interests. Versailles is an asset-backed commercial paper conduit which has a current Moody's rating of P-1. Bleachers is not currently rated by Moody's. Natixis Financial Products Inc. provides liquidity and credit support facilities for both Versailles and Bleachers. * Moody's Downgrades Ratings on Nine Certs. by Resecuritizations ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on nine certificates issued in three RMBS resecuritization transactions from 2005 and 2008. The certificates in the resecuritizations are backed by one or more securities, which in turn are backed by residential mortgage loans. These rating actions have been triggered by changes in performance and/or Moody's ratings on the underlying residential mortgage-backed securities (underlying securities). The ratings on the certificates in the resecuritization are based on: (i) The updated expected loss of the pool of loans backing the underlying securities portfolio and the updated ratings on the underlying securities portfolio (ii) The available credit enhancement on the underlying securities, and (iii) The structure of the resecuritization transaction. (1) Moody's first updated its loss assumptions on the underlying pool of mortgage loans (backing the underlying securities) and then arrived at updated ratings on the underlying securities. Certain resecuritizations may contain underlying securities that were not originally rated by Moody's. In this case, an expected loss was derived by comparing the non-rated deal to Moody's-rated deals with similar current collateral and performance characteristics. An implicit rating was then determined by comparing current available credit enhancement for the non rated tranche to the estimated expected loss for the deal. The ratings on the underlying securities are then used to derive a weighted average portfolio rating based on a weighted average rating factor. To determine the portfolio WARF, Moody's assigns the ratings on the underlying securities a Rating Factor based on Moody's published 10-yr idealized loss expectations. Weights are assigned to each Rating Factor based on the contribution (by outstanding pledged balance) of the underlying security to the resecuritized transaction. (2) Second, Moody's determines the weighted average credit enhancement available to the portfolio security by evaluating the loss coverage level consistent with the ratings on the underlying securities and the underlying mortgage pool losses and weighting them based on the outstanding pledged balance of the underlying securities. (3) Finally, the ratings on the bonds issued in the resecuritization are determined after taking into consideration additional structural aspects of the resecuritization. For transactions where only a single tranche is issued, the weighted average portfolio rating (as determined in step 1 above) is the rating assigned to the tranche. Where multiple securities are issued, the loss allocation and cash flow priority are taken into consideration. For instance where the certificates in the resecuritization are tranched into a super senior tranche and a support tranche, the support tranche is notched down to reflect a higher severity of loss to that tranche. The rating on the super senior tranche is determined based on the total credit enhancement available i.e. the credit enhancement assessed in step (2) and the additional enhancement from the support tranche. The probability of default for the junior-most certificate in the resecuritization is the same as the probability of default for the lowest rated underlying certificate. However, Moody's anticipates a higher loss severity on the junior-most class due to its subordinate position (both in terms of principal distribution and loss allocation) and smaller size (when compared to underlying certificate). Therefore, the ratings on junior certificates in the resecuritization are lower than the portfolio rating on the combined underlying bonds. Because the ratings on the certificates in the resecuritization are linked to the ratings on the underlying certificates and their mortgage pool performance, any rating action on the underlying certificates may trigger a further review of the ratings on the certificates in the resecuritization. The ratings on the certificates in the resecuritization address the ultimate payment of promised interest and principal and do not address any other amounts that may be payable on the certificates. For securities insured by a financial guarantor, the rating on the securities is equal to the higher of (i) the guarantor's financial strength rating and (ii) the current underlying rating (i.e., absent consideration of the guaranty) on the security. The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty and is as described above. Complete Rating Actions are: Issuer: Bear Stearns ARM Trust 2005-8 -- Cl. A-1, Downgraded to Aa3; previously on 5/8/2009 Downgraded to Aa1 -- Cl. A-2, Downgraded to A1; previously on 5/8/2009 Downgraded to Aa1 -- Cl. A-3, Downgraded to A1; previously on 5/8/2009 Downgraded to Aa1 -- Cl. A-4, Downgraded to A2; previously on 5/8/2009 Downgraded to Aa1 -- Cl. X, Downgraded to A1; previously on 5/8/2009 Downgraded to Aa1 Issuer: Bear Stearns Structured Products Inc. Trust Notes, Series 2008-R2 -- Cl. I-A-1, Downgraded to Caa2; previously on 5/15/2008 Assigned Aaa and Placed Under Review for Possible Downgrade -- Cl. I-A-2, Downgraded to C; previously on 5/15/2008 Assigned Aaa and Placed Under Review for Possible Downgrade Issuer: MASTR Adjustable Rate Mortgages Trust 2005-4 -- Cl. A-2, Downgraded to Aa2; previously on 6/27/2005 Assigned Aaa -- Cl. A-3, Downgraded to Ba3; previously on 6/27/2005 Assigned Aa1 * S&P Downgrades Ratings on 47 Classes From Seven RMBS Deals ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 47 classes from seven residential mortgage-backed securities transactions backed by U.S. Alternative-A mortgage loan collateral issued in 2004 and 2005. S&P removed 45 of the lowered ratings from CreditWatch with negative implications. S&P also affirmed its ratings on 15 classes from four of these transactions and removed 14 of the affirmed ratings from CreditWatch with negative implications. S&P downgraded the 1-A-1 and 1-A-2 classes from Impac CMB Trust's series 2005-6 to 'BBB', and the ratings on these classes remain on CreditWatch with negative implications due to financial guarantees provided by Ambac Assurance Corp. ('BBB/Watch Neg' financial strength rating). The downgrades, affirmations, and CreditWatch resolutions incorporate S&P's current and projected losses based on the dollar amounts of loans currently in the transactions' delinquency, foreclosure, and real estate owned pipelines, as well as S&P's projection of future defaults. S&P also incorporated cumulative losses to date in S&P's analysis when assessing rating outcomes. S&P derived its loss assumptions using the criteria listed in the "Related Research" section below. As part of its analysis, S&P considered the characteristics of the underlying mortgage collateral as well as macroeconomic influences. For example, the risk profile of the underlying mortgage pools influences S&P's default projections, while S&P's outlook for housing price declines and the health of the housing market influence S&P's loss severity assumptions. Furthermore, S&P adjusted its loss expectations for each deal based on upward trends in delinquencies. Standard & Poor's has established loss projections for each Alt-A transaction rated in 2005 based on a forward-looking default curve. To maintain a 'AAA' rating, S&P considers whether a bond is able to withstand approximately 150% of S&P's base-case loss assumptions, subject to individual caps and qualitative factors assumed on specific transactions. For a class for which we've affirmed a 'B' rating, S&P considers whether a bond is able to withstand S&P's base-case loss assumptions. Other rating categories are dispersed, approximately equally, between these two loss assumptions. For example, to maintain a 'BB' rating on one class, S&P may consider whether the class is able to withstand approximately 110% of S&P's base-case loss assumptions, while, in connection with a different class, S&P may consider whether it is able to withstand approximately 120% of S&P's base-case loss assumptions to maintain a 'BBB' rating. The affirmations reflect S&P's belief that there is sufficient credit enhancement to support the ratings at their current levels. The subordination of more junior classes within each structure provides credit support for the affected transactions. The collateral backing these deals originally consisted predominantly of Alt-A, first-lien, fixed- or adjustable-rate, or negative- amortization residential mortgage loans secured by one- to four- family properties. S&P monitors these transactions to incorporate updated losses and delinquency pipeline performance to assess whether, in S&P's view, the applicable credit enhancement features are sufficient to support the current ratings. S&P will continue to monitor these transactions and take additional rating actions as S&P think appropriate. Rating Actions Impac CMB Trust Series 2005-6 Series 2005-6 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A-1 45254NQG5 BBB/Watch Neg AAA/Watch Neg 1-A-2 45254NQW0 BBB/Watch Neg AAA/Watch Neg 1-M-1 45254NQK6 CC AA/Watch Neg IndyMac INDX Mortgage Loan Trust 2005-AR10 Series 2005-AR10 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 45660LKW8 A- AAA/Watch Neg A-2 45660LKX6 CCC AAA/Watch Neg A-3 45660LKY4 CCC AAA/Watch Neg A-X 45660LKZ1 A- AAA/Watch Neg B-1 45660LLB3 CCC AA+/Watch Neg B-2 45660LLC1 CCC AA/Watch Neg B-3 45660LLD9 CCC AA-/Watch Neg B-4 45660LLE7 CC A/Watch Neg B-5 45660LLF4 CC BBB+/Watch Neg Nomura Asset Acceptance Corporation Alternative Loan Trust Series 2004-AR4 Rating ------ Class CUSIP To From ----- ----- -- ---- I-A-1 65535VGK8 AAA AAA/Watch Neg I-A-2 65535VGL6 AAA AAA/Watch Neg II-A-1 65535VGM4 AAA AAA/Watch Neg II-A-2 65535VGN2 AAA AAA/Watch Neg II-A-3 65535VGP7 AAA AAA/Watch Neg II-A-4 65535VGQ5 AAA AAA/Watch Neg II-A-5 65535VGR3 AAA AAA/Watch Neg II-A-6 65535VGS1 AAA AAA/Watch Neg III-A-1 65535VGT9 AAA AAA/Watch Neg III-A-2 65535VGU6 AAA AAA/Watch Neg M-1 65535VGV4 AA AA/Watch Neg M-2 65535VGW2 CCC A+/Watch Neg M-3 65535VGX0 CC A-/Watch Neg RALI Series 2005-QA5 Trust Series 2005-QA5 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 76110H4Z9 AAA AAA/Watch Neg A-II 76110H5A3 A+ AAA/Watch Neg M-1 76110H5C9 CCC AA/Watch Neg RALI Series 2005-QA8 Trust Series 2005-QA8 Rating ------ Class CUSIP To From ----- ----- -- ---- CB-I-1 761118BP2 CCC AAA/Watch Neg CB-I-2 761118BQ0 CCC AAA/Watch Neg NB-I 761118BR8 CCC AAA/Watch Neg CB-II-1 761118BS6 B- AAA/Watch Neg CB-III 761118BV9 B+ AAA/Watch Neg NB-II 761118BU1 B+ AAA/Watch Neg NB-III 761118BW7 B+ AAA/Watch Neg M-1 761118BY3 CC AA/Watch Neg CB-II-2 761118BT4 B- AAA/Watch Neg RALI Series 2005-QO1 Trust Series 2005-QO1 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 761118EN4 AA AAA/Watch Neg A-2 761118EP9 AA AAA/Watch Neg A-3 761118EQ7 BBB+ AAA/Watch Neg A-4 761118ER5 CCC AAA/Watch Neg X 761118ET1 AA AAA/Watch Neg M-1 761118EX2 CCC AA+/Watch Neg M-2 761118EY0 CC AA/Watch Neg M-3 761118EZ7 CC AA-/Watch Neg M-4 761118ES3 CC A+/Watch Neg M-5 761118EW4 CC A/Watch Neg M-6 761118FT0 CC A-/Watch Neg Structured Asset Mortgage Investments II Trust 2005-AR3 Series 2005-AR3 Rating ------ Class CUSIP To From ----- ----- -- ---- I-A-1 86359LJZ3 AAA AAA/Watch Neg I-A-2 86359LKA6 BB AAA/Watch Neg I-A-3 86359LKB4 CCC AAA/Watch Neg I-X 86359LKC2 AAA AAA/Watch Neg II-A-1 86359LKD0 CCC AAA/Watch Neg M-X 86359LKE8 CCC AA+/Watch Neg M-1 86359LKJ7 CCC AA+/Watch Neg M-2 86359LKK4 CCC AA+/Watch Neg M-3 86359LKL2 CC AA/Watch Neg M-4 86359LKM0 CC AA/Watch Neg M-5 86359LKN8 CC AA-/Watch Neg M-6 86359LKP3 CC A+/Watch Neg B-1 86359LKQ1 CC A/Watch Neg Rating Affirmed Impac CMB Trust Series 2005-6 Series 2005-6 Class CUSIP Rating ----- ----- ------ 2-A-1 45254NQQ3 AAA * S&P Downgrades Ratings on 52 Tranches From 26 CDO Transactions ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 52 tranches from 26 U.S. cash flow and hybrid collateralized debt obligation transactions. At the same time, S&P removed 36 of the lowered ratings from CreditWatch with negative implications. The ratings on 13 of the downgraded tranches are on CreditWatch with negative implications, indicating a significant likelihood of further downgrades. Additionally, S&P placed its ratings on two of the other tranches S&P reviewed on CreditWatch negative. The CDO downgrades reflect a number of factors, including credit deterioration and recent negative rating actions on U.S. subprime residential mortgage-backed securities. The CreditWatch placements primarily affect transactions for which a significant portion of the collateral assets currently have ratings on CreditWatch with negative implications or have significant exposure to assets rated in the 'CCC' category. In addition, Standard & Poor's reviewed the rating assigned to Blue Heron Funding VI Ltd. and, based on the current credit support available to the tranche, has left the rating at its current level. The 52 downgraded U.S. cash flow and hybrid tranches have a total issuance amount of $12.162 billion. Eleven of the 26 affected transactions are mezzanine structured finance CDOs of asset-backed securities, which are collateralized in large part by mezzanine tranches of RMBS and other SF securities. Ten of the 26 transactions are high-grade SF CDOs of ABS that were collateralized at origination primarily by 'AAA' through 'A' rated tranches of RMBS and other SF securities. The other five transactions are CDOs of CDOs that were collateralized at origination primarily by notes from other CDOs, as well as by tranches from RMBS and other SF transactions. Standard & Poor's will continue to monitor the CDO transactions it rates and take rating actions, including CreditWatch placements, when appropriate. Rating Actions Rating ------ Transaction Class To From ----------- ----- -- ---- ACA ABS 2005-2 Ltd. A-1S CC B-/Watch Neg Belle Haven ABS CDO 2005-1 Ltd. A-1 CC B-/Watch Neg Bernoulli High Grade CDO II Ltd. A-1A CC BB+/Watch Neg Charles River CDO I Ltd. A-1A CC BB+/Watch Neg Charles River CDO I Ltd. A-1B CC BB+/Watch Neg Charles River CDO I Ltd. A-2F CC CCC-/WatchNeg Charles River CDO I Ltd. A-2V CC CCC-/WatchNeg Coast Investment Grade 2000-1 Ltd. B-1 BB+/Watch Neg BBB/Watch Neg Coast Investment Grade 2000-1 Ltd. B-2 BB+/Watch Neg BBB/Watch Neg Connecticut Valley Structured Credit A-1 A/Watch Neg AAA/Watch Neg CDO II Ltd. Connecticut Valley Structured Credit A-2 A/Watch Neg AAA/Watch Neg CDO II Ltd. Connecticut Valley Structured Credit B-1 BBB-/WatchNeg AA+/Watch Neg CDO II Ltd. Connecticut Valley Structured Credit B-2 BBB-/WatchNeg AA+/Watch Neg CDO II Ltd. Connecticut Valley Structured Credit C-1 B/Watch Neg A-/Watch Neg CDO II Ltd. Connecticut Valley Structured Credit C-2 B/Watch Neg A-/Watch Neg CDO II Ltd. Diversified Global Securities Ltd.II B AA/Watch Neg AA Diversified Global Securities Ltd.II C BBB+/WatchNeg A- Duke Funding X Ltd. A-1 CC BB/Watch Neg Duke Funding X Ltd. A-2 CC B/Watch Neg Dutch Hill Funding II Ltd. B CCC- BB-/Watch Neg Fort Sheridan ABS CDO Ltd. A-1 CC B+/Watch Neg Fort Sheridan ABS CDO Ltd. A-2 CC CCC Highridge ABS CDO II Ltd. A-1J CC CCC/Watch Neg Highridge ABS CDO II Ltd. A-1S CC BB+/Watch Neg Hudson Mezzanine Funding 2006-2 Ltd. S CCC- BB/Watch Neg Ischus CDO II Ltd. A-1A CC B-/Watch Neg Ischus CDO II Ltd. A-1B CC B-/Watch Neg Kleros Preferred Funding IX Ltd. A-1 CC BB/Watch Neg Longshore CDO Funding 2006-1 Ltd. A-1 CC B-/Watch Neg Mercury CDO II Ltd. A-1 CC B+/Watch Neg Mercury CDO II Ltd. A-2 CC CCC- Montauk Point CDO Ltd. A1 CC BB-/Watch Neg Montauk Point CDO Ltd. A2 CC B-/Watch Neg Mulberry Street CDO II Ltd. A-1U CC CCC-/WatchNeg Mulberry Street CDO Ltd. A-1B CC CCC+/WatchNeg North Cove CDO III Ltd. A CC CCC+/WatchNeg North Cove CDO III Ltd. B CC CCC/Watch Neg North Cove CDO III Ltd. C CC CCC-/WatchNeg North Cove CDO III Ltd. D CC CC/Watch Neg Orient Point CDO II Ltd. A CC B-/Watch Neg Orient Point CDO II Ltd. B CC CCC+/WatchNeg Orient Point CDO II Ltd. C CC CCC-/WatchNeg Orient Point CDO Ltd. A-1NVA CC BB+/Watch Neg Orient Point CDO Ltd. A-1NVB CC BB+/Watch Neg Orient Point CDO Ltd. A-1V CC BB+/Watch Neg Orient Point CDO Ltd. A-2 CC B-/Watch Neg Orient Point CDO Ltd. B CC CCC-/WatchNeg Parapet 2006 Ltd. A CC B/Watch Neg Sheffield CDO II Ltd. A-1 BB/Watch Neg BBB-/WatchNeg Sheffield CDO II Ltd. A-2 B-/Watch Neg B+/Watch Neg Sheffield CDO II Ltd. A-3 CCC-/WatchNeg CCC/Watch Neg Sheffield CDO II Ltd. S AAA/Watch Neg AAA Solstice ABS CBO III Ltd. A-2 BB-/Watch Neg BBB/Watch Neg Stillwater ABS CDO 2006-1 Ltd. A-1 CC B+/Watch Neg Stillwater ABS CDO 2006-1 Ltd. A-2 CC CCC-/WatchNeg Other Ratings Reviewed Transaction Class Rating ----------- ----- ------ ACA ABS 2005-2 Ltd. A-1J CC ACA ABS 2005-2 Ltd. A-2F CC ACA ABS 2005-2 Ltd. A-2V CC ACA ABS 2005-2 Ltd. A-3 CC ACA ABS 2005-2 Ltd. B CC ACA ABS 2005-2 Ltd. ComboSecs CC Belle Haven ABS CDO 2005-1 Ltd. A-2 CC Belle Haven ABS CDO 2005-1 Ltd. B CC Belle Haven ABS CDO 2005-1 Ltd. C CC Belle Haven ABS CDO 2005-1 Ltd. D-1 CC Belle Haven ABS CDO 2005-1 Ltd. D-2 CC Bernoulli High Grade CDO II Ltd. A-1B CC Bernoulli High Grade CDO II Ltd. B CC Bernoulli High Grade CDO II Ltd. C CC Bernoulli High Grade CDO II Ltd. D CC Bernoulli High Grade CDO II Ltd. E CC Bernoulli High Grade CDO II Ltd. F CC Bernoulli High Grade CDO II Ltd. G CC Blue Heron Funding VI Ltd. Cert AAA Charles River CDO I Ltd. B-F CC Charles River CDO I Ltd. B-V CC Charles River CDO I Ltd. C CC Charles River CDO I Ltd. Comb Sec CC Coast Investment Grade 2000-1 Ltd. A AAA Diversified Global Securities Ltd.II A AAA Duke Funding X Ltd. A-3 CC Duke Funding X Ltd. B-1 CC Duke Funding X Ltd. B-2 CC Dutch Hill Funding II Ltd. C CC Dutch Hill Funding II Ltd. C Loan CC Dutch Hill Funding II Ltd. D-1 CC Dutch Hill Funding II Ltd. D-2 CC Dutch Hill Funding II Ltd. D-3 CC Fort Sheridan ABS CDO Ltd. B CC Fort Sheridan ABS CDO Ltd. C-1 CC Fort Sheridan ABS CDO Ltd. C-2 CC Fort Sheridan ABS CDO Ltd. C-3 CC Highridge ABS CDO II Ltd. A-2 CC Highridge ABS CDO II Ltd. A-3 CC Highridge ABS CDO II Ltd. B CC Hudson Mezzanine Funding 2006-2 Ltd. A-1 CC Hudson Mezzanine Funding 2006-2 Ltd. A-2 CC Hudson Mezzanine Funding 2006-2 Ltd. B CC Hudson Mezzanine Funding 2006-2 Ltd. C CC Hudson Mezzanine Funding 2006-2 Ltd. D CC Hudson Mezzanine Funding 2006-2 Ltd. E CC Ischus CDO II Ltd. A-2 CC Ischus CDO II Ltd. B CC Ischus CDO II Ltd. C CC Ischus CDO II Ltd. D CC Kleros Preferred Funding IX Ltd. A-2 CC Kleros Preferred Funding IX Ltd. A-3 CC Kleros Preferred Funding IX Ltd. B CC Kleros Preferred Funding IX Ltd. C CC Kleros Preferred Funding IX Ltd. D CC Longshore CDO Funding 2006-1 Ltd. A-2 CC Longshore CDO Funding 2006-1 Ltd. B CC Longshore CDO Funding 2006-1 Ltd. C CC Longshore CDO Funding 2006-1 Ltd. D CC Mercury CDO II Ltd. B CC Mercury CDO II Ltd. C CC Mercury CDO II Ltd. D CC Montauk Point CDO Ltd. B CC Montauk Point CDO Ltd. C CC Montauk Point CDO Ltd. D CC Montauk Point CDO Ltd. E CC Montauk Point CDO Ltd. F CC Montauk Point CDO Ltd. G CC Mulberry Street CDO II Ltd. A-1A BBB Mulberry Street CDO II Ltd. A-1B BBB Mulberry Street CDO II Ltd. A-1W BBB Mulberry Street CDO II Ltd. A-2 CC Mulberry Street CDO II Ltd. B-F CC Mulberry Street CDO II Ltd. B-V CC Mulberry Street CDO II Ltd. C CC Mulberry Street CDO Ltd. A-1A BBB Mulberry Street CDO Ltd. A-2 CC Mulberry Street CDO Ltd. B CC Mulberry Street CDO Ltd. C CC North Cove CDO III Ltd. E CC Orient Point CDO II Ltd. D CC Orient Point CDO II Ltd. E CC Orient Point CDO Ltd. C CC Orient Point CDO Ltd. D CC Orient Point CDO Ltd. E CC Sheffield CDO II Ltd. B CC Sheffield CDO II Ltd. C CC Sheffield CDO II Ltd. D CC Solstice ABS CBO III Ltd. A-1 AAA Solstice ABS CBO III Ltd. B CC Solstice ABS CBO III Ltd. C-1 CC Solstice ABS CBO III Ltd. C-2 CC Stillwater ABS CDO 2006-1 Ltd. A-3 CC Stillwater ABS CDO 2006-1 Ltd. B CC Stillwater ABS CDO 2006-1 Ltd. C CC Stillwater ABS CDO 2006-1 Ltd. D CC * S&P Downgrades Ratings on 62 Classes From Six Alt-A Transactions ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 62 classes from six U.S. Alternative-A and prime jumbo residential mortgage-backed securities transactions issued in 2004 through 2007. S&P removed 45 of the lowered ratings from CreditWatch with negative implications. Additionally, S&P affirmed its ratings on 23 classes from these six transactions and removed three of the affirmed ratings from CreditWatch negative. The downgrades, affirmations, and CreditWatch resolutions incorporate S&P's current and projected losses based on the dollar amounts of loans currently in the transactions' delinquency, foreclosure, and real estate owned pipelines, as well as S&P's projection of future defaults. S&P also incorporated cumulative losses to date in S&P's analysis when assessing rating outcomes. S&P derived its loss assumptions using S&P's criteria listed in the "Related Research" section. As part of its analysis, S&P considered the characteristics of the underlying mortgage collateral, as well as macroeconomic influences. For example, the risk profile of the underlying mortgage pools influences S&P's default projections, while S&P's outlook for housing price declines and the health of the housing market influence S&P's loss severity assumptions. Furthermore, S&P adjusted its loss expectations for each deal based on upward trends in delinquencies. For Alt-A transactions, to maintain a 'AAA' rating, S&P consider whether a class is able to withstand approximately 150% of S&P's base-case loss assumptions, subject to individual caps and qualitative factors assumed on specific transactions. For a class for which we've affirmed a 'B' rating, S&P considers whether a bond is able to withstand S&P's base-case loss assumptions. To maintain a rating in categories between 'B' (the base case) and 'AAA', S&P assess whether the class can withstand losses exceeding the base-case assumption at a percentage specific to each rating category, up to 150% for a 'AAA' rating. For example, S&P would assess whether one class could withstand approximately 110% of S&P's base-case loss assumptions to maintain a 'BB' rating, while S&P would assess whether a different class could withstand approximately 120% of S&P's base-case loss assumptions to maintain a 'BBB' rating. For prime jumbo transactions, to maintain a 'AAA' rating, S&P consider whether a class is able to withstand approximately 235% of S&P's base-case loss assumptions, subject to individual caps and qualitative factors applied to specific transactions. For a class for which we've affirmed a 'B' rating, S&P consider whether a bond is able to withstand S&P's base-case loss assumptions. To maintain a rating in categories between 'B' (the base case) and 'AAA', S&P assess whether the class can withstand losses exceeding the base-case assumption at a percentage specific to each rating category, up to 235% for a 'AAA' rating. For example, S&P would assess whether one class could withstand approximately 127% of S&P's base-case loss assumptions to maintain a 'BB' rating, while S&P would assess whether a different class could withstand approximately 154% of S&P's base-case loss assumptions to maintain a 'BBB' rating. The lowered ratings reflect S&P's belief that the amount of credit enhancement available for the downgraded classes is not sufficient to cover losses at the previous rating levels, given S&P's current projected losses. The affirmations reflect S&P's belief that there is sufficient credit enhancement to support the ratings at their current levels. Certain senior classes also benefit from senior-support classes that would provide support to a certain extent before any applicable losses could affect the super-senior certificates. The subordination of classes within each structure provides credit support for the affected transactions. The collateral backing these deals originally consisted predominantly of Alt-A, first-lien, fixed-rate, adjustable-rate, or negative-amortization residential mortgage loans secured by one- to four-family properties. S&P monitors these transactions to incorporate updated losses and delinquency pipeline performance to assess whether, in S&P's view, the applicable credit enhancement features are sufficient to support the current ratings. S&P will continue to monitor these transactions and take additional rating actions as S&P deem appropriate. Rating Actions Alternative Loan Trust 2005-43 Series 2005-43 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A-1 12667G5S8 A- AAA 4-A-1 12667G5Z2 BB- AAA 5-A-1 12668AAX3 CCC AAA CHL Mortgage Pass Through Trust 2004-22 Series 2004-22 Rating ------ Class CUSIP To From ----- ----- -- ---- M 12669F7C1 A AA B-1 12669F7D9 B BBB B-2 12669F7E7 CCC B Citigroup Mortgage Loan Trust 2007-6 Series 2007-6 Rating ------ Class CUSIP To From ----- ----- -- ---- 2-A1 17312VAS7 CC CCC 2-A2 17312VAT5 CC CCC 2-A3 17312VAU2 CC CCC 2-A4 17312VAV0 CC CCC 2-A5 17312VAW8 CC CCC 2-A6 17312VAX6 CC CCC 2-XS 17312VBH0 CC CCC 2-PO 17312VAY4 CC CCC GSR Mortgage Loan Trust 2007-AR2 Series 2007-AR2 Rating ------ Class CUSIP To From ----- ----- -- ---- 1A1 3622N6AA7 CCC A-/Watch Neg 1A2 3622N6AB5 CC B/Watch Neg 2A1 3622N6AC3 CCC BBB-/Watch Neg 2A2 3622N6AD1 CC B/Watch Neg 3A1 3622N6AE9 CCC BBB-/Watch Neg 3A2 3622N6AF6 CC B/Watch Neg 4A1 3622N6AG4 BBB- BBB-/Watch Neg 4A2 3622N6AH2 CC B/Watch Neg 5A1A 3622N6AJ8 B BBB-/Watch Neg 5A1B 3622N6AW9 B BBB-/Watch Neg 5A2 3622N6AK5 CC B/Watch Neg 6A1 3622N6AL3 CCC BBB-/Watch Neg 6A2 3622N6AM1 CCC B/Watch Neg B1 3622N6AN9 CC CCC B2 3622N6AP4 CC CCC B3 3622N6AQ2 CC CCC Merrill Lynch Mortgage Investors Trust MLMI Series 2005-A7 Series 2005-A7 Rating ------ Class CUSIP To From ----- ----- -- ---- I-A-1 59020UE35 AAA AAA/Watch Neg I-A-2 59020UE43 CCC AAA/Watch Neg II-A-1 59020UH32 BB AAA/Watch Neg II-A-2 59020UH40 CCC AAA/Watch Neg M-1 59020UE50 CCC AA/Watch Neg M-2 59020UE68 CC A/Watch Neg M-3 59020UE76 CC BBB/Watch Neg B-1 59020UE92 CC BB/Watch Neg Structured Adjustable Rate Mortgage Loan Trust Series 2005-1 Series 2005-1 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A1 863579KY3 A AAA/Watch Neg 1-A2 863579KZ0 A- AAA/Watch Neg 2-A 863579LA4 A- AAA/Watch Neg 3-A 863579LB2 A- AAA/Watch Neg 3-AX 863579MF2 A- AAA/Watch Neg 4-A1 863579LC0 AA+ AAA/Watch Neg 4-A2 863579LD8 A- AAA/Watch Neg 5-A1 863579LE6 AAA AAA/Watch Neg 5-A2 863579LF3 A- AAA/Watch Neg 6-A 863579LG1 A- AAA/Watch Neg B1 863579LH9 BB AA+/Watch Neg B1X 863579LJ5 CCC AA+/Watch Neg B2 863579LK2 CCC AA+/Watch Neg B2X 863579LL0 CCC AA+/Watch Neg B3 863579LM8 CCC AA+/Watch Neg B3X 863579LN6 CCC AA+/Watch Neg B4 863579LP1 CCC AA/Watch Neg B4X 863579LQ9 CCC AA/Watch Neg B5 863579LR7 CCC A+/Watch Neg B5X 863579LS5 CCC A+/Watch Neg B6 863579LT3 CC A/Watch Neg B7 863579LU0 CC A-/Watch Neg B7X 863579LV8 CC A-/Watch Neg B8 863579LW6 CC BBB+/Watch Neg B9 863579LY2 CC BBB/Watch Neg B10 863579LZ9 CC BBB-/Watch Neg B10X 863579LX4 CC BBB-/Watch Neg Ratings Affirmed Alternative Loan Trust 2005-43 Series 2005-43 Class CUSIP Rating ----- ----- ------ 1-A-2 12667G5T6 CCC 1-A-3 12667G5U3 CCC 2-A-1 12667G5V1 AAA 2-A-2 12667G5W9 CCC 3-A-1 12667G5X7 CCC 4-A-2 12667G6A6 CCC 4-A-3 12667G5Y5 CCC 5-A-2 12668AAY1 CCC CHL Mortgage Pass Through Trust 2004-22 Series 2004-22 Class CUSIP Rating ----- ----- ------ A-1 12669F6X6 AAA A-2 12669F6Y4 AAA A-3 12669F6Z1 AAA X-2 12669F7A5 AAA X-3 12669F7B3 AAA Citigroup Mortgage Loan Trust 2007-6 Series 2007-6 Class CUSIP Rating ----- ----- ------ 1-A1A 17312VAA6 CCC 1-1IO 17312VAC2 CCC 1-A2A 17312VAD0 CCC 1-A3A 17312VAE8 CCC 1-23IO 17312VAG3 CCC 1-A4A 17312VAH1 CCC 1-4IO 17312VAK4 CCC * S&P Downgrades Ratings on 166 Classes From 10 Alt-A RMBS Deals ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 166 classes from 10 U.S. Alternative-A and U.S. prime jumbo residential mortgage-backed securities transactions issued in 2005, 2006, and 2007. S&P removed 117 of the lowered ratings from CreditWatch with negative implications. Additionally, S&P affirmed S&P's ratings on 33 classes from five of these transactions and removed 16 of the affirmed ratings from CreditWatch negative. The downgrades, affirmations, and CreditWatch resolutions incorporate S&P's current and projected losses based on the dollar amounts of loans currently in the transactions' delinquency, foreclosure, and real estate owned pipelines, as well as S&P's projection of future defaults. S&P also incorporated cumulative losses to date in S&P's analysis when assessing rating outcomes. S&P derived its loss assumptions using S&P's criteria listed in the "Related Research" section. As part of S&P's analysis, S&P considered the characteristics of the underlying mortgage collateral, as well as macroeconomic influences. For example, the risk profile of the underlying mortgage pools influences S&P's default projections, while S&P's outlook for housing price declines and the health of the housing market influence S&P's loss severity assumptions. Furthermore, S&P adjusted its loss expectations for each deal based on upward trends in delinquencies. For Alt-A transactions, to maintain a 'AAA' rating, S&P consider whether a class is able to withstand approximately 150% of S&P's base-case loss assumptions, subject to individual caps and qualitative factors assumed on specific transactions. For a class for which we've affirmed a 'B' rating, S&P consider whether a bond is able to withstand S&P's base-case loss assumptions. To maintain a rating in categories between 'B' (the base case) and 'AAA', S&P assess whether the class can withstand losses exceeding the base-case assumption at a percentage specific to each rating category, up to 150% for a 'AAA' rating. For example, S&P would assess whether one class could withstand approximately 110% of S&P's base-case loss assumptions to maintain a 'BB' rating, while S&P would assess whether a different class could withstand approximately 120% of S&P's base-case loss assumptions to maintain a 'BBB' rating. For prime jumbo transactions, to maintain a 'AAA' rating, S&P consider whether a class is able to withstand approximately 235% of S&P's base-case loss assumptions, subject to individual caps and qualitative factors applied to specific transactions. For a class for which we've affirmed a 'B' rating, S&P consider whether a bond is able to withstand S&P's base-case loss assumptions. To maintain a rating in categories between 'B' (the base case) and 'AAA', S&P assess whether the class can withstand losses exceeding the base-case assumption at a percentage specific to each rating category, up to 235% for a 'AAA' rating. For example, S&P would assess whether one class could withstand approximately 127% of S&P's base-case loss assumptions to maintain a 'BB' rating, while S&P would assess whether a different class could withstand approximately 154% of S&P's base-case loss assumptions to maintain a 'BBB' rating. The lowered ratings reflect S&P's belief that the amount of credit enhancement available for the downgraded classes is not sufficient to cover losses at the previous rating levels, given S&P's current projected losses. The affirmations reflect S&P's belief that there is sufficient credit enhancement to support the ratings at their current levels. Certain senior classes also benefit from senior-support classes that would provide support to a certain extent before any applicable losses could affect the super-senior certificates. The subordination of classes within each structure provides credit support for the affected transactions. The collateral backing these deals originally consisted predominantly of Alt-A, first-lien, fixed-rate, adjustable-rate, or negative-amortization residential mortgage loans secured by one- to four-family properties. S&P monitors these transactions to incorporate updated losses and delinquency pipeline performance to assess whether, in S&P's view, the applicable credit enhancement features are sufficient to support the current ratings. S&P will continue to monitor these transactions and take additional rating actions as S&P deem appropriate. Rating Actions Chevy Chase Funding LLC Mortgage Backed-Certificates, Series 2006-3 Trust Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 16678YAA0 CCC A A-2 16678YAB8 CCC A/Watch Neg A-NA CCC A IO CCC AAA/Watch Neg NIO CCC AAA/Watch Neg B-1 16678YAC6 CC B/Watch Neg B-1NA CC B/Watch Neg B-2 16678YAD4 CC CCC B-2NA CC CCC B-3 16678YAE2 CC CCC B-3NA CC CCC GSR Mortgage Loan Trust 2006-4F Series 2006-4F Rating ------ Class CUSIP To From ----- ----- -- ---- 1A-1 362650AA1 B BB/Watch Neg 2A-1 362650AB9 B BB/Watch Neg 2A-2 362334QD9 B BB/Watch Neg 2A-3 362650AC7 BB BB/Watch Neg 2A-4 362650AD5 B BB/Watch Neg 2A-5 362650AE3 B BB/Watch Neg 2A-6 362650AF0 B BB/Watch Neg 2A-7 362650AG8 B BB/Watch Neg 2A-8 362650AH6 B BB/Watch Neg 2A-9 362650AJ2 B BB/Watch Neg 2A-10 362650AK9 AAA AAA/Watch Neg 2A-11 362650AL7 B BB/Watch Neg 3A-1 362650AM5 BBB A-/Watch Neg 3A-2 362650BP7 B BB/Watch Neg 4A-1 362650AN3 B BB/Watch Neg 4A-2 362650AP8 B BB/Watch Neg 5A-1 362650AQ6 BB BB/Watch Neg 5A-2 362650AR4 BB BB/Watch Neg 5A-3 362650AS2 AAA AAA/Watch Neg 5A-4 362650AT0 AAA AAA/Watch Neg 5A-5 362650AU7 AAA AAA/Watch Neg 5A-6 362650AV5 BB BB/Watch Neg 5A-7 362650AW3 AAA AAA/Watch Neg 5A-8 362650AX1 AAA AAA/Watch Neg 5A-9 362650AY9 BB BB/Watch Neg 5A-10 362650AZ6 AAA AAA/Watch Neg 5A-11 362650BA0 B BB/Watch Neg 6A-1 362650BB8 B BB/Watch Neg 6A-2 362650BQ5 AAA AAA/Watch Neg 6A-3 362650BR3 B BB/Watch Neg A-P 362650BC6 B BB/Watch Neg A-X 362650BD4 AAA AAA/Watch Neg B-1 362650BF9 CCC B/Watch Neg B-2 362650BG7 CC CCC Harborview Mortgage Loan Trust 2005-14 Series 2005-14 Rating ------ Class CUSIP To From ----- ----- -- ---- 2-A-1A 41161PWT6 B AAA/Watch Neg 2-A-1B 41161PYR8 CCC AA/Watch Neg 3-A-1A 41161PWU3 B AAA/Watch Neg 3-A-1B 41161PYS6 CCC BB+/Watch Neg 4-A-1A 41161PWV1 B AAA/Watch Neg 4-A-1B 41161PYT4 CCC BB+/Watch Neg 5-A-1A 41161PWW9 B AAA/Watch Neg 5-A-1B 41161PYU1 CCC BB+/Watch Neg B-1 41161PWZ2 CC B/Watch Neg B-2 41161PXA6 CC CCC B-3 41161PXB4 CC CCC Harborview Mortgage Loan Trust 2006-12 Series 2006-12 Rating ------ Class CUSIP To From ----- ----- -- ---- 1A-1A 41162DAA7 CC CCC 2A-1A2 41162DAC3 CCC BBB 2A-1A3 41162DAD1 CCC B 2A-2B 41162DAG4 CCC B B-1 41162DAJ8 CC CCC Morgan Stanley Mortgage Loan Trust 2007-13 Series 2007-13 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A-1 61756HAA8 CCC B/Watch Neg 1-A-2 61756HAB6 BB AAA/Watch Neg 1-A-3 61756HAC4 CCC B/Watch Neg 1-A-P 61756HAD2 CCC B/Watch Neg 1-A-X 61756HAE0 BB AAA 2-A-1 61756HAF7 CCC B/Watch Neg 2-A-2 61756HAG5 BB AAA/Watch Neg 2-A-3 61756HAH3 CCC B/Watch Neg 2-A-P 61756HAJ9 CCC B/Watch Neg 3-A-1 61756HAK6 CCC AAA/Watch Neg 3-A-2 61756HAL4 CC B/Watch Neg 4-A-1 61756HAM2 CCC B/Watch Neg 4-A-2 61756HAN0 CC B 4-A-3 61756HAP5 CCC B/Watch Neg 4-A-4 61756HAQ3 BB AAA/Watch Neg 4-A-5 61756HAR1 CCC B/Watch Neg 4-A-6 61756HAS9 BB AAA/Watch Neg 4-A-7 61756HAT7 CCC B/Watch Neg 4-A-8 61756HAU4 BB AAA/Watch Neg 4-A-9 61756HAV2 CCC B/Watch Neg 4-A-10 61756HAW0 CCC B/Watch Neg 4-A-11 61756HAX8 CCC B 7-A18 61756HCL2 CCC B/Watch Neg 7-A-X 61756HCM0 B AAA 3-B-1 61756HCR9 CC CCC 3-B-2 61756HCS7 CC CCC 3-B-3 61756HCT5 CC CCC 3-B-4 61756HCY4 CC CCC 6-A-1 61756HBN9 CCC AA/Watch Neg 6-A-2 61756HBP4 CCC B/Watch Neg 6-A-3 61756HBQ2 CCC AA/Watch Neg 6-A-4 61756HBR0 CCC AA/Watch Neg 6-A-5 61756HBS8 CCC AA/Watch Neg 7-A-1 61756HBT6 CCC AA/Watch Neg 7-A-2 61756HBU3 CCC B/Watch Neg 7-A-3 61756HBV1 CCC AA 7-A-4 61756HBW9 B AAA/Watch Neg 7-A-5 61756HBX7 CCC AA/Watch Neg 7-A-6 61756HBY5 CCC AA/Watch Neg 7-A-7 61756HBZ2 CCC B/Watch Neg 7-A-8 61756HCA6 B AAA/Watch Neg 7-A-9 61756HCB4 CCC AA/Watch Neg 7-A-10 61756HCC2 CCC AA 7-A-11 61756HCD0 B AAA/Watch Neg 7-A-12 61756HCE8 CCC B/Watch Neg 7-A-13 61756HCF5 CCC AA/Watch Neg 7-A-14 61756HCG3 CC AA 7-A-15 61756HCH1 CCC AA/Watch Neg 7-A-16 61756HCJ7 CCC AA 7-A-17 61756HCK4 CCC AA/Watch Neg 4-A-12 61756HAY6 CCC B 4-A-13 61756HAZ3 CCC B/Watch Neg 4-A-14 61756HBA7 CCC B 4-A-15 61756HBB5 CCC B/Watch Neg 4-A-16 61756HBC3 CCC B/Watch Neg 4-A-17 61756HBD1 CCC B/Watch Neg 4-A-18 61756HBE9 CCC B 4-A-19 61756HBF6 CCC B 4-A-X 61756HBG4 BB AAA B-1 61756HCN8 CC CCC B-2 61756HCP3 CC CCC B-3 61756HCQ1 CC CCC B-4 61756HCV0 CC CCC 5-A-1 61756HBH2 CCC AA/Watch Neg 5-A-2 61756HBJ8 CCC B/Watch Neg 5-A-3 61756HBK5 B AAA/Watch Neg 5-A-4 61756HBL3 CCC AA/Watch Neg 5-A-P 61756HBM1 CCC B/Watch Neg Structured Asset Mortgage Investments II Grantor Trust 2007-AR3 Series 2007-AR3 CLASS I-A-4B Rating ------ Class CUSIP To From ----- ----- -- ---- I-A-4B 86363QAA0 CCC AAA/Watch Neg Structured Asset Mortgage Investments II Grantor Trust 2007-AR3 Series 2007-AR3 CLASS II-A-3B Rating ------ Class CUSIP To From ----- ----- -- ---- II-A-3B 86363QAB8 CCC AAA/Watch Neg Structured Asset Mortgage Investments II Trust 2006-AR7 Series 2006-AR7 Rating ------ Class CUSIP To From ----- ----- -- ---- A-2A 86361HAC8 CCC AAA A-2B 86361HAD6 CCC AAA A-4 86361HAG9 CCC AAA A-5 86361HAH7 CCC AAA A-6 86361HAJ3 CCC AAA A-9 86361HAM6 B AAA A-10 86361HAN4 B AAA A-11 86361HAP9 B AAA A-12 86361HAQ7 CCC AAA A-13A 86361HAR5 CCC BBB/Watch Neg B-1 86361HAU8 CC B/Watch Neg B-2 86361HAV6 CC CCC B-3 86361HAW4 CC CCC B-4 86361HAX2 CC CCC B-5 86361HAY0 CC CCC Structured Asset Mortgage Investments II Trust 2007-AR3 Series 2007-AR3 Rating ------ Class CUSIP To From ----- ----- -- ---- I-A-1 86363NAA7 AAA AAA/Watch Neg I-A-2 86363NAB5 BB AAA/Watch Neg I-A-3 86363NAC3 BB AAA/Watch Neg I-A-4A 86363NAD1 CCC AAA/Watch Neg I-A-4B 86363NAR0 CCC AAA/Watch Neg I-A-5 86363NAX7 CCC AAA/Watch Neg I-B-1 86363NAG4 CC AA+/Watch Neg I-B-2 86363NAH2 CC AA/Watch Neg I-B-3 86363NAJ8 CC AA-/Watch Neg I-B-4 86363NAK5 CC A+/Watch Neg I-B-5 86363NAL3 CC A/Watch Neg I-B-6 86363NAM1 CC A-/Watch Neg I-B-7 86363NAN9 CC BBB/Watch Neg I-B-8 86363NAP4 CC BBB-/Watch Neg I-B-9 86363NAQ2 CC BB+/Watch Neg II-A-2 86363NAZ2 CCC AAA/Watch Neg II-A-3A 86363NBA6 CCC AAA/Watch Neg II-A-3B 86363NBG3 CCC AAA/Watch Neg II-B-1 86363NBB4 CC BB/Watch Neg II-B-2 86363NBC2 CC B/Watch Neg II-B-3 86363NBD0 CC CCC Structured Asset Mortgage Investments II Trust 2007-AR4 Series 2007-AR4 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 86364MAA8 AAA AAA/Watch Neg A-2 86364MAB6 B AAA/Watch Neg A-3 86364MAC4 B AAA/Watch Neg A-5 86364MAE0 B AAA/Watch Neg A-6 86364MAF7 CCC AAA/Watch Neg A-7 86364MAG5 CCC AAA/Watch Neg B-1 86364MAK6 CC AA+/Watch Neg B-2 86364MAL4 CC AA+/Watch Neg B-3 86364MAM2 CC AA/Watch Neg B-4 86364MAN0 CC AA-/Watch Neg B-5 86364MAP5 CC A+/Watch Neg B-6 86364MAQ3 CC A/Watch Neg B-7 86364MAR1 CC A-/Watch Neg B-8 86364MAS9 CC BBB+/Watch Neg B-9 86364MAT7 CC BBB/Watch Neg Ratings Affirmed Harborview Mortgage Loan Trust 2006-12 Series 2006-12 Class CUSIP Rating ----- ----- ------ 2A-1A1 41162DAB5 AAA 2A-1B 41162DAE9 AAA 2A-2A 41162DAF6 AA 2A-2C 41162DAH2 AAA Structured Asset Mortgage Investments II Trust 2006-AR7 Series 2006-AR7 Class CUSIP Rating ----- ----- ------ A-1A 86361HAA2 AAA A-1B 86361HAB0 AAA A-3 86361HAF1 AAA A-8 86361HAL8 AAA A-13B 86361HAS3 BBB X 86361HAT1 AAA Structured Asset Mortgage Investments II Trust 2007-AR3 Series 2007-AR3 Class CUSIP Rating ----- ----- ------ I-X-1 86363NAE9 AAA I-X-2 86363NAF6 AAA II-A-1 86363NAY5 AAA Structured Asset Mortgage Investments II Trust 2007-AR4 Series 2007-AR4 Class CUSIP Rating ----- ----- ------ A-4A 86364MAD2 AAA A-4B 86364MAU4 AAA X-1 86364MAH3 AAA X-2 86364MAJ9 AAA * S&P Downgrades Ratings on 6,198 Classes From 611 RMBS Deals ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 6,198 classes from 611 residential mortgage-backed securities transactions backed by U.S. Alternative-A mortgage loan collateral issued in 2005, 2006, and 2007. S&P removed 3,945 of the lowered ratings from CreditWatch with negative implications. In addition, S&P affirmed its ratings on 2,125 classes from these transactions and from 52 additional transactions and removed 221 of the affirmed ratings from CreditWatch negative. In total, the downgrades affected $235.21 billion of RMBS certificates. The downgrades reflect S&P's opinion that projected credit support for the affected classes is insufficient to maintain the previous ratings, given S&P's current projected losses. To assess the creditworthiness of each class, S&P reviewed the individual delinquency and loss trends of each transaction for changes, if any, in risk characteristics, servicing, and the ability to withstand additional credit deterioration. In order to maintain a 'B' rating on a class, S&P assessed whether, in its view, a class could absorb the base-case loss assumptions S&P used in S&P's analysis. In order to maintain a rating higher than 'B', S&P assessed whether the class could withstand losses exceeding the base-case assumption at a percentage specific to each rating category, up to 150% for a 'AAA' rating. For example, in general, S&P would assess whether one class could withstand approximately 110% of S&P's base-case loss assumptions to maintain a 'BB' rating, while S&P would assess whether a different class could withstand approximately 120% of S&P's base-case loss assumptions to maintain a 'BBB' rating. Each class with an affirmed 'AAA' rating can, in S&P's view, withstand approximately 150% of S&P's base-case loss assumptions under S&P's analysis. The affirmed ratings reflect S&P's belief that the amount of credit enhancement available for these classes is sufficient to cover the losses associated with the current rating levels. Subordination provides credit support for the affected transactions. In addition, some classes also benefit from overcollateralization and excess spread. The underlying pool of loans backing these transactions consists of different combinations of fixed- and adjustable-rate, hybrid, and option adjustable-rate mortgage Alt-A mortgage loans. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed Chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. The Sunday TCR delivers securitization rating news from the week then-ending. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Danilo Munnoz, Joseph Medel C. Martirez, Denise Marie Varquez, Philline Reluya, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2009. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***