/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/100725.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, July 25, 2010, Vol. 14, No. 204 Headlines ALPINE III: Moody's Downgrades Ratings on Various Classes of Notes BANC OF AMERICA: Fitch Downgrades Ratings on Various Certificates BANC OF AMERICA: S&P Downgrades Rating on Class SM-J Certs. BOMBARDIER CAPITAL: S&P Corrects Rating on Class M-1 Notes to 'D' BOMBARDIER CAPITAL: S&P Downgrades Rating on Class A to 'B+' CFSB ABS: Moody's Downgrades Rating on Series 2002-HE16 Notes CGCMT 2006-FL2: Fitch Downgrades Ratings on Two 2006-FL2 Certs. CITIGROUP COMMERCIAL: Moody's Upgrades Ratings on Five Classes CLYDESDALE CLO: Moody's Upgrades Ratings on Three Classes COMMERCIAL MORTGAGE: Fitch Downgrades Ratings on 1998-C2 Certs. COMMODORE CDO: Moody's Downgrades Ratings on Two Classes COMMODORE CDO: Moody's Downgrades Ratings on Three Classes CREDIT AND REPACKAGED: Moody's Downgrades Ratings on 2006-8 Notes CREDIT SUISSE: Fitch Downgrades Ratings on Five 2001-CK3 Certs. CREDIT SUISSE: Fitch Downgrades Ratings on 2001-CF2 Certs. CREDIT SUISSE: Fitch Downgrades Ratings on Four 2006-TFL1 Notes EDUCATION FUNDING: S&P Downgrades Ratings on Three Classes FRANKLIN AUTO: Moody's Reviews Ratings on Eight Tranches GE-WMC ASSET-BACKED: Moody's Downgrades Ratings on 11 Tranches GMAC COMMERCIAL: Fitch Downgrades Ratings on 2000-C1 Certs. GMAC COMMERCIAL: S&P Downgrades Rating on Class M Certs. to 'D' GRAMERCY CAPITAL: Moody's Does Not Take Rating Action on Bonds GREENWICH CAPITAL: Fitch Affirms Ratings on 10 2004-FL2 Notes GREENWICH CAPITAL: S&P Downgrades Ratings on Five 2006-FL4 Certs. GSC ABS: Fitch Downgrades Ratings on Five Classes of Notes HELIOS FINANCE: Moody's Upgrades Ratings on Two 2007-S1 Notes HOMETOWN COMMERCIAL: S&P Downgrades Ratings on Various Certs. INGRESS CDO: Fitch Takes Various Rating Actions on Classes JER CRE: Moody's Downgrades Ratings on Four Classes of Notes JP MORGAN: Fitch Affirms Ratings on Series 1998-C6 Certificates JP MORGAN: Fitch Downgrades Ratings on 12 2003-PM1 Certificates JP MORGAN: Fitch Downgrades Ratings on Series 2001-C1 Certs. JP MORGAN: Moody's Affirms Ratings on 12 2004-C1 Certificates JP MORGAN: Moody's Upgrades Ratings on Two 2000-C9 Certificates JPMORGAN CHASE: S&P Downgrades Ratings on 2002-C3 Certificates JWS CBO: Moody's Upgrades Ratings on Three Classes of Notes KINGSLAND IV: Moody's Confirms Ratings on Class E Notes to 'Ca' LACKAWANNA COUNTY: S&P Downgrades Rating on GO Debt to 'BB' LACKAWANNA COUNTY: S&P Withdraws 'BB' Rating on GO Debt LB-UBS COMMERCIAL: Moody's Reviews Ratings on 12 2005-C1 Certs. LB-UBS COMMERCIAL: S&P Downgrades Rating on Class N Certs. to 'D' LEHMAN ABS: S&P Downgrades Rating on Class A-2 Certs. to 'CC' LIBERTY SQUARE: Moody's Upgrades Ratings on Various Classes M-2 SPC: Moody's Downgrades Ratings on Various Series of Notes MAGNOLIA FINANCE: S&P Withdraws Ratings on Various Classes MERRILL LYNCH: Moody's Downgrades Ratings on 135 Tranches MOB MANAGEMENT: Moody's Withdraws 'B1' Rating on Series 2001 A MORGAN STANLEY: Fitch Downgrades Ratings on 1999-LIFE1 Certs. MORGAN STANLEY: Fitch Upgrades Ratings on 2002-IQ2 Certificates MORGAN STANLEY: Moody's Downgrades Ratings on 251 Tranches MORGAN STANLEY: S&P Downgrades Rating on Class F Certs. to 'D' MORTGAGE CAPITAL: Fitch Affirms Ratings on 1998-MC2 Certs. ORANGE COUNTY: S&P Downgrades Rating on 1998C Bonds to 'BB-' PARADIGM FUNDING: Moody's Withdraws Rating on ABCP Program PEOPLE'S CHOICE: Moody's Downgrades Ratings on 23 Tranches PERITUS I: Moody's Upgrades Ratings on Three Classes of Notes POPULAR ABS: Moody's Downgrades Ratings on 99 Tranches PRUDENTIAL SECURITIES: Fitch Affirms Ratings on 1995-MCF2 Certs. RESTRUCTURED ASSET: S&P Cuts Ratings on 2004-2-A Notes to 'BB+' RFMSI SERIES: Moody's Upgrades Ratings on Six Tranches SALOMON BROTHERS: Fitch Affirms Ratings on 1999-C1 Certificates SALS B-2005-1: Moody's Downgrades Ratings on Various Notes SALT CREEK: S&P Downgrades Rating on Class B-6$L 2005-1 Notes SAXON ASSET: Moody's Downgrades Ratings on 46 Tranches SONOMA VALLEY: Moody's Downgrades Ratings on Three Classes SONOMA VALLEY: Moody's Downgrades Ratings on Two Classes of Notes SOVEREIGN COMMERCIAL: Moody's Affirms Ratings on Three Certs. TW HOTEL: S&P Affirms Ratings on 14 2005-LUX Certificates VALEO INVESTMENT: Moody's Upgrades Ratings on Class A-2 Notes WACHOVIA BANK: Moody's Affirms Ratings on Seven 2005-C17 Certs. WAMU MORTGAGE: Moody's Downgrades Ratings on 20 Tranches WILBRAHAM CBO: Fitch Affirms Ratings on Two Classes of Notes WOODBURY UNIVERSITY: Moody's Affirms Rating on $18.9 Mil. Bonds * Fitch Downgrades Ratings on 194 Bonds From 120 RMBS Deals to 'D' * Fitch Takes Various Rating Actions on Six SF CDO Deals * S&P Downgrades Ratings on 76 Tranches From 27 TruPs CDO Deals * S&P Puts Ratings on Five Tranches on CreditWatch Negative * S&P Takes Rating Actions on Two Market Value CDO Transactions ********* ALPINE III: 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 Alpine III. Alpine III is a synthetic CDO that references municipal issuers. The reference pool consists of ISDA master agreement documenting swap, option and other derivative transactions. The transaction was closed in August 2004. -- US$60M Class A Floating Rate Notes due August 16, 2014 MTN Program, Downgraded to Aa1; previously on Aug 17, 2004 Assigned Aaa -- US$17.025M Class B Floating Rate Notes due August 16, 2014 MTN Program, Downgraded to A1; previously on Aug 17, 2004 Assigned Aa2 -- US$9M Class C Floating Rate Notes due August 16, 2014 MTN Program, Downgraded to Ba1; previously on Aug 17, 2004 Assigned Baa2 -- US$8.025M Class D Floating Rate Notes due August 16, 2014 MTN Program, Downgraded to B1; previously on Aug 17, 2004 Assigned Ba1 -- US$3M Class E Floating Rate Notes due August 16, 2014 MTN Program, Downgraded to B3; previously on Aug 17, 2004 Assigned Ba1 Moody's notes that the ratings of these notes will be withdrawn subsequently due to the lack of information. Moody's explains that it has downgraded the ratings due to deterioration in the credit quality of the reference pool. Rating concentration tests for the pool are currently failing. The covenants specify that bond obligations rated below Aaa, Aa1, Aa2, Aa3 and A1 may not be more than 65%, 50%, 35%, 20% and 10% respectively. Currently, these ratios, calculated as a percentage of the aggregate maximum exposure amount of $750M, are approximately 87%, 64%, 47%, 20% and 17% respectively. More than one third of the portfolio rely on financial guarantees from various guarantors. Approximately 14% of the entire portfolio is guaranteed by a financial guarantor whose Insurance Financial Strength rating is currently Caa2 on review for upgrade and a portion of these do not currently have any outstanding rated obligations. Approximately 6% of the entire portfolio does not have any ratings outstanding to derive the default probability. By way of comparison, the subordination available for various rated tranches ranges from 1.07% to 6.01%. Moody's notes that a credit event in the transaction occurs when there is a failure to pay on the relevant master agreements, and a failure to pay by the financial guarantor where such guarantee exists. Bond obligations of the reference entity are used to determine the valuation after the occurrence of a credit event. A portion of the portfolio has reference entities whose ratings have been withdrawn. For these reference entities, Moody's made various assumptions on their rating that range from Ba1 to Caa3, to arrive at default probability. Moody's assigned a default probability for each name according to the idealized corporate default rates. A default distribution is generated by CDOROM to evaluate the expected losses for the tranches. CDOROM is based on a Monte Carlo simulation framework, within which, defaults are generated so that they occur with the frequency indicated by the default probability for each credit in the pool. Correlated defaults are simulated using a normal (or "Gaussian") copula model that applies an asset correlation framework. BANC OF AMERICA: Fitch Downgrades Ratings on Various Certificates ----------------------------------------------------------------- Fitch Ratings downgrades, assigns Loss Severity Ratings, Recovery Ratings, and Rating Outlooks to Banc of America Commercial Mortgage Inc.'s commercial mortgage pass-through certificates, series 2001-1: -- $14.2 million class H to 'BB/LS5' from 'A-'; Outlook Negative; -- $13.3 million class J to 'CCC/RR1' from 'BBB'; -- $23.5 million class K to 'CC/RR5' from 'BB'; -- $2.1 million class L to 'C/RR6' from 'BB-'; -- $5.5 million class M to 'C/RR6' from 'B+'; -- $6.8 million class N to 'C/RR6' from 'CCC/RR1'. Fitch also affirms, assigns Outlooks, and LS Ratings to these classes: -- $319.7 million class A-2 at 'AAA/LS1'; Outlook Stable; -- $30.3 million class A-2F at 'AAA/LS1'; Outlook Stable; -- $35.6 million class B at 'AAA/LS4'; Outlook Stable; -- $21.3 million class C at 'AAA/LS5'; Outlook Stable; -- $19 million class D at 'AAA/LS5'; Outlook Stable; -- $9.5 million class E at 'AAA/LS5'; Outlook Stable; -- $9.5 million class F at 'AAA/LS5'; Outlook Stable; -- $19 million class G at 'AA/LS5'; Outlook Negative; -- $2.8 million class O at 'C/RR6'. Fitch withdraws the rating of the interest-only class X. Class A-1 has been paid in full. Class P was not rated by Fitch at issuance. The rating downgrades are due to an increase in expected losses on specially serviced assets coupled with expected losses following Fitch's prospective review of potential stresses to the transaction. Fitch expects losses of 6.3% of the remaining pool balance, approximately $33.4 million from the loans in special servicing and the loans that are not expected to refinance at maturity based on Fitch's refinance test. The majority of the Fitch total expected losses (92%) is associated with the specially serviced assets. The Ratings Outlooks reflect the likely direction of any rating changes over the next one to two years. As of the July 2010 distribution date, the pool's aggregate balance has decreased 44% to $532.1 million from $948.1 million at issuance. Forty-one loans (37.1%) have defeased. Fitch has designated 28 loans (30.1%) as Fitch Loans of Concern. These include the 15 specially serviced assets (15.5%) and four of the top 10 loans in the transaction (7.8%). The largest specially serviced asset (2.9%) is secured by a 239 room hotel located in Riverside, CA. The loan was transferred to special servicing in June 2010 due to the borrower's request for a discounted payoff of the loan. The special servicer is evaluating the borrower's request. The second largest specially serviced asset (2.7%) is secured by a 673,396 square foot industrial property located in Grand Blanc, MI. The loan was transferred to special servicing in May 2009 due to delinquency resulting from declining occupancy due to tenant vacancies. The special servicer has retained counsel for a possible foreclosure. The third largest specially serviced asset (2.3%) is secured by 159,000 sf office complex located in Irving, TX. The loan was transferred to special servicing in March 2010 due to the borrower's request for a 24-month maturity extension due to financial hardship. The special servicer is currently evaluating the borrower's request. Fitch stressed the cash flow of the remaining non-defeased loans by applying a 5% reduction to 2009 fiscal year end net operating income, 10% reduction to 2008, and 15% for all loans which did not report YE 2008 and applying an adjusted market cap rate between 7.25% and 10.5% to determine value. Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to pay off at maturity. Of the non-defeased or non-specially serviced loans, three loans (2.5% of the pool) incurred a loss when compared to Fitch's stressed value. BANC OF AMERICA: S&P Downgrades Rating on Class SM-J Certs. ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class SM-J commercial mortgage pass-through certificate from Banc of America Commercial Mortgage Inc.'s series 2005-1, a U.S. commercial mortgage-backed securities transaction, to 'D' from 'CCC-'. The downgrade follows principal losses sustained by the class. The July 12, 2010, remittance report reflected cumulative principal losses in the amount of $11,753 for the SM-J class. The principal losses are due to a modification to the Southdale Mall loan, the largest exposure in the transaction. As of the July 12, 2010, remittance report, the asset had a whole-loan balance of $158.2 million (9.0%), consisting of a $121.7 million (6.9%) pooled senior component and a $36.5 million (2.1%) nonpooled subordinate note, both included in the subject trust. The SM-A through SM-J nonpooled rake certificates derive 100% of their cash flows from this subordinate note. The loan was transferred to the special servicer, J.E. Robert Co. Inc., in February 2010 due to the borrower's inability to secure refinancing proceeds for the loan's April 1, 2010, maturity date. According to the July 2010 reporting documents, the loan was modified in April 2010 and returned to the master servicer, Bank of America N.A., in July 2010. The special servicer's comments indicate that the loan's maturity date was extended to April 1, 2013, its amortization schedule was modified to a 30-year schedule (the loan was interest-only prior to the modification), and the borrower paid down $28.0 million of the original principal balance of the senior component (which was $150.0 million). As a result of the principal paydown, the amount of cash flow available to service payments on the nonpooled rake certificates has been reduced, resulting in shortfalls on the most subordinate raked class, SM-J. Cumulative interest shortfalls on this class were $10,851 as of July 2010. Pursuant to the transaction's pooling and servicing agreement, principal intended to pay down the class SM-J certificate is being diverted to pay down the ongoing interest shortfalls that are affecting this class, resulting in the observed principal losses. S&P expects the principal losses to occur each month going forward. The loan is secured by 740,326 sq. ft. of a 1,181,355-sq.-ft. regional mall built in 1956 in Edina, Minn. The master servicer reported a debt service coverage of 1.58x for the whole-loan balance (2.07x for the senior component only) as of December 2009. Collateral occupancy was 58.0% as of March 2010. BOMBARDIER CAPITAL: S&P Corrects Rating on Class M-1 Notes to 'D' ----------------------------------------------------------------- Standard & Poor's Ratings Services corrected its rating on the class M-1 notes from Bombardier Capital Mortgage Securitization Corp.'s series 1999-A by lowering it to 'D' from 'CCC-'. Bombardier Capital Mortgage Securitization Corp. did not make the full interest payment on the class M-1 notes on its May 17, 2010, payment date. Due to an error, S&P's rating action on this class did not occur contemporaneously with the interest payment shortfall. Rating Corrected Bombardier Capital Mortgage Securitization Corp. Series 1999-A Rating ------ Class To From ----- -- ---- M-1 D CCC- BOMBARDIER CAPITAL: S&P Downgrades Rating on Class A to 'B+' ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its rating on the class A notes from Bombardier Capital Mortgage Securitization Corp.'s series 1998-C to 'B+' from 'BB-'. S&P also affirmed its 'CCC-' rating on the class M-1 notes from the same series and its 'B' ratings on the four class A notes from series 1999-A. The downgrade of the class A notes from series 1998-C reflects S&P's view of the higher-than-expected cumulative net losses in the underlying collateral pool and the resulting reduction in hard credit enhancement supporting the notes to a level that is commensurate with the lower rating. The affirmations of the ratings on the four class A notes from series 1999-A reflect S&P's view that credit enhancement for the notes is adequate for the current ratings, despite S&P's view of the higher-than-expected cumulative net losses in the underlying collateral pool. The affirmation of the rating on the class M-1 notes from series 1998- C reflects S&P's continuing belief that M-1 noteholders will not receive ultimate repayment of their original principal investment. The collateral pool for both Bombardier Capital Mortgage Securitization Corp. transactions consists of installment sales contracts and mortgage loans secured by real estate and affixed manufactured homes. In the fourth quarter of 2001, Bombardier announced that it was exiting the manufactured housing loan origination business. In March 2006, Bombardier Capital Inc. resigned as servicer for these transactions and Green Tree Servicing LLC was assigned as the successor servicer. As of the June 15, 2010, payment date, the pool factor, or percentage of the initial pool balance that remains outstanding, was 24.70% for series 1998-C and 25.09% for series 1999-A. S&P calculates that to date, series 1998-C has experienced cumulative net losses amounting to 37.19% of the original pool balance, and series 1999-A has experienced cumulative net losses amounting to 37.68% of the original pool balance. Over the past several years, 90-plus-day delinquencies and repossessed inventory for both series have been steadily decreasing to their current levels of approximately 1.00%; however, the rate of losses has not decreased over the same time period. After reviewing the performance information S&P has received for the transactions to date, S&P raised its cumulative net loss expectations for both series to 45.0%-48.0%. Both revised loss expectations significantly exceed S&P's original expected base?case loss assumption at issuance. S&P's analysis assumes a loss severity of 80%-90%. At closing, credit support for both transactions was provided through a combination of subordination, overcollateralization, and excess spread. As of the June 15, 2010, payment date, overcollateralization had been depleted in both transactions and monthly excess spread for both transactions has been insufficient to cover monthly net losses. This has resulted in a significant number of the subordinated classes in both transactions being written down. Currently, classes M-1 and M-2 in the 1998-C transaction, which combined total 35.27% of the current pool balance, are providing the only hard credit enhancement to the class A notes. The class M-2 notes, which total 3.89% of the current pool balance, provide credit support to the class M-1 notes. The class M-1 notes in series 1999-A (29.38% of the current pool balance) provide the only hard credit enhancement to the class A notes. Table 1 Credit Support (%) As of the June 15, 2010, payment date Total hard Current total credit support hard credit Series Class at issuance(%)(i) support (i)(% of current) ------ ----- ----------------- ------------------------- 1998-C A 24.50 35.27 1998-C M-1 16.75 3.89 1998-C M-2 11.25 0 1998-C B-1 7.00 0 1999-A A 24.25 29.38 1999-A M-1 16.75 0 1999-A M-2 11.75 0 1999-A B-1 7.00 0 1999-A B-2 2.50 0 (i) Consists of overcollateralization, and subordination; excludes excess spread, which can provide additional enhancement. Standard & Poor's will continue to monitor the performance of these transactions to assess whether the credit enhancement remains sufficient, in S&P's view, to support the rating on the notes under various stress scenarios. Rating Lowered Bombardier Capital Mortgage Securitization Corp. Rating ------ Series Class To From ------ ----- -- ---- 1998-C A B+ BB- Ratings Affirmed Bombardier Capital Mortgage Securitization Corp. Series Class Rating ------ ----- ------ 1998-C M-1 CCC- 1999-A A-2 B 1999-A A-3 B 1999-A A-4 B 1999-A A-5 B CFSB ABS: Moody's Downgrades Rating on Series 2002-HE16 Notes ------------------------------------------------------------- Moody's Investors Service has downgraded the rating of one tranche issued by CFSB ABS Trust Series 2002-HE16. The underlying collateral consists of seasoned fixed-rate mortgage and adjustable-rate mortgage loans acquired from various subprime mortgage loan originator by DLJ Mortgage Capital, Inc. The downgrade is a result of a $24,989 write down on the Class B-1 and the balance of loans delinquent 60 days or more, including loans in foreclosure and real estate owned, compared to the credit enhancement provided by subordination and excess spread. The Class B-1 remains on review for downgrade as Moody's completes its review of this transaction. Moody's generally rates securities Caa1 or lower if it has a very high likelihood of taking a loss in the expected case. Complete rating action is: Issuer: Credit Suisse First Boston Mortgage Securities Corp. Series 2002-HE-16 -- Cl. B-1, Downgraded to Caa1 and Remains On Review for Possible Downgrade; previously on April 8, 2010 B1 Placed Under Review for Possible Downgrade CGCMT 2006-FL2: Fitch Downgrades Ratings on Two 2006-FL2 Certs. --------------------------------------------------------------- Fitch Ratings has downgraded two classes and assigned a Negative Rating Outlook to one class from CGCMT 2006-FL2 Floating Rate Commercial Mortgage Trust, series 2006-FL2, reflecting Fitch's base case loss expectation of 21.7% for the pooled classes. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. The Negative Outlook reflects additional sensitivity analysis related to further negative credit migration of the underlying collateral. Under Fitch's methodology, approximately 56.8% of the pool and all of the junior non-pooled participations are expected to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the average cash flow decline is 13.1% from fourth quarter 2009 cash flows. In its review, Fitch analyzed servicer- reported operating statements and rent rolls, updated property valuations, and recent lease and sales comparisons. Given that the loan positions within the pooled portion of the CMBS are the lower leveraged A-notes (average base case LTV of 136.5%), Fitch estimates the average recoveries on the pooled loans will be approximately 61.9% in the base case while the average recoveries on the more highly-leveraged non-pooled participations will be approximately 5.6%. The defaults are determined considering the total leverage of each asset, including additional B-notes and mezzanine debt; however, a default may not result in a loss to the pooled portion given its lower leverage position. The base case term and refinance DSCR for the pooled A-notes is 2.0 times and 1.11x, respectively. The transaction is collateralized by seven loans, four of which are secured by hotels (64.4%) and three secured by office properties (35.6%). One of the hotel properties (3.5%) has an office component. All of the final extension options on the loans are within the next two years and are: 31.6% in 2010 and 68.4% in 2011. Fitch identified one Loan of Concern within the pool, Snake River Lodge and Spa (8%), which is specially serviced. In addition, Fitch's analysis resulted in loss expectations for three loans in the base case stress scenario. The three contributors to losses (by unpaid principal balance) in the base case stress scenario are Radisson Ambassador Plaza Hotel and Casino (69.1% Loss Severity), and Snake River Lodge (9.5%). The largest contributor to loss under the 'B' stress, the Radisson Ambassador Plaza Hotel and Casino loan, is secured by a 233-room, full service hotel located one block from the beach in the Condado section of San Juan, Puerto Rico. Amenities include a 14,800 sf casino in the lobby, six meeting room facilities, a restaurant, a sports bar and a business center. The rooftop contains a pool, a poolside bar and grill and a fitness center. The hotel consists of two towers, one containing 146 standard guest rooms and a second tower containing 87 suites. Despite the capital improvements since issuance, performance has deteriorated with RevPAR reported at $90.21 as of year-end 2009, compared to $119.16 as of YE 2007. According to the YE 2009 STR report, RevPAR penetration was 98.4 indicating the hotel was trailing the market competition by a small margin. In addition, revenue from casino operations has significantly declined since issuance for an overall decline in hotel revenues of 20% since 2007. The third largest contributor to loss under the 'B' stress, the Snake River Lodge loan, is secured by an 88-room, full-service luxury hotel located at the base of the Jackson Hole mountain range, in Teton Village. Amenities include a 17,000 sf, five story destination spa, which includes 10 treatment rooms, a restaurant and bar, an indoor/outdoor pool, luxuriously furnished guestrooms, and 4,205 square feet of meeting space. The loan transferred to the special servicer in February 2010 due to a maturity default as a result of the borrower failing to meet the extension provisions of the loan or to refinance. The loan was originally structured with three extension options of which two have been exercised and one remains. The loan documents call for a new or replacement interest rate cap as well as a 1.20x DSCR hurdle for the third extension option. The special servicer is in negotiations with the borrower for a possible forbearance or extension of the loan; however, an extension workout would require the borrower pay down a portion of the loan in lieu of satisfying extension provisions. The loan remains current. Fitch has removed from Rating Watch Negative, downgraded, and assigned Recovery Ratings to these pooled classes: -- $22.4 million class K to 'CCC/RR5' from 'BBB'; -- $23.9 million class L to 'CC/RR6' from 'BB-'. Also, Fitch has removed from Rating Watch Negative, upgraded, and assigned Outlooks and Loss Severity ratings to these pooled classes: -- $24.1 million class E to 'AAA/LS4' from 'AA-'; Outlook Stable; -- $26.9 million class F to 'AAA/LS4' from 'A+'; Outlook Stable; -- $23.9 million class G to 'AA/LS4' from 'A'; Outlook Stable. In addition, Fitch has removed from Rating Watch Negative, affirmed, and assigned Outlooks and LS ratings to these pooled classes: -- $20.9 million class H at 'A-/LS4'; Outlook Stable; -- $22.4 million class J at 'BBB+/LS4'; Outlook Negative. Additionally, Fitch removed from Rating Watch Negative, downgraded, and assigned RRs to these non-pooled participation classes: -- $2 million class RAM-1 to 'CC/RR6' from 'BB-'; -- $2.4 million class RAM-2 to 'CC/RR6' from 'BB-'. Finally, Fitch removed from Rating Watch Negative, affirmed and assigned Outlooks to these non-pooled participation classes: -- $257,664 class CAC-1 at 'BBB+'; Outlook Stable; -- $176,519 class CAC-2 at 'BBB'; Outlook Stable; -- $205,253 class CAC-3 at 'BBB-'; Outlook Stable; -- $742,109 class CAN-1 at 'BBB+'; Outlook Stable; -- $1.1 million class CAN-2 at 'BBB'; Outlook Stable; -- $2.2 million class CAN-3 at 'BBB-'; Outlook Stable; -- $10.6 million class CNP-1 at 'BBB-'; Outlook Stable; -- $20.1 million class CNP-2 at 'BBB-'; Outlook Stable; -- $5.2 million class CNP-3 at 'BB+'; Outlook Stable; -- $1 million class DSG-1 at 'BBB-'; Outlook Stable. Fitch does not rate classes DHC-1, DHC-2, DHC-3, DSG-2, PHH-1, PHH-2, and SRL. Fitch withdraws the rating on interest-only classes X-2 and X-3. Classes A-1, A-2, X-1, B, C, D, HFL, HGI-1, HGI-2, HMP-1, HMP-2, HMP-3, WBD-1, WBD-2 and WPP have been paid in full. This transaction was analyzed according to the 'Surveillance Criteria for U.S. Commercial Real Estate Loan CDOs'. It applies stresses to property cash flows and uses debt service coverage ratio (DSCR) tests to project future default levels for the underlying portfolio. Recoveries are based on stressed cash flows and Fitch's long-term capitalization rates. This methodology was used to review this transaction as floating-rate CMBS loan pools are concentrated and similar in composition to CREL CDO pools. In many cases, the CMBS notes are senior portions of notes held in CDO transactions. The assets are generally transitional in nature, frequently underwritten with pro forma income assumptions that have not materialized as expected. Overrides to this methodology were applied on a loan-by-loan basis if the senior position of the CMBS note or property specific performance warranted an alternative analysis. For bonds rated 'B-' or better, the current credit enhancement levels were compared to the expected losses generated in each rating category divided by the total deal size. These classes were assigned LS ratings, which indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the expected loss for the collateral under the 'B' stress. LS ratings should always be considered in conjunction with probability of default indicated by a class' long-term credit rating. Fitch does not assign Outlooks or LS ratings to classes rated 'CCC' or lower. Outlooks were determined by further stressing the cash flows and fully recognizing all maturity defaults in all ratings stresses. The credit enhancements were then compared to the expected losses generated in each rating category to determine potential credit migration over the next two years. If the Outlook scenario would imply a lower rating, then the class was assigned a Negative Outlook. The ratings for bonds rated 'CCC' or lower, are based on a deterministic analysis. Bonds are rated 'C' when the expected losses on currently defaulted loans exceed a classes' respective credit enhancement level. Bonds are rated 'CC' when the combined base case expected losses on the currently defaulted loans and loans likely to default exceed a classes' respective credit enhancement level. Bonds are rated 'CCC' when the base case expected loss exceeds a classes' respective credit enhancement level. Bonds rated 'CCC' and below were assigned Recovery Ratings in order to provide a forward-looking estimate of recoveries on currently distressed or defaulted structured finance securities. Recovery Ratings are calculated by subtracting the base case expected losses in reverse sequential order from the pooled certificates. Any principal recoveries first pay interest shortfalls on the bonds and then sequentially through the classes. The remaining bond principal amount is divided by the current outstanding bond balance. The resulting percentage is used to assign the Recovery Ratings on the bonds. The assignment of 'RR4' to class H reflects modeled recoveries of 34.4% of its outstanding balance. The expected recovery proceeds are broken down: -- Present value of expected principal recoveries ($3.24 million); -- Present value of expected interest payments ($9,774); -- Total present value of recoveries ($3.25 million); -- Sum of undiscounted recoveries ($3.6 million). Classes are assigned a Recovery Rating of 'RR6' when the present value of the recoveries in each case is less than 10% of each class' principal balance CITIGROUP COMMERCIAL: Moody's Upgrades Ratings on Five Classes -------------------------------------------------------------- Moody's Investors Service upgraded five classes, downgraded one class and affirmed 16 classes of Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2006- FL2. The upgrade reflects the payoff of the City National Plaza Loan which had accounted for approximately 66% of the pool balance prior to the payoff. The downgrade is due to the increase in credit quality dispersion in the pool and the refinancing risk associated with loans approaching maturity in an adverse environment. All loans in the pool mature within the next 12 months. Loans secured by hotel properties now represent 64% of pool balance. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. The pooled classes are secured by seven loans totaling $164.3 million. The loans range in size from a little over 2% to 30% of the current pool balance. As of the July 16, 2010 distribution date, the transaction's aggregate certificate balance has decreased by approximately 86% to $179.8 million from $1.3 billion at securitization. Moody's weighted average loan to value ratio for the pooled trust mortgage balance is 89.6% compared to 87.3% at last review on March 18, 2010, and 61% at securitization. Moody's stressed debt service coverage ratio for the pooled trust mortgage balance is 0.98X, compared to 1.08X at last review and 1.66X at securitization. The pool has not experienced losses since securitization. There is currently one loan in special servicing, the Snake River Lodge & Spa Loan ($13.1 million -- 8% of the pooled balance) which is secured by a 93 room full-service hotel located in Jackson Hole, Wyoming. There is also $1.1 million of non-pooled (rake) trust debt, and a $12.8 million non-trust junior secured loan component. The loan was transferred to special servicing on February 11, 2010, because the low DSCR did not enable the borrower to exercise the one remaining extension option. The special servicer is in the process of negotiating a resolution with the borrower. Due to the decreased net cash flow of the property, Moody's current underlying rating is B3, unchanged from the last review. The largest pooled exposure is the Radisson Ambassador Plaza Hotel and Casino Loan ($50 million - 30% of the pooled balance) which is secured by a 233 room full-service hotel with a 15,000 square feet casino located in San Juan, Puerto Rico. There is also $4.4 million of rake trust debt, and $35.6 million in mezzanine debt. Casino revenue, which continues to represent more than 50% of the total revenue from the property, has declined since securitization. Year end 2005 casino revenue of $19.6 million declined to $14.6 million as of year-end 2009. In addition, Revenue per available room has decreased 26% from a high of $122 in 2006 to $90 in 2009. Due to the decline in property performance, Moody's LTV for the trust debt is 123% and Moody's stressed DSCR is 0.27X. Moody's current underlying rating for the pooled balance is B3, the same as at last review. The second largest pooled exposure is the CarrAmerica -- Pool 3 (National Portfolio) Loan ($28.8 million -- 17.5% of the pooled balance) which is the 7.5% portion of a pari passu split loan structure. There is also $3.8 million of rake trust debt, a $179 million non-trust junior secured loan component and $166 million in mezzanine debt. The portfolio contains approximately 8.7 million square feet, of which 6.0 million square feet represents the loan sponsor's wholly-owned interests and its percentage ownership interests in joint venture properties. Of the 6.0 million square feet, approximately 4.9 million square feet (22 properties) is secured by first mortgage liens and 1.1 million square feet (8 properties) is secured by a pledge of refinance and sale proceeds. The pledged properties represent approximately 8.4% of the total allocated trust balance. At securitization, the portfolio contained 19.4 million square feet, of which 13.9 million square feet was borrower owned collateral for the loan, including 11.6 million square feet in mortgage collateral and 2.3 million square feet in pledged collateral. The outstanding trust balance has decreased by 72.3% since securitization from the payment of loan collateral release premiums. The portfolio has geographic concentration in the San Jose, California metro area, with 61.4% of the mortgage collateral by NRA (16 properties) located in San Jose, Santa Clara, Palo Alto and Sunnyvale. The suburban San Jose office market has a Fourth Quarter 2009 Moody's Red-Yellow-Green(R) score of Red (6). As of September 2009, the loan collateral secured by first mortgage liens had a weighted average occupancy rate of 78%, compared to 85% for the current portfolio at Moody's last full review and 87% at securitization. The market fundamentals within the Silicon Valley market have deteriorated significantly. The San Jose Class A office market posted a 31% vacancy rate as of 4th quarter 2009, along with an 11% decline in market rents during 2009 with an additional 11% decline projected for 2010 (Source: CB Richard Ellis). The San Jose R&D market vacancy rate was 18% with a market rent decline of 15% in 2009 and a further 4% decline projected through 2011. It is anticipated that the portfolio's revenue will decrease as current leases expire and new leases are signed at lower rents. Moody's LTV for the trust debt is 95%, based on mortgage collateral only and Moody's stressed DSCR is 1.12X. Moody's underlying rating for the pooled balance is Baa3, unchanged from last review. The third largest pooled exposure is the Doubletree Suites Galleria Loan ($26 million -- 15.8% of pooled balance) which is secured by a 355-room full service hotel located in the Galleria submarket in Houston, Texas. There is also $2.4 million of rake trust debt, and $25.3 million of non-trust junior secured debt. Revenue per available room has decreased 13% from a high of $113 in 2008 to $98 for the trailing twelve month period ending September 2009. Due to the decline in property performance, Moody's LTV for the trust debt is 79.8% and Moody's stressed DSCR is 0.79X. Moody's current underlying rating for the pooled balance is Baa3, the same as at last review. Moody's rating action is: -- Class E, $24,052,896, Upgraded to Aaa; previously on March 18, 2010 Downgraded to Aa3 -- Class F, $26,855,000, Upgraded to Aaa; previously on March 18, 2010 Downgraded to A2 -- Class G, $23,871,000, Upgraded to Aa1; previously on March 18, 2010 Downgraded to Baa1 -- Class H, $20,887,000, Upgraded to A1; previously on March 18, 2010 Downgraded to Baa3 -- Class J, $22,379,000, Upgraded to A3; previously on March 18, 2010 Downgraded to Ba1 -- Class K, $22,380,000, Affirmed at Ba3; previously on March 18, 2010 Downgraded to Ba3 -- Class L, $23,871,082, Downgraded to Caa1; previously on March 18, 2010 Downgraded to B3 -- Class X-2, Notional, Affirmed at Aaa; previously on November 14, 2006 Assigned Aaa -- Class X-3, Notional, Affirmed at Aaa; previously on November 14, 2006 Assigned Aaa -- Class RAM-1, $2,000,000, Affirmed at Caa1; previously on March 18, 2010 Downgraded to Caa1 -- Class RAM-2, $2,400,000, Affirmed at Caa2; previously on March 18, 2010 Downgraded to Caa2 -- Class DSG-1, $1,000,000, Affirmed at Ba1; previously on March 3, 2009 Downgraded at Ba1 -- Class DSG-2, $1,400,000, Affirmed at Ba2; previously on March 3, 2009 Downgraded at Ba2 -- Class DHC-1, $975,993, Affirmed at B3; previously on March 18, 2010 Downgraded to B3 -- Class DHC-2, $1,073,592, Affirmed at Caa1; previously on March 18, 2010 Downgraded to Caa1 -- Class SRL, $1,100,000, Affirmed at Caa2; previously on March 18, 2010 Downgraded to Caa2 -- Class CAC-1, $257,664, Affirmed at Ba1; previously on March 18, 2010 Downgraded to Ba1 -- Class CAC-2, $176,519, Affirmed at Ba2; previously on March 18, 2010 Downgraded to Ba2 -- Class CAC-3, $205,253, Affirmed at Ba3; previously on March 18, 2010 Downgraded to Ba3 -- Class CAN-1, $710,989, Affirmed at Ba1; previously on March 18, 2010 Downgraded to Ba1 -- Class CAN-2, $1,054,145, Affirmed at Ba2; previously on March 18, 2010 Downgraded to Ba2 -- Class CAN-3, $2,067,150, Affirmed at Ba3; previously on March 18, 2010 Downgraded to Ba3 CLYDESDALE CLO: Moody's Upgrades Ratings on Three Classes --------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of these notes issued by Clydesdale CLO 2003 Ltd.: -- US$234,000,000 Class A Senior Secured Floating Rate Notes Due 2015 (current outstanding balance of $131,490,350), Upgraded to Aa1; previously on June 17, 2009 Downgraded to A1; -- US$19,000,000 Class B Second Priority Floating Rate Notes Due 2015, Upgraded to Baa3; previously on June 17, 2009 Downgraded to Ba2; -- US$13,000,000 Class C Third Priority Floating Rate Notes Due 2015, Upgraded to Caa1; previously on June 17, 2009 Downgraded to Caa3. According to Moody's, the rating actions taken on the notes result primarily from delevering of the Class A notes since the last rating action and increase in the overcollateralization levels of the notes. Since the last rating action on July 17, 2009, the Class A notes have been paid down by approximately $85 million, or roughly 39% of their outstanding balance reported in May 2009. Moody's expects delevering to continue as a result of the end of the deal's reinvestment period in September 2008. As a result of the delevering, the overcollateralization ratios have increased since the last rating action. Based on the latest trustee report dated June 7, 2010, the Class A, Class B, and Class C overcollateralization ratios increased to 126.6%, 113.0%, and 105.3%, respectively, compared to May 2009 levels of 119.8%, 110.3%, and 104.7, respectively. Moody's notes that the June overcollateralization levels do not reflect the principal payment of $27 million which was made to the Class A notes on the June 14, 2010 payment date. Moody's analyzed the transaction as if this payment had already occurred. Additionally, the dollar amount of defaulted securities has decreased to about $14 million from approximately $22MM in May 2009. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" and "Annual Sector Review (2009): Global CLOs," key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Clydesdale CLO 2003 Ltd., issued in September of 2003, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. COMMERCIAL MORTGAGE: Fitch Downgrades Ratings on 1998-C2 Certs. --------------------------------------------------------------- Fitch Ratings downgrades and assigns Recovery Ratings to these classes of Commercial Mortgage Acceptance Corp., series 1998-C2, commercial mortgage pass-through certificates: -- $65.1 million class J to 'CCC/RR2' from 'BB'; -- $21.7 million class K to 'C/RR5' from 'B+'. Fitch affirms and assigns Loss Severity ratings to these classes: -- $25.3 million class E at 'AAA/LS4'; Outlook Stable; -- $21.7 million class G at 'AAA/LS5'; Outlook Stable; -- $20.4 million class H at 'AA-/LS4'; Outlook Stable. The $10 million class L remains at 'D' and the RR has been revised to 'RR6' from 'RR5'. Fitch withdraws the rating of the interest-only class X. Fitch does not rate the $122.9 million class F. Classes A-1, A-2, A-3, B, C, and D have been paid in full. The downgrades are the result of Fitch's revised loss estimates for the transaction following Fitch's prospective analysis, which is similar to its recent vintage fixed-rate CMBS analysis. Fitch expects potential losses of 9.4%, approximately $28.4 million, of the remaining pool balance from the loans in special servicing and the loans that are not expected to refinance at maturity based on Fitch's refinance test. The Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. As of the July 2010 distribution date, the pool has paid down 88% to $302.8 million from $2.9 billion at issuance. Ten loans (14%) are defeased. Fitch has identified 21 Loans of Concern (32%), including seven loans in special servicing (17.4%). The largest specially serviced asset (4.7%) is a 239,540 sf grocery-anchored retail center located in Anderson, IN. The asset transferred to special servicing in August 2008 due to a discovery that the loan was cross collateralized and cross defaulted with another loan in the pool, currently the second largest specially serviced asset (4.3%), a 245,010 sf grocery anchored retail property located in Lafayette, IN, which was transferred to special servicing in May 2008. The special servicer filed a repurchase claim against the loan seller, Merrill Lynch, because it has been unable to obtain a signed copy of the Cross Guaranty and Contribution Agreement, which the borrower claims was never signed at closing. The repurchase claim was declined in December 2008 by the court. Subsequently in March 2010 the Indiana Court of Appeals ruled the loans are not crossed due to a lack of a signed and fully executed agreement. The borrower continues to pursue workouts on the loan. The third largest specially serviced asset (3.9%) is an office property located in Phoenix, AZ. The property is 100% vacant when its sole tenant, the IRS, vacated in mid-2009 at its lease expiration. The loan is greater than 90 days delinquent. The borrower continues to pursue workouts on the loan. Fitch stressed the cash flow of the remaining non-defeased loans by applying a 10% reduction to 2008 fiscal year end net operating income or adjusted 2009 cash flow based on performance issues, such as a significant decline in occupancy, and applying an adjusted market cap rate between 7.5% and 10.5% to determine value. Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to payoff at maturity. Under this scenario, eight loans are not expected to payoff at maturity with three loans incurring a loss when compared to Fitch's stressed value. COMMODORE CDO: Moody's Downgrades Ratings on Two Classes -------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of two classes of notes issued by Commodore CDO IV Ltd. The notes affected by the rating action are: -- US$220,000,000 Class A-1(a)-U Floating Rate Variable Funding Notes due 2045 (current balance of $52,473,921), Downgraded to Ca; previously on February 26, 2009 Downgraded to Caa2; -- US$36,000,000 Class A-1(b) Floating Rate Notes due 2045, Downgraded to C; previously on February 26, 2009 Downgraded to Ca. Commodore CDO IV Ltd., issued on August 19, 2005, is a collateralized debt obligation issuance backed by a portfolio that consists primarily of residential mortgage-backed securities and commercial mortgage-backed securities. RMBS comprise approximately 56% of the underlying portfolio, of which the majority are 2004 and 2005 vintage. According to Moody's, the rating downgrade actions are the result of deterioration in the credit quality of the underlying portfolio. Such credit deterioration is observed through numerous factors, including a decline in the average credit rating of the portfolio (as measured by an increase in the weighted average rating factor), an increase in the dollar amount of defaulted securities, failure of the coverage tests, and number of assets that are currently on review for possible downgrade. In particular, the weighted average rating factor, as reported by the trustee, has increased from 1668 in February 2009 to 2126 in July 2010. During the same time, the dollar amount of defaulted securities increased from $67.5 million to $107.5 million, and the Class A/B overcollateralization ratio decreased from 76.30% to 34.24%. Also, in April 2010, the ratings of approximately $29 million of pre-2005 RMBS in the underlying portfolio were placed on review for possible downgrade as a result of Moody's updated loss projections applicable to certain RMBS. Moody's explained that in arriving at the rating actions noted above, the ratings of subprime, Alt-A and Option-ARM RMBS which are currently on review for possible downgrade were stressed. For purposes of monitoring its ratings of SF CDOs with exposure to pre-2005 vintage RMBS, Moody's considered the various factors indicating continued negative performance that were described in Moody's press releases dated April 8th for subprime, April 12th for Option-ARM and April 13th for Alt-A. Such seasoned deals will have varying stress based on RMBS asset type. For pre-2005 Alt-A, Aaa rated securities were stressed by four notches, Aa rated securities by six notches, and A or Baa rated securities by nine notches. Pre-2005 Option-ARM securities currently rated Aaa were stressed by two notches, Aa and A by six notches, and Baa by nine notches. For pre-2005 subprime, Aaa and Aa rated securities were stressed by two notches, A rated securities were stressed by six notches, and Baa rated securities were stressed by nine notches. All subprime, Alt-A and Option-ARM RMBS securities which originated prior to 2005, are currently rated Ba or below, and are also currently on review for possible downgrade have been stressed to Ca. Moody's further explained that these stresses are based on a preliminary sample analysis of deals from a given vintage and asset type, and that they will be utilized in its SF CDO rating analysis while subprime, Alt-A and Option-ARM securities remain on review for downgrade. Current public ratings will be used for securities that have undergone an in depth review by Moody's RMBS team, and that are no longer on review for downgrade. COMMODORE CDO: 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 Commodore CDO III, Ltd. The notes affected by the rating action are: -- US$245,000,000 Class A-1A First Priority Senior Secured Floating Rate Notes (current balance of $68,696,639), Downgraded to Ca; previously on October 19, 2009 Downgraded to Caa3; -- US$83,300,000 Class A-1B First Priority Senior Secured Floating Rate Notes (current balance of $11,455,235), Downgraded to Caa3; previously on October 19, 2009 Downgraded to Caa1; -- US$16,700,000 Class A-1C First Priority Senior Secured Floating Rate Notes (current balance of $16,584,235), Downgraded to C; previously on October 19, 2009 Downgraded to Ca. Commodore CDO III, Ltd., issued on March 1, 2005, is a collateralized debt obligation issuance backed by a portfolio that consists primarily of residential mortgage-backed securities and commercial mortgage-backed securities. RMBS comprise approximately 77% of the underlying portfolio, of which the majority are from pre-2005 vintage. According to Moody's, the rating downgrade actions are the result of deterioration in the credit quality of the underlying portfolio. Such credit deterioration is observed through numerous factors, including a decline in the average credit rating of the portfolio (as measured by an increase in the weighted average rating factor), failure of the coverage tests, and number of assets that are currently on review for possible downgrade. In particular, the weighted average rating factor, as reported by the trustee, has increased from 1831 in September 2009 to 2065 in June 2010. During the same time, the Class A/B overcollateralization ratio decreased from 41.02% to 35.75%, and the coverage test is failing. Also, in April 2010, the ratings of approximately $76.8 million of pre-2005 RMBS in the underlying portfolio were placed on review for possible downgrade as a result of Moody's updated loss projections applicable to certain RMBS. Moody's explained that in arriving at the rating actions noted above, the ratings of subprime, Alt-A and Option-ARM RMBS which are currently on review for possible downgrade were stressed. For purposes of monitoring its ratings of SF CDOs with exposure to pre-2005 vintage RMBS, Moody's considered the various factors indicating continued negative performance that were described in Moody's press releases dated April 8th for subprime, April 12 for Option-ARM and April 13th for Alt-A. Such seasoned deals will have varying stress based on RMBS asset type. For pre-2005 Alt-A, Aaa rated securities were stressed by four notches, Aa rated securities by six notches, and A or Baa rated securities by nine notches. Pre-2005 Option-ARM securities currently rated Aaa were stressed by two notches, Aa and A by six notches, and Baa by nine notches. For pre-2005 subprime, Aaa and Aa rated securities were stressed by two notches, A rated securities were stressed by six notches, and Baa rated securities were stressed by nine notches. All subprime, Alt-A and Option-ARM RMBS securities which originated prior to 2005, are currently rated Ba or below, and are also currently on review for possible downgrade have been stressed to Ca. Moody's further explained that these stresses are based on a preliminary sample analysis of deals from a given vintage and asset type, and that they will be utilized in its SF CDO rating analysis while subprime, Alt-A and Option-ARM securities remain on review for downgrade. Current public ratings will be used for securities that have undergone an in depth review by Moody's RMBS team, and that are no longer on review for downgrade. CREDIT AND REPACKAGED: Moody's Downgrades Ratings on 2006-8 Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded its ratings of notes issued by Credit and Repackaged Securities Limited Series 2006-8, a corporate synthetic obligation transaction referencing a portfolio of corporate entities. -- US$200,000,000 Single Tranche Notes due September 20, 1013 Notes, Downgraded to C; previously on Feb 26, 2009 Downgraded to Ca Moody's explained that the rating action taken is the result of the deterioration of the credit quality of the reference portfolio which will lead to losses that are higher than what are implied by the previous Ca ratings. Since the last rating action, the portfolio has suffered further losses from the credit events on Ambac Assurance Corporation., Capmark Financial Group Inc., Cemex, S.A.B. de C.V., Syncora Guarantee Inc, and Financial Guaranty Insurance Company. These credit events couple with the credit events on Federal Home Loan Mortgage Corp., Federal National Mortgage Association, Kaupthing Bank hf, Lehman Brothers Holdings, Inc., and Washington Mutual, Inc have lead to a total losses of approximately 69% of the rated tranche. The portfolio has the highest industry concentrations in Banking (16%), Insurance (15%), and Finance (10%). CREDIT SUISSE: Fitch Downgrades Ratings on Five 2001-CK3 Certs. --------------------------------------------------------------- Fitch Ratings has downgraded five classes and assigned Rating Outlooks to several classes of Credit Suisse First Boston Mortgage Securities Corp.'s commercial mortgage pass-through certificates, series 2001-CK3. Fitch has also assigned Loss Severity ratings and Recovery Ratings to numerous classes. The downgrades are primarily due to an increase in realized losses since the last review as well as Fitch's expected losses on loans currently in special servicing. Fitch expects losses to fully deplete classes K and L, while classes M through O have already been reduced to zero. As of the June 2010 distribution date, the pool's aggregate principal balance has been reduced 38.2% to $696.8 million from $1.13 billion at issuance, which consists of 34.5% of paydown and 3.7% of realized losses. Thirty-five loans (35.8%) have defeased, including four (12.1%) of the top 10 loans. As of the June 2010 remittance, interest shortfalls are reaching class J. Expected loss as a percentage of the current deal balance is 2.6%. Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. Fitch has designated 20 loans (10%) as Fitch Loans of Concern, which includes nine specially serviced loans (5.7%). The largest specially serviced loan (1.5%) is secured by a 142,000 sf office building located in White Plains, NY. The $10.1 million 222 Bloomingdale Road loan transferred to the special servicer in July 2009 and is over 90 days delinquent as of the June 2010 remittance. The special servicer and the borrower are currently in negotiations for a DPO. Current occupancy is 78%, and the first-quarter 2010 DSCR was 0.50x. Fitch expects the trust to experience a loss on this loan. The second largest specially serviced loan (1.1%) is secured by a 267-unit multifamily property located in Austell, GA, approximately 17 miles west of downtown Atlanta. The $7.1 million Whisperwood Apartments loan transferred in March 2010 for imminent default and is over 90 days delinquent as of the June remittance. The special servicer is moving forward with foreclosure and Fitch expects the trust to experience a loss on this loan. The property's DSCR for 2009 was 0.17x and the most recent reported occupancy was 47%. Fitch stressed the value of the non-defeased loans by generally applying a 5% haircut to 2009 fiscal year-end net operating income (NOI) and applying an adjusted market cap rate between 7.50% and 10% to determine value. Similar to Fitch's prospective analysis of recent vintage commercial mortgage backed securities, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a DSCR of 1.25x or higher were considered to pay off at maturity. Of the non-defeased or non-specially serviced loans, 21 loans (11.3% of the overall pool) were assumed not to be able to refinance, of which Fitch modeled losses for four loans (0.8%) in instances where Fitch's derived value was less than the outstanding balance. Fitch has downgraded and assigned Rating Outlooks, LS ratings and RRs as indicated: -- $8 million class G-1 to 'A/LS4' from 'A+'; Outlook Negative; -- $11.7 million class G-2 to 'A/LS4' from 'A+'; Outlook Negative; -- $14.1 million class H to 'BB/LS4' from 'A-'; Outlook Negative; -- $24.8 million class J to 'CC/RR2' from 'BB+'; Outlook Negative; -- $9 million class K to 'C/RR6' from 'B+'; Outlook Negative. Fitch has affirmed and assigned Outlooks and LS ratings to these classes: -- $476.3 million class A-4 at 'AAA/LS1'; Outlook Stable; -- $42.3 million class B at 'AAA/LS3'; Outlook Stable; -- $56.3 million class C at 'AAA/LS3'; Outlook Stable; -- $11.3 million class D at 'AAA/LS5'; Outlook Stable; -- $14.1 million class E at 'AAA/LS4'; Outlook Stable; -- $25.4 million class F at 'AA+/LS4'; Outlook Stable; Fitch has affirmed and revised a Recovery Rating to this class: -- $3.6 million class L to 'D/RR6' from 'D/RR2'. Lastly, Fitch has affirmed class M, which has been reduced to zero by realized losses, at 'D/RR6'. The A-1, A-2 and A-3 classes have been paid in full. Classes M, N and O have been reduced to zero as a result of realized losses to the trust. Fitch withdraws the rating on the interest-only class A-X. Fitch did not rate classes N and O at issuance. CREDIT SUISSE: Fitch Downgrades Ratings on 2001-CF2 Certs. ---------------------------------------------------------- Fitch Ratings downgrades and assigns Recovery Ratings to these classes of Credit Suisse First Boston Mortgage Securities Corp., series 2001-CF2: -- $21.9 million class J to 'CCC/RR1' from 'BB'; -- $8.2 million class K to 'CC/RR1' from 'BB-'; -- $9.3 million class L to 'C/RR6' from 'B+'. In addition, Fitch affirms and assigns LS ratings and Rating Outlooks as indicated: -- $283 million class A-4 at 'AAA/LS1'; Outlook Stable; -- $43.8 million class B at 'AAA/LS4'; Outlook Stable; -- $49.3 million class C at 'AAA/LS4'; Outlook Stable; -- $10.9 million class D at 'AAA/LS5'; Outlook Stable; -- $16.4 million class E at 'AAA/LS5'; Outlook Stable; -- $18.9 million class F at 'AA/LS5'; Outlook Stable; -- $14 million class G at 'A+/LS5'; Outlook Negative; -- $16.4 million class H at 'A-/LS5'; Outlook Negative. The $1.7 million class M remains at 'D', and the Recovery Rating has been revised to 'RR6' from 'RR3'. Fitch withdraws the rating of the interest-only class A-X. The downgrades are the result of Fitch's revised loss estimates for the transaction following Fitch's prospective analysis, which is similar to its recent vintage fixed-rate CMBS analysis. Fitch expects potential losses of 4.3%, approximately $21.3 million, of the remaining pool balance from the loans in special servicing and the loans that are not expected to refinance at maturity based on Fitch's refinance test. The Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. As of the June 2010 distribution date, the pool has paid down 53% to $494.9 million from $1.1 billion at issuance. Thirty-one loans (32.3%) are defeased. Fitch has identified 32 Loans of Concern (20.7%), including 12 loans in special servicing (8.8%). The largest specially serviced asset (1.3%) is a 115-room, non- flagged, full-service hotel property located in Groten, CT. The asset transferred to special servicing in February 2009 for imminent default as a result of the borrower requesting for loan modification and relief from the lender due to property performance decline. The borrower continues to pursue workouts on the loan. The second largest specially serviced asset (1.2%) is an 86,072 square foot retail property located in Forest City, NC. The asset transferred to special servicing in July 2009 after the borrower sent a hardship letter to the master servicer informing that the anchor tenant, Goody's, which occupied 29% of the gross leasable area, filed Chapter 11 and subsequently vacated in February 2009. The loan is current, and the borrower has continued to cover the negative cash flow. The borrower recently released the vacated space to an outlet retailer increasing occupancy to 96.5% from 67.5%. Fitch stressed the cash flow of the remaining non-defeased loans by, generally, applying a 10% reduction to 2008 fiscal year-end net operating income, 5% reduction to 2009 fiscal-year-end net operating income, or adjusted 2009 cash flow based on performance issues, such as a significant decline in occupancy, and applying an adjusted market cap rate between 7.25% and 10% to determine value. Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to pay off at maturity. Under this scenario, 12 loans are not expected to pay off at maturity with nine loans incurring a loss when compared to Fitch's stressed value. CREDIT SUISSE: Fitch Downgrades Ratings on Four 2006-TFL1 Notes --------------------------------------------------------------- Fitch Ratings has downgraded four classes and affirmed eight classes of Credit Suisse First Boston Mortgage Securities Corp., series 2006-TFL1. CSFB 2006-TFL1 has only two loans remaining. The downgrades of classes H though L reflect base case losses of 3.6%, as well as concern over the ability of the Tharaldson Hotel Portfolio loan to refinance at maturity. This Fitch loan of concern, which comprises 87.7% of the pool, is highly leveraged with a base case stressed loan-to-value of 94% on the A-note and 157% on the total debt stack. In addition, its final extended maturity date is in April 2011. The downgrades are a result of inadequate credit enhancement to withstand Fitch's loss expectations, which incorporate prospective views of cash flow declines and commercial real estate market value declines. The Tharaldson Hotel Portfolio loan is secured by fee and/or leasehold interests in 105 limited service hotels (8,238 rooms). The portfolio, which is located across 26 states, consists of hotels with 14 different flags. Currently, in addition to the $478.5 million A-note, there are $177.5 million in B-notes and $145.1 million in mezzanine debt held outside the trust. Portfolio performance declined substantially enough in 2009 to trigger a financial covenant. As of November 2009, all excess cash flow after debt service is being swept into a lender- controlled reserve account as additional collateral for the loan. Under Fitch's updated analysis, the Tharaldson loan is modeled to default in the base case stress scenario, defined as the 'B' stress. The other loan in the transaction is secured by Charleston Place Hotel, a 442-room full-service luxury hotel located in the Historic District of Charleston, South Carolina. The collateral also includes approximately 50,000 square feet of retail space and a former theater that is used for meeting space and administrative offices. The loan is currently in its third and final extension period and matures in March 2011. Currently, in addition to the $67 million A-note, there is both B-note and mezzanine debt held outside the trust. Both subordinate loans are serviced only by excess cash flow and may accrue. Additionally, the theater portion of the property secures a $3 million senior lien in favor of the City of Charleston. Debt service on this senior lien is being escrowed in full by the borrower. In its base case scenario, the modeled average cash flow decline for the two assets is 6.6% from year end 2009 servicer-reported financial data. Fitch has downgraded and removed these classes from Rating Watch Negative, and assigned a Recovery Rating as indicated: -- $25 million class H to 'BBB' from 'A-', Outlook Stable; -- $27 million class J to 'BB' from 'BBB', Outlook Stable. -- $36 million class K to 'B' from 'BBB-', Outlook Negative; -- $32.5 million class L to 'CCC/RR4' from 'BBB-'. Fitch has affirmed and removed these classes from Rating Watch Negative, and assigned or revised Outlooks as indicated: -- $52 million class A-1 at 'AAA', Outlook to Stable from Negative; -- $195 million class A-2 at 'AAA', Outlook Stable; -- $39 million class B at 'AAA', Outlook Stable; -- $34 million class C at 'AA+', Outlook Stable; -- $27 million class D at 'AA'; Outlook Stable; -- $29 million class E at 'AA-'; Outlook Stable; -- $24 million class F at 'A+', Outlook Stable; -- $25 million class G at 'A', Outlook Stable. In addition, Fitch withdraws the rating of the interest-only classes A-X-1 and A-X-2. Class A-X-3 has paid in full. This transaction was analyzed according to the 'Surveillance Criteria for U.S. Commercial Real Estate Loan CDOs'. It applies stresses to property cash flows and uses debt service coverage ratio tests to project future default levels for the underlying portfolio. Recoveries are based on stressed cash flows and Fitch's long-term capitalization rates. This methodology was used to review this transaction as floating-rate commercial mortgage backed security loan pools are concentrated and similar in composition to CREL CDO pools. In many cases, the CMBS notes are senior portions of notes held in CDO transactions. The assets are generally transitional in nature, frequently underwritten with pro forma income assumptions that have not materialized as expected. Overrides to this methodology were applied on a loan-by-loan basis if the property specific performance warranted an alternative analysis. For bonds rated 'B-' or better, the current credit enhancement levels were compared to the expected losses generated in each rating category divided by the total deal size. These classes were assigned Loss Severity ratings, which indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the expected losses for the collateral in the 'B' stress. LS ratings should always be considered in conjunction with probability of default indicated by a class' long-term credit rating. Fitch does not assign Rating Outlooks or LS ratings to classes rated 'CCC' and lower. Rating Outlooks were determined by further stressing the cash flows and fully recognizing all maturity defaults in all ratings stresses. The credit enhancements were then compared to the expected losses generated in each rating category to determine potential credit migration over the next two years. If the Rating Outlook scenario would imply a lower rating, then the class was assigned a Negative Outlook. The ratings for bonds rated 'CCC' or lower are based on a deterministic analysis. Bonds are rated 'C' when the expected losses on currently defaulted loans exceed a class's respective credit enhancement level. Bonds are rated 'CC' when the combined base case expected losses on the currently defaulted loans and loans likely to default exceed a class's respective credit enhancement level. Bonds are rated 'CCC' when the base case expected loss exceeds a class's respective credit enhancement level. Bonds rated 'CCC' and below were assigned Recovery Ratings in order to provide a forward-looking estimate of recoveries on currently distressed or defaulted structured finance securities. Recovery Ratings are calculated by subtracting the base case expected losses in reverse sequential order from the pooled and non-pooled rake certificates. Any principal recoveries first pay interest shortfalls on the bonds and then sequentially through the classes. The remaining bond principal amount is divided by the current outstanding bond balance. The resulting percentage is used to assign the Recovery Ratings on the bonds. The assignment of 'RR4' to class L reflects modeled recoveries of 37% of its outstanding balance. The expected recovery proceeds are broken down: -- Present value of expected principal recoveries ($11.7 million) -- Present value of expected interest recoveries ($0.2 million) -- Total present value of recoveries ($11.9 million) -- Sum of undiscounted recoveries ($13.1 million) Classes are assigned a Recovery Rating of 'RR6' when the present value of the recoveries in each case is less than 10% of each class' principal balance. As there are only two loans remaining, one of which is over 87% of the remaining collateral, the transaction is similar to a U.S. CMBS single-borrower transaction. In addition to the CREL CDO methodology, Fitch reviewed the transaction in conjunction with its 'Rating U.S. Single-Borrower Commercial Mortgage Transactions,' including reviewing insurance requirements and borrower structure. As there is no current criteria for assigning Loss Severity ratings to single-borrower deals, none were assigned to this transaction's classes. EDUCATION FUNDING: S&P Downgrades Ratings on Three Classes ---------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the class A-1, A-2, and A-3 notes and the class B notes from Education Funding 2006-1 LLC, a student loan asset-backed securities transaction. Concurrently, S&P removed these ratings from CreditWatch with negative implications, where S&P had placed them on March 16, 2010. The downgrades reflect S&P's view of the deterioration in collateral performance for this transaction, including higher- than-expected levels of delinquencies, defaults, and net losses, as well as reductions in excess spread. S&P's default projections and rating actions on this transaction also reflect its negative outlook on the private student loan sector for 2010 and its view that private student loan performance will likely remain under pressure over the next year. Pool Performance The EFP 2006-1 transaction had 12 quarters of performance through the quarterly performance period ended March 2010 (on the April 2010 quarterly distribution date), with a collateral pool factor (the principal balance remaining in the pool as a percent of the original pool balance plus the prefunding account) of 85.7%. At the same time, the amount of loans in repayment was 58.2% of the current collateral balance (excluding accrued interest). Ninety-plus-day delinquencies have fluctuated between approximately 2.8% and 8.9% as a percent of loans in repayment since the deal's inception and totaled 5.4% as of March 2010. Total delinquencies have vacillated between 6% and 18% of loans in repayment. As of March 2010, total delinquencies were 12.2%. Additionally, as of March 2010, forbearance stood at 16.5% of loans in repayment, forbearance, and deferment, a 59% increase from the quarterly period ended March 2009. Defaults continue to rise at a rapid pace. As of March 2010, cumulative defaults (as a percentage of the initial collateral balance and capitalized interest) had increased by 69% since March 2009, to 14.5% from 8.6%. The higher levels of delinquencies and defaults have eroded available credit support, as evidenced by the declining overcollateralization amounts and corresponding parities. Total parity (the total pool balance plus the balance of the capitalized interest account and the collection account {the "total trust asset value"}, divided by the aggregate balance of the outstanding notes) has declined by 4.5 percentage points from the same time last year, and stood at 91.5% as of March 2010. This is almost 8pps below the starting total parity of 99.54% (according to the transaction's first servicer report, distributed in December 2006). Mezzanine parity (the total trust asset value divided by the aggregate balance of the outstanding class A and B notes) and senior parity (the total trust asset value divided by the aggregate balance of the outstanding class A notes) have also declined by approximately 4.5pps each, and stood at 94.92% and 107.65%, respectively. These numbers are also down significantly from their original levels of 102.81% and 114.65%, respectively. Default Expectations And Net Loss Projections Based on S&P's view of the current and projected performance of this pool of private student loans, S&P has raised its lifetime cumulative default expectations for this transaction to 33.0%- 35.0% of the original pool balance plus capitalized interest, from its previous expectation of 20%-21%. S&P assumed future stressed recovery rates of approximately 15%-20% of the dollar amount of cumulative defaults, which results in its expectation for remaining cumulative net losses of 18.2%-21.4% (as a percent of the current collateral balance plus capitalized interest as of March 2010). Structure This transaction has a lockout period during which principal is paid sequentially to the class A, B, and C notes. After the lockout period ends on the "step-down date," which is the later of (a) the date on which no class A-1 notes remain outstanding or (b) the earlier of (i) the first quarterly payment date on which no senior notes remain outstanding, or (ii) the quarterly payment date in July 2012), payments of principal will be made pro rata to the class A, B, and C notes if the subordinate-note principal trigger is not in effect. The subordinate-note principal trigger occurs after the step-down date if the total asset percentage (total trust asset value divided by principal amount of total notes outstanding) falls below 101%. If this happens, the principal payment priority switches back to sequential for as long as the trigger remains in effect. In addition, the transaction pays principal sequentially within the subclasses of the class A notes. The transaction also has two interest reprioritization triggers, which affect the payment of interest on the class B and C notes. The transaction will breach the subordinate-note interest trigger if both the senior asset percentage (total trust asset value divided by principal amount of senior notes outstanding) falls below 100% and cumulative defaults exceed the rate outlined in table 1 below. If this trigger occurs, interest that would have been paid to the class B notes is diverted to pay principal on the class A notes. The transaction will breach the junior subordinate-note interest trigger if both the subordinate asset percentage (total trust asset value divided by principal amount of senior notes and class B notes outstanding) falls below 100% and cumulative defaults exceed the rate outlined in table 1 below. This trigger is currently in effect on the transaction, resulting in the diversion of interest that would have been paid to the class C notes to pay principal on the class A notes. Therefore, the class C notes are not currently receiving interest payments. Table 1 Cumulative Default Rates Date Class B (%) Class C (%) ---- ----------- ----------- April 2008 3 3 April 2009 10 8 April 2010 17 14 April 2011 25 23 April 2012 27 25 April 2013 30 28 April 2014 and thereafter 32 31 Furthermore, an administrative fee trigger is currently in effect on the transaction. The transaction breached this trigger when the total asset percentage (total trust asset value divided by principal amount of all outstanding notes) fell below 100%. This breach resulted in the subordination of administrative fees below the payment of principal and interest on all of the notes, and consequently, the administrative fees are not currently being paid. This has a negative impact on the administrator's ability to fund incremental delinquency management and collections strategies, including those with outside collection agencies, beyond what the base servicing agreement provides. Breakeven Cash Flow Modeling Assumptions S&P ran midstream breakeven cash flows for this transaction under various rating stress assumptions. These cash flow runs provided breakeven percentages that represent the maximum amount of remaining cumulative net losses a transaction (or class of notes) can absorb (as a percent of the pool balance as of the cash flow cutoff date) before failing to pay full and timely interest and ultimate principal. These are some of the major assumptions S&P modeled: * Moderately front-loaded default curves of differing speeds that covered periods of five and six years; * Recovery rates of 15% for the class A notes and 20% for the class notes; and * Prepayment speeds starting at approximately 2 CPR (constant prepayment rate, an annualized prepayment speed stated as a percent of the current loan balance) and ramping up over three years to a maximum rate of 5 CPR. After three years, S&P held the maximum rate constant. Breakeven Cash Flow Modeling Results/Rating Actions S&P's cash flow runs indicated that the class A notes are able to absorb remaining cumulative net losses of approximately 26.8%, before a payment default would occur. After considering the aforementioned breakevens and remaining expected net losses of 19.3%-21.4%, S&P lowered its ratings on the class A notes to 'BBB- ' from 'AA-' to reflect its view of the current loss coverage levels. The breakevens for the class B notes ranged between 17.6% and 18.0%. After comparing these breakevens to the remaining expected net losses of 18.2%-20.2%, S&P lowered the class B ratings to 'B' from 'BBB-'. The rating on the class C notes remains 'D', where S&P placed it on Feb. 10, 2009, due to a breach of the junior subordinate-note interest trigger and the consequent missed interest payment to this class. Standard & Poor's will continue to monitor the performance of the student loan receivables backing this transaction relative to S&P's revised cumulative default expectations and available credit enhancement. Ratings Lowered And Removed From Creditwatch Negative Education Funding 2006-1 LLC Rating ------ Class To From ----- -- ---- A-1 BBB- AA-/Watch Neg A-2 BBB- AA-/Watch Neg A-3 BBB- AA-/Watch Neg B B BBB-/Watch Neg Other Outstanding Rating Education Funding 2006-1 LLC Class Rating ----- ------ C D FRANKLIN AUTO: Moody's Reviews Ratings on Eight Tranches -------------------------------------------------------- Moody's Investors Service has placed on review for possible upgrade eight tranches from five Franklin auto loan securitizations sponsored by Franklin Capital Corporation. The review actions are the result of the build-up in credit enhancement relative to remaining losses and the lowered projected Cumulative Net Loss levels for Franklin transactions issued between 2005 and 2007. As performance stabilized over the past 12 months, the range of expected lifetime CNL was lowered compared to Moody's previously published range on February 27, 2009. Moody's current lifetime CNL projections for the affected transactions range between 2.40% and 11.50% of the original pool balance, compared to between 2.50% to 12.00% from previous reviews. For the 2004-2 and 2005-1 transactions, the current loss projections (as a percentage of the original pool balance) range from 2.40% to 4.40%. For the 2006-1, 2007-1 and 2008-A transactions, the current loss projections range from 7.00% to 11.50%. Even though the CNL projections for the 2006-1, 2007-1 and 2008-A transactions have increased compared to estimates at deal closing, the build-up in credit enhancement in these transactions has been rapid. Total hard credit enhancement (excluding excess spread) for the MBIA wrapped Class A-4 tranche from Franklin 2004-2 is approximately 48%. Other total hard credit enhancements (consist of subordination, cash reserve account, and Letter of Credit) for affected Class B and Class C of the senior-subordinate structured Franklin transactions (2005-1,2006-1, 2007-1, and 2008-A) range approximately from 21% to 49% and 6% to 31% respectively of the outstanding collateral pool balances. Franklin Auto Trust 2008-A further benefits from a higher total reserve target level at 10.25% compared to targets at 5.25% or 5.00% from earlier Franklin transactions. 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 ratings were issued. 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. Primary sources of assumption uncertainty are the current macroeconomic environment, in which unemployment continues to rise, and weakness in the used vehicle market. Moody's currently views the used vehicle market as stronger now than it was a year ago, when the uncertainty relating to the economy as well as the future of the U.S auto manufacturers was significantly greater. Overall, Moody's central global scenario remains "Hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. Complete rating actions are: Issuer: Franklin Auto Trust 2004-2 -- Cl. A-4, Aa3 Placed Under Review for Possible Upgrade; previously on December 30, 2008, Upgraded to Aa3 from A1 -- Guarantor: MBIA (B3; previously on February 18, 2009 Downgraded to B3 from Baa1) -- Underlying rating: Aa3 Placed Under Review for Possible Upgrade; previously on December 30, 2008, Upgraded to Aa3 from A1 Issuer: Franklin Auto Trust 2005-1 -- Cl. C, A3 Placed Under Review for Possible Upgrade; previously on February 27, 2009,Upgraded to A3 from Baa3 Issuer: Franklin Auto Trust 2006-1 -- Cl. B, Aa3 Placed Under Review for Possible Upgrade; previously on October 11, 2006 Definitive Rating Assigned Aa3 -- Cl. C, B2 Placed Under Review for Possible Upgrade; previously on February 27, 2009 Downgraded to B2 from Baa2 Issuer: Franklin Auto Trust 2007-1 -- Cl. B, A3 Placed Under Review for Possible Upgrade; previously on February 27, 2009 Downgraded to A3 from Aa3 Issuer: Franklin Auto Trust 2008-A -- Cl. B, Aa3 Placed Under Review for Possible Upgrade; previously on February 27, 2009 Downgraded to Aa3 from Aa1 -- Cl. C, A3 Placed Under Review for Possible Upgrade; previously on February 27, 2009 Downgraded to A3 from Aa3 GE-WMC ASSET-BACKED: Moody's Downgrades Ratings on 11 Tranches -------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 11 tranches and confirmed the ratings of 2 tranches from 3 RMBS transactions issued by GE-WMC. The collateral backing these deals primarily consists of first-lien, fixed and adjustable-rate subprime residential mortgages. The actions are a result of the continued performance deterioration in Subprime pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on subprime pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. Issuer: GE-WMC Asset-Backed Pass-Through Certificates, Series 2005-1 -- Cl. A-1, Downgraded to A2; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ba3; previously on January 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: GE-WMC Asset-Backed Pass-Through Certificates, Series 2005-2 -- Cl. A-1, Downgraded to B2; previously on January 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Caa1; previously on January 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: GE-WMC Asset-Backed Pass-Through Certificates, Series 2006-1 -- Cl. A-1a, Downgraded to Ca; previously on January 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-1b, Downgraded to C; previously on January 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2a, Downgraded to Ca; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2b, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2c, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade GMAC COMMERCIAL: Fitch Downgrades Ratings on 2000-C1 Certs. ----------------------------------------------------------- Fitch Ratings has downgraded and assigned Recovery Ratings to GMAC Commercial Mortgage Securities, Inc.'s commercial mortgage pass- through certificates, series 2000-C1: -- $8.8 million class K to 'CC/RR2' from 'B+'. In addition, Fitch has affirmed and assigned Loss Severity and RR ratings as indicated: -- $10.5 million class H at 'BBB/LS3'; Outlook Stable; -- $6.6 million class J at 'BB+/LS4'; Outlook Negative. The $7.7 million class L remains 'D/RR5'. Classes A through G have been paid in full while classes M through O have been reduced to zero due to realized losses. Fitch withdraws the rating of the interest only class X. The affirmation is the result of sufficient credit enhancement to offset Fitch's revised loss estimates for the transaction following Fitch's prospective analysis which is similar to its recent vintage fixed-rate CMBS analysis. Fitch expects losses of 19.7% of the remaining pool balance, approximately $6.6 million, from the loans in special servicing and a loan that is not expected to refinance at maturity based on Fitch's refinance test. The majority of Fitch expected losses (97.1%) come from loans in special servicing. Expected loss as a percentage of the original deal balance is 3.35%. As of the June 2010 distribution date, the pool's collateral balance has paid down 96.2% to $33.6 million from $880 million at issuance. Four of the remaining loans have defeased (16%). As of June 2010, there are seven specially serviced loans (70.2%). The largest specially serviced loan (15.5%), is secured by a 224- unit apartment complex located in Riverdale, GA. The loan transferred to special servicing in July 2009 for imminent maturity default. The special servicer has foreclosed and the property is real estate owned. The second largest specially serviced loan (11.1%) is a 73,149 sf office property in Fort Lauderdale, FL. The loan transferred to special servicing in May 2009 for imminent default. The special servicer has approved a modification to extend the maturity date to October 2011. The most recent servicer reported occupancy at year end 2009 was 59.6%. Fitch stressed the cash flow of the remaining non-defeased loans by applying a 10% reduction to 2008 fiscal year end net operating income and applying an adjusted market cap rate between 7.25% and 10.5% to determine value. Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to pay off at maturity. Under this scenario, one loan is not expected to pay off at maturity and incurs a loss when compared to Fitch's stressed value. GMAC COMMERCIAL: S&P Downgrades Rating on Class M Certs. to 'D' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class M commercial mortgage pass-through certificate from GMAC Commercial Mortgage Securities Inc.'s series 2001-C2, a U.S. commercial mortgage-backed securities transaction, to 'D' from 'CCC-'. The downgrade follows principal losses sustained by the class, which were detailed in the July 15, 2010, remittance report. , The class M certificate experienced losses amounting to 6.3% of its $11.3 million original certificate balance since the previous report. To date, classes N through Q have lost 100% of their aggregate $22.6 million original certificate balance. Classes N through P are rated 'D', and Standard & Poor's doesn't rate the class Q certificate. The principal losses detailed in the July 2010 remittance report resulted from the liquidation of an asset that was with the special servicer, Berkadia Commercial Mortgage LLC. The 400 Horsham Road asset is a 150,581-sq.-ft. office in Horsham, Pa. The asset had a total exposure of $16.4 million. The asset was transferred to the special servicer on May 6, 2008, and became real estate owned on Sept. 24, 2008. The trust incurred a $13.3 million realized loss when the asset was liquidated on July 1, 2010. Based on the July 2010 remittance report data, the loss severity for this asset was 89.1% (based on the asset's balance at the time of disposition). As of the July 15, 2010, remittance report, the collateral pool consisted of 80 assets with an aggregate trust balance of $553.2 million, down from 96 assets totaling $754.9 million at issuance. Eight assets, totaling $105.2 million (19.0%), are with the special servicer. To date, the trust has experienced losses on seven assets totaling $23.5 million. Based on the July 2010 remittance report, the weighted average loss severity for these assets was approximately 41.9% (based on the assets' balances at the time of disposition). GRAMERCY CAPITAL: Moody's Does Not Take Rating Action on Bonds -------------------------------------------------------------- Moody's Investors Service has determined that a Supplemental Indenture dated as of June 14, 2010, between Gramercy Capital Corp., an underlying asset in Taberna Preferred Funding IV, Ltd. (as the "Issuer"), and The Bank of New York Mellon Trust Company, N.A. (as the "Trustee") will not at this time result in a withdrawal, reduction or other adverse action with respect to Moody's current ratings of any class of notes issued by the Issuer. Moody's does not express an opinion as to whether the Supplemental Indenture could have non-credit-related effects. Moody's has been informed that the Supplemental Indenture received the consent of the majority of the controlling class and hedge counterparty, and the Supplement may be summarized: The Issuer held $24.38 million of GKK Capital LP Trust Preferred Securities. The collateral manager, TP Management, an affiliate of Fortress Investment Group LLC, exchanged the GKK TRUPs for the replacement securities in the total principal amount of $24.38 million and three-month Treasury bills in the total amount of $2.32 million. CUSIP Deal Name Class of Notes Current public Moody's rating -- 385000AC8 Gramercy Real Estate CDO 2005-1 Class B Aa3 -- 385000AF1 Gramercy Real Estate CDO 2005-1 Class E Ba1 -- 385000AG9 Gramercy Real Estate CDO 2005-1 Class F Ba2 -- 385000AH7 Gramercy Real Estate CDO 2005-1 Class G Ba3 -- 385000AJ3 Gramercy Real Estate CDO 2005-1 Class H B2 -- 38500VAC0 Gramercy Real Estate CDO 2006-1 Class A-2 Baa2 -- 38500VAE6 Gramercy Real Estate CDO 2006-1 Class C Caa2 -- 38500VAF3 Gramercy Real Estate CDO 2006-1 Class D Caa3 -- 38500VAG1 Gramercy Real Estate CDO 2006-1 Class E Caa3 -- 35800VAH9 Gramercy Real Estate CDO 2006-1 Class F Caa3 -- 38500VAJ5 Gramercy Real Estate CDO 2006-1 Class G Caa3 -- 38500XAC6 Gramercy Real Estate CDO 2007-1 Class A-3 A2 -- 38500XAD4 Gramercy Real Estate CDO 2007-1 Class B-FL Ba1 -- 38500XAE2 Gramercy Real Estate CDO 2007-1 Class C-FL NR -- 38500XAF9 Gramercy Real Estate CDO 2007-1 Class D NR -- 38500XAG7 Gramercy Real Estate CDO 2007-1 Class E NR -- 38500XAH5 Gramercy Real Estate CDO 2007-1 Class G-FL NR GREENWICH CAPITAL: Fitch Affirms Ratings on 10 2004-FL2 Notes ------------------------------------------------------------- Fitch Ratings has downgraded one class and affirmed 10 classes of Greenwich Capital Commercial Funding Corp. commercial mortgage pass-through certificates, series 2004-FL2. The downgrade of class L is a result of actual principal losses. To date, the class has incurred $373,648 of losses. The affirmations of the remaining classes are a result of adequate credit enhancement to withstand Fitch's loss expectations, which incorporate prospective views of cash flow declines and commercial real estate market value declines. The assignment of a Negative Outlook to classes J, K, and N-SO reflects an additional sensitivity analysis related to further credit migration of the underlying loans. There are two loans remaining in the transaction, Southfield Town Center (84.8%) and Aviation Mall (15.2%). Under Fitch's updated analysis, one of the loans is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled cash flow decline is 17.1% from fourth-quarter 2009 servicer-reported cash flow and no losses are expected in the base case scenario. Both remaining loans were transferred to special servicing in May 2009 after being unable to refinance prior to the loan's maturity. The Southfield Town Center loan had an original term of two years, plus three one-year extensions, which were all exercised. The Aviation Mall loan had an original term of four years, plus two one-year extensions, which were all exercised. A modification of both loans was exercised in August 2009 and subsequently, the loans were returned to the master servicer. The Southfield Town Center loan is secured by a 2.2 million square foot office complex located in Southfield, Michigan. The loan matures in July 2011 with an additional one-year extension option. Currently, in addition to the $151.2 million pooled note and a $7.7 million non-pooled note, there is a $67.4 million B-note and a $25 million mezzanine loan held outside the trust. The modification of the Southfield Town Center loan included these terms: a two-year maturity extension with a one-year extension option available; a conversion of the loan from interest-only to amortizing; an increase in the interest rate cap of the loan to 4% for the first year through July 2010 and 3.5% for the second year through July 2011; and an increase in the funding of a rollover reserve account, to be capped at $7.5 million, for future leasing costs. Aviation Mall, while back at the master servicer, remains a Loan of Concern. The loan is secured by a 514,612 square foot retail mall located in Queensbury, New York. The final extension option on the loan occurs in July 2011. Currently, in addition to the $27 million A note, there is an $8.8 million B note held outside the trust. Year-end 2009 property performance and occupancy are comparable to year-end 2008. However, current occupancy as of first-quarter 2010 has declined to 96% compared to 100% at year- end 2009 with weaker sales anticipated. The modification of the Aviation Mall loan included these terms: a two-year maturity extension; an increase in the interest rate cap of the loan to 3% for the first year through July 2010 and 7% for the second year through July 2011; and trapping of all excess cash flow for the duration of the extension. Fitch has downgraded and removed this class from Rating Watch Negative, and assigned a Recovery Rating as indicated: -- $15.3 million class L to 'D/RR1' from 'B-'. Fitch has affirmed and removed these classes from Rating Watch Negative, and assigned or maintained Outlooks as indicated: -- $26.4 million class C at 'AAA'; Outlook to Stable from Negative; -- $22.7 million class D at 'AAA'; Outlook Stable; -- $12.4 million class E at 'AAA'; Outlook Stable; -- $22.8 million class F at 'AAA'; Outlook Stable; -- $19.5 million class G at 'AAA'; Outlook Stable; -- $14.5 million class H at 'AA'; Outlook Stable; -- $23.1 million class J at 'A-'; Outlook Negative from Rating Watch Negative; -- $10.3 million class K at 'BBB'; Outlook Negative from Rating Watch Negative; -- $7.7 million class N-SO at 'BBB-'; Outlook Negative from Rating Watch Negative. In addition, Fitch has affirmed this rating and maintained the Outlook as indicated: -- $11.3 million class B at 'AAA'; Outlook Stable. Classes A-1, A-2, X-1, H-ROSW, L-ROSW, N-ROSW, N-LH, N-MV, K-NO, M-NO, N-NO, and N-WV have all paid in full. This transaction was analyzed according to the 'Surveillance Criteria for U.S. Commercial Real Estate Loan CDOs'. It applies stresses to property cash flows and uses debt service coverage ratio tests to project future default levels for the underlying portfolio. Recoveries are based on stressed cash flows and Fitch's long-term capitalization rates. This methodology was used to review this transaction as floating-rate commercial mortgage backed security loan pools are concentrated and similar in composition to CREL CDO pools. In many cases, the CMBS notes are senior portions of notes held in CDO transactions. The assets are generally transitional in nature, frequently underwritten with pro forma income assumptions that have not materialized as expected. Overrides to this methodology were applied on a loan-by-loan basis if the property specific performance warranted an alternative analysis. For bonds rated 'B-' or better, the current credit enhancement levels were compared to the expected losses generated in each rating category divided by the total deal size. These classes were assigned Loss Severity ratings, which indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the expected losses for the collateral in the 'B' stress. LS ratings should always be considered in conjunction with probability of default indicated by a class' long-term credit rating. Fitch does not assign Rating Outlooks or LS ratings to classes rated 'CCC' and lower. Rating Outlooks were determined by further stressing the cash flows and fully recognizing all maturity defaults in all ratings stresses. The credit enhancements were then compared to the expected losses generated in each rating category to determine potential credit migration over the next two years. If the Rating Outlook scenario would imply a lower rating, then the class was assigned a Negative Outlook. The ratings for bonds rated 'CCC' or lower are based on a deterministic analysis. Bonds are rated 'C' when the expected losses on currently defaulted loans exceed a class's respective credit enhancement level. Bonds are rated 'CC' when the combined base case expected losses on the currently defaulted loans and loans likely to default exceed a class's respective credit enhancement level. Bonds are rated 'CCC' when the base case expected loss exceeds a class's respective credit enhancement level. Bonds rated 'CCC' and below were assigned Recovery Ratings in order to provide a forward-looking estimate of recoveries on currently distressed or defaulted structured finance securities. Recovery Ratings are calculated by subtracting the base case expected losses in reverse sequential order from the pooled and non-pooled rake certificates. Any principal recoveries first pay interest shortfalls on the bonds and then sequentially through the classes. The remaining bond principal amount is divided by the current outstanding bond balance. The resulting percentage is used to assign the Recovery Ratings on the bonds. The assignment of 'RR1' to class L reflects modeled recoveries of 90% of its outstanding balance. The expected recovery proceeds are broken down: -- Present value of expected principal recoveries ($13.5 million) -- Present value of expected interest recoveries ($0.3 million) -- Total present value of recoveries ($13.8 million) -- Sum of undiscounted recoveries ($15.1 million) Classes are assigned a Recovery Rating of 'RR6' when the present value of the recoveries in each case is less than 10% of each class' principal balance. As there are only two loans remaining, one of which is over 80% of the remaining collateral, the transaction is similar to a U.S. CMBS single-borrower transaction. In addition to the CREL CDO methodology, Fitch reviewed the transaction in conjunction with its 'Rating U.S. Single-Borrower Commercial Mortgage Transactions,' including reviewing insurance requirements and borrower structure. As there is no current criteria for assigning Loss Severity ratings to single-borrower deals, none were assigned to this transaction's classes. GREENWICH CAPITAL: S&P Downgrades Ratings on Five 2006-FL4 Certs. ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on five pooled classes of commercial mortgage pass-through certificates from Greenwich Capital Commercial Funding Corp.'s series 2006-FL4. Concurrently, S&P affirmed its ratings on three raked classes from this transaction. The rating actions follow S&P's analysis of the transaction, which included the revaluation of the collateral securing 11 floating- rate loans indexed to one-month LIBOR and three real estate owned assets. The pool consists of lodging, office, retail, and multifamily properties. Lodging properties, which constitute 46.6% ($215.3 million) of the pooled trust balance (as of the July 8, 2010, trustee remittance report), have experienced declines in valuation to levels between 10.1% and 38.9% below the levels S&P assessed in its last review, on May 22, 2009. S&P's downgrades of the pooled certificates also reflect its opinion that these classes are susceptible to future interest shortfalls. S&P affirmed its ratings on the "WSC" raked certificates based upon its revaluation of the Westchester Shopping Center loan. The raked certificates derive 100% of their cash flow from this loan. The class X-2 certificate is an interest-only certificate with a balance that references the aggregate certificate balances of the pooled principal and interest certificates in the transaction. S&P lowered its rating on class X-2 based on its current criteria. Lodging Collateral Lodging exposure totals $215.3 million (46.6% of the pooled trust balance), including four loans and two REO assets. The hotel properties are located in Palm Beach Gardens, Fla. (16.6%), Waikiki, Hawaii (13.8%), Boston, Mass. (5.9%), Scottsdale, Ariz. (5.1%), Portland, Ore. (3.4%), and Metairie, La. (1.8%). S&P based its analysis of the hotels on its review of the borrowers' operating statements for year-end 2009, their 2010 budgets, and available Smith Travel Research (STR) reports. S&P noted that a reduction in business and leisure travel significantly affected the performance of the lodging collateral in 2009 compared with 2008. STR reported that revenue per available room for the general U.S. hotel industry declined 16.7% in 2009 compared with 2008 and fell 9.3% for the trailing 12 months ended May 2010 compared with the same period in 2009. Largest Lodging Loan The PGA National Resort and Spa loan, the largest lodging loan and the largest exposure in the pool, has a trust balance of $76.9 million (16.6%) and a whole-loan balance of $132.6 million. In addition, the equity interests in the borrower of the whole loan secure mezzanine debt totaling $30.4 million held outside the trust. The whole loan is secured by a 339-room full-service resort hotel with amenities that include, among other items, five 18-hole golf courses in Palm Beach Gardens, Fla. The borrower's year-end 2009 operating statements for the property reported a 13.2% decline in net operating income from 2008, and S&P's adjusted valuation has declined 38.9% since its last review, due primarily to a decrease in its expected RevPAR for the property. Using a weighted average capitalization rate of 11.5%, its analysis yielded a stressed loan-to-value (LTV) ratio of 129.4% on the trust balance. The master servicer, Wells Fargo Bank N.A. (Wells Fargo), reported a debt service coverage of 3.60x and 54.8% occupancy for year-end 2009. The loan matures on Sept. 1, 2010. Wells Fargo stated that the borrower has not yet indicated whether it plans to exercise its remaining one 12-month extension option. Lodging Exposures With Maturities Within The Next Three Months Nine of the remaining 11 loans in the pool currently have final maturities in 2010 or 2011. One other loan was recently extended to a final maturity of February 2013, while one matured in August 2009. In addition to the PGA National Resort and Spa loan, the ResortQuest Waikiki Beach loan matures within the next three months. The ResortQuest Waikiki Beach loan, the third-largest exposure in the pool, has a trust balance of $63.5 million (13.8%) and a whole-loan balance of $70.0 million. In addition, the equity interests in the borrower of the whole loan secure mezzanine debt totaling $34.9 million held outside the trust. The whole loan is secured by a 644-room, full-service hotel in Waikiki, Hawaii. The borrower's year-end 2009 operating statements for the property reported a 42.9% decrease in net cash flow from 2008. S&P's adjusted valuation has declined 10.1% since its last review, primarily due to a decrease in its expected RevPAR. Using a capitalization rate of 10.8%, S&P's analysis yielded a stressed LTV ratio of 105.9% on the trust balance. Wells Fargo reported a DSC of 3.44x and 75.1% occupancy for year-end 2009. The loan matures on Oct. 1, 2010. Wells Fargo stated that the borrower has not yet indicated whether it plans to exercise its one remaining 12-month extension option. Lodging Exposures With The Special Servicers There are two REO hotel assets with the special servicers. Details are: The Mondrian ? Scottsdale asset, a 194-room, full-service boutique hotel in Scottsdale, Ariz., has a senior pooled balance of $23.4 million (5.1% of the pooled trust balance) and a $2.6 million subordinate nonpooled component that provides the sole source of cash flow for the "MON" raked certificates. The property became REO on March 16, 2010. An appraisal reduction amount of $9.0 million is in effect against the total exposure of $28.6 million, which is based on a July 8, 2009, appraisal value of $21.7 million. According to Wells Fargo, one of the two special servicers for this transaction, the property is currently operating as the Hotel Theodore and is not generating sufficient cash flow to pay debt service. The reported occupancy was 40.8% as of year-end 2009, and Wells Fargo plans to market the property for sale. S&P downgraded the "MON" raked certificates to 'D' on April 27, 2010, due to recurring interest shortfalls resulting from special servicing fees, appraisal subordinate entitlement reduction amounts, and other related expenses. The Galleria Sheraton - Metairie is a 182-room hotel in Metairie, La., with a senior pooled balance of $8.5 million (1.8% of the pooled trust balance) and a $1.9 million subordinate nonpooled component that supports the "GSM" raked certificates. The property became REO on Feb. 4, 2010, and an ARA of $3.4 million is in effect against the total exposure of $11.1 million, which is based on an Aug. 27, 2009, appraisal value of $9.1 million. The special servicer for this asset, Situs Asset Management, has indicated that it is currently evaluating various purchase offers for the property. The master servicer reported a 0.25x DSC for year-end 2008 and 64.8% occupancy as of year-end 2009. S&P downgraded the "GSM" raked certificates to 'D' on April 27, 2010, due to recurring interest shortfalls resulting from special servicing fees, ASER amounts, and other related expenses. Office Collateral Office properties secure five loans totaling $178.7 million (38.7% of the pooled trust balance). The office properties are located in New York City (20.2%), Houston, Texas (11.3%), and Southern California (7.2%). S&P based its analysis of the office properties on its review of the borrowers' operating statements for year-end 2009, their 2010 budgets, and their 2009 or 2010 rent rolls. S&P's average adjusted valuations for the five loans were stable since its last review. Largest Office Loan The Metropolitan Tower loan, the largest office loan and the second-largest exposure in the pool, has a whole-loan balance of $145.5 million that comprises a $72.8 million senior pooled component (15.8% of the pooled trust balance), a $8.7 million subordinate nonpooled component that supports the "MET" raked certificates (not rated by Standard & Poor's), and two nontrust junior participation interests totaling $64.0 million. The whole loan is secured by a condominium interest totaling 259,800 sq. ft. in the first 18 stories of a 66-story class A office building in midtown Manhattan. The reported occupancy of the portion that serves as collateral for the whole loan was 97.3% as of December 2009. S&P's adjusted valuation has increased 5.7% from its last review, primarily due to lower-than-expected operating expenses. Using a capitalization rate of 8.5%, S&P's analysis yielded a stressed LTV ratio of 73.2% on the trust balance. Wells Fargo reported a DSC of 11.34x for year-end 2009. The loan matures on Nov. 1, 2010, and Wells Fargo stated that the borrower has not yet indicated whether it plans to exercise its one remaining 12-month extension option. Office Loans With The Special Servicers There are two office loans that are with the special servicers. Details are: The 260 East 161st Street loan, which is a matured balloon loan, has a whole-loan balance of $30.0 million that consists of a $20.2 million senior pooled component (4.4% of the pooled trust balance), a $0.8 million subordinate nonpooled component that supports the N-E161 raked certificate (not rated by Standard & Poor's), and a $9.0 million nontrust junior participation interest. The whole loan is secured by a 10-story, 223,600-sq.- ft. class B office building in Bronx, N.Y. The loan was transferred to the special servicer, Wells Fargo, on the April 1, 2010, maturity date after the borrower was not able to meet the DSC test to exercise its one remaining 12-month extension option. Wells Fargo stated that it is currently finalizing a loan modification with the borrower, which would include extending the loan's maturity to April 1, 2013, amending the participation agreement, and paying down $1.1 million of the senior trust balance. The June 1, 2010, appraisal valued the property at $45.0 million. S&P's adjusted valuation has increased 12.7% from its last review due to lower-than-expected operating expenses. Using a 9.0% capitalization rate, its analysis yielded a stressed LTV ratio of 90.8% on the trust balance. Wells Fargo reported a 7.09x DSC for the nine months ended Sept. 30, 2010, and 84.9% occupancy as of April 2010. The 2600 West Olive Avenue loan, which is in its grace period, has a whole-loan balance of $36.6 million consisting of a $15.7 million senior pooled component (3.4% of the pooled trust balance), a $6.4 million subordinate nonpooled component that supports the "2600" raked certificates (not rated by Standard & Poor's), and a $14.5 million nontrust junior participation interest. The whole loan, secured by a 148,300-sq.-ft. class A office building in Burbank, Calif., was transferred to the special servicer on March 25, 2009, due to imminent default after the borrower submitted a proposal to modify the loan. The special servicer for the loan, Situs, indicated that the loan was modified on April 26, 2010. The modification terms include new capital from the borrower to bring the loan current as well as to fund capital and debt service reserves. The modification also extended the loan's maturity to Feb. 28, 2012, with one 12-month extension option. A Dec. 31, 2009, appraisal valued the property at $30.0 million on a stabilized basis. S&P's adjusted valuation has declined 6.4% from its last review due to a longer-than-expected stabilization period. S&P's analysis, which factored in a weighted average capitalization rate of 8.9% and current market data, yielded a stressed LTV ratio of 121.5% on the trust balance. Wells Fargo reported a 0.34x DSC for year-end 2008 and 50.8% occupancy as of March 2010. Other Loans With The Special Servicers In addition to the four assets discussed above, one additional loan and one REO asset are with the special servicers. Details are: The Northwest Plaza Shopping Center asset, which became REO on Sept. 1, 2009, has a whole-loan exposure of $29.3 million that includes a $24.7 million senior pooled component (5.3% of the pooled trust balance) and a $4.6 million subordinate nonpooled component that supports the "NW" raked certificates (not rated by Standard & Poor's). The property includes a 1.7 million-sq.-ft. super-regional mall and an attached 12-story, 152,600-sq.-ft. class B office building in St. Ann, Mo., that were 29.0% and 48.7% occupied, respectively, as of April 2010. The special servicer, Wells Fargo, indicated that the property is under contract for sale for $13.0 million to the City of St. Ann in lieu of a condemnation suit. Wells Fargo expects the transaction to close by the first quarter of 2011. An ARA of $24.6 million is in effect on the total exposure of $31.9 million, which is based on a Jan. 26, 2010, appraisal value of $13.0 million. The Greenwich Residential loan, which is a matured balloon loan, has a trust balance of $25.8 million (5.6% of the pooled trust balance) and a $40.8 million whole-loan balance. Situs, the special servicer, indicated that the cash flow at the property is being trapped in a lockbox and is only sufficient to make debt service payments on the senior trust balance. This loan is secured by a 31-unit multifamily condominium conversion complex in Greenwich, Conn. The loan was transferred to the special servicer on July 22, 2009, due to imminent maturity default. The loan had an Aug. 1, 2009, maturity with three remaining six-month extension options. At the time of the first extension option, Situs indicated that the borrower did not fund a required $20.0 million principal paydown, which resulted in an event of default under the loan agreement. The borrower reported positive NOI for the five months ended May 31, 2010, and for year-end 2009. According to Situs, the borrower has rented out 29 of the 31 units and plans to market and sell the condo units early next year. Situs is currently negotiating a loan modification with the borrower while pursuing foreclosure. An ARA of $1.8 million is in effect on the whole loan based on the Aug. 11, 2009, appraisal value of $26.8 million. S&P's analysis, using an 8.25% capitalization rate, yielded a stressed LTV ratio of 154.1% on the trust balance. Loans With Raked Certificates In addition to the "MON" and "GSM" raked certificates, Standard & Poor's also rates the "WSC" raked certificates, which derive 100% of their cash flow from the Westchester Shopping Center loan. The Westchester Shopping Center loan has a whole-loan balance of $33.2 million that consists of a $17.6 million senior pooled component (3.8% of the pooled trust balance), a $3.1 million subordinate nonpooled component that is raked to the "WSC" certificates, and a nontrust junior participation interest with an outstanding balance of $12.5 million. The loan is secured by a 157,350-sq.-ft. neighborhood shopping center in Los Angeles, Calif. S&P's adjusted valuation is comparable to the levels that S&P assessed in its last review. Using a 9.0% capitalization rate, S&P's analysis yielded a stressed LTV ratio of 71.5% on the trust balance. Wells Fargo reported a DSC of 1.77x for year-end 2009 and 100% occupancy as of March 2010. The loan matures on Feb. 1, 2011, and has no extension options remaining. Ratings Lowered Greenwich Capital Commercial Funding Corp. Commercial mortgage pass-through certificates series 2006-FL4 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-1 AA AAA 89.65 A-2 BBB- AA+ 39.79 B BB- AA- 32.13 C B- BB+ 25.49 X-2 AA AAA N/A Ratings Affirmed Greenwich Capital Commercial Funding Corp. Commercial mortgage pass-through certificates series 2006-FL4 Class Rating ----- ------ N-WSC BBB- O-WSC BB+ P-WSC BB N/A - Not applicable. GSC ABS: Fitch Downgrades Ratings on Five Classes of Notes ---------------------------------------------------------- Fitch Ratings has downgraded and withdrawn the ratings on five classes of notes issued by GSC ABS CDO 2005-1, Ltd./Corp. This rating action is a result of the liquidation of the collateral. GSC 2005-1 entered an event of default on Nov. 5, 2008, after the sum of non-defaulted collateral and cash assets declined below the amount of the remaining senior swap, class A1S and A1J notes. The required majority of the controlling class voted to accelerate on Feb. 9, 2010, and subsequently voted to liquidate the portfolio on Feb. 10, 2010. The trustee held a public auction on June 29, 2010 and sold the collateral. The proceeds from the sale were sufficient to make a payment of interest to class A1S notes. There were no available funds to make any other payments of interest or principal on any other classes of notes. All rated notes experienced a full loss. GSC 2005-1 was a hybrid structured finance collateralized debt obligation that closed on Jan. 12, 2006, and was managed by GSC Group. The transaction gained all of its exposure to SF assets synthetically via credit default swaps. Fitch has downgraded and subsequently withdrawn these ratings: -- $0 class A1S notes to 'D' from 'C'; -- $0 class A1J notes to 'D' from 'C'; -- $0 class A2 notes to 'D' from 'C'; -- $0 class A3 notes to 'D' from 'C'; -- $0 class B notes to 'D' from 'C'. HELIOS FINANCE: Moody's Upgrades Ratings on Two 2007-S1 Notes ------------------------------------------------------------- Moody's has upgraded two retained risk positions and two credit- linked notes issued by HELIOS Finance Limited Partnership 2007-S1 and HELIOS Finance Corporation 2007-S1 as co-issuers. The Notes were issued in connection with a credit default swap tied to a reference portfolio, under which Wachovia Bank, National Association (Wachovia Bank) is the protected party. The reference portfolio consists of loans originated and serviced by Wells Fargo Bank, N.A. (as successor by merger to Wachovia Bank, N.A.), a direct wholly-owned subsidiary of Wells Fargo & Company. The rating actions reflect Moody's updated lower lifetime loss expectations as well as build up in credit enhancement due to performance triggers that locked out payment to the junior classes. Complete rating actions are: Issuer: HELIOS Finance Limited Partnership 2007-S1/HELIOS Finance Corporation 2007-S1 - Synthetic Auto Loan Transaction Pool Current Expected Cumulative Net Losses: 5.40% (as a percentage of the original loan pool balance) -- Cl. A-2 retained risk position, Upgraded to Aaa; previously on July 2, Aa1 Placed Under Review for Possible Upgrade -- Cl. A-3 retained risk position, Upgraded to Aaa; previously on July 2, A1 Placed Under Review for Possible Upgrade -- Cl. B-1 credit-linked notes, Upgraded to Aaa; previously on July 2, Baa3 Placed Under Review for Possible Upgrade -- Cl. B-2 credit-linked notes, Upgraded to A2; previously on July 2, B3 Placed Under Review for Possible Upgrade Moody's expects the HELIOS reference portfolio to incur lifetime cumulative net losses of 5.40% which is within the range of 5.25% to 5.50% that was published when the securities were placed on review on July 2, 2010. This is down from 6% to 7% previously published in June 2009, but still higher than the initial expectation at closing of 3.50%. Total credit enhancement for Cl. A-2, Cl. A-3, Cl. B-1, Cl. B-2 upgraded tranches are approximately 46%, 33%, 19%, 10%, respectively of the outstanding collateral balance. Moody's volatility proxy Aaa level for the transactions is approximately 10% of the remaining collateral balance. As a synthetic, the structure of this transaction has unique elements when compared to other auto loan ABS. For the first twelve months, principal payments (notional reductions in the case of the retained risk positions) are allocated in sequential order of seniority (A-1, then A-2 and so on). Thereafter, principal payments depend on certain delinquency and cumulative net loss based schedules of monthly performance triggers. The delinquency trigger schedule is common for all tranches, while the CNL trigger schedules are specific to each tranche. If the trigger level for a certain tranche is breached (actual delinquency or CNL level is higher than the specified trigger level), it no longer receives any principal payment until that trigger level is cured. Due to the weaker than expected performance and the resulting breach of CNL triggers, the transaction remained sequential for an additional fifteen months. The transaction went pro rata in September 2009. However, the A- 1, A-2, A-3 and B-1 tranches continued to benefit from the lock out of the B-2 until June 2010, when it too started receiving principal payments. Since the current CNL is already higher than the highest monthly CNL trigger level for the B-3 tranche, it is locked out from any repayment of principal until the prior classes are repaid in full. The B-1 and B-2 notes, along with the A-2 and A-3 retained risk positions, are expected to continue receiving principal based on Moody's current lifetime loss expectation. The B-1 and B-2 balances are however subject to floors, which are calculated as a percentage of the original notional balance of the reference portfolio. Principal payments for these tranches are allocation pro rata based on their outstanding balances. The performance expectations for a given variable indicate Moody's forward-looking view of the likely ranges of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given ranges may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected ranges 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 ranges of factors including, but not exclusively, the performance metrics. Primary sources of assumption uncertainty are the current macroeconomic environment, in which unemployment continues to rise, and weakness in the used vehicle market. Moody's currently views the used vehicle market as stronger now than it was a year ago, when the uncertainty relating to the economy as well as the future of the U.S auto manufacturers was significantly greater. Overall, Moody's central global scenario remains "Hook-shaped" for 2010 and 2011; Moody's expect overall a sluggish recovery in most of the world largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. HOMETOWN COMMERCIAL: S&P Downgrades Ratings on Various Certs. ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the class A and B commercial mortgage pass-through certificates from Hometown Commercial Trust 2006-1. The downgrade of the class B certificates follows 12 consecutive months of interest shortfalls. S&P expects these shortfalls to continue for the foreseeable future, and as a result, S&P lowered the rating to 'D' from 'CCC-'. In addition, S&P lowered its rating on the class A certificates to 'CCC-' from 'B' because S&P believes this class is susceptible to future interest shortfalls due to poor collateral performance that S&P expects to continue into the future. Poor performance has already resulted in nine of the 13 classes that are subordinate to class A experiencing 100% principal losses. The recurring interest shortfalls are primarily due to appraisal subordinate entitlement reductions in effect for the specially serviced assets and special servicing fees. Standard & Poor's analysis primarily considered ASERs based on appraisal reduction amounts calculated using recent Member of the Appraisal Institute appraisals. S&P also considered servicer trust expenses and special servicing fees that are likely, in S&P's view, to cause recurring interest shortfalls. As of the July 12, 2010, remittance report, ARAs were in effect for four assets. The total reported ASER amount was $60,280, and the reported cumulative ASER amount was $676,782. Standard & Poor's considered all of these ASERs, which were based on MAI appraisals, as well as current special servicing fees, in taking S&P's rating actions. The reported interest shortfalls total $65,746 and have affected all classes up to and including class B. The collateral pool for Hometown 2006-1 consists of 36 loans with an aggregate trust balance of $109.6 million. As of the July 12, 2010, remittance report, seven assets ($25.1 million; 22.9%) in the pool were with the special servicer. The payment status of these assets is: three loans are in foreclosure ($13.0 million, 11.9%), three are 90-plus-days delinquent ($11.1 million, 10.1%), and one is 60 days delinquent ($1.0 million, 0.9%). Ratings Lowered Hometown Commercial Trust 2006-1 Commercial mortgage pass-through certificates series 2006-1 Rating ------ Class To From ----- -- ---- A CCC- B B D CCC- INGRESS CDO: Fitch Takes Various Rating Actions on Classes ---------------------------------------------------------- Fitch Ratings has taken various actions on classes of notes issued by Ingress CDO I Ltd. Fitch downgraded one class of notes as default appears inevitable due to losses sustained by the disposition of defaulted assets resulting in the class being undercollateralized. Fitch affirmed one class of notes and assigned a Positive Outlook given the credit quality of the remaining assets in the portfolio. This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. The default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under the various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. In addition to the stress scenarios described in these reports, Fitch also analyzed the structure's sensitivity to the assets that are experiencing interest shortfalls (18.8% of the portfolio). Since Fitch's last rating action in March 2009, the credit quality of the portfolio has improved to a current weighted average Fitch derived rating of 'BB+/BB', from 'B' at last review primarily because defaulted assets are no longer in the portfolio. The portfolio is concentrated with 13 obligors and includes two interest-only securities. Approximately 30.7% of the portfolio, excluding the IO securities, has a Fitch derived rating below investment grade, of which 11.9% is considered defaulted and 18.8% is experiencing interest shortfalls. The class B notes have paid down $40.2 million since the last review. Based on the review of the portfolio and the quantitative analysis described above, the class B notes are affirmed at 'BBB'. The Positive Rating Outlook on the class B notes reflects improvement in the credit quality of the assets that cover these notes. The class is backed by high investment grade collateral, which materially overcollateralizes these notes. As the class B notes pay down, credit enhancement will continue to improve, indicating possible positive rating movement in the future. Fitch also assigned a Loss Severity rating to the class B notes. An LS rating indicates a tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the expected loss for the collateral under the 'B' stress. 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 or Loss Severity Rating to classes rated 'CCC' or lower. The breakeven default rates for the class C notes do not pass Fitch's base cash flow model stress. Based upon the June 28, 2010 trustee report, the principal amount of the class C notes continues to be written up by the amount of accrued interest due on these notes. Currently, $10.8 million of interest remains outstanding on the class C notes. Further, the notes are undercollateralized as a result of losses sustained from the sale of defaulted assets. The current performing principal portfolio balance is $26.9 million. After allocation for the repayment of the class B notes, however, the class C notes are collateralized by $13 million compared to an outstanding balance on the class C notes of $32.1 million. As such, the class C notes have been downgraded to 'C', indicating default is inevitable. Ingress CDO I is a collateralized debt obligation supported by a static pool of commercial mortgage backed securities (62.6%), residential mortgage-backed securities (18.6%), and asset-backed securities (18.8%). Additionally, $31.9 million of the $62.3 million portfolio represents the notional balance of interest-only CMBS collateral, which, while rated 'AAA', has a weighted average remaining life of 12 months. Fitch has taken the actions listed below, including assigning LS ratings, as indicated: -- $13,848,256 class B affirmed at 'BBB/LS3'; Outlook revised to Positive from Stable'; -- $32,078,288 class C downgraded to 'C' from 'CC'. JER CRE: Moody's Downgrades Ratings on Four Classes of Notes ------------------------------------------------------------ Moody's Investors Service downgraded four classes of Notes issued by JER CRE CDO 2005-1, Ltd. due to deterioration in the credit quality of the underlying portfolio as measured by deterioration in the weighted average rating factor. In addition, the deal has triggered an Event of Default as of June 2010 due to default in interest payments to Class B-1 and B-2. The rating action, which concludes Moody's current review, is the result of Moody's on- going surveillance of commercial real estate collateralized debt obligation transactions. JER CRE CDO 2005-1, Ltd., is a static Re-Remic CRE CDO transaction backed by a portfolio of commercial mortgage backed securities collateral (96.6% of the pool) and Re-Remic certificates (3.4% of the pool). As of June 17, 2010, the aggregate Notes balance of the transaction, including the Income Notes, has decreased to $413.6 million from $416.0 million at issuance, due to approximately $2.4 million in pay-downs to the Class A Notes. The pay-down was triggered as a result of the failure of the Class A/B, Class C, and Class D/E Overcollateralization Tests. Per the Indenture, the failure of any Overcollateralization Test results in all scheduled interest and principal payments being directed to pay down the most senior notes, until such Overcollateralization Test is satisfied. Thirty-four assets totaling approximately $174.7 million par amount (41.7% of the pool balance) were listed as defaulted and another forty-one assets totaling approximately $235.3 million par amount (56.2% of the pool balance) as impaired securities as of June 17, 2010. Moody's has identified these parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life, weighted average recovery rate, and Moody's asset correlation. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's have completed updated credit estimates for the entire pool and the results will be reflected in a future Trustee Report. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 7,003 compared to 5,347 at last review. WAL acts to adjust the probability of default of the collateral pool for time. Moody's modeled to the actual WAL of 6.6 years compared to 7 years at last review. WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. Moody's modeled the actual WARR of 2.6% compared to 3.3% at last review. MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC of 99.9%, similar to that at last review. Moody's review incorporated CDOROM v2.6, one of Moody's CDO rating models, which was released on May 27, 2010. The cash flow model, CDOEdge v3.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. As always, Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output. The rating actions are: -- Class A, Downgraded to Caa2; previously on March 17, 2010 Downgraded to Ba1 -- Class B-1, Downgraded to C; previously on March 17, 2010 Downgraded to B3 -- Class B-2, Downgraded to C; previously on March 17, 2010 Downgraded to B3 -- Class C, Downgraded to C; previously on March 17, 2010 Downgraded to Caa3 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 full review is summarized in a press release dated March 17, 2010. JP MORGAN: Fitch Affirms Ratings on Series 1998-C6 Certificates --------------------------------------------------------------- Fitch Ratings has affirmed and assigned Loss Severity ratings to JP Morgan Commercial Mortgage Finance Corp. 1998-C6. The affirmations are the result of increased credit enhancement due to paydown of approximately 47% since Fitch's last review in February 2009. The paydown offsets Fitch's revised loss estimates for the transaction following Fitch's prospective analysis which is similar to its recent vintage fixed-rate commercial mortgage backed security analysis. Fitch expects potential losses of 20.7% of the remaining pool balance from the loans in special servicing and the loans that are not expected to refinance at maturity based on Fitch's refinance test. The majority of the expected losses come from the loans in special servicing. Expected loss as a percentage of the original deal balance is 3.96%. Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. As of the May 2010 distribution date, the pool's collateral balance has paid down 91.5% to $42.4 million from $796 million at issuance. Fitch has identified two Loans of Concern (37.6%), including one asset in special servicing (36.7%). The specially serviced asset is collateralized by a 361,945 square foot anchored retail center located in Deptford, NJ. The loan transferred to the special servicer in February 2009 for imminent default. As of year end 2008 the property was 56% leased compared to 98% at issuance. Occupancy declined due to the vacancy of Sam's Club and Circuit City in 2008. A forbearance agreement has been executed and the borrower has agreed to a receiver. The trust can foreclose no earlier than June 30, 2011. The second-largest loan (30.7%) is an office property located in Warren, NJ. The property was built in 1997 and was 100% occupied by Verizon Wireless as of YE 2009. The YE 2009 servicer reported debt service coverage ratio was 1.74 times. Fitch stressed the cash flow of the remaining non-defeased loans by applying a 10% reduction to 2008 fiscal year end net operating income or adjusted 2009 cash flow and applying an adjusted market cap rate between 7.25% and 10.5% to determine value. Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25x or higher were considered to pay off at maturity. Under this scenario, all of the loans are expected to pay off at maturity. Fitch has revised the Recovery Rating on this class: -- $19.9 million class G to 'CCC/RR4' from 'CCC/RR1'. In addition, Fitch has affirmed and assigned Loss Severity ratings and Rating Outlooks to these classes as indicated: -- $5.4 million class E at 'AAA/LS4'; Outlook Stable; -- $39.8 million class F at 'BBB-/LS3'; Outlook Negative; -- $2.4 million class H remains at 'D/RR6'. Classes A-1, A-2, A-3, B, C, and D have been paid in full. Fitch withdraws the rating of the interest only class X. JP MORGAN: Fitch Downgrades Ratings on 12 2003-PM1 Certificates --------------------------------------------------------------- Fitch Ratings has downgraded and assigned Rating Outlooks to 12 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., series 2003-PM1. Fitch has also assigned Loss Severity ratings and Recovery Ratings to numerous classes. The downgrades are the result of Fitch's revised loss estimates for the transaction following Fitch's prospective analysis, which is similar to its recent vintage fixed-rate commercial mortgage backed securities analysis. Fitch expects potential losses of 6.1%, approximately $52 million, of the remaining pool balance from the loans in special servicing and the loans that are not expected to refinance at maturity based on Fitch's refinance test. Fitch expects losses to fully deplete classes J through P. As of the July 2010 distribution date, the pool's aggregate principal balance has been reduced 26% to $856 million from $1.16 billion at issuance, which consists of 24.4% of paydown and 1.6% of realized losses. Fourteen loans (21.7%) are currently defeased, including the largest loan in the pool (8.1%). As of the June 2010 remittance, cumulative interest shortfalls reach class F. Fitch has designated 27 loans (21.6%) as Fitch Loans of Concern, which includes five specially serviced loans (9.3%). The largest specially serviced loan (5.8%) is secured by a 702,427 square foot regional mall located in West Palm Beach, FL. The loan transferred to special servicing in March 2009 after two of the mall's anchors, Dillard's and Macy's, closed their stores in October 2008 and January 2009, respectively. The tenants indicated the closures were related to poor sales as newer, superior malls had opened up in the market and were consistently taking market share away from the subject property. Dillard's and Macy's were not part of the loan collateral; however, their closures had a significant impact on remaining tenants at the mall, and many of these tenants vacated or closed their stores throughout 2009. In early 2010, the mall was permanently closed. Fitch expects significant losses upon liquidation of the loan based on a recent appraisal value. The second largest specially serviced loan (1.4%) is secured by a portfolio of four, cross-collateralized and cross-defaulted properties in Minneapolis, MN. The portfolio transferred to special servicing in May 2010 because cash flow from two of the properties was not adequate to support the allocated debt service. Excess cash flow from the other two properties is currently sufficient to support the total debt amount. The servicer is negotiating with the borrower to cure the default. Fitch stressed the value of the non-defeased loans by generally applying a 5% haircut to 2009 fiscal year-end net operating income (NOI) and applying an adjusted market cap rate between 7% and 10% to determine value. Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to pay off at maturity. Of the non-defeased or non-specially serviced loans, 29 loans (24.6% of the overall pool) were assumed not to be able to refinance, of which Fitch modeled losses for four loans (3.9%) in instances where Fitch's derived value was less than the outstanding balance. Fitch has removed from Rating Watch Negative, downgraded, assigned Rating Outlooks, LS ratings and RRs to these classes as indicated: -- $27.5 million class D to 'BBB-/LS5' from 'AAA'; Outlook Negative; -- $13 million class E to 'BB/LS5' from 'AA+'; Outlook Negative; -- $15.9 million class F to 'CCC/RR1' from 'AA-'; -- $13 million class G to 'CCC/RR1' from 'A'; -- $18.8 million class H to 'C/RR2' from 'BBB+'; -- $15.9 million class J to 'C/RR6' from 'BBB-'; -- $7.2 million class K 'C/RR6' from 'BB+'; -- $8.7 million class L to 'C/RR6'from 'BB'; -- $7.2 million class M to 'C/RR6' from 'B+'; -- $4.3 million class N to 'C/RR6' from 'B-'; -- $2.9 million class P to 'C/RR6' from 'CCC'. Fitch downgrades, assigns an Outlook and LS rating to this class: -- $13 million class C to 'AA/LS5' from 'AAA'; Outlook Negative. Fitch affirms and assigns LS ratings to these classes: -- $299.5 million class A1A at 'AAA/LS1'; Outlook Stable; -- $9.7 million class A-2 at 'AAA/LS1'; Outlook Stable; -- $82.6 million class A-3 at 'AAA/LS1'; Outlook Stable; -- $282 million class A-4 at 'AAA/LS1'; Outlook Stable; -- -$33.2 million class B at 'AAA/LS4'; Outlook to Negative from Stable. The class A-1 has been paid in full. Fitch withdraws the ratings on the interest-only classes X-1 and X-2. JP MORGAN: Fitch Downgrades Ratings on Series 2001-C1 Certs. ------------------------------------------------------------ Fitch Ratings downgrades, assigns Loss Severity Ratings, revises and assigns Recovery Ratings, and assigns Rating Outlooks to J.P. Morgan Chase Commercial Mortgage Securities Corp.'s commercial mortgage pass-through certificates, series 2001-C1: -- $21.9 million class H to 'BBB/LS3' from 'BBB+'; Outlook Negative; -- $9 million class J to 'BB/LS4' from 'BBB'; Outlook Negative; -- $6.4 million class K to 'B/LS5' from 'BBB-'; Outlook Negative; -- $10.3 million class L to 'CC/RR1'from 'BB-'; -- $5.2 million class M to 'C/RR5' from 'B'; -- $5.2 million class N to 'C/RR6' from 'CCC/RR1'. Fitch affirms and assigns Outlooks and LS Ratings to these classes: -- $600.2 million class A-3 at 'AAA/LS1'; Outlook Stable; -- $47.7 million class B at 'AAA/LS3'; Outlook Stable; -- $21.9 million class C at 'AAA/LS3'; Outlook Stable; -- $21.9 million class D at 'AAA/LS3'; Outlook Stable; -- $12.9 million class E at 'AAA/LS4'; Outlook Stable; -- $25.8 million class F at 'AA+/LS3'; Outlook Stable; -- $12.9 million class G at 'AA-/LS4'; Outlook Stable; -- $32.7 million class NC-1 at 'A'; Outlook Stable; -- $6.7 million class NC-2 at 'A-'; Outlook Stable. Fitch withdraws the rating of the interest-only class X-1. The class NC-1 and NC-2 certificates represent subordinate interests in the Newport Centre loan. Classes A-1, A-2, and X-2 are paid in full. Fitch does not rate the $6.2 million class NR certificates. The rating downgrades are due to an increase in expected losses on specially serviced assets coupled with expected losses following Fitch's prospective review of potential stresses to the transaction. Fitch expects losses of 1.9% of the remaining pool balance, approximately $16.1 million from the loans in special servicing and the loans that are not expected to refinance at maturity based on Fitch's refinance test. The majority of the Fitch total expected losses (90%) are associated with the specially serviced assets. The Ratings Outlooks reflect the likely direction of any rating changes over the next one to two years. As of the June 2010 distribution date, the pool has paid down 20.9% to $846.9 million from $1.07 billion at issuance. In addition, 41 loans (29.6%) have defeased including six (11.2%) of the top 10 loans. Fitch has identified 32 loans (17.3%) as Fitch Loans of Concern, including eight specially serviced loans (4.7%). The largest specially serviced asset (1.4%) is secured by a multifamily property in Austin, TX. The property became REO in May 2004. The special servicer is awaiting a permit so they can begin remediation work to cure the environmental ground water concerns at the property. Upon completion of the remediation work, the property will be marketed for sale. The second largest specially serviced asset (1.3%) is currently 60 days delinquent. The loan is secured by a multifamily property located in Holland, OH. The loan was recently transferred to special servicing in June 2010 and the special servicer is in the process of reviewing the asset to determine the appropriate resolution strategy. Fitch also reviewed the performance of the largest loan in the pool, the Newport Centre Mall (17.3%). The mall is secured by 386,000 square feet of a 920,000 square foot regional mall located in Jersey City, NJ. The loan consists of a $107.2 million senior component and a $39.4 million subordinate component, which represents the non-pooled class NC certificates. In-line occupancy at the mall declined to 81% as of April 2010 from 98% at issuance. Despite the increased vacancy, servicer-reported net operating income has improved 11% since issuance. Fitch stressed the cash flow of the remaining non defeased loans by applying a 5% reduction to 2009 fiscal year end net operating income, 10% reduction to 2008, and 15% for all loans which did not report YE 2008 and applying an adjusted market cap rate between 7.25% and 10.5% to determine value. Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to payoff at maturity. Of the non-defeased or non-specially serviced loans, four loans (3.4% of the pool) incurred a loss when compared to Fitch's stressed value. JP MORGAN: Moody's Affirms Ratings on 12 2004-C1 Certificates ------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 12 classes and downgraded six classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2004-C1. The downgrades are due to higher expected losses for the pool resulting from anticipated losses from specially serviced and highly leveraged watchlisted loans. The affirmations are due to key parameters, including Moody's loan to value ratio, Moody's stressed debt service coverage ratio and the Herfindahl, remaining within acceptable ranges. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the July 15, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 35% to $673.4 million from $1.0 billion at securitization. The Certificates are collateralized by 104 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten loans representing 39% of the pool. Thirteen loans, representing 16% of the pool, have defeased and are collateralized by U.S. Government securities. At last review the pool contained one loan with an investment grade underlying rating, the Forum Shops Loan. This loan has paid off since last review. Thirty 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 CRE Finance Council (formerly Commercial Mortgage Securities Association) 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 $4.6 million loss (80% loss severity). Three loans, representing 3% of the pool, are currently in special servicing. The largest specially serviced loan is the 610 Broadway Loan ($11.3 million -- 1.7% of the pool), which is secured by a 152,454 square foot office complex built in 1909 and renovated in 2002 and located in the Jewelry District of downtown Los Angeles, California. The loan was transferred to special servicing in January 2010 due to monetary default and the special servicer is currently is in the process of recommending the installation of a receiver. The most recent appraisal as of March 2010 values the property at $14.5 million. The remaining two specially serviced loans are secured by a multifamily and manufactured housing property. Moody's has estimated an aggregate $3.7 million loss (19% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for seven poorly performing loans representing 4% of the pool and has estimated an aggregate $6.7 million loss (25% expected loss based on a 50% probability default) from these troubled loans. Moody's rating action recognizes potential uncertainty around the timing and magnitude of loss from this troubled loan. Moody's was provided with year-end or partial year 2009 operating statements for 92% of the conduit pool. Moody's weighted average LTV for the conduit pool is 82% compared to 84% at last review. Although the overall LTV has declined since last review, credit quality dispersion has increased. Based on Moody's analysis, 18% of the conduit pool has an LTV in excess of 100% compared to 7% at last review. Moody's conduit actual and stressed DSCRs are 1.37X and 1.28X, respectively, compared to 1.37X and 1.22X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of Herf 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 has a Herf score of 20 compared to 23 at last review. The top three conduit loans represent 27% of the pool. The largest conduit loan is the Hometown America Portfolios IV & V Loan ($89.2 million -- 13.3% of the pool), which is secured by 14 manufactured home communities totaling 3,742 units and located in eight states. The portfolio was 89% leased as of September 2009, the same as at last review. The loan has amortized 3% since last review. Moody's LTV and stressed DSCR are 74% and 1.32X, respectively, compared to 79% and 1.23X at last review. The second largest conduit loan is the One Fordham Plaza Loan ($48.1 million -- 7.1% of the pool), which is secured by a 414,002 square foot office building located in Bronx, New York. The property was 88% leased as of March 2010 compared to 89% at last review. The largest tenant is Montefiore Hospital, which leases approximately 125,000 square feet of the net rentable area (NRA) under various leases expiring in 2012 and 2013. Included is a proprietary lease (109,000 square feet), where upon expiration of the initial term in 2012, Montefiore can extend through September 2036 at $1.00 per annum plus expense reimbursements. Other tenants include the New York City Housing Authority (18% of NRA; lease expiration March 2030) and the New York State Division of Human Rights (11% of NRA; lease expiration July 2010). The loan is currently on the servicer's watchlist due to low DSCR. The DSCR decrease is primarily the result of lower occupancy during 2009. Property performance has declined due to both a decrease in rental income as well as increased expenses. The loan has amortized 9% since last review. Moody's LTV and stressed DSCR are 83% and 1.31X, respectively, compared to 75% and 1.44X at last review. The third largest conduit loan is the White Oak Crossing Shopping Center Loan ($41.3 million -- 6.1% of the pool), which is secured by a 517,000 square foot shopping center located approximately seven miles southeast of Raleigh, North Carolina. The center is anchored by BJ's Wholesale Club (22% of NRA; lease expiration August 2023), Kohl's (17% of NRA; lease expiration January 2024), and Dick's Sporting Goods (9% of NRA; lease expiration January 2019). The center is shadow anchored by Target. The center was 94% leased as of March 2010, compared to 100% at last review. The loan has benefitted from 4% of principal amortization since last review. Moody's LTV and stressed DSCR are 82% and 1.22X, respectively, compared to 84% and 1.19X at last review. Moody's rating action is: -- Class A-1A, $170,886,523, affirmed at Aaa; previously assigned at Aaa on 04/02/2004 -- Class A-2, $56,694,455, affirmed at Aaa; previously assigned at Aaa on 04/02/2004 -- Class A-3, $303,158,000, affirmed at Aaa; previously assigned at Aaa on 04/02/2004 -- Class X-1, Notional, affirmed at Aaa; previously assigned at Aaa on 04/02/2004 -- Class X-2, Notional, affirmed at Aaa; previously assigned at Aaa on 04/02/2004 -- Class B, $27,355,000, affirmed at Aaa; previously upgraded to Aaa from Aal on 10/29/2008 -- Class C, $11,724,000, affirmed at Aaa; previously upgraded to Aaa from Aa2 on 10/29/2008 -- Class D, $22,145,000, affirmed at A1; previously upgraded to A1 from A2 on 10/29/2008 -- Class E, $13,026,000, affirmed at A3; previously assigned at A3 on 04/02/2004 -- Class F, $11,723,000, affirmed at Baa1; previously assigned at Baa1 on 04/02/2004 -- Class G, $9,119,000, affirmed at Baa2; previously assigned at Baa2 on 04/02/2004 -- Class H, $10,421,000, affirmed at Baa3; previously assigned at Baa3 on 04/02/2004 -- Class J, $6,513,000, downgraded to Ba3 from Ba1; previously assigned at Ba1 on 04/02/2004 -- Class K, $5,210,000, downgraded to B1 from Ba2; previously assigned at Ba2 on 04/02/2004 -- Class L, $3,908,000, downgraded to B3 from Ba3; previously assigned at Ba3 on 04/02/2004 -- Class M, $5,211,000, downgraded to Caa2 from B1; previously assigned at B1 on 04/02/2004 -- Class N, $2,605,000, downgraded to Ca from B2; previously assigned at B2 on 04/02/2004 -- Class P, $2,605,000, downgraded to C from B3; previously assigned at B3 on 04/02/2004 JP MORGAN: Moody's Upgrades Ratings on Two 2000-C9 Certificates --------------------------------------------------------------- Moody's Investors Service upgraded the ratings of two classes and affirmed three classes of J.P. Morgan Commercial Mortgage Finance Corp., Mortgage Pass-Through Certificates, Series 2000-C9. The upgrades are due to the increased credit support due to loan payoffs and principal amortization. The deal has paid down 90% since Moody's prior review in January 2009. The affirmations are due to key rating parameters, including Moody's loan to value ratio and Moody's stressed debt service coverage ratio, remaining within acceptable ranges. As of the July 15, 2010 statement date, the transaction's aggregate certificate balance has decreased 94% to $49.8 million from $814 million at securitization. The certificates are collateralized by 11 mortgage loans ranging from 2% to 21% of the pool. One loan, representing 19% of the pool, has defeased and is collateralized by U.S. Government securities. Six loans, representing 55% of the pool, mature within in the next six months or are currently past their respective anticipated repayment dates (ARD). Four of these loans, representing 32% of the pool, have a Moody's stressed DSCR less than 1.0X. Three loans, representing 38% 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 CRE Finance Council (formerly Commercial Mortgage Securities Association) 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. Twenty-one loans have been liquidated from the pool, resulting in an aggregate realized loss of approximately $32.5 million (39% severity on average). Four loans, representing 32% of the pool, are currently in special servicing. The largest specially serviced loan is the Cory Industries Loan ($8.5 million -- 17% of the pool), which is secured by four industrial buildings located in Elizabeth, New Jersey. The property was 84% leased as of December 2009 with all of the leases rolling within the next three years. The loan has passed its September 2009 anticipated repayment date and was not able to secure alternative financing. The borrower has requested a loan modification. The loan is current. The remaining three specially serviced loans are secured by retail and multifamily properties. Moody's estimates an aggregate $3.9 million loss for all of the specially serviced loans (overall 25% expected loss). Moody's has assumed a high default probability for three loans representing 38% of the pool. These loans are currently on the master servicer's watchlist and have experienced declines in performance. Moody's has estimated an aggregate $3.6 million loss for these loans (overall 19% expected loss based on a weighted average 64% default probability). Moody's rating action recognizes potential uncertainty around the timing and magnitude of loss from these troubled loans. Moody's was provided with full-year 2008 and full-year 2009 operating results for 100% and 64%, respectively, of the pool. Excluding specially serviced and troubled loans, Moody's conduit weighted average LTV is 77% compared to 85% at Moody's prior review. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.48X and 1.56X, respectively, compared to 1.25X and 1.53X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of the Herf 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 is 40. The pool has a Herf of 6 compared to 35 at Moody's prior review. The top three non-defeased loans represent 42% of the pool. The largest conduit loan is Hickory Hospitality Portfolio Loan ($10.5 million -- 21.1% of the pool), which is secured by four limited service hotels totaling 388 guest-rooms. The hotels are all located in North Carolina. Competition from newer properties and the overall decline in the hotel sector has contributed to the portfolio's weak performance. The loan has been on the watchlist since July 2009 due to a decline in the portfolio's net operating income. Moody's has assumed a high probability of default for this loan due to concerns with the portfolio's declining performance. Moody's LTV and stressed DSCR are 136% and 0.95X, respectively, compared 124% and 1.11X at last review. The second largest conduit loan is the Bridgewater Place Loan ($7.0 million -- 14.1% of the pool), which is secured by a 140,200 square foot office building located in Syracuse, New York. The building was 79% leased as of March 2010. The loan is currently on the watchlist due to the drop in leasing. The loan has passed its April 2009 ARD. Moody's has assumed a high probability of default for this loan due to concerns with the property's declining performance. Moody's LTV and stressed DSCR are 100% and 1.14X, respectively, compared 88% and 1.36X at last review. The third largest conduit loan is the K-Mart -- Baltimore Loan ($3.2 million -- 6.5% of the pool), which is secured by a retail center located in Baltimore, Maryland. As of December 2009, the property was 95% leased. The property is anchored by K-Mart, which leases 79% of the property's net rentable area (NRA) through November 2014. The loan has passed its December 2009 ARD. Moody's LTV and stressed DSCR are 93% and 1.14X, respectively, compared 91% and 1.22X at last review. Moody's rating action is: -- Class X, Notional, affirmed at Aaa; previously on 1/25/2000 assigned Aaa -- Class F, $1,324,258, upgraded to Aaa from A1; previously on 2/27/2007 upgraded to A1 from Baa2 -- Class G, $14,251,000, upgraded to Aa3 from Baa2; previously on 2/27/2007 upgraded to Baa2 from Ba1 -- Class H, $20,359,000, affirmed at B1; previously on 11/19/2002 downgraded to B1 from Ba2 -- Class J, $13,817,506, affirmed at C; previously on 11/22/2005 downgraded to C from Caa1 JPMORGAN CHASE: S&P Downgrades Ratings on 2002-C3 Certificates -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on five classes of commercial mortgage pass-through certificates from JPMorgan Chase Commercial Mortgage Securities Corp.'s series 2002- C3, a U.S. commercial mortgage-backed securities transaction, and removed them from CreditWatch, where they were placed with negative implications on April 13, 2010. Concurrently, S&P affirmed its 'AAA' ratings on four other classes from this same transaction. The rating affirmations and downgrades follow S&P's review of the transaction due to an increase in the amount of ongoing interest shortfalls affecting the trust. The additional interest shortfalls, which were reflected in the April 12, 2010, trustee remittance report, prompted us to place five classes on CreditWatch with negative implications in April 2010. According to the master servicer, Berkadia Commercial Mortgage LLC, the increase in interest shortfalls was primarily due to legal expenses related to the 318 West Adams Street loan, as well as the servicer's recovery of past advanced amounts on the Maple Glen loan that Berkadia deemed non-recoverable. The legal expenses and advance recovery, in conjunction with appraisal subordinate entitlement reduction amounts and ongoing special servicing fees, resulted in interest shortfalls that affected all of the classes below the class C certificate in April 2010. Although the legal expenses and advance recovery are no longer causing interest shortfalls, S&P believes that classes C through F are more susceptible to future interest shortfalls due to a reduction in interest available to pay subordinate classes following realized principal losses to the trust. Based on S&P's analysis of the transaction's waterfall, the interest paid to subordinate classes provides a cushion to the classes that were downgraded, insulating them from interest shortfalls. However, if additional assets are transferred to the special servicer, this may result in an increase in the ASER amounts and special servicing fees, which would increase interest shortfalls and may affect additional classes. S&P lowered its rating on class G to 'D' due to accumulated interest shortfalls that S&P does not expect to be recovered in the near future. It is S&P's understanding from Berkadia that litigation-related expenses from the 318 West Adams Street loan have been recategorized as principal losses, of which $138,914 was reflected in the June 14, 2010, trustee remittance report and $55,034 in the July 12, 2010, trustee remittance report. Moreover, the legal fees of $242,451 that caused the interest shortfalls reflected in the April 2010 trustee remittance report were recategorized as principal loss in the July 2010 trustee remittance report. The master servicer indicated to us that any future litigation expenses related to the 318 West Adams Street loan will cause additional principal losses to the trust. It is S&P's understanding, based on discussions with the special servicer, ING Clarion Capital Loan Services LLC, that the trust will continue to incur litigation-related expenses related to the 318 West Adams Street loan for at least the next several months, since the trial has been scheduled for September 2010. The additional erosion of the principal balances of the most subordinate classes are expected to continue to reduce overall credit support and the amount of subordinate interest available to absorb future interest shortfalls. Since S&P's last comprehensive review of the transaction on March 11, 2010, S&P has also determined that two additional loans are at increased risk of default and loss. The larger of the two loans, the Sibley Building loan ($11.1 million, 2.1%), is the 10th-largest real estate exposure in the pool. According to Berkadia, the borrower has sent a hardship letter on April 29, 2010, stating that the largest tenant, which occupies 81.0% of the gross leasable area, plans to vacate the 250,095-sq.-ft. office building in Syracuse, N.Y., upon its Dec. 31, 2010, lease expiration date. According to the borrower, if it is unable to lease out the vacant space, cash flow at the property will not be sufficient to fund operating expenses and debt service payments. The other loan ($2.2 million) is 30-plus days delinquent. This loan, secured by a multifamily apartment complex in Warner Robins, Ga., had a reported debt service coverage of 0.58x and 60.0% occupancy as of year-end 2009. Recent realized principal losses to the trust from liquidation of assets were reflected in the May and July 2010 trustee remittance reports totaling $8.9 million. The specially serviced Maple Glen asset, a 706-unit garden-style apartment complex in Columbus, Ohio, was liquidated in May 2010, incurring a realized principal loss of $7.8 million. The asset incurred an aggregate realized loss of $8.2 million, which is in excess of 100% of the principal balance because liquidation proceeds were insufficient to recover the total master servicer's advances of $1.8 million. The other specially serviced asset, the Valley View Commerce Center, a 29,885-sq.-ft. suburban office building in Farmers Branch, Texas, was liquidated in July 2010, at a realized principal loss of $1.1 million. Ratings Lowered And Removed From Creditwatch Negative JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2002-C3 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- C AA AAA/Watch Neg 16.31 D A- AA/Watch Neg 11.86 E BBB- A+/Watch Neg 10.15 F B- BB-/Watch Neg 6.05 G D B-/Watch Neg 4.00 Ratings Affirmed JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2002-C3 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 23.15 A-2 AAA 23.15 B AAA 18.02 X-1 AAA N/A JWS CBO: 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 JWS CBO 2000-1: -- US$36,750,000 Class B Floating Rate Second Priority Senior Secured Notes (current balance of $19,229,966), Upgraded to Aaa; previously on November 16, 2006 Upgraded to Aa1; -- US$15,000,000 Class C-1 Fixed Rate Third Priority Senior Secured Notes, Upgraded to Ba3, previously on May 18, 2009 Downgraded to B1; -- US$16,500,000 Class C-2 Floating Rate Third Priority Senior Secured Notes, Upgraded to Ba3, previously on May 18, 2009 Downgraded to B1. According to Moody's, the rating actions taken on the notes are a result of substantial delevering of the transaction from unscheduled principal proceeds. In particular, since the previous rating action, the Class A Notes have been paid in full and the Class B Notes were paid a total of about $17.5 million, accounting for roughly 52% of the total Class B outstanding balance reported in April 2009. Moody's notes that a considerable amount of the principal proceeds used to delever the Class A and Class B Notes were from unscheduled redemptions (including redemptions at par or at a premium to par). JWS CBO 2000-1, Ltd., issued in July 2000, is a collateralized bond obligation backed primarily by a portfolio of senior unsecured bonds. KINGSLAND IV: Moody's Confirms Ratings on Class E Notes to 'Ca' --------------------------------------------------------------- Moody's Investors Service announced that it has confirmed the rating of these notes issued by Kingsland IV, Ltd.: -- US$14,900,000 Class E Senior Secured Deferrable Floating Rate Notes Due 2021, Confirmed at Ca; previously on May 20, 2010 Ca Placed Under Review for Possible Upgrade. According to Moody's, the improvement in the overcollateralization of the Class E Notes' has not been sufficient to warrant an upgrade of the notes' rating. Since placing the Class E notes on review for possible upgrade in May 2009, there has been a minimal improvement in the overcollateralization of the Class E Notes. In particular, as of the latest trustee report dated June 28, 2010, the Class E overcollateralization ratio was reported at 103.52% versus 102.87% in April 2010. Moody's also notes that the portfolio includes a number of investments in structured finance 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 revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" and "Annual Sector Review (2009): Global CLOs," key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Kingsland IV, Ltd., issued in February 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans and a material concentration in CLO securities. LACKAWANNA COUNTY: S&P Downgrades Rating on GO Debt to 'BB' ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its underlying rating on Lackawanna County, Pa.'s outstanding general obligation debt to 'BB' from 'BBB-', due to continued structural budgetary imbalance and reliance on non-recurring revenues to fund operations. At the same time, Standard & Poor's assigned its 'BB' long-term rating to the county's series 2010B GO bonds. The outlook is stable. In S&P's opinion, the 'BB' rating reflects the county's history of weak and unstable financial operations; and unaudited fiscal 2009 results showing a deficit fund balance position of negative $280,000, or negative 0.3% of expenditures. Positive credit factors include the county's administration that has made significant cost-cutting measures since fiscal 2008, and continues to do so in order to provide budget relief in the near term and to have recurring revenues match recurring expenditures in future budgets; and successful sale of the county's nursing home, which provided $10 million in available resources for operations and capital projects, and effectively eliminated ongoing subsidy payments of $350,000-$400,000 annually. "S&P expects that the actions taken by management to date have provided adequate budget relief in the interim," said Standard & Poor's credit analyst Jesse Brady. "S&P also expect that management will continue to make efforts toward achieving a structurally balanced budget." The bonds are a GO of the county; an ad valorem pledge on all taxable property within the county secures the bonds and notes. Proceeds will be used to refund the county's series 2008B notes, and to fund a termination payment, currently estimated at $7.5 million, of the county's swap agreement with PNC in relation to the 2008B notes. LACKAWANNA COUNTY: S&P Withdraws 'BB' Rating on GO Debt ------------------------------------------------------- Standard & Poor's Ratings Services said it withdrew its 'BB' long- term rating on Lackawanna County, Pa.'s outstanding general obligation debt at the issuer's request. LB-UBS COMMERCIAL: Moody's Reviews Ratings on 12 2005-C1 Certs. --------------------------------------------------------------- Moody's Investors Service placed 12 classes of LB-UBS Commercial Mortgage Trust 2005-C1, Commercial Mortgage Pass-Through Certificates, Series 2005-C1 on review for possible downgrade due to higher expected losses for the pool resulting from actual and anticipated losses from specially serviced and highly leveraged watchlisted loans. The action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the July 16, 2010 distribution date, the transaction's aggregate certificate balance has decreased by approximately 22% to $1.2 billion from $1.5 billion at securitization. The Certificates are collateralized by 76 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top 10 non- defeased loans representing 65% of the pool. Twenty loans, representing 17% 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 CRE Finance Council (formerly Commercial Mortgage Securities Association) 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. Four loans have been liquidated from the pool since securitization, resulting in an aggregate $6.6 million loss (30% loss severity on average). Currently 7 loans, representing 7% of the pool, are in special servicing. The largest specially serviced loan is the Atlantic Building Loan ($28.2 million -- 2.4% of the pool), which is secured by a 315,993 square foot office building located in Philadelphia, Pennsylvania. The loan was transferred to special servicing in April 2010 due to monetary default . The property was 74% leased as of January 2010 and performance has declined since securitization. The remaining 6 loans are secured by a mix of multifamily, retail, office and industrial properties. Moody's review will focus on potential losses from specially serviced and watchlisted loans and the performance of the overall pool. Moody's rating action is: -- Class A-J, $102,769,000, currently rated Aaa, on review for possible downgrade; previously assigned to Aaa on 2/10/2005 -- Class B, $26,704,000, currently rated Aa1, on review for possible downgrade; previously assigned to Aa1 on 2/10/2005 -- Class C, $26,704,000, currently rated Aa2, on review for possible downgrade; previously assigned to Aa2 on 2/10/2005 -- Class D, $19,073,000, currently rated Aa3, on review for possible downgrade; previously assigned to Aa3 on 2/10/2005 -- Class E, $24,796,000, currently rated A2, on review for possible downgrade; previously assigned to A2 on 2/10/2005 -- Class F, $15,259,000, currently rated A3, on review for possible downgrade; previously assigned to A3 on 2/10/2005 -- Class G, $17,167,000, currently rated Baa1, on review for possible downgrade; previously assigned to Baa1 on 2/10/2005 -- Class H, $17,166,000, currently rated Baa2, on review for possible downgrade; previously assigned to Baa2 on 2/10/2005 -- Class J, $22,889,000, currently rated Ba1, on review for possible downgrade; previously downgraded to Ba1 from Baa3 on 7/9/2009 -- Class K, $5,717,000, currently rated Ba2, on review for possible downgrade; previously downgraded to Ba2 from Ba1 on 7/9/2009 -- Class L, $7,623,000, currently rated Ba3, on review for possible downgrade; previously downgraded to Ba3 from Ba2 on 7/9/2009 -- Class M, $3,811,000, currently rated B1, on review for possible downgrade; previously downgraded to B1 from Ba3 on 7/9/2009 LB-UBS COMMERCIAL: S&P Downgrades Rating on Class N Certs. to 'D' ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class N commercial mortgage pass-through certificate from LB-UBS Commercial Mortgage Trust 2006-C1, a U.S. commercial mortgage- backed securities transaction, to 'D' from 'CCC-'. The downgrade follows principal losses sustained by the class, which were reported in the July 16, 2010, remittance report. The class N certificate experienced reported losses amounting to 32.4% of its $9.2 million opening certificate balance. The class P certificate lost 100% of its $3.3 million opening balance. S&P downgraded this class to 'D' on April 28, 2010, due to a prior principal loss. According to the July 2010 remittance report, the principal losses resulted from the liquidation through note sales of three assets that were with the special servicer, LNR Partners Inc. Details of the three liquidated assets are: The Northern Pine asset comprises various mixed-use properties in Pennsylvania, totaling 21,750 sq. ft., which had a total exposure of $2.6 million. The asset was transferred to LNR on Jan. 15, 2009, because it was 60-days delinquent. The trust incurred a $732,869 realized loss when the asset was liquidated on July 9, 2010. Based on the July 2010 remittance report, the loss severity for this loan was 27.9% of its balance before liquidation. The Holiday Inn Express-Destin asset is a 74-unit limited-service hotel in Destin, Fla., which had a total exposure of $6.7 million. The asset was transferred to LNR on Dec. 11, 2009, for imminent monetary default. The trust incurred a $4.4 million realized loss when the asset was liquidated on July 9, 2010. Based on the July 2010 remittance report, the loss severity for this loan was 66.6% of its balance before liquidation.The Palmiers Apartments asset is a 96-unit multifamily property in Fort Lauderdale, Fla., which had a total exposure of $4.2 million. The asset was transferred to LNR on Aug. 17, 2007, because it was 60-days delinquent. The trust incurred a $1.1 million realized loss when the asset was liquidated on July 9, 2010. Based on the July 2010 remittance report, the loss severity for this loan was 26.7% of its balance before liquidation. The remittance report notes that the collateral pool for the transaction consisted of 138 loans with an aggregate trust balance of $2.3 billion, down from 145 loans totaling $2.5 billion at issuance. There are eight loans with the special servicer totaling $160.2 million. To date, the trust has experienced losses on eight loans totaling $43.1 million. Based on the July 2010 remittance report, the weighted average loss severity for these loans was approximately 58.4% of their balance before liquidation. LEHMAN ABS: S&P Downgrades Rating on Class A-2 Certs. to 'CC' ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class A-2 certificates from Lehman ABS Manufactured Housing Contract Trust 2001-B to 'CC' from 'BBB+'. At the same time, S&P placed its ratings on the class A-3, A-4, A-5, A-6, A-7, and M-1 certificates from the same transaction on CreditWatch with negative implications. The downgrade of class A-2 reflects S&P's view that the certificates are not likely to pay the full principal due to investors by Nov. 15, 2010, the certificates' legal final maturity date. Due to the higher-than-expected cumulative net losses, the transaction is currently not generating enough collections each month to pay the class A certificates the complete amount of principal due according to the transaction documents. As such, the class A certificates have accumulated an unpaid principal shortfall amount. According to the transaction documents, the payment waterfall specifies that prior to the normal sequential principal payment distribution, any unpaid principal shortfall amount is to be paid pro rata among all the class A certificates until they pay down. Accordingly, the class A-2 certificates are currently receiving their pro rata share of the available monthly collections. Over the past 12 months, principal payments to the class A-2 certificates have averaged approximately $120,000 per month. As of the June 2010 distribution period, class A-2 had an outstanding principal balance of approximately $8.4 million. Based on the recent average monthly principal payments to the class A-2 certificates, and the likelihood that these principal payments will remain at similar levels for the foreseeable future due to the substantial unpaid principal shortfall amounts remaining for all of the class A certificates, S&P believes that the class A-2 certificates are unlikely to be paid off in full within the next five months. The CreditWatch negative placements on the six other classes reflect S&P's view of the continued deterioration in collateral performance due to the high default frequencies and loss severities, the resulting write-downs to the class M-2, B-1, and B-2 certificates, and the complete depletion of the overcollateralization. In addition, in S&P's view, the senior classes with the closest legal final maturities may be at risk of not being repaid by their legal final maturity date given the class A certificates' current pro rata payment structure. The class A-7 certificates benefit from a bond insurance policy issued by Ambac Assurance Corp. ('R'). Under S&P's criteria, the issue credit rating on a fully enhanced bond issue is the higher of (i) S&P's rating on the credit enhancer; and (ii) the Standard & Poor's underlying rating on the class. Over the next 90 days, Standard & Poor's will assess the credit support and analyze the cash flow for this transaction to assess whether S&P thinks any credit action would be consistent with its criteria. Long-Term Rating Lowered Lehman ABS Manufactured Housing Contract Trust 2001-B Rating ------ Class To From ----- -- ---- A-2 CC BBB+ Long-Term Ratings Placed On Creditwatch Negative Lehman ABS Manufactured Housing Contract Trust 2001-B Rating ------ Class To From ----- -- ---- A-3 BBB+/Watch Neg BBB+ A-4 BBB+/Watch Neg BBB+ A-5 BBB+/Watch Neg BBB+ A-6 BBB+/Watch Neg BBB+ A-7 BBB+/Watch Neg BBB+ M-1 B-/Watch Neg B- LIBERTY SQUARE: Moody's Upgrades Ratings on Various Classes ----------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of these notes issued by Liberty Square CDO II, Ltd.: -- US$140,000,000 Class A-1 Floating Rate Notes Due 2013 (current balance of $8,919,280), Upgraded to Aaa; previously on May 21, 2009 Downgraded to A1; -- US$30,000,000 Class A-2 Floating Rate Notes Due 2013 (current balance of $1,911,274), Upgraded to Aaa; previously on May 21, 2009 Downgraded to A1; -- US$22,500,000 Class B Floating Rate Notes Due 2013, Upgraded to Aa2; previously on May 21, 2009 Downgraded to Ba2; -- US$25,000,000 Class C Floating Rate Notes Due 2013, Upgraded to Caa3; previously on May 21, 2009 Downgraded to Ca; -- US$30,000,000 Class A-2 Floating Rate Notes Due 2013- Combination Notes (current rated balance of $1,911,274), Upgraded to Aaa; previously on May 21, 2009 Downgraded to A1. According to Moody's, the rating actions taken on the notes result primarily from improvement in the credit quality of the underlying portfolio and a significant increase in the overcollateralization of the notes due to delevering since the last rating action in May 2009. Moody's notes that the notes benefited from the substantial delevering of the Class A-1 Notes and Class A-2 Notes, which have been paid down by approximately $70MM since the last rating action, accounting for roughly 86% of the total Class A-1 and Class A-2 notes' outstanding balance reported in April 2009. As a result of the delevering, the overcollateralization ratios have increased significantly since the rating action in May 2009. In particular, based on the trustee report, dated June 7, 2010, the Class AB overcollateralization ratio was reported at 133.34% versus the April 2009 level of 121.02%. A substantial proportion of the delevering is attributable to collateral sales and principal prepayments on the underlying bonds. In addition, the Class AB overcollateralization ratio has also increased due to the diversion of excess interest to delever the Class A-1 and Class A- 2 notes as a result of the Class C and Class D overcollateralization test failures. Based on the June 2010 report, the Class C overcollateralization ratio was reported at 96.61% versus a test level of 107.5% and the Class D overcollateralization ratio was reported at 88.88% versus a test level of 104.3%. Moody's expects delevering to continue as a result of the end of the deal's reinvestment period in June 2006 and continued diversion of excess interest to cure the Class C and Class D overcollateralization test failures. Improvement in the credit quality is observed through an improvement in the average credit rating (as measured by the weighted average rating factor). As of the latest trustee report, dated June 7, 2010, the weighted average rating factor is 2133 compared to 3434 in April 2009. The improvement in WARF is primarily a result of rating upgrades on several obligors with large positions in the underlying portfolio. Additionally, the dollar amount of defaulted securities has remained stable since the last rating action. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" and "Annual Sector Review (2009): Global CLOs," key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Additionally, Moody's notes that while the Class C overcollateralization ratio is reported at only 96.61%, the transaction benefits from a substantial amount of excess interest which is used to delever the rated notes due to the Class C and Class D overcollateralization test failures. The excess spread serves as additional overcollateralization support for the rated notes, including the Class C notes. Liberty Square CDO II, Ltd., issued in May 8, 2001, is a collateralized bond obligation backed primarily by a portfolio of senior unsecured bonds. M-2 SPC: Moody's Downgrades Ratings on Various Series of Notes -------------------------------------------------------------- Moody's Investors Service announced that it has downgraded its ratings of M-2 SPC Series 2006-B and Series 2006-C, a corporate syntehtic obligation referencing a managed portfolio of corporate entities. The rating actions are: -- US$7.5M Series 2006-B Notes, Downgraded to C; previously on Nov 10, 2008 Downgraded to Ca; -- US$20M Series 2006-C Notes, Downgraded to C; previously on Nov 10, 2008 Downgraded to Ca. Moody's explained that the rating actions taken are the result of the rated tranches experiencing 100% losses due to credit events on Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Lehman Brothers Holdings Inc., Washington Mutual Inc., Kaupthing Banki Hf, Idearc Inc., General Growth Properties Inc., and RH Donnelley Corp. MAGNOLIA FINANCE: S&P Withdraws Ratings on Various Classes ---------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings on the notes issued by Magnolia Finance II PLC's series 2005-6, 2006-7C, and 2006-7A3 following the full repurchase of the notes from each transaction. Rating Withdrawn Magnolia Finance II PLC Series 2005-6 Rating ------ Class To From ----- -- ---- A NR AAA Magnolia Finance II PLC Series 2006-7C Rating ------ Class To From ----- -- ---- Notes NR BB+ Magnolia Finance II PLC Series 2006-7A3 Rating ------ Class To From ----- -- ---- Notes NR A+ NR - Not rated. MERRILL LYNCH: Moody's Downgrades Ratings on 135 Tranches --------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 135 tranches and confirmed the ratings of 29 tranches from 28 RMBS transactions issued by Merrill Lynch. The collateral backing these deals primarily consists of first-lien, fixed and adjustable-rate subprime residential mortgages. The actions are a result of the continued performance deterioration in Subprime pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on subprime pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. Complete rating actions are: Issuer: Merrill Lynch Mortgage Investors Trust 2005-AR1 -- Cl. A-1A, Downgraded to Aa1; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-1B, Downgraded to Aa3; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to A1; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-3A4, Downgraded to Aa1; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-3B, Downgraded to A1; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Ca; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2005-FM1 -- Cl. A-1A, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-1B, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to A2; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-AHL1 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to Caa3; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to Ca; previously on January 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2D, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-AR1 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to Ba3; previously on January 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to Ca; previously on January 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2D, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-FF1 -- Cl. A-1, Downgraded to Ba3; previously on January 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to Ba1; previously on January 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to B1; previously on January 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Ca; previously on January 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on January 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-FM1 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to Caa2; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to C; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to C; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-MLN1 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2A, Downgraded to A3; previously on January 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to Ca; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2C, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-OPT1 -- Cl. A-1, Downgraded to Caa3; previously on January 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to Caa1; previously on January 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to Ca; previously on January 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to Ca; previously on January 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-RM1 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-RM2 -- Cl. A-1A, Downgraded to Ca; previously on January 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-RM3 -- Cl. A-1A, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-1B, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2B, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2C, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-RM4 -- Cl. A-1, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2A, Downgraded to C; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-RM5 -- Cl. A-1, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2A, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2006-WMC2 -- Cl. A-1, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to C; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust 2007-MLN1 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2A, Downgraded to Ca; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust Series 2005-HE1 -- Cl. A-1B, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2C, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Caa1; previously on January 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust Series 2006-HE1 -- Cl. A-1, Downgraded to Ba1; previously on January 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to B2; previously on January 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to Caa2; previously on January 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust Series 2006-HE2 -- Cl. A-3, Downgraded to Caa3; previously on January 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Ca; previously on January 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust Series 2006-HE3 -- Cl. A-2, Downgraded to Ca; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-3, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-4, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust Series 2006-HE4 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to Ca; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust Series 2006-HE5 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa1 Remained On Review for Possible Downgrade -- Cl. A-2A, Downgraded to A1; previously on January 13, 2010 Aaa Remained On Review for Possible Downgrade -- Cl. A-2B, Downgraded to Ca; previously on January 13, 2010 B3 Remained On Review for Possible Downgrade -- Cl. A-2C, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust Series 2006-HE6 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2A, Downgraded to Caa3; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-2B, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2C, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust Series 2007-HE2 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2A, Downgraded to Ca; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2B, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2C, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust Series 2007-HE3 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-3, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-4, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors Trust, Series 2007-HE1 -- Cl. A-1, Downgraded to Ca; previously on January 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2A, Downgraded to Ca; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2B, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2C, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2D, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors, Inc. 2005-NC1 -- Cl. M-1, Downgraded to A1; previously on January 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to B1; previously on January 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on January 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on Mar 17, 2009 Downgraded to Ba2 -- Cl. B-2, Downgraded to C; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to C; previously on January 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors, Inc. 2005-WMC1 -- Cl. M-1, Downgraded to Baa1; previously on January 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to B1; previously on January 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Ca; previously on January 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ca; previously on January 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on January 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to C; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to C; previously on January 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. B-4, Downgraded to C; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Merrill Lynch Mortgage Investors, Inc. 2005-WMC2 -- Cl. M-2, Downgraded to A1; previously on January 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to B3; previously on January 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on January 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on January 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on January 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade MOB MANAGEMENT: Moody's Withdraws 'B1' Rating on Series 2001 A -------------------------------------------------------------- Moody's Investors Service has withdrawn the B1/S.G. rating assigned to the MOB Management Two, LLC, Variable Rate Revenue Bonds, Series 2001 A due to the expiration of the Synovus Bank letter of credit which provided credit and liquidity support for the transaction. There was a mandatory tender of the bonds in conjunction with the expiration of the letter of credit. The most recent rating action on the bonds was on April 23, 2010, when the long term rating was lowered to B1 due to the downgrade of Synovus Bank long term deposit rating. MORGAN STANLEY: Fitch Downgrades Ratings on 1999-LIFE1 Certs. ------------------------------------------------------------- Fitch Ratings downgrades and assigns Rating Outlooks, Loss Severity ratings, and Recovery Ratings to Morgan Stanley Capital I Inc. commercial mortgage pass-through certificates, series 1999- LIFE1, as indicated: -- $10.4 million class H to 'BB/LS5' from 'BBB+'; Outlook Negative; -- $4.8 million class J to 'CC/RR2' from 'BB+'; -- $7.2 million class K to 'C/RR6' from 'BB'. In addition, Fitch affirms and assigns LS and RR ratings as indicated: -- $5.7 million class E at 'AA/LS5'; Outlook Stable; -- $7.4 million class F at 'A+/LS5'; Outlook Stable; -- $1.5 million class G at 'A/LS5'; Outlook Stable. Classes A-1, A-2, B, C, and D are paid in full. Fitch does not rate the class P certificates. The balances of classes M and N have been reduced to zero as a result of losses on disposed loans. The rating of class L remains at 'D' with a revised RR to 'RR6' from 'RR1'. The ratings of classes M and N remain at 'D/RR6'. Fitch withdraws the rating of the interest only class X. The downgrades are due to an increase in Fitch expected losses following Fitch's prospective review of potential stresses and expected losses associated with specially serviced assets. Fitch expects losses of 23.58% of the remaining pool balance, approximately $10 million, from the loans in special servicing and the loans that are not expected to refinance at maturity based on Fitch's refinance test. As of the June 2010 distribution date, the pool's collateral balance has paid down 92.8% to $42.6 million from $960 million at issuance. None of the remaining loans have defeased. As of June 2010, there are three specially serviced loans (25.6%). The largest specially serviced loan, Renaissance Plaza (11.5%), is secured by a 83,587 square foot office building located in Appleton, WI. The loan transferred to special servicing in June 2009 for maturity default. The loan became real estate owned in January 2010 and continues to be marketed. The second largest specially serviced loan, 200 Forest Drive (10.2%) is secured by a 137,139 sf industrial property located in East Hills, NY. The loan transferred to special servicing in March 2010 for maturity default. A one year extension has been completed. The largest Fitch Loan of Concern that is not specially serviced is the Hampton Meadows Apartments (4.1%), multi-family property located in the Cramerton, NC. The property is struggling with occupancy levels causing low rental income and a decline from the previous year's debt service coverage ratio. The largest loan in the pool represents 57.4% of the remaining pool. It is secured by a class A, 210,793 sf office building located in New York, NY. The loan matures in September 2013 and has been performing despite declining occupancy. Fitch stressed the cash flow of the remaining non-defeased loans by applying a 10% reduction to 2008 fiscal year end net operating income and applying an adjusted market cap rate between 7.25% and 10.5% to determine value. Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to payoff at maturity. Under this scenario, 16 loans are not expected to payoff at maturity with six loans incurring a loss when compared to Fitch's stressed value. MORGAN STANLEY: Fitch Upgrades Ratings on 2002-IQ2 Certificates --------------------------------------------------------------- Fitch Ratings has upgraded and assigned Rating Outlooks to several classes of Morgan Stanley Dean Witter Capital I Trust 2002-IQ2 commercial mortgage pass-through certificates, series 2002-IQ2. Fitch has also assigned Loss Severity ratings to numerous classes and a Recovery Rating to one class. The upgrades are due to continued amortization and payoff on the loans, percentage of defeased loans, and stable performance of the non-defeased loans. There is only one loan in special servicing representing 1.8% of the pool, and Fitch does not expect the loan to take a loss. As of the July 2010 distribution date, the pool's aggregate principal balance has been reduced 58% to $327.2 million from $778.6 million at issuance, which consists of 57.6% of paydown and 0.4% of realized losses. Three loans (32.6%) have defeased including the second and fourth largest loans at issuance (29.9%). As of the July 2010 remittance, only class O is incurring interest shortfalls. Fitch's expected loss on the remaining loans is less than 1% of the current deal balance. Fitch has designated four loans (3.6%) as Fitch Loans of Concern, which includes one specially serviced loan (1.8%). The specially serviced loan is secured by a 98,000 square foot retail center located in York, PA. The $5.8 million Meadowbrook Village loan was taken real estate owned via foreclosure in December 2009. Occupancy was 34% as of April 2010, however, the property manager has executed a lease that will backfill over 32,000 sf of space previously vacated by Circuit City. Once the tenant takes occupancy, the property will be over 67% occupied. The property is being marketed for sale and based on recent value estimates and potential bids for the asset, Fitch did not model a loss for this loan. Fitch stressed the value of the non-defeased loans by generally applying a 5% haircut to 2009 fiscal year-end net operating income and applying an adjusted market cap rate between 7.50% and 10% to determine value. Based on these parameters, the current Fitch loan to value for the non-defeased pool is 38.7%. Similar to Fitch's prospective analysis of recent vintage commercial mortgage backed securities, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to pay off at maturity. Of the non- defeased or non-specially serviced loans, only one loan (1.5% of the overall pool) was assumed not to be able to refinance. However, Fitch did not model a loss for this loan as the derived value was greater than the outstanding balance. Fitch has upgraded and assigned Rating Outlooks and LS ratings as indicated: -- $7.8 million class F to 'AAA/LS4' from 'AA+'; Outlook Stable; -- $5.8 million class G to 'AAA/LS4' from 'AA-'; Outlook Stable; -- $9.7 million class H to 'AA/LS3' from 'BBB'; Outlook Stable; -- $5.8 million class J to 'A/LS4' from 'BB+'; Outlook Stable; -- $3.9 million class K to 'BBB-/LS5' from 'BB-'; Outlook Stable. Fitch has affirmed and assigned and revised Rating Outlooks, LS ratings and RRs as indicated: -- $214.4 million class A-4 at 'AAA/LS1'; Outlook Stable; -- $25.3 million class B at 'AAA/LS3'; Outlook Stable; -- $24.3 million class C at 'AAA/LS3'; Outlook Stable; -- $7.8 million class D at 'AAA/LS4'; Outlook Stable; -- $7.8 million class E at 'AAA/LS4'; Outlook Stable; -- $3.9 million class L at 'B+/LS5'; Outlook to Stable from Negative; -- $2.9 million class M at 'B/LS5'; Outlook to Stable from Negative; -- $2.9 million class N at 'CCC/RR1'. The class A-1, A-2 and A-3 and the interest-only class X-2 balances have been paid in full. Fitch withdraws the rating on the interest-only class X-1. MORGAN STANLEY: Moody's Downgrades Ratings on 251 Tranches ---------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 251 tranches, upgraded the ratings of 5 tranches, and confirmed the ratings of 32 tranches from 52 RMBS transactions issued by Morgan Stanley. The collateral backing these deals primarily consists of first-lien, fixed and adjustable-rate subprime residential mortgages. The actions are a result of the continued performance deterioration in Subprime pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on subprime pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. Certain tranches included in this action, noted below, are wrapped by Financial Guaranty Insurance Company (Insured Rating Withdrawn Mar 25, 2009). For securities insured by a financial guarantor, the rating on the securities is 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 earlier. Complete rating actions are: Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE1 -- Cl. A-1mz, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2ss, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2mz, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-1ss, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Baa3; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Caa1; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Caa3; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ca; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on March 13, 2009 Downgraded to Ba3 -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on March 13, 2009 Downgraded to Ca Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE2 -- Cl. A-1mz, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2ss, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2mz, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-3b, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-3mz, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-1ss, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to B1; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Caa3; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Ca; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ca; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to Ca; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE3 -- Cl. M-1, Upgraded to Aaa; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Baa3; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Caa1; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE4 -- Cl. A-1, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Aa1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Ba2; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Caa3; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE5 -- Cl. A-1, Downgraded to Aa1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Aa2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to B1; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Ca; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE6 -- Cl. A-1, Downgraded to Baa2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to B2; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE7 -- Cl. A-1, Downgraded to Ba1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to B2; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. A-2b, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-NC1 -- Cl. A-1ss, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-1mz, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2c, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2mz, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Ba3; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Caa3; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Ca; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ca; previously on Jan. 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on March 13, 2009 Downgraded to Baa2 -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-NC2 -- Cl. M-1, Confirmed at Aa1; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to B2; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Ca; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ca; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to Ca; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to Ca; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC1 -- Cl. M-1, Downgraded to Baa1; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Caa2; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Ca; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC2 -- Cl. M-1, Downgraded to Aa3; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to B3; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Ca; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ca; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to Ca; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC3 -- Cl. M-2, Downgraded to Baa1; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Caa1; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ca; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC4 -- Cl. B-1, Downgraded to C; previously on Jan. 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. M-2, Upgraded to Aaa; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-3, Confirmed at A2; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ba1; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to Caa1; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC5 -- Cl. M-2, Confirmed at Aa2; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to A3; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to B1; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to Caa3; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to C; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC6 -- Cl. M-1, Downgraded to Aa3; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to B2; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-HE2 -- Cl. A-1, Downgraded to Caa2; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-HE3 -- Cl. A-1, Downgraded to Caa2; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Caa3; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-HE4 -- Cl. A-3, Downgraded to Ca; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-HE5 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Ba1; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-HE6 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Caa3; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2fpt, Downgraded to Caa3; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-HE7 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2fpt, Downgraded to Caa2; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Caa2; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-HE8 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Ca; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2fpt, Downgraded to Ca; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. A-2a, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-NC1 -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Caa1; previously on Jan. 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to B1; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-NC3 -- Cl. A-1, Downgraded to Caa2; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Caa2; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-NC4 -- Cl. A-1, Downgraded to Caa3; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Caa3; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Caa3; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-NC5 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2a, Downgraded to A1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Caa3; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2fpt, Downgraded to Caa3; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-WMC1 -- Cl. A-1, Downgraded to Caa2; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Ba3; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-WMC2 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2fpt, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2b, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2c, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2d, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-HE1 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-2a, Downgraded to Aa3; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Caa3; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2fpt, Downgraded to Caa3; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-HE2 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2a, Downgraded to B1; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2d, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-HE3 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2a, Downgraded to B1; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2d, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-HE4 -- Cl. A-1, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2a, Downgraded to Caa3; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-HE5 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2a, Downgraded to Caa2; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-HE6 -- Cl. A-1, Downgraded to Caa3; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-HE7 -- Cl. A-1, Downgraded to Caa3; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. A-2A, Downgraded to B3; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to Ca; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to Ca; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-NC1 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2a, Downgraded to Aa2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Ca; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2d, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-NC2 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. A-2fpt, Downgraded to Ca; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-2a, Downgraded to Caa2; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Ca; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-NC3 -- Cl. A-1, Downgraded to Ca; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-2a, Downgraded to Caa2; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Ca; previously on Jan. 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 -- Cl. A-1, Downgraded to C; previously on March 24, 2009 Downgraded to Caa2 -- Underlying Rating: Downgraded to C; previously on Oct. 30, 2008 Downgraded to Caa2 -- Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn Mar 25, 2009) -- Cl. A-2a, Downgraded to Ca; previously on March 24, 2009 Downgraded to Caa2 -- Underlying Rating: Downgraded to Ca; previously on March 13, 2009 Downgraded to Caa2 -- Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn Mar 25, 2009) Issuer: Morgan Stanley Capital I Inc. Trust 2006-HE1 -- Cl. A-3, Downgraded to Caa2; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Ca; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Capital I Inc. Trust 2006-NC2 -- Cl. A-1, Downgraded to Caa3; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Caa1; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Ca; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Home Equity Loan Trust 2005-1 -- Cl. M-1, Upgraded to Aaa; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Baa2; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Caa2; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Home Equity Loan Trust 2005-2 -- Cl. M-1, Upgraded to Aaa; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Upgraded to Aa3; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to B1; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ca; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Home Equity Loan Trust 2005-3 -- Cl. A-3, Downgraded to Aa1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Baa3; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Ca; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Home Equity Loan Trust 2005-4 -- Cl. A-1, Downgraded to A2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to B1; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Ca; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Home Equity Loan Trust 2006-1 -- Cl. A-1, Downgraded to B2; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. A-2b, Downgraded to A2; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Caa2; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Home Equity Loan Trust 2006-2 -- Cl. A-3, Downgraded to B2; previously on Jan. 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Caa3; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Caa1 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Home Equity Loan Trust 2006-3 -- Cl. A-3, Downgraded to Ca; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Home Equity Loan Trust 2007-1 -- Cl. A-1, Downgraded to B1; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-3, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-4, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Home Equity Loan Trust 2007-2 -- Cl. A-1, Downgraded to Ba3; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Caa3; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley IXIS Real Estate Capital Trust 2006-1 -- Cl. A-3, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Ca; previously on Jan. 13, 2010 Caa1 Placed Under Review for Possible Downgrade Issuer: Morgan Stanley IXIS Real Estate Capital Trust 2006-2 -- Cl. A-1, Downgraded to Baa3; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Ca; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-fpt, Downgraded to Ca; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-3, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-4, Confirmed at Ca; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade MORGAN STANLEY: S&P Downgrades Rating on Class F Certs. to 'D' -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class K commercial mortgage pass-through certificate from Morgan Stanley Capital I Inc.'s series 1998-HF1, a U.S. commercial mortgage- backed securities transaction, to 'D' from 'CCC'. The downgrade follows principal losses sustained by the class, which were reflected on the July 15, 2010, remittance report. The class K certificate experienced reported losses amounting to 2.7% of its ($9.6 million opening certificate balance. To date, the class NR certificate, which Standard & Poor's does not rate, has lost 100% of its $22.5 million original balance. According to the July 2010 remittance report, the principal losses resulted from the liquidation of the sole asset that was with the special servicer, LNR Partners Inc. The Continental Luxury Apartments asset comprises a 66-unit, multifamily property in Shaker Heights, Ohio, built in 1997, which had a total exposure of $2.4 million. The asset was transferred to LNR on Sept. 11, 2009, for nonmonetary default. The trust incurred a $1.6 million realized loss when the asset was liquidated on July 9, 2010, through a note sale. Based on the July 2010 remittance report, the loss severity for this loan was 72.4% of its balance before liquidation. The remittance report notes that the collateral pool for the transaction consisted of 22 loans with an aggregate trust balance of $51.4 million, down from 226 loans totaling $1.3 billion at issuance. There are no loans with the special servicer. To date, the trust has experienced losses on 12 loans totaling $19.9 million. Based on the July 2010 remittance report, the weighted average loss severity for these loans was approximately 38.2% their balance before liquidation. MORTGAGE CAPITAL: Fitch Affirms Ratings on 1998-MC2 Certs. ---------------------------------------------------------- Fitch Ratings has affirmed and assigned Loss Severity ratings, and revised Outlooks to Mortgage Capital Funding, Inc.'s commercial mortgage pass-through certificates, series 1998-MC2 as indicated: -- $39.2 million class D at 'AAA/LS1'; Outlook Stable; -- $37.9 million class E at 'AAA/LS1'; Outlook Stable; -- $12.6 million class F at 'AAA/LS3'; Outlook Stable; -- $25.2 million class G at 'A+/LS1'; Outlook Stable; -- $7.6 million class H at 'BBB-/LS2'; Outlook revised to Negative from Stable; -- $15.1 million class J at 'B+/LS1'; Outlook revised to Negative from Stable; -- $7.6 million class K at 'CCC/RR1'. Additionally, Fitch has withdrawn the rating of the interest-only class X. Fitch does not rate the $2.5 million class L certificates. The class A-1, A-2, B and C certificates have paid in full. The affirmations reflect sufficient credit enhancement to offset Fitch's minimal loss expectations for the transaction. The revised Outlooks reflect Fitch's concerns over the concentration of the pool, as the largest loan in the pool represents 52% of the remaining balance of the transaction. Of the original 147 loans in the pool, 27 remain. As of the June 2010 distribution date, the pool's aggregate balance has been reduced by 85.3%, to $147.7 million from $1,009.5 million at issuance. There are currently no delinquent, specially serviced loans, or defeased loans remaining in the transaction. The largest loan in the pool, Minneapolis City Center (52.2%), has a final maturity date of May 2028. The loan did not pay off at its anticipated repayment date of May 2008. As of March 2010, the servicer reported occupancy was 92.7% with a debt service coverage ratio of 1.28 times as of year end 2009. The loan is secured by a 50-story mixed use property consisting of 1.1 million square feet of office space, 370,000 sf of retail, the land on which a 584- room Marriott Hotel is constructed, and a 687-space parking garage. The second largest loan in the pool, Fiesta Trails Power Center (15.8%), has a final maturity date of October 2012. As of March 2010, the servicer reported occupancy was 93.3% with a year end 2009 DSCR of 1.47x. Fiesta Trails is a 312,370 sf retail center located in San Antonio, Texas. Eight loans (8.7%) are considered Fitch loans of concern, of which five loans (6.01%) have the same sponsor and are located in Columbus, OH. The largest of these loans (3.5%) is secured by two multifamily properties. As of March 2010 the servicer reported occupancies for these two properties were 86.1% and 88.4%, respectively, with a DSCR of 0.99x and 0.98x. In total the sponsor has 11 loans (12.3%) in the trust, which are all located in Columbus, OH and secured by various property types. The remaining loans mature in 2012 (18.8%), 2013 (5.6%), 2014 (3.9%), 2017 (0.6%), 2018 (18.9%) and 2028 (52.2%). ORANGE COUNTY: S&P Downgrades Rating on 1998C Bonds to 'BB-' ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its long-term rating on Orange County Housing Authority, Fla.'s (Housing and Neighborhood Development Services Inc.) multifamily housing revenue series 1998C to 'BB-' from 'BBB+'. The outlook remains negative. The downgrade reflects S&P's opinion of a decline in debt service coverage levels to 1.00x maximum annual debt service based on audited financial statements for the 2009 fiscal year; a 15% decrease in rental revenues in 2009; low occupancy rates at Green Gables apartments of 75% for the first quarter of 2010; and weak rental housing market and increasing unemployment in the Orlando metropolitan area, where the project is located. However, in S&P's opinion, the above weaknesses are partially offset by a debt service reserve fund funded at 12 months' MADS, and strong and experienced ownership and management by HANDS. "In S&P's view, the negative outlook reflects the project's trend of declining DSC and declining occupancy," said Standard & Poor's credit analyst Mikiyon Alexander. Green Gables Apartments is a 95-unit affordable housing project located in Orlando, Fla. The property was built in 1986 and was renovated in 1999. The property consists of 21 efficiency, 64 one-bedroom, and 10 three-bedroom/two-bath apartments. PARADIGM FUNDING: Moody's Withdraws Rating on ABCP Program ---------------------------------------------------------- At the issuer's request, Moody's has withdrawn the Prime-1 rating of the ABCP issued by Paradigm Funding LLC, a partially supported, multi-seller ABCP program administered by WestLB AG. (A3/Prime-1/ E+). As of July 16, 2010, all outstanding ABCP had been repaid in full. Issuer: Paradigm Funding LLC -- Commercial Paper, Withdrawn; previously on Dec 22, 2000 Assigned P-1 PEOPLE'S CHOICE: Moody's Downgrades Ratings on 23 Tranches ---------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 23 tranches from 5 RMBS transactions issued by People's Choice. Two bonds' ratings have been upgraded as they have accumulated protection against future losses. The collateral backing these deal primarily consists of first-lien, fixed and adjustable-rate subprime residential mortgages The actions are a result of the continued performance deterioration in Subprime pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on subprime pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. Complete rating actions are: Issuer: People's Choice Home Loan Securities Trust 2005-1 -- Cl. M2, Upgraded to Aaa; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M3, Upgraded to A1; previously on Jan. 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. M4, Downgraded to Caa3; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M5, Downgraded to C; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: People's Choice Home Loan Securities Trust 2005-2 -- Cl. M1, Upgraded to Aaa; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M2, Downgraded to Baa2; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M3, Downgraded to Caa2; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M4, Downgraded to C; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M5, Downgraded to C; previously on Jan. 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. M6, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: People's Choice Home Loan Securities Trust 2005-3 -- Cl. 2A2, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M1, Confirmed at Aa2; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M2, Downgraded to B3; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M3, Downgraded to C; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M4, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M5, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: People's Choice Home Loan Securities Trust 2005-4 -- Cl. 1A2, Downgraded to Caa2; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. 1A3, Downgraded to Ca; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to Ba1; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M1, Downgraded to C; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M2, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M3, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: People's Choice PFRMS 2006-1 -- Cl. 1A2, Downgraded to Ca; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. 1A3, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. 1A4, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. 2A2, Downgraded to Ca; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade PERITUS I: 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 Peritus I CDO Ltd.: -- US$20,000,000 Class X Deferrable Amortizing Fixed Rate Notes Due May 24, 2015 (current balance of $7,713,648), Upgraded to Baa3; previously on October 21, 2009 Downgraded to Ba3; -- US$8,000,000 Class B Deferrable Floating Rate Notes Due May 24, 2015, Upgraded to Ba2; previously on October 21, 2009 Downgraded to B1; -- US$64,000,000 Class C Deferrable Fixed Rate Notes Due May 24, 2015 (current balance of $53,404,397), Upgraded to Caa3; previously on October 21, 2009 Downgraded to Ca. According to Moody's, the upgrade rating actions on the notes result primarily from significant delevering of the Class A Notes and a substantial increase in the overcollateralization of the notes since the last rating action in October 2009. The transaction benefited from the delevering of the Class A Notes which have been paid down by approximately $108 million, or roughly 45% of their outstanding balance reported in September 2009. A substantial proportion of this paydown is attributable to principal prepayments on the underlying bonds and asset sales by the manager. Moody's expects delevering of the Class A Notes to continue as a result of the end of the deal's reinvestment period. As a result of the delevering, the overcollateralization ratios have increased since September 2009 and all overcollateralization tests are in compliance. In particular, as of the latest trustee report dated June 22, 2010, the Class A, Class B, and Class C overcollateralization ratios are reported at 162.48%, 153.31%, and 111.37% versus the September 2009 levels of 129.63%, 125.48%, and 102.74%, respectively. Additionally, the dollar amount of defaulted securities held by the issuer has decreased from $19 million in September 2009 to none as of the June 2010 report. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" and "Annual Sector Review (2009): Global CLOs," key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Peritus I CDO Ltd., issued on May 26, 2005, is a collateralized bond obligation backed primarily by a portfolio of senior unsecured bonds. POPULAR ABS: Moody's Downgrades Ratings on 99 Tranches ------------------------------------------------------ Moody's Investors Service has downgraded the ratings of 99 tranches from 16 RMBS transactions issued by Popular. The collateral backing these deals primarily consists of first-lien, fixed and/or adjustable-rate subprime residential mortgages. The actions are a result of the continued performance deterioration in Subprime pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on subprime pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. The above mentioned approach "Subprime RMBS Loss Projection Update: February 2010" is adjusted slightly when estimating losses on pools left with a small number of loans. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool (typically 20% for subprime pools). Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility and hence the stress applied. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2005 vintage, the adjusted rate of new delinquency would be 20.20%. If current delinquency levels in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.2 to 2.0 for current delinquencies ranging from less than 2.5% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication. Complete rating actions are: Issuer: Popular ABS Mortgage Pass-Through Trust 2005-1 -- Cl. AF-5, Downgraded to Aa2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-4, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-6, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AV-1A, Downgraded to Ba1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AV-1B, Downgraded to B1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AV-2, Downgraded to Ba1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Ca; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2005-2 -- Cl. AV-1A, Downgraded to Baa2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AV-1B, Downgraded to Ba2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AV-2, Downgraded to Baa2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-3, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-4, Downgraded to Aa2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-5, Downgraded to Aa2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-6, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Caa2; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2005-3 -- Cl. AF-3, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-4, Downgraded to Aa1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-5, Downgraded to Aa2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-6, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AV-1A, Downgraded to Ba1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AV-1B, Downgraded to B1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AV-2, Downgraded to Ba1; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Ca; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2005-4 -- Cl. AF-4, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-5, Downgraded to Ba2; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Ca; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2005-5 -- Cl. AF-3, Downgraded to Ba1; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. AF-4, Downgraded to Caa2; previously on Jan. 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. AF-5, Downgraded to Caa3; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. AF-6, Downgraded to Caa1; previously on Jan. 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. AV-1, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AV-2C, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. MV-1, Downgraded to Caa2; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. MV-2, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. MV-3, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. MF-1, Downgraded to C; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. MF-2, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2005-6 -- Cl. A-3, Downgraded to B1; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Caa3; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. A-5, Downgraded to Ca; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. A-6, Downgraded to Caa2; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2005-A -- Cl. AF-4, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. AF-5, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Ba3; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Caa3; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2005-B -- Cl. M-1, Downgraded to Aa3; previously on Jan. 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to B3; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Caa3; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2005-C -- Cl. AF-5, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to B1; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2005-D -- Cl. A-3, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to A3; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. A-5, Downgraded to B2; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. A-6, Downgraded to Ba3; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2006-A -- Cl. A-4, Downgraded to B1; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on Jan. 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2006-B -- Cl. A-3, Downgraded to B3; previously on Jan. 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Caa3 Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2006-C -- Cl. A-3, Downgraded to Ba3; previously on Jan. 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Caa1; previously on Jan. 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2006-D -- Cl. A-1, Confirmed at Aaa; previously on Jan. 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to B3; previously on Jan. 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Caa3; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2006-E -- Cl. A-1, Downgraded to A2; previously on Jan. 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Caa2; previously on Jan. 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Ca; previously on Jan. 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 B2 Placed Under Review for Possible Downgrade Issuer: Popular ABS Mortgage Pass-Through Trust 2007-A -- Cl. A-1, Downgraded to Caa2; previously on Jan. 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Ca; previously on Jan. 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Ca; previously on Jan. 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on Jan. 13, 2010 Ca Placed Under Review for Possible Downgrade PRUDENTIAL SECURITIES: Fitch Affirms Ratings on 1995-MCF2 Certs. ---------------------------------------------------------------- Fitch Ratings has affirmed Prudential Securities Secured Financing Corp.'s commercial mortgage pass-through certificates, series 1995-MCF2: -- $327,201 class H at 'D/RR1'. Classes A-1 through G have paid in full. As of the June 2010 distribution date, the deal has paid down 99.8% to $327,201 from $222.3 million at issuance. Of the original 85 loans, one (Frank's Nursery and Craft Stores) remains in the pool with a modified maturity date occurring in 2012. The loan remains current and is scheduled to fully amortize by the maturity date in 2012. No additional losses are expected. RESTRUCTURED ASSET: S&P Cuts Ratings on 2004-2-A Notes to 'BB+' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Restructured Asset Securities With Enhanced Returns Series 2004-2- A Trust's $8 million class A1 and A2 certificates to 'BB+' from 'A-' and removed the ratings from CreditWatch with negative implications, where S&P had placed them on May 29, 2009. S&P's ratings on the class A1 and A2 certificates are dependent on its rating on the underlying security, Arlington Street CDO (Cayman) Ltd.'s class A-3 floating and fixed-rate notes due June 10, 2012 ('BB+'). The rating actions follow S&P's July 14, 2010, lowering of its rating on the underlying security to 'BB+' from 'A-' and its removal of that rating from CreditWatch negative, where S&P had placed it on May 11, 2009. S&P may take subsequent rating actions on the class A1 and A2 certificates due to changes in S&P's rating on the underlying security. RFMSI SERIES: Moody's Upgrades Ratings on Six Tranches ------------------------------------------------------ Moody's Investors Service has upgraded the ratings of six tranches and downgraded the ratings of three tranches from three RMBS transactions, backed by prime jumbo loans, issued by RFMSI Series 2006-S12 Trust, Wells Fargo Mortgage Backed Securities 2006-11 Trust, and First Horizon Mortgage Pass-Through Trust 2007-1. The rating actions are a result of corrections to certain loss and cash flow allocation rules that were used in modeling these deals. These transactions have super senior support tranches that support different senior tranches up to a pre-defined dollar limit. The previous ratings on these transactions did not incorporate the dollar limit rules. Moody's has also corrected an additional error in the RFMSI Series 2006-S12 Trust transaction that caused, under select scenarios, incorrect cash flow allocation to the senior tranches after the subordinate tranches are depleted. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable, prime jumbo residential mortgage loans. The actions also reflect Moody's updated loss expectations on prime jumbo pools issued from 2005 to 2008. To assess the rating implications of the updated loss levels on prime jumbo RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. Complete rating actions are: Issuer: RFMSI Series 2006-S12 Trust -- Cl. III-A-1, Upgraded to Ba3; previously on Apr 12, 2010 Downgraded to B2 -- Cl. III-A-2, Upgraded to B2; previously on Apr 12, 2010 Downgraded to Caa1 -- Cl. III-A-3, Upgraded to B2; previously on Apr 12, 2010 Downgraded to B3 -- Cl. III-A-4, Downgraded to B3; previously on Apr 12, 2010 Downgraded to B2 -- Cl. III-A-5, Downgraded to Caa2; previously on Apr 12, 2010 Confirmed at B3 -- Cl. III-A-6, Downgraded to Caa2; previously on Apr 12, 2010 Confirmed at B3 Issuer: First Horizon Mortgage Pass-Through Trust 2007-1 -- Cl. A-1, Upgraded to B1; previously on Mar 26, 2010 Downgraded to Caa1 -- Cl. A-2, Upgraded to B1; previously on Mar 26, 2010 Downgraded to Caa1 Issuer: Wells Fargo Mortgage Backed Securities 2006-11 Trust -- Cl. A-10, Upgraded to Ba3; previously on Apr 12, 2010 Downgraded to B2 SALOMON BROTHERS: Fitch Affirms Ratings on 1999-C1 Certificates --------------------------------------------------------------- Fitch Ratings affirms and assigns Loss Severity ratings to these Salomon Brothers, series 1999-C1 commercial mortgage pass-through certificates: -- $6.8 million class E at 'AAA/LS5'; Outlook Stable; -- $11 million class F at 'AAA/LS4'; Outlook Stable; -- $14.6 million class G at 'AAA/LS4'; Outlook Stable;. Fitch removes from Rating Watch Negative, affirms, and assigns Rating Outlooks and LS ratings to these classes: -- $20.2 million class H at 'A/LS3'; Outlook Stable; -- $9.1 million class J at 'BBB-/LS4'; Outlook Negative. In addition, Fitch affirms these classes: -- $16.5 million class K at 'CCC/RR1'; -- $7.3 million class L at 'C/RR5'. Fitch does not rate the $1.4 million class M. Classes A-1, A-2, B, C, and D have paid in full. Fitch withdraws the rating of the interest only class X. The rating affirmations reflect the stable performance of the pool and sufficient credit enhancement to offset Fitch expected losses following Fitch's analysis which is similar to its recent vintage fixed rate CMBS analysis. Fitch expects potential losses of 6.3% of the remaining pool balance from loans in special servicing and loans that are not expected to refinance at maturity based on Fitch's refinance test. The Rating Outlooks reflect the likely direction of any rating changes over the next one or two years. As of the June 2010 distribution date the pool has paid down 88.1% to $87.3 million from $734 million at issuance. Of the original 213 loans, 53 remain in the transaction and 29 (9.1%) have been defeased. Fitch has identified 10 Loans of Concern (15.2%), including six loans in special servicing (8.9%), as well as other loans with deteriorating performance. The largest specially serviced loan is collateralized by manufacturing housing communities (4.88% of the pool) in Pennsylvania. The loan transferred to special servicing in August 2005. The special servicer has been working to stabilize the property and has been marketing it for sale. Fitch stressed the cash flow of the remaining non-defeased loans by applying a 10% reduction to 2008 fiscal year end net operating income and applying an adjusted market cap rate between 7.25% and 10.5% to determine value. Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to pay off at maturity. Under this scenario, five loans are not expected to pay off at maturity with three loans incurring a loss when compared to Fitch's stressed value. SALS B-2005-1: Moody's Downgrades Ratings on Various Notes ---------------------------------------------------------- Moody's Investors Service announced that it has downgraded its ratings of notes issued by SALS B-2005-1, collateralized debt obligation transactions referencing a portfolio of corporate entities. -- US$9,000,000 SALS B-2005-1 Floating Rate Notes due June 20, 2012 Notes, Downgraded to C; previously on Oct 17, 2008 Downgraded to Ca Moody's explained that the rating action taken is the result of the deterioration of the credit quality of the reference portfolio which has led to losses that are higher than what are implied by the previous Ca rating. Since the last rating action, the portfolio has suffered further losses from the credit events on Abitibi-Consolidated Inc., CIT Group Inc, Lear Corporation, and Visteon Corporation. These credit events coupled with the credit events on Dana Corporation, Delphi Corporation, Federal Home Loan Mortgage Corporation, Lehman Brothers Holdings, Inc., and Washington Mutual, Inc have led to a total loss of 4.9% of the portfolio, resulting in a 100% loss of the rated tranche. The portfolio has the highest industry concentrations in Insurance (13%), Retail (11%), and Automotive (11%). SALT CREEK: S&P Downgrades Rating on Class B-6$L 2005-1 Notes ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on class B- 6$L from Salt Creek High Yield CSO 2005-1 Ltd., a synthetic collateralized debt obligation, to 'D' due to a principal loss on the notes. Concurrently, S&P withdrew its ratings on the 10 remaining classes following full paydowns. Rating Lowered Salt Creek High Yield CSO 2005-1 Ltd. Rating ------ Class To From ----- -- ---- B-6$L D CC Ratings Withdrawn Salt Creek High Yield CSO 2005-1 Ltd. Rating ------ Class To From ----- -- ---- A-1 NR A+ A-2 NR A- A-6 NR BB- A-7 NR B- B-2 NR CCC- B-5 NR CCC- A-2EF NR BBB+ A-6EL-1 NR CCC- A-4$L NR BBB- B-3$L NR CCC- SAXON ASSET: Moody's Downgrades Ratings on 46 Tranches ---------------------------------------------------- Moody's Investors Service has downgraded the ratings of 46 tranches and confirmed the ratings of 18 tranches from 11 RMBS transactions issued by Saxon. The collateral backing these deals primarily consists of first-lien, fixed and adjustable-rate subprime residential mortgages. The actions are a result of the continued performance deterioration in Subprime pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on subprime pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. Complete rating actions are: Issuer: Saxon Asset Securities Trust 2005-1 -- Cl. M-1, Confirmed at Aa3; previously on January 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Caa1; previously on January 13, 2010 A3 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Ca; previously on January 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on Mar 13, 2009 Downgraded to Ba3 -- Cl. M-5, Downgraded to C; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade Issuer: Saxon Asset Securities Trust 2005-2 -- Cl. A-1A, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-1B, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2D, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Confirmed at Aa3; previously on January 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Caa2; previously on January 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Ca; previously on January 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on January 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on January 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Saxon Asset Securities Trust 2005-3 -- Cl. A-1A, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2D, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. M-1, Confirmed at Aa3; previously on January 13, 2010 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Ba2; previously on January 13, 2010 Baa1 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to Caa1; previously on January 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on January 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on January 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Saxon Asset Securities Trust 2005-4 -- Cl. A-1A, Downgraded to Aa1; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-1B, Downgraded to Aa3; previously on January 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to Aa1; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to A2; previously on January 13, 2010 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Ba2; previously on January 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Caa2; previously on January 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on January 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to C; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Saxon Asset Securities Trust 2006-1 -- Cl. A-1, Downgraded to Aa2; previously on January 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. A-2C, Downgraded to Aa2; previously on January 13, 2010 Aa1 Placed Under Review for Possible Downgrade -- Cl. A-2D, Downgraded to Baa1; previously on January 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Caa2; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on January 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Saxon Asset Securities Trust 2006-2 -- Cl. A-1, Downgraded to Ba3; previously on January 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Ba3; previously on January 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-3C, Downgraded to Ba3; previously on January 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. A-3D, Downgraded to B3; previously on January 13, 2010 Ba1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to Caa3; previously on January 13, 2010 Ba2 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Saxon Asset Securities Trust 2006-3 -- Cl. A-2, Confirmed at Ba3; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Caa2; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Caa3; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Saxon Asset Securities Trust 2007-1, Mortgage Loan Asset Backed Certificates, Series 2007-1 -- Cl. A-1, Downgraded to Caa3; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade -- Cl. A-2a, Confirmed at A2; previously on January 13, 2010 A2 Placed Under Review for Possible Downgrade -- Cl. A-2b, Confirmed at B3; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Downgraded to Caa3; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2d, Downgraded to Caa3; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Saxon Asset Securities Trust 2007-2 -- Cl. A-1, Confirmed at Caa2; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. A-2a, Confirmed at Ba3; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. A-2b, Confirmed at Caa3; previously on January 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. A-2c, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. A-2d, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Saxon Asset Securities Trust 2007-3 -- Cl. 1-A, Downgraded to Caa2; previously on January 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. 2-A1, Confirmed at B2; previously on January 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. 2-A2, Downgraded to Caa3; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. 2-A3, Downgraded to Ca; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. 2-A4, Downgraded to Ca; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Saxon Asset Securities Trust 2007-4 -- Cl. A-1, Confirmed at B2; previously on January 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-2, Downgraded to Caa3; previously on January 13, 2010 Caa1 Placed Under Review for Possible Downgrade SONOMA VALLEY: Moody's Downgrades Ratings on Three Classes ---------------------------------------------------------- Moody's Investors Service downgraded three classes of Notes issued by Sonoma Valley 2007-1 Synthetic CDO of CMBS Variable Rate Notes Due 2049 due to systematic increases in real estate risk and revised modeling parameters. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation transactions. Sonoma Valley 2007-1 Synthetic CDO of CMBS Variable Rate Notes Due 2049 is a synthetic CRE CDO transaction backed by a portfolio of credit default swaps referencing $2.5 billion notional amount of commercial mortgage backed securities. All of the CMBS reference obligations were securitized in 2006. Moody's has identified these parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life, weighted average recovery rate, and Moody's asset correlation. These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's have completed updated credit estimates for the non- Moody's rated reference obligations. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 1, the same as at securitization. The distribution of current ratings is: Aaa (100%, the same as at securitization). WAL acts to adjust the probability of default of the reference obligations in the pool for time. Moody's modeled to the actual WAL of 5.9 years compared to 9.4 years at securitization. WARR is the par-weighted average of the mean recovery values for the reference obligations in the pool. Moody's modeled a variable WARR with a mean of 75%, the same as at securitization. MAC is a single factor that describes the pair-wise asset correlations to default distribution among the instruments within the reference obligations pool (i.e. the measure of diversity). Moody's modeled a MAC of 75.1% compared to 47.7% at securitization. Moody's review incorporated CDOROM v2.6, one of Moody's CDO rating models, which was released on May 27, 2010. The rating actions are: -- Series 92/2007, Downgraded to A1; previously on April 3, 2007 Assigned Aaa -- Series 93/2007, Downgraded to A3; previously on April 3, 2007 Assigned Aa2 -- Series 94/2007, Downgraded to Baa1; previously on April 3, 2007 Assigned A2 As always, Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. The rating outcome may differ from the model output. 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. This is Moody's first review since securitization. SONOMA VALLEY: Moody's Downgrades Ratings on Two Classes of Notes ----------------------------------------------------------------- Moody's Investors Service downgraded two classes of Notes issued by Sonoma Valley 2007-4 Synthetic CDO of CMBS Variable Rate Notes Due 2051 due to systematic increases in real estate risk, revised modeling parameters, and deterioration in the credit quality of the underlying portfolio of reference obligations as evidenced by an increase in the weighted average rating factor. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation transactions. Sonoma Valley 2007-4 Synthetic CDO of CMBS Variable Rate Notes Due 2051 is a synthetic CRE CDO transaction backed by a portfolio of credit default swaps referencing $2.3 billion notional amount of commercial mortgage backed securities. All of the CMBS reference obligations were securitized in 2006 (45%) and 2007 (55%). Moody's has identified these parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life, weighted average recovery rate, and Moody's asset correlation. These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's have completed updated credit estimates for the non- Moody's rated reference obligations. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 32 compared to 1 at securitization. The distribution of current ratings is: Aaa (65% compared to 100% at securitization), Aa1-Aa3 (20% compared to 0% at securitization), A1-A3 (13% compared to 0% at securitization), and Baa1-Baa3 (2% compared to 0% at securitization). WAL acts to adjust the probability of default of the reference obligations in the pool for time. Moody's modeled to the actual WAL of 6.3 years compared to 9.4 years at securitization. WARR is the par-weighted average of the mean recovery values for the reference obligations in the pool. Moody's modeled a variable WARR with a mean of 69%, compared to 81.7% at securitization. MAC is a single factor that describes the pair-wise asset correlations to default distribution among the instruments within the reference obligations pool (i.e. the measure of diversity). Moody's modeled a MAC of 53.3% compared to 36.3% at securitization. Moody's review incorporated CDOROM v2.6, one of Moody's CDO rating models, which was released on May 27, 2010. The rating actions are: -- Series 115/2007, Downgraded to Ba3; previously on November 7, 2007 Assigned Aa2 -- Series 114/2007, Downgraded to B1; previously on September 17, 2007 Assigned A3 As always, Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. The rating outcome may differ from the model output. 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. This is Moody's first review since securitization. SOVEREIGN COMMERCIAL: Moody's Affirms Ratings on Three Certs. ------------------------------------------------------------- Moody's Investors Service affirmed the ratings of three classes and downgraded 11 classes of Sovereign Commercial Mortgage Securities Trust Commercial Mortgage Pass-Through Certificates, Series 2007-C1. The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and poorly performing watchlisted loans and concerns about refinance risk associated with loans maturing in an adverse economic environment. One hundred and twenty eight loans mature within the next 36 months. Twenty-two of these loans, representing 12% of the pool, have a Moody's stressed debt service coverage ratio less than 1.0X. The affirmations are due to key rating parameters, including Moody's loan to value ratio, Moody's stressed DSCR and the Herfindahl Index remaining within acceptable ranges. Moody's placed 11 classes of this transaction on review for possible downgrade on July 14, 2010. 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 June 22, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 14% to $869.2 million from $1.0 billion at securitization. The Certificates are collateralized by 224 mortgage loans ranging in size from less than 1% to 4% of the pool, with the top ten loans representing 21% of the pool. The pool does not contain any defeased loans or loans with underlying ratings. Eighty- seven loans, representing 34% 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 CRE Finance Council (formerly Commercial Mortgage Securities Association) 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. Fifteen loans have been liquidated from the pool, resulting in an aggregate $11.9 million loss (35% loss severity on average). Currently five loans, representing 4% of the pool, are in special servicing. The largest specially serviced loan is The Marina Palms Apartments Loan ($17.4 million -- 2.0% of the pool), which is secured by a 229-unit apartment complex located in Bradenton, Florida. The loan was transferred to special servicing in September 2008 due to payment default. Foreclosure proceedings are underway. The remaining four loans are secured by multifamily and mixed use properties. Moody's estimates a $10.6 million aggregate loss from the specially serviced loans (35% loss severity on average). Moody's has assumed a high default probability on 30 loans representing approximately 12% of the pool. These loans are on the watchlist due to declines in performance or mature within the next six months and have a Moody's stressed DSCR less than 1.0X. Moody's has estimated a $23.9 million loss from these loans (23% expected loss based on an overall 46% default probability). Moody's rating action recognizes potential uncertainty around the timing and magnitude of losses from these troubled loans. As of the most recent remittance date, the transaction has experienced unpaid accumulated interest shortfalls totaling $438,349, affecting Classes F through N. Interest shortfalls are caused by special servicing fees, appraisal reductions, extraordinary trust expenses and loan modifications. Moody's was provided with full and partial-year 2009 operating results for 83% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 104% compared to 127% at Moody's last review in February 2009. The last review was part of the first quarter 2009 ratings sweep of 2006-2009 vintage conduit and fusion CMBS transactions. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.47X and 1.21X, respectively, compared to 1.20X and 0.96X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of Herf 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 has a Herf of 87 compared to 114 at last review. The three largest conduit loans represent 10% of the pool. The largest conduit loan is the West New York Portfolio Loan ($35.7 million -- 4.1% of the pool), which is secured by a portfolio consisting of 34 multifamily, retail and office properties located in West New York and Union City, New Jersey. The portfolio was 98% leased, similar to securitization. Performance has been stable since last review. Moody's LTV and stressed DSCR are 141% and 0.97X, respectively, essentially the same as at last review. The second largest loan is the Franklin Towne Center Loan ($29.9 million -- 3.4% of the pool), which is secured by a retail center located in Franklin Township, New Jersey. The center is master leased to Stop & Shop through October 2030, with a corporate guarantee from Koninklijke Ahold NV (LT issuer rating Baa3, positive outlook). The center is currently 100% leased to 24 tenants. Moody's LTV and stressed DSCR are 125% and 0.86X, respectively, compared to 147% and 0.77X at last review. The third largest loan is the 1 Pine Tree Boulevard Loan ($19.6 million -- 2.3% of the pool), which is secured by a 324 unit multifamily property located in Old Bridge, New Jersey. Although the property was 100% leased as of December 2009, performance has declined due to rental concessions and increased expenses. The loan is currently on the watchlist due to decline in NOI. Moody's LTV and stressed DSCR are 132% and 0.74X, respectively, compared to 126% and 0.81X at last review. Moody's rating action is: -- Class A-1A, $450,841,615, affirmed at Aaa; previously assigned Aaa on 7/4/2007 -- Class A-2, $227,222,671, affirmed at Aaa; previously assigned Aaa on 7/4/2007 -- Class X, Notional, affirmed at Aaa; previously assigned Aaa on 7/4/2007 -- Class A-J, $105,205,000, downgraded to Baa1 from A1; previously placed on review for possible downgrade on 7/14/2010 -- Class B, $15,211,000 downgraded to Ba1 from A3; previously placed on review for possible downgrade on 7/14/2010 -- Class C, $17,745,000, downgraded to B2 from Baa3; previously placed on review for possible downgrade on 7/14/2010 -- Class D, $20,281,000, downgraded to Caa2 from Ba3; previously placed on review for possible downgrade on 7/14/2010 -- Class E, $10,140,000, downgraded to Caa3 from B1; previously placed on review for possible downgrade on 7/14/2010 -- Class F, $7,605,000, downgraded to Ca from B3; previously placed on review for possible downgrade on 7/14/2010 -- Class G, $2,535,000, downgraded to Ca from Caa2; previously placed on review for possible downgrade on 7/14/2010 -- Class H, $2,535,000, downgraded to C from Caa2; previously placed on review for possible downgrade on 7/14/2010 -- Class J, $3,803,000, downgraded to C from Caa3; previously placed on review for possible downgrade on 7/14/2010 -- Class K, $2,535,000, downgraded to C from Caa3; previously placed on review for possible downgrade on 7/14/2010 -- Class L, $3, 590,527, downgraded to C from Caa3; previously placed on review for possible downgrade on 7/14/2010 TW HOTEL: S&P Affirms Ratings on 14 2005-LUX Certificates --------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on 14 classes of commercial mortgage pass-through certificates from TW Hotel Funding 2005 LLC's series 2005-LUX and concurrently removed 13 of the ratings from CreditWatch with developing implications. The rating actions follow S&P's analysis of the four lodging properties that secure the Ty Warner Hotels & Resorts loan in the transaction. The affirmations primarily reflect S&P's analysis of a recent modification of the loan. The terms of the modification include, but are not limited to: * The borrower will make a partial principal paydown of $25.0 million; * The borrower will pledge the 119-acre Montecito Country Club as additional collateral; * The borrower will assume all costs, fees, and expenses associated with the loan modification, including workout fees; * The maturity date will be extended to Jan. 9, 2011; and * The borrower will have one 12-month extension option that would require, among other items, an additional partial principal paydown of $10 million. The loan modification was finalized in June 2010; however, the effective date of the modification is Jan. 9, 2010, the loan's prior maturity date. The loan did not pay off on this date, and the borrower was unable to meet its maturity extension hurdle, so the loan was transferred to special servicing on Oct. 16, 2009. According to the transaction documents, principal payments are made on a pro rata basis until an event of default, at which time they are applied sequentially. Since the effective date of the loan modification was backdated to the loan's prior maturity date, the loan was deemed to no longer be in default, which allowed the $25.0 million partial principal paydown to be applied pro rata. S&P based its analysis, in part, on a review of the borrower's operating statements for year-end 2009 and trailing-12 months ending May 2010, the borrower's 2010 budgets, Smith Travel Research reports, and Torto Wheaton Research's projected revenue per available room for each submarket. The Montecito Country Club, which was added as collateral as part of the loan modification, was appraised as land for residential development since it is a private country club. Standard & Poor's valued the additional collateral at a 70% valuation haircut to the February 2010 appraisal, a discount equal to the weighted average Standard & Poor's value discount to current appraised values for the four lodging assets in the transaction. S&P's resulting stressed in- trust loan-to-value ratio improved to 116% from 133% at its last review, mainly due to deleveraging from the $25.0 million principal paydown. While the transaction has benefited from this deleveraging and the additional collateral, S&P's in-trust LTV ratio remains well in excess of 100%, so no positive rating adjustments are warranted. According to the trustee, the class N certificates experienced a one-time principal loss of $7,185 due to interest shortfalls. At this time, S&P views the principal loss as de minimis and does not warrant a downgrade as it is its understanding that the loss was applied in error. The special servicer, Berkadia Commercial Mortgage LLC (Berkadia), has indicated that it is holding funds from the borrower in a reserve account to pay all costs for the modification, including shortfalls to the trust. As of the July 2010 remittance report, the Ty Warner Hotels & Resorts Loan had a trust and whole-loan balance of $319.6 million, subsequent to the partial principal paydown of $25.0 million. In addition, the borrower's equity interests in the collateral properties secure a $155.0 million mezzanine loan. The loan is secured by four lodging properties: Four Seasons Hotel - New York in New York City (54% of the allocated loan balance), the Four Seasons Biltmore Resort in Montecito, Calif. (23%), the Las Ventanas al Paraiso in San Jose del Cabo, Mexcio (17%), and the San Ysidro Ranch in Montecito, Calif. (5%). Since issuance, one property was fully released from the collateral pool, resulting in an $80.4 million paydown of the loan balance. The master servicer, also Berkadia, reported debt service coverage of 6.15x and 62% occupancy as of May 2010. For the trailing-12 months ending May 2010, the portfolio occupancy and average daily rate were 61.7% and $786.19, respectively, yielding a RevPAR of $485.21, up from $457.06 at year-end 2009. Ratings Affirmed And Removed From Creditwatch Developing TW Hotel Funding 2005 LLC Commercial mortgage pass-through certificates series 2005-LUX Class To From ----- -- ---- A-2 A A/Watch Dev B BBB+ BBB+/Watch Dev C BBB- BBB-/Watch Dev D BB+ BB+/Watch Dev E BB BB/Watch Dev F B B/Watch Dev G B- B-/Watch Dev H CCC+ CCC+/Watch Dev J CCC CCC/Watch Dev K CCC- CCC-/Watch Dev L CCC- CCC-/Watch Dev M CCC- CCC-/Watch Dev N CCC- CCC-/Watch Dev Rating Affirmed TW Hotel Funding 2005 LLC Commercial mortgage pass-through certificates series 2005-LUX Class Rating ----- ------ A-1 AAA VALEO INVESTMENT: Moody's Upgrades Ratings on Class A-2 Notes ------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the rating of these notes issued by Valeo Investment Grade CDO Ltd.: * US$12,250,000 Class A-2 Floating Rate Senior Subordinated Notes due January 15, 2013 (current balance of $13,404,319), Upgraded to B1; previously on May 15, 2009 Downgraded to Caa2. According to Moody's, the rating actions taken on the notes result primarily from substantial delevering of the transaction and the improvement in the Class A-2 overcollateralization ratio since the rating action in May 2009. Since the last rating action, the Class A-1 Notes were paid down by about $80 million, accounting for roughly 33% of the total Class A Notes' outstanding balance reported in May 2009. This paydown is attributable to principal amortizations including scheduled payments. As a result of the delevering, the Class A-2 overcollateralization ratio has improved from 106.02% in May 2009 to 109.97% in June 2010. Moody's expects delevering to continue as a result of the end of the deal's reinvestment period in January 2004. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" and "Annual Sector Review (2009): Global CLOs," key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Valeo Investment Grade CDO Ltd., issued in January 2001, is a collateralized bond obligation backed primarily by a portfolio of senior unsecured bonds. WACHOVIA BANK: Moody's Affirms Ratings on Seven 2005-C17 Certs. --------------------------------------------------------------- Moody's Investors Service affirmed the ratings of seven classes and downgraded 14 classes of Wachovia Bank Commercial Mortgage Securities, Inc., Commercial Mortgage Pass-Through Certificates, Series 2005-C17. The downgrades are due to higher expected losses for the pool resulting from actual and anticipated losses from specially serviced and highly leveraged watchlisted loans. The affirmations are due to key rating parameters, including Moody's loan to value ratio, Moody's stressed DSCR and the Herfindahl Index, remaining within acceptable ranges. On July 14, 2010, Moody's placed 14 classes of this transaction on review for possible downgrade. This action concludes Moody's review of this transaction. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the July 16, 2010 distribution date, the transaction's aggregate certificate balance has decreased by approximately 12% to $2.4 billion from $2.7 billion at securitization. The Certificates are collateralized by 209 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top 10 non- defeased loans representing 32% of the pool. The pool includes three loans with investment grade underlying ratings, representing 7% of the pool. At last review two additional loans, representing 10% of the pool, had underlying ratings. Their performance has declined since securitization and they are now analyzed as part of the conduit pool because of increased leverage. Twenty-four loans, representing 11% of the pool, have defeased and are collateralized by U.S. Government securities. Forty-two loans, representing 20% 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 CRE Finance Council (formerly Commercial Mortgage Securities Association) 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. Two loans have been liquidated from the pool since securitization, resulting in a $4.5 million loss for one of the loans (66% loss severity). The second loan was liquidated with no loss. Currently 14 loans, representing 9% of the pool, are in special servicing. The largest specially serviced loan is the Falchi Building Loan ($43.6 million -- 1.8% of the pool), which is secured by a 638,712 square foot industrial/office building located in Long Island City, New York. The loan was transferred to special servicing in December 2009 due to imminent maturity default and has passed its March 11, 2010 anticipated repayment date. The property was 89% leased as of March 2010 and performance has been stable since securitization. The borrower is negotiating a loan modification with the special servicer and Moody's does not expect a loss from this loan. Moody's current LTV and stressed DSCR are 104% and 0.99X, respectively, compared to 119% and 0.86X at last review. Of the remaining 13 specially serviced loans, six loans are either 90+ days delinquent, real estate owned or in the process of foreclosure. The servicer has recognized an aggregate $34.1 million appraisal reduction for four of the specially serviced loans. Moody's estimates an aggregate $49.6 million loss for 10 of the specially serviced loans (39% expected loss on average). In addition to recognizing losses from specially serviced loans, Moody's has assumed a high default probability on 12 loans, representing 7% of the pool, due to refinancing risk or performance issues. Moody's estimates a $38.3 million aggregate expected loss for these troubled loans (22% expected loss on average based on overall 35% loss severity and 63% overall default probability). Moody's rating action recognizes potential uncertainty around the timing and magnitude of loss from these troubled loans. Moody's was provided with full-year 2008 and partial or full-year 2009 operating results for 99% and 91% of the pool, respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV ratio is 94% compared to 100% at Moody's prior review. Although the overall LTV has declined, the pool has experienced increased credit quality dispersion. Based on Moody's analysis, 13% of the conduit pool has an LTV greater than 120% compared to 1% at last review. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCR are 1.49X and 1.15X, respectively, compared to 1.39 X and 1.01X at last review. Moody's actual DSCR is based on Moody's net cash flow and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of Herf 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 has a Herf of 41 compared to 50 at last review. The largest loan with an underlying rating is the Tharaldson Pool 1-B Loan ($66.0 million -- 2.8% of the pool), which is secured by the borrower's leasehold interest in 13 limited service hotels located in Nevada, Texas, California, Oklahoma, New York and Pennsylvania. Occupancy and revenue per available room for the trailing twelve month period ending December 2009 were 71% and $75, respectively, compared to 79% and $94 in 2008. The loan sponsor is Gary Tharaldson. The loan benefits from a 20 year amortization schedule and has amoritized 12% since last review. Moody's underlying rating and stressed DSCR are A2 and 1.99X, respectively, compared to A1 and 2.16X at last review. The second largest loan with an underlying rating is the Tharaldson Pool 1-A Loan ($47.9 million -- 2.0% of the pool), which is secured by fee interests in 14 limited service hotels and fee interests in the land supporting an additional 13 limited service hotels. Each land parcel is leased to borrowers in the Tharaldson 1-B Pool, which is included in the trust. Occupancy and RevPAR for the trailing twelve month period ending December 2009 were 71% and $67, respectively, compared to 76% and $78 in 2008. The loan sponsor is Gary Tharaldson. The loan benefits from a 20 year amortization schedule and has amortized 12% since last review. Moody's underlying rating and stressed DSCR are Baa1 and 1.87X, respectively, compared to A3 and 1.91X at last review. The third largest loan with an underlying rating is the 200 Varick Street Loan ($27.0 million -- 1.1% of the pool), which is secured by a 400,061 SF Class B office building located in the Greenwich Village submarket of New York City. The largest tenants include Cardinia Real Estate LLC (28% of the net rentable area; lease expiration June 2020), Doremus & Company, Inc. (25% of the NRA; lease expiration June 2010) and Nysarc, Inc. (10% of the NRA; lease expiration December 2019). As of March, 2010 the property was 99% leased, the same as at year end 2008. The loan is currently on the master servicer's watchlist due to near term lease rollover. The loan is interest only for its entire 10 year term. Moody's underlying rating and stressed DSCR are Aa2 and 1.91X, respectively, compared to Aa2 and 2.02X at last review. The first loan that previously had an investment grade underlying rating is the One & Two International Place Loan ($205.1 million - - 8.6% of the pool),which represents a 50% pari passu interest in a $410.2 million first mortgage loan. The loan is secured by two Class A office buildings, totaling 1,852,501 SF, located in Boston, Massachusetts. The largest tenants include Ropes & Gray LLP (19% of the NRA; lease expiration December 2010), Eaton Vance Management (17% of the NRA; lease expiration May 2024) and Choate Hall & Stewart (10% of the NRA; lease expiration September 2015). The property was 90% leased as of February 2010. Performance has declined since securitization due to increased expenses. In addition, market rents for the Financial District submarket have declined 10% since securitization. Moody's LTV and stressed DSCR are 81% and 1.10X, respectively, compared to 70% and 1.27X at last review. The second loan that previously had an investment grade underlying rating is the Great Wolf Resorts Pool Loan ($44.5 million -- 1.8% of the pool), which is secured by two resorts located in Michigan and Kansas. Performance declined significantly in 2009 as a result of a drop in vacation travel caused by the economic recession. Occupancy and RevPAR for the trailing 12- month period ending December 2009 were 56% and $114, respectively, compared to 61% and $127 for the same period in 2008. The loan is currently on the master servicer's watchlist due low DSCR. Due to the decline in performance, Moody's has assumed a high probability of default for this loan. Moody's LTV and stressed DSCR are 158% and 0.79X, respectively, compared 54% and 1.48X at last review. The top three conduit loans represent 11% of the pool. The largest conduit loan is the Digital Realty Trust Portfolio Loan ($142.6 million -- 6.0% of the pool), which is secured by six office properties located in five states. The properties were 97% leased as of March 2010. Net operating income (NOI) and occupancy have significantly increased since securitization. The loan sponsor is Digital Realty Trust, a publicly traded REIT. Moody's LTV and stressed DSCR are 58% and 1.85X, respectively, compared to 88% and 1.21X at last review. The second largest conduit loan is the Olympia Portfolio Loan ($57.5 million -- 2.4% of the pool), which consists of 23 loans secured by 22 anchored retail properties and two office properties located in Florida and Georgia. Seven of the loans, representing 26% of the pool, have defeased and are collateralized by U.S. Government securities. Twenty of the properties, representing 88.3% of the allocated loan balance, are anchored by Walgreen Company (senior unsecured rating A2; stable outlook ). Four loans are currently on the master servicer's watchlist due to low DSCR, low occupancy and deferred maintenance. Moody's LTV and stressed DSCR are 93% and 1.02X, respectively, compared to 95% and 1.0X at last review. The third largest conduit loan is the MetroPlace III & IV Loan ($52.2 million -- 2.2% of the pool), which is secured by two Class A office towers, totaling 325,328 SF, located in Fairfax, Virginia. As of March 2010, the buildings were 99% leased. The largest tenants include GSA-INS (31% of the NRA; lease expiration February 2014), GSA-DEA (22% of the NRA; lease expiration February 2015) and Lockhead Martin (21% of the NRA; lease expiration January 2013). The property was 99% leased as of March 2010. The property's NOI has been steadily increasing since securitization. Moody's LTV and stressed DSCR are 77% and 1.30X, respectively, compared to 93% and 1.07X at last review. Moody's rating action is: -- Class A-2, $140,908,623, affirmed at Aaa; previously assigned Aaa on 5/10/2005 -- Class X-C, Notional, affirmed at Aaa; previously assigned Aaa on 5/10/2005 -- Class X-P, Notional, affirmed at Aaa; previously assigned Aaa on 5/10/2005 -- Class A-3, $82,046,000, affirmed at Aaa; previously assigned Aaa on 5/10/2005 -- Class A-PB, $212,012,566, affirmed at Aaa; previously assigned Aaa on 5/10/2005 -- Class A-4, $1,079,352,000, affirmed at Aaa; previously assigned Aaa on 5/10/2005 -- Class A-1A, $ 334,620,169, affirmed at Aaa; previously assigned Aaa on 5/10/2005 -- Class A-J, $187,242,000, downgraded to Aa2 from Aaa, previously placed on review for possible downgrade on 7/14/2010 -- Class B, $74,897,000, downgraded toA2 from Aa2, previously placed on review for possible downgrade on 7/14/2010 -- Class C, $23,830,000, downgraded to A3 from Aa3, previously placed on review for possible downgrade on 7/14/2010 -- Class D, $47,661,000, downgraded to Baa2 from A2, previously placed on review for possible downgrade on 7/14/2010 -- Class E, $27,235,000, downgraded to Ba1 from A3, previously placed on review for possible downgrade on 7/14/2010 -- Class F, $27,235,000, downgraded to Ba3 from Baa1, previously placed on review for possible downgrade on 7/14/2010 -- Class G, $30,639,000, downgraded to B3 from Baa2, previously placed on review for possible downgrade on 7/14/2010 -- Class H, $37,448,000, downgraded to Caa2 from Baa3, previously placed on review for possible downgrade on 7/14/2010 -- Class J, $6,808,000, downgraded to Caa3 from Ba1, previously placed on review for possible downgrade on 7/14/2010 -- Class K, $10,213,000, downgraded to Ca from Ba2, previously placed on review for possible downgrade on 7/14/2010 -- Class L, $13,617,000, downgraded to C from Ba3, previously placed on review for possible downgrade on 7/14/2010 -- Class M, $6,808,000, downgraded to C from B1, previously placed on review for possible downgrade on 7/14/2010 -- Class N, $6,808,000, downgraded to C from B2, previously placed on review for possible downgrade on 7/14/2010 -- Class O, $6,808,000, downgraded to C from B3, previously placed on review for possible downgrade on 7/14/2010 WAMU MORTGAGE: Moody's Downgrades Ratings on 20 Tranches -------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 20 tranches and confirmed the ratings of 8 tranches from 7 RMBS transactions issued by WMABS. The collateral backing these deals primarily consists of first-lien, fixed and adjustable-rate subprime residential mortgages. The actions are a result of the continued performance deterioration in Subprime pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody's updated loss expectations on subprime pools issued from 2005 to 2007. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. Issuer: WaMu Mortgage Pass-Through Certificates, WMABS Series 2006-HE1 Trust -- Cl. I-A, Downgraded to Caa3; previously on January 13, 2010 A1 Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C; previously on January 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to C; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. II-A-3, Downgraded to Caa1; previously on January 13, 2010 Baa3 Placed Under Review for Possible Downgrade -- Cl. II-A-4, Downgraded to Ca; previously on January 13, 2010 Ba1 Placed Under Review for Possible Downgrade Issuer: WaMu Mortgage Pass-Through Certificates, WMABS Series 2006-HE2 Trust -- Cl. A-2, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. A-3, Downgraded to Ca; previously on January 13, 2010 B2 Placed Under Review for Possible Downgrade -- Cl. A-4, Downgraded to Ca; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade Issuer: Washington Mutual Asset-Backed Certificates, WMABS Series 2006-HE3 Trust -- Cl. I-A, Downgraded to Ca; previously on January 13, 2010 B1 Placed Under Review for Possible Downgrade -- Cl. II-A-1, Confirmed at Aaa; previously on January 13, 2010 Aaa Placed Under Review for Possible Downgrade -- Cl. II-A-2, Downgraded to Caa2; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. II-A-3, Downgraded to C; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade -- Cl. II-A-4, Downgraded to C; previously on January 13, 2010 Caa2 Placed Under Review for Possible Downgrade Issuer: Washington Mutual Asset-Backed Certificates, WMABS Series 2006-HE4 Trust -- Cl. I-A, Downgraded to Ca; previously on January 13, 2010 Caa3 Placed Under Review for Possible Downgrade -- Cl. II-A-1, Confirmed at Baa2; previously on January 13, 2010 Baa2 Placed Under Review for Possible Downgrade -- Cl. II-A-2, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Washington Mutual Asset-Backed Certificates, WMABS Series 2006-HE5 Trust -- Cl. I-A, Downgraded to Ca; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. II-A-1, Downgraded to Caa2; previously on January 13, 2010 Ba3 Placed Under Review for Possible Downgrade -- Cl. II-A-2, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. II-A-3, Downgraded to C; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Washington Mutual Asset-Backed Certificates, WMABS Series 2007-HE1 Trust -- Cl. I-A, Downgraded to Ca; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. II-A-1, Downgraded to Caa3; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. II-A-2, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. II-A-3, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade Issuer: Washington Mutual Asset-Backed Certificates, WMABS Series 2007-HE2 Trust -- Cl. I-A, Downgraded to Ca; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. II-A-1, Downgraded to Ca; previously on January 13, 2010 B3 Placed Under Review for Possible Downgrade -- Cl. II-A-2, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade -- Cl. II-A-3, Confirmed at Ca; previously on January 13, 2010 Ca Placed Under Review for Possible Downgrade WILBRAHAM CBO: Fitch Affirms Ratings on Two Classes of Notes ------------------------------------------------------------ Fitch Ratings has affirmed two classes of notes issued by Wilbraham CBO Ltd./Corp. In addition, Fitch has revised the Recovery Rating on one class of notes and maintained the Recovery Rating on the other class of notes. This review was conducted under the framework described in the reports highlighted at the end of this press release. Since Fitch's last review in March 2009, the class A-2 notes have been paid in full, leaving the class B-1 and class B-2 notes as the senior-most remaining tranche. The class B notes have a cumulative par balance of approximately $40.6 million, compared to a performing collateral balance of $4.1 million from three unique obligors. There are also three defaulted bonds totaling about $3.8 million of par, from which Fitch expects relatively weak recoveries. Due to the insufficient collateral balance available to support the class B notes, an ultimate principal shortfall appears inevitable, which is reflected by the 'C' rating on these notes. Additionally, interest proceeds are projected to be insufficient to fulfill the cumulative class B interest amount at the next payment date in January 2011. Failure to pay the class B interest amount will lead to a payment default unless sufficient principal proceeds become available to compensate for the interest shortfall. Fitch has revised the Recovery Rating on the class B-1 notes to 'RR6' from 'RR5', while maintaining the recovery rating on the class B-2 notes at 'RR5'. The lower recovery projection for the class B-1 notes is attributable to the relatively low interest coupon of Libor plus 2.05% received by these notes. The class B-2 notes receive a significantly higher fixed coupon of 9.42%, leading to relatively higher recovery prospects as Recovery Ratings are based on the total discounted future cash flows projected to be available to the notes in a base-case default scenario. Recovery Ratings are designed to provide a forward-looking estimate of recoveries on currently distressed or defaulted structured finance securities rated 'CCC' or below. For further detail on Recovery Ratings, please see Fitch's report 'Global Surveillance Criteria for Corporate CDOs'. Wilbraham CBO is a cash flow collateralized debt obligation that closed on July 13, 2000 and is managed by Babson Capital Management LLC. Fitch affirms and revises the Recovery Rating on this class: -- $9,329,033 class B-1 notes to 'C/RR6' from 'C/RR5'. Fitch affirms this class: -- $31,279,032 class B-2 notes 'C/RR5'. WOODBURY UNIVERSITY: Moody's Affirms Rating on $18.9 Mil. Bonds --------------------------------------------------------------- Moody's Investors Service has affirmed Woodbury University's Baa3 rating. The rating applies to the University's $18.9 million of series 2006 bonds issued through the California Educational Facilities Authority. The outlook for the rating is stable. The University also participated in the 2007 College and University Financing Program, rated Ba1 with a negative outlook, issued through the California Educational Facilities Authority. Although Woodbury is a member of the pooled financings, the rating and outlook is based on the relative share of each participant in the pool, bond maturities, the participants underlying credit quality and the corresponding expected loss (default frequency times loss severity) for their rating categories. For more information on this series, please see Moody's last report dated July 7, 2010. Legal Security: The Series 2006 bonds are a general obligation of the University with a first lien on gross revenue pledge and a deed of trust on real property assets of the Burbank Campus. Interest Rate Derivatives: None Strengths * Market niche as private residential university outside of Los Angeles, CA in Burbank; specializing in architecture, business and media design programs. The University currently enrolls 1,465 students with approximately 150 of those at the San Diego Campus. Students come largely from the greater Los Angeles area with close to 20% of enrollment at the graduate level and half of the undergraduate student population transferring from area community colleges. Tuition growth has been moderate but steady with net tuition per student at $19,881 in FY2009 compared to $16,093 million in FY 2005. * Good fiscal management manifesting in healthy annual operations. The University has consistently produced positive annual operating margins; averaging 4.7% from FY2007 through FY2009; based on Moody's calculations which includes a 5% endowment spend rate. Healthy margins are largely a result of the University's current policy of not spending from the endowment in an effort to grow the endowment value. In addition, the University annually budgets at least a $400,000 dollar endowment contribution/contingency. Operating cash flow, at 12.1% in 2009, provides good coverage of debt service at an average 2.9 times. Management expects to end the 2010 fiscal year with another positive surplus in line with FY2009 results. * Healthy liquidity of resources. The University, at June 30, 2009, held monthly liquidity of over 142 days. University assets are invested through BNY Mellon with holdings of 59% equity, 36% fixed income and 5% cash. * Conservative debt profile of 100% fixed rate debt coupled with no additional debt plans. Challenges * Deterioration of financial resources and pension assets due to investment declines. Woodbury experienced an investment loss consistent with peers of -15.6% as of the end of the 2009 fiscal year and its pension liability increased to $6.8 million from $2.9 million at the end of the 2008 fiscal year (6/30). As a result, the University's expendable financial resource cushion to both debt and operations fell to a stressed 0.2 times and 0.2 times, respectively. Management reports a positive investment return for the 2010 fiscal year; contributing to growth in the endowment of 13% as of May 31, 2010. Moody's notes limited capacity for additional debt issuance at the current rating level. * Strong competition from other area private and lower-priced public institutions. As applications have increased, selectivity has remained relatively stable at 81.5% for new freshman and 83.6% for transfers in Fall 2009. At the same time, yield has trended downward to 30% in 2009 compared to 50% in 2004 for new freshman and remained more stable for transfers at 47%. While total undergraduate enrollment has remained steady, graduate enrollment has continued to grow at a healthy pace; at 289 full time equivalents in the fall of 2009 from 160 in the fall of 2006. As a highly tuition dependent institution (87% of Moody's FY2009 adjusted revenue base), Woodbury's operating performance is highly vulnerable to enrollment shortfalls. * Revenue stress possible as the State of California (rated A1) faces fiscal stress. Enrollment and operations may be pressured going forward in light of fiscal pressure at the State and potential reduction of the Cal Grant program; which supports lower and middle income students with tuition support. Currently, Woodbury receives approximately $3.5 million annually or 9% of revenues from this program. Outlook The stable outlook reflects Moody's expectation that the College will continue to be challenged by a competitive marketplace, but will continue to budget conservatively in order to maintain healthy operating margins and grow financial resources to better support outstanding debt. What could change the rating -- UP Strengthening of market demand coupled with continuation of strong operating margins; significant growth of the financial resources supporting outstanding debt What could change the rating -- DOWN Deterioration of market demand resulting in weakened operating margins; weakened financial resource cushion supporting debt; increase of debt Key Indicators (FY 2009 financial data and fall 2009 enrollment data): * Total Full-Time Equivalent Students (FTE): 1,465 students * Freshman Acceptance Rate: 81.1% * Freshman Matriculation Rate: 29.7% * Total Pro-Forma Direct Debt: $27.4 million * Expendable Financial Resources: $5.9 million * Expendable Resources to Pro-Forma Direct Debt: 0.22 times * Expendable Resources to Operations: 0.18 times * Monthly Days Cash: 142 days * Three-year Average Operating Margin: 4.7% * Operating Cash Flow Margin: 12.1% * Reliance on Student Charges: 86.8% Rated Debt * Series 2006: Baa3 underlying * Series 2007: Ba1 based on College and University Financing Program pooled rating The last rating action with respect to Woodbury University was on June 18, 2009, when the Baa3 rating and stable outlook was affirmed. The rating was subsequently recalibrated to Baa3 with a stable outlook on May 7, 2010. * Fitch Downgrades Ratings on 194 Bonds From 120 RMBS Deals to 'D' ------------------------------------------------------------------ mortgage-backed securities transactions to 'D' indicating that the bonds have incurred a principal write-down. The bonds being downgraded to 'D' as part of this review were all previously rated 'CC' or 'C' indicating that a default was expected. The action is limited to just the bonds with write-downs. The remaining bonds in these transactions have not been analyzed as part of this review. Of the 120 transactions affected by these downgrades 72 are Alt-A and 45 are Subprime. The remaining three transactions are other product types. Ninety-eight percent were previously rated 'C'. Fifty-two percent have an outstanding Recovery Rating of 'RR6' indicating that minimal recovery is expected. Forty-three percent have Recovery Ratings of 'RR2' or 'RR3' indicating that 50% to 90% of the outstanding balance is expected to be recovered. Fitch downgrades bonds to 'D' as part of the ongoing surveillance process and will continue to monitor these transactions for additional defaults. * Fitch Takes Various Rating Actions on Six SF CDO Deals -------------------------------------------------------- Fitch Ratings has taken various rating actions as detailed at the end of this press release for classes of notes issued by six structured finance collateralized debt obligations that closed in 2005 with exposure to structured finance assets. The downgrades are due to credit deterioration in the underlying portfolios. This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria' and 'Global Rating Criteria for Structured Finance CDOs'. The analytical scope of each CDO review varied depending on the quality of the portfolio and credit enhancement for the CDO's classes available from subordination and excess spread. For transactions where expected losses from assets with a Fitch derived rating of 'CC' and lower already significantly exceed the credit enhancement level of the most senior class of notes, Fitch believes that the probability of default for all classes of notes can be evaluated without factoring potential further losses from the remaining portion of the portfolios and without considering the outcomes of various interest rate and default timing scenarios as described in the relevant criteria. Therefore these transactions were not modeled using the Structured Finance Portfolio Credit Model or cash flow model. For transactions where expected losses from distressed assets did not significantly exceed the credit enhancement level of the senior class of notes, Fitch used SF PCM to project losses from the transaction's entire portfolio. If credit enhancement levels to the most senior class indicate a rating higher than 'CCC', Fitch performed cash flow model analysis to evaluate the notes' performance under a range of interest rate and default timing scenarios. For all transactions, this review considered realized losses and credit migration in the underlying portfolios since last review, the ongoing and future impact of interest rate hedges, availability of excess spread to pay down the notes, or conversely, erosion of par due to the use of principal proceeds to pay interest, and the likelihood of these trends to continue. Fitch considered non-deferrable classes which have missed their interest on at least one payment date and have not cured within an appropriate cure period as specified in the transaction's documents, to be in default as reflected in the respective ratings. Fitch does not assign Rating Outlooks or LS ratings to notes rated category 'CCC' and lower. Fitch currently does not assign Recovery Ratings to notes of structured finance CDOs. Fitch has taken these rating actions: Acacia CDO 8, Ltd./Inc. -- $127,987,408 class A-1 affirmed at 'C'; -- $15,000,000 class A-2 affirmed at 'C'; -- $22,000,000 class B affirmed at 'C'; -- $20,655,085 class C affirmed at 'C'; -- $10,514,876 class D affirmed at 'C'; -- $10,738,558 class E affirmed at 'C'. Fitch did not perform SF PCM or cash flow model analysis on Acacia 8. The losses expected from the distressed portion of the portfolio already significantly exceed the CE level of the class A-1 notes. Additionally, interest collections are not sufficient to fulfill the interest obligation to the class B notes. Principal proceeds are currently being used to fulfill the remaining interest due to class B and to pay down the class A-1 notes. Acacia 8 is a cash flow CDO that closed on July 14, 2005 and is monitored by Redwood Asset Management. As of the June 2010 report, the portfolio is composed of residential mortgage-backed securities, commercial mortgage-backed securities, and SF CDOs bonds primarily of the 2004 through 2006 vintage. C-BASS CBO XIII, Ltd. -- $148,428,469 class A downgraded to 'C' from 'CC'; -- $39,500,000 class B affirmed at 'C'; -- $12,000,000 class C affirmed at 'C'; -- $18,186,132 class D affirmed at 'C'. Fitch did not perform SF PCM or cash flow model analysis on C-BASS CBO XIII, Ltd. The losses expected from the distressed portion of the portfolio already significantly exceed the CE level of class A notes. Additionally, interest collections are not sufficient to fulfill the interest obligation to the class A and class B notes. Principal proceeds are currently being used to fulfill the remaining interest due on these classes, and to pay down the class A notes. C-BASS is a cash flow CDO that closed on March 17, 2005, and is monitored by C-BASS Investment Mangement LLC. As of the June 2010 trustee report, the portfolio is primarily composed of RMBS, CMBS, structured finance CDOs, and various commercial ABS bonds of 1996 through 2005 vintage. Commodore CDO III, LTD./INC. -- $68,696,639 class A-1A downgraded to 'C' from 'CC'; -- $11,455,235 class A-1B downgraded to 'C' from 'CC'; -- $16,584,235 class A-1C downgraded to 'C' from 'CC'; -- $63,750,000 class A-2 affirmed at 'C'; -- $50,000,000 class B affirmed at 'C'; -- $20,569,378 class C-1 affirmed at 'C'; -- $2,650,648 class C-2 affirmed at 'C'. Fitch performed SF PCM analysis on Commodore III because the expected loss from the distressed portion of the portfolio is higher than, but still comparable to, the CE levels of the class A-1A, A-1B and A-1C notes. However, the resulting 'CCC' RLR from SF PCM is significantly greater than the class A-1 CE levels. Additionally, interest collections are insufficient to fulfill the hedge counterparty payment. Principal proceeds are currently being used to fulfill the remaining payment to the hedge counterparty and the entire accrued interest distribution amounts to the class A-1, class A-2 and class B notes before redeeming the class A-1 notes. Commodore III is a cash flow CDO that closed on March 1, 2005 and is monitored by Fischer Francis Trees & Watts, Inc. As of the June 1, 2010 trustee report, the portfolio is comprised of RMBS, CMBS, corporate and SF CDOs, and consumer and commercial ABS primarily from 2004 through 2007 vintage transactions. G-Star 2005-5, Ltd. -- $317,059,499 class A-1 downgraded to 'C' from 'CC'; -- $60,000,000 class A-2 affirmed at 'C'; -- $37,000,000 class A-3 affirmed at 'C'; -- $22,771,375 class B affirmed at 'C'; -- $25,245,210 class C affirmed at 'C'; -- $35,000,000 income notes affirmed at 'C'. Fitch did not perform SF PCM or cash flow model analysis on G-Star 2005-5, Ltd. The losses expected from the distressed portion of the portfolio already significantly exceed the CE level of the class A-1 notes. Although a small portion of interest proceeds are currently being used to redeem the senior notes, this amount it not sufficient to offset the ongoing deterioration of the portfolio. G-Star 2005-5 is a cash flow CDO that closed on March 16, 2005 and is managed by MBIA Asset Management Corp., who replaced Ventras Capital Advisors LLC on Nov. 11, 2009. As of the June 2010 trustee report, the portfolio is primarily composed of RMBS, CMBS, commercial real estate loans, structured finance CDOs, and various commercial ABS bonds of 1997 through 2008 vintage. RFC CDO II Ltd. -- $74,838,423 class A-1 downgraded to 'CCC' from 'BBB/ LS3'; -- $39,000,000 class A-2 downgraded to 'CC' from 'CCC'; -- $6,000,000 class B-1 downgraded to 'C' from 'CC'; -- $6,000,000 class B-2 downgraded to 'C' from 'CC'; -- $13,500,000 class C affirmed at 'C'; -- $3,380,203 class D affirmed at 'C'; -- $3,380,203 class E affirmed at 'C'; -- $3,000,000 class F affirmed at 'C'. Fitch performed SF PCM and cash flow model analysis on RFC II. Since Fitch's last review in November 2009, 49.5% of the portfolio has been downgraded a weight average of 5.3 notches. Approximately 69.3% of the portfolio has a below investment grade rating, with 51.9% considered in the 'CCC' rating category or below, compared to 51.5% and 31.4%, respectively, at the last review. While the class A-1 notes are receiving some principal repayment from excess interest due to the failing class A/B overcollateralization test, the amount of benefit from these payments is marginal relative to the remaining outstanding balance of the class A-1 notes. RFC II is a structured finance collateralized debt obligation (SF CDO) that closed on March 3, 2005, and is monitored by Castle Peak Capital Advisors, LLC. As of the June 30, 2010 trustee report, the portfolio is comprised of RMBS and CMBS from 2002 through 2005 vintage transactions. STACK Ltd., Series 2005-1 -- $96,022,573 series A2-US$ downgraded to 'C' from 'CC'; -- EUR4,722,422 series A2-EUR downgraded to 'C' from 'CC'; -- $74,000,000 class B-US$ affirmed at 'C'; -- EUR6,000,000 class B-EUR affirmed at 'C'; -- $33,000,000 class C-US$ affirmed at 'C'; -- YEN1,000,000,000 class C-JPY affirmed at 'C'; -- $31,000,000 class D-US$ affirmed at 'C'; -- YEN500,000,000 class D-JPY affirmed at 'C'. Fitch performed SF PCM analysis on Stack 2005-1 because the expected loss from the distressed portion of the portfolio is higher than, but still comparable to, the CE level of the class A2-EUR and A2-US$ notes. However, the resulting 'CCC' RLR from SF PCM is significantly greater than the class A2 CE level. The class A2 notes continue to amortize, but the degree of deterioration in the underlying portfolio outweighs the benefit of amortizing. Additionally, because STACK 2005-1 is a synthetic transaction, there are no cash flow diverting structural features that can compensate for the difference between the portfolio's expected loss and class A2 CE level. STACK 2005-1 is a synthetic CDO that closed on March 24, 2005, and is managed by TCW Asset Management Co. The portfolio is composed entirely of subprime RMBS from 2003 through 2006 vintage transactions. * S&P Downgrades Ratings on 76 Tranches From 27 TruPs CDO Deals --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 76 tranches from 27 U.S. TruPs collateralized debt obligation transactions and removed them from CreditWatch negative. The tranches with lowered ratings have a total issuance amount of $9.488 billion. At the same time, S&P affirmed its ratings on 33 tranches from eight transactions and removed 12 of them from CreditWatch negative. The downgrades reflect three primary factors: * The application of S&P's updated corporate CDO criteria; * The application of S&P's revised recovery assumptions for trust- preferred securities issued by U.S. Banks; and * In most cases, significant deterioration in the credit quality of the underlying asset portfolios due to increased exposure to obligors that have either defaulted or deferred payments on trust-preferred securities, along with an increase in the number of trust-preferred securities that experienced downgrades into the 'CCC' range. In July 2010, S&P stated that S&P has observed severe negative credit migration and significant increases in defaults and deferrals in the pools underlying assets. Previously, in January 2009, S&P indicated its view that the economic and regulatory conditions pointed to a potential increase in the number of U.S. banks that defer on their TruPs payment obligations. Since that time, S&P has observed significant increases in the number of deferrals of U.S. Bank TruPs held by the CDOs S&P rates. While the rate of increase in the number of deferrals may have recently slowed, in S&P's view, the economic and regulatory conditions at the root of these deferrals continue to unfold. The affirmations reflect S&P's view that the affirmed tranches have sufficient credit support to maintain their current ratings according to its updated criteria. Some of the affirmed tranches were structured as principal-protected notes that are supported by additional collateral, usually in the form of a zero-coupon bond issued by the U.S. government or an entity backed by the U.S. government. S&P's ratings on these principal-protected notes address only the payment of principal at maturity and are linked to the rating on the bond pledged as additional collateral. Accordingly, the credit quality of the CDO portfolios did not drive S&P's ratings on the principal-protected notes. S&P expects to continue reviewing the remaining transactions with ratings S&P placed on CreditWatch following its corporate CDO criteria update and to resolve the CreditWatch status of the affected tranches. Rating Actions Rating ------ Transaction Class To From ----------- ----- -- ---- Alesco Preferred Funding XI Ltd A-1A CCC+ BBB+/Watch Neg Alesco Preferred Funding XI Ltd A-1B CCC+ BBB+/Watch Neg Alesco Preferred Funding XII Ltd A-1 CCC BB/Watch Neg Alesco Preferred Funding XII Ltd A-2 CCC- B/Watch Neg Alesco Preferred Funding XII Ltd X BBB AAA/Watch Neg Attentus CDO I Ltd A1 B- BBB-/Watch Neg Attentus CDO I Ltd A2 CCC+ BB/Watch Neg Attentus CDO I Ltd B CCC- CCC+/Watch Neg Attentus CDO I Ltd C1 CCC- CCC-/Watch Neg Attentus CDO I Ltd C2A CC CCC-/Watch Neg Attentus CDO I Ltd C2B CC CCC-/Watch Neg Attentus CDO III Ltd A-1A AA AAA/Watch Neg Attentus CDO III Ltd A-2 B B/Watch Neg Attentus CDO III Ltd B CCC CCC/Watch Neg Attentus CDO III Ltd C-1 CCC- CCC-/Watch Neg Attentus CDO III Ltd C-2 CCC- CCC-/Watch Neg Attentus CDO III Ltd D CCC- CCC-/Watch Neg Kodiak CDO I, Ltd. A-1 BBB- A+/Watch Neg Kodiak CDO I, Ltd. A-2 BB BB/Watch Neg Kodiak CDO I, Ltd. B CCC+ B-/Watch Neg Kodiak CDO I, Ltd. C CCC- CCC/Watch Neg Kodiak CDO I, Ltd. D-1 CCC- CCC-/Watch Neg Kodiak CDO I, Ltd. D-2 CCC- CCC-/Watch Neg Kodiak CDO I, Ltd. D-3 CCC- CCC-/Watch Neg MM Community Funding IX, Ltd A-1 CCC- BBB+/Watch Neg MM Community Funding IX, Ltd A-2 CCC- BB+/Watch Neg MMCapS Funding XIX Ltd A-1 CCC- BB/Watch Neg MMCapS Funding XIX Ltd A-2 CCC- CCC/Watch Neg MMCapS Funding XVII, Ltd. A-1 CCC- BB-/Watch Neg MMCapS Funding XVII, Ltd. A-2 CCC- B+/Watch Neg MMCapS Funding XVII, Ltd. B CCC- CCC+/Watch Neg Preferred Term Securities XV A-1 CCC- BB/Watch Neg Preferred Term Securities XV A-2 CCC- B-/Watch Neg Preferred Term Securities XV A-3 CCC- B-/Watch Neg Preferred Term Securities XVI A-1 CCC- BB-/Watch Neg Preferred Term Securities XVI A-2 CCC- CCC+/Watch Neg Preferred Term Securities XVI A-3 CCC- CCC+/Watch Neg Preferred Term Securities XVII A-1 CCC- BB/Watch Neg Preferred Term Securities XVII A-2 CCC- B+/Watch Neg Preferred Term Securities XVIII A-1 CCC+ BB+/Watch Neg Preferred Term Securities XVIII A-2 CCC- BB-/Watch Neg Preferred Term Securities XX A-1 CCC- BB-/Watch Neg Preferred Term Securities XX A-2 CCC- B-/Watch Neg Preferred Term Securities XXV A-1 CCC BB+/Watch Neg Preferred Term Securities XXV A-2 CCC- B+/Watch Neg Preferred Term Securities XXVIII A-1 CCC BBB-/Watch Neg Preferred Term Securities XXVIII A-2 CCC- BB+/Watch Neg Regional Diversified Funding2004 A-1 CCC- BB+/Watch Neg Regional Diversified Funding2004 A-2 CCC- B/Watch Neg Soloso CDO 2005-1 Ltd. A-1L CCC- B-/Watch Neg Soloso CDO 2005-1 Ltd. A-1LA CCC- BB/Watch Neg Soloso CDO 2005-1 Ltd. A-1LB CCC- B-/Watch Neg Soloso CDO 2005-1 Ltd. A-2L CCC- CCC/Watch Neg Taberna Preferred Funding IX A-1LA CCC+ BBB+/Watch Neg Taberna Preferred Funding IX A-1LAD CCC+ BBB+/Watch Neg Taberna Preferred Funding IX A-1LB CCC- BB+/Watch Neg Taberna Preferred Funding IX A-2LA CCC- BB/Watch Neg Taberna Preferred Funding IX A-2LB CCC- B-/Watch Neg Taberna Preferred Funding IX A-3LA CCC- CCC+/Watch Neg Taberna Preferred Funding IX A-3LB CCC- CCC+/Watch Neg Taberna Preferred Funding IX B-1L CC CCC-/Watch Neg Taberna Preferred Funding IX B-2L CC CCC-/Watch Neg Taberna Preferred Funding V A-1LA CCC- BB-/Watch Neg Taberna Preferred Funding V A-1LAD CCC- BB-/Watch Neg Taberna Preferred Funding V A-1LB CCC- CCC+/Watch Neg Taberna Preferred Funding V A-2L CC CCC-/Watch Neg Taberna Preferred Funding VIII A-1A BB A+/Watch Neg Taberna Preferred Funding VIII A-1B BB A+/Watch Neg Taberna Preferred Funding VIII A-2 B- BB+/Watch Neg Taberna Preferred Funding VIII B CCC- B/Watch Neg Taberna Preferred Funding VIII C CCC- CCC+/Watch Neg Taberna Preferred Funding VIII D CCC- CCC/Watch Neg Taberna Preferred Funding VIII E CCC- CCC-/Watch Neg Taberna Preferred Funding VIII F CC CCC-/Watch Neg Trapeza CDO I, LLC A-1 A- AAA/Watch Neg Trapeza CDO I, LLC A-2 A- AAA/Watch Neg Trapeza CDO II, LLC A1A AAA AAA/Watch Neg Trapeza CDO II, LLC A1B BB- BBB+/Watch Neg Trapeza CDO IX Ltd A-1 CCC+ BBB/Watch Neg Trapeza CDO XII, Ltd. A-1 CCC- BBB/Watch Neg Trapeza CDO XII, Ltd. A-2 CCC- BB+/Watch Neg Trapeza CDO XII, Ltd. R A A+/Watch Neg Tropic CDO II Ltd A-1L CCC- BB-/Watch Neg Tropic CDO II Ltd A-2L CCC- B+/Watch Neg Tropic CDO V Ltd. A-1La1 D CCC/Watch Neg Tropic CDO V Ltd. A-2L CC CCC-/Watch Neg U.S. Capital Funding VI Ltd A-1 CCC- B-/Watch Neg U.S. Capital Funding VI Ltd A-2 CC CCC-/Watch Neg Ratings Affirmed Transaction Class Rating ----------- ----- ------ Alesco Preferred Funding XII Ltd P-1 Combo AAA Alesco Preferred Funding XII Ltd P-2 Combo AAA Attentus CDO I Ltd D CC Attentus CDO I Ltd E CC Attentus CDO III Ltd A-1B AAA Attentus CDO III Ltd E-1 CC Attentus CDO III Ltd E-2 CC Attentus CDO III Ltd F CC Kodiak CDO I, Ltd. E-1 CC Kodiak CDO I, Ltd. E-2 CC Kodiak CDO I, Ltd. F CC Kodiak CDO I, Ltd. G CC Kodiak CDO I, Ltd. H CC Taberna Preferred Funding V A-3FV CC Taberna Preferred Funding V A-3FX CC Taberna Preferred Funding V A-3L CC Taberna Preferred Funding V B-1L CC Taberna Preferred Funding V B-2FX CC Taberna Preferred Funding V B-2L CC Tropic CDO V Ltd. P-1 Combo AAA Tropic CDO V Ltd. P-2 Combo AAA Other Ratings Outstanding Transaction Class Rating ----------- ----- ------ Tropic CDO V Ltd. A-1La2 D Tropic CDO V Ltd. A-1Lb D * S&P Puts Ratings on Five Tranches on CreditWatch Negative ----------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on five tranches from five U.S. synthetic collateralized debt obligation transactions backed by commercial mortgage-backed securities and four tranches from three corporate-backed synthetic CDO transactions on CreditWatch with negative implications. At the same time, S&P placed its rating on one tranche from one corporate-backed synthetic CDO transaction on CreditWatch positive. In addition, S&P affirmed its rating on one tranche from a CMBS-backed synthetic CDO transaction and removed it from CreditWatch negative. The CreditWatch actions and rating affirmations followed S&P's monthly review of U.S. synthetic CDO transactions. The CreditWatch negative placements reflect negative rating migration in the respective portfolios and synthetic rated overcollateralization ratios that had fallen below 100% as of the June month-end run. The CreditWatch positive placement reflects substitutions made in the respective portfolio and an SROC ratio that had risen above 100% at the next-higher rating level. Rating Actions ABACUS 2006-NS1 Ltd. Rating ------ Class To From ----- -- ---- D CCC/Watch Neg CCC Aphex Capital NSCR 2007-6 Ltd. Rating ------ Class To From ----- -- ---- A-1 CCC+/Watch Neg CCC+ Claris Limited 114/2007 Rating ------ Class To From ----- -- ---- Tranche B/Watch Neg B Cloverie PLC 2005-56 Rating ------ Class To From ----- -- ---- A A/Watch Neg A Credit Default Swap US$1 bil Swap Risk Rating - Portfolio CDS Ref. No. 07ML113512A Rating ------ Class To From ----- -- ---- Tranche CCC+srp/Watch Neg CCC+srp Credit-Linked Trust Certificates 2005-I Rating ------ Class To From ----- -- ---- 2005-I-D BBB+/Watch Neg BBB+ CypressTree Synthetic CDO Limited 2005-134&6 Rating ------ Class To From ----- -- ---- 2005-1 BBB-/Watch Neg BBB- 2005-3 BB-/Watch Neg BB- HARBOR SPC 2006-2 Rating ------ Class To From ----- -- ---- D CCC+ CCC+/Watch Neg Marvel Finance 2007-3 LLC Rating ------ Class To From ----- -- ---- IA BB+/Watch Pos BB+ Morgan Stanley ACES SPC 2006-1 Rating ------ Class To From ----- -- ---- Scrd Nts BB-/Watch Neg BB- * S&P Takes Rating Actions on Two Market Value CDO Transactions --------------------------------------------------------------- Standard & Poor's Ratings Services took rating actions on two market value collateralized debt obligations. S&P removed its rating on one tranche from Shiprock Finance SPC from CreditWatch with negative implications. S&P withdrew its rating on the class B tranche from BlackRock Senior Income Series III PLC because the tranche was paid down. At the same time, S&P affirmed its ratings on two tranches from BlackRock Senior Income Series III PLC and left its rating on one trance from the same transaction on CreditWatch with negative implications. The rating actions follow S&P's monthly review of market value CDO performance. 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 see declines in the overcollateralization levels. S&P will remove the ratings from CreditWatch or raise the ratings if the tranches reestablish an appropriate O/C cushion or improve their cushion for several months. Rating And Creditwatch Actions Rating ------ Transaction Class To From ----------- ----- -- ---- BlackRock Senior Income Series III B NR BB/Watch Neg Shiprock Finance SPC 2007-VFN AAA AAA/Watch Neg Rating Remaining On Creditwatch Transaction Class Rating ----------- ----- ------ BlackRock Senior Income Series III C CCC-/Watch Neg Ratings Affirmed Transaction Class Rating ----------- ----- ------ BlackRock Senior Income Series III D CC BlackRock Senior Income Series III E CC ********* 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. 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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. Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, 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 2010. All rights reserved. ISSN: 1520-9474. 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