/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/120715.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 15, 2012, Vol. 16, No. 195 Headlines ANTHRACITE 2004-HY1: S&P Cuts Rating on Class A Notes to CCC+(sf) ANTHRACITE 2005-HY2: S&P Cuts Rating on 4 Note Classes to 'D(sf)' APHEX CAPITAL 2006-2: S&P Lowers Rating on 4 Note Classes to 'D' APIDOS CLO IX: S&P Assigns 'BB(sf)' Rating to $17.4MM Cl. E Notes ARCAP 2005-1: S&P Lowers Rating on Class A Notes to 'CCC+(sf)' ASSET REPACKAGING: S&P Cuts Ratings on Class B Notes to 'B(sf)' ASSET SECURITIZATION 1997-D5: Fitch Keeps Rating on 5 Cert Classes BALDWIN PARK: Fitch Cuts Rating on $4.1-Mil. Bonds to 'BB' BANC OF AMERICA 2007-1: Moody's Cuts Ratings on 3 Certs. to Caa3 BAYVIEW FINANCIAL: Moody's Takes Action on $115-Mil. U.S. RMBS BEAR STEARNS 1999-WF2: Fitch Affirms 'D' Ratings on 2 Cert Classes BLACKROCK SENIOR: Moody's Lifts Ratings on 2 Note Classes to Ba2 C-BASS MORTGAGE: Moody's Takes Action on $24-Mil. US RMBS CHASE MORTGAGE: Moody's Cuts Rating on Class B-3 Secs. to 'C' CREDIT SUISSE 2001-CKN5: Moody's Cuts Rating on K Certs. to 'C' CREDIT SUISSE 2006-C2: Moody's Affirms 'C' Ratings on 11 Certs. CREDIT SUISSE 2006-TFL2: Fitch Raises Rating on 12 Note Classes DEUTSCHE MORTGAGE 1998-C1: Fitch Affirms 'D' Rating on Cl. K Certs DLJ COMMERCIAL 1998-CG1: Fitch Affirms B- Rating on Cl. B-7 Certs. DLJ COMMERCIAL 1998-CF1: Fitch Affirms 'B-' Rating on B-7 Certs. DLJ COMMERCIAL 1998-CF2: Fitch Affirms 'C' Rating on B-6 Certs. DSLA MORTGAGE: Moody's Cuts Rating on Cl. A-2B Tranche to 'Caa2' FFCA 2000-1: Fitch Affirms Ratings on Four Note Classes FIELDSTONE MORTGAGE: Moody's Confirms 'B1' Rating on M3 Secs. FLAGSHIP CLO III: Moody's Raises Rating on Class D Notes to 'Ba1' FLAGSHIP CREDIT: S&P Rates $7.10MM Class D Subordinate Notes 'BB' GE CAPITAL 2001-1: Fitch Affirms Junk Rating on 3 Cert. Classes GRAMERCY REAL 2005-1: Fitch Affirms Rating on All Note Classes GS MORTGAGE 2006-GSFL: Moody's Affirms 'B3' Rating on H Certs. GS MORTGAGE 2006-RR2: S&P Affirms 'CCC-' Ratings on 3 CMBS Classes GS MORTGAGE 2007-GKK1: S&P Cuts Rating on A-1 CMBS to 'D(sf)' GUGGENHEIM PRIVATE: Fitch Rates Two Note Classes at Low-B GULF STREAM 2004-1: Moody's Raises Rating on D Notes From 'Ba2' HARBORVIEW MORTGAGE: Moody's Confirms Caa2 Rating on A-X Secs. HELLER FINC'L. 1999PH-1: Fitch Affirms 'D' Rating on Cl. J Certs. HEWETT'S ISLAND: Moody's Lifts Rating on $11-Mil. Notes From Ba1 IMPAC CMB: Moody's Takes Action on $865MM of US Alt-A RMBS KHALEEJ II: S&P Lowers Rating on Class A Notes to 'D(sf)' IMSCI COMMERCIAL: Fitch Issues Presale Report on Several Certs. LB-UBS COMMERCIAL 2000-C3: Fitch Cuts Rating on $16MM Notes to BB LB-UBS COMMERCIAL 2004-C4: Moody's Keeps 'C' Ratings on 6 Certs. LEHMAN BROTHERS 1998-C1: Fitch Keeps Dsf Rating on 2 Note Classes MERRILL LYNCH 2004-KEY2: Fitch Cuts Rating on Four Note Classes MERRILL LYNCH 2008-C1: Moody's Lowers Rating on J Certs. to Caa1 MKP CBO III: Fitch Affirms 'Dsf' Rating on $45MM Class B Notes MORGAN STANLEY 2004: Moody's Takes Action on $730MM US Alt-A RMBS MORGAN STANLEY 2004-TOP13: Losses Cues Fitch to Lower Ratings MORGAN STANLEY 2012-C5: Fitch Releases Presale Report on Certs. MULTI SECURITY: S&P Cuts Rating on Class N Notes to 'D(sf)' NOMURA ASSET: Moody's Lowers Rating on Cl. M-2 Tranche to 'Caa2' OAK HILL III: Moody's Raises Rating on Class D Notes From 'Ba1' PRIMA CAPITAL: Fitch Affirms 'CCCsf' Ratings on 2 Note Classes SALOMON BROTHERS 1999-C1: Fitch Affirms 'D' Rating on $4.2MM Secs. SALOMON BROTHERS 2000-C2: Moody's Affirms 'C' Ratings on 2 Certs. SANTANDER DRIVE: S&P Raises Ratings on 17 Classes SANTANDER DRIVE 2012-4: Moody's Rates $47MM Class E Notes 'Ba2' SLM STUDENT 2002-7: Fitch Affirms 'BBsf' Rating on Class B Notes SLM STUDENT 2002-7: Fitch Affirms 'BBsf' Rating on Class B Notes SLM STUDENT 2003-7: Fitch Affirms 'BBsf' Rating on Class B Notes SLM STUDENT 2004-14: Fitch Affirms 'BBsf' Rating on Class B Notes STRUCTURED ADJUSTABLE: Moody's Cuts Rating on 3 Tranches to 'C' TALMAGE 2006-3: Fitch Affirms 'CCCsf' Ratings on 3 Note Classes TALMAGE 2006-4: Fitch Affirms Junk Rating on Six Note Classes TAURUS CMBS 2007-1: Moody's Cuts Rating on Cl. A2 Notes to 'Ba2' TCW'S GLOBAL: Fitch Affirms Junk Ratings on Two Note Classes WAMU 2003-C1: Fitch Upgrades Rating on Seven Certificate Classes WHITEHORSE III: S&P Affirms Class B-2L Rating at 'CCC+(sf)' * Moody's Says Leverage on US CMBS Conduit Loans Up in 3Q 2012 * Moody's Reviews Ratings on 2000-2006 Second Lien RMBS Tranches * S&P Cuts Ratings on 4 Classes on JPMorgan/GMAC CMBS to 'Dsf' * S&P Lowers 13 Ratings on Three BofA U.S. CMBS Transactions * S&P Cuts Ratings On 8 Classes From 5 CMBS Transactions to 'D' * S&P Cuts Three Ratings on Two U.S. RMBS Re-REMIC Transactions ********* ANTHRACITE 2004-HY1: S&P Cuts Rating on Class A Notes to CCC+(sf) ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on one class from Anthracite 2004-HY1 Ltd., a U.S. commercial real estate collateralized debt obligation (CRE CDO) transaction. "At the same time, we affirmed our ratings on five classes from the same transaction. We removed our ratings on the classes in this review from CreditWatch with negative implications. The downgrade and affirmations reflect our analysis of the transaction's liability structure and the credit characteristics of the underlying collateral using our global CDOs of pooled structured finance assets criteria," S&P said. "The downgrade also reflects the results of the largest obligor default test, part of the supplemental stress test. The largest obligor default test assesses the ability of a rated CDO of pooled structured finance liability tranche to withstand the default of a minimum number of the largest credit or obligor exposures within an asset pool, factoring in the underlying assets' credit quality," S&P said. "The global CDOs of pooled structured finance assets criteria include revisions to our assumptions on correlations, recovery rates, and the collateral's default patterns and timings. The criteria also include supplemental stress tests in our analysis," S&P said. According to the June 21, 2012, trustee report, Anthracite 2004- HY1 Ltd. was collateralized by 13 commercial mortgage-backed securities (CMBS) classes ($116.8 million, 100%) from seven distinct transactions issued between 1998 and 2004. The transaction's liabilities, including capitalized interest, totaled $149.6 million. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it determines necessary. Rating Lowered And Removed From Creditwatch Negative Anthracite 2004-HY1 Ltd. Rating Rating Class To From A CCC+ (sf) B+ (sf)/Watch Neg Ratings Affirmed And Removed From Creditwatch Negative Anthracite 2004-HY1 Ltd. Rating Rating Class To From B CCC- (sf) CCC- (sf)/Watch Neg C CCC- (sf) CCC- (sf)/Watch Neg D CCC- (sf) CCC- (sf)/Watch Neg E CCC- (sf) CCC- (sf)/Watch Neg F CCC- (sf) CCC- (sf)/Watch Neg ANTHRACITE 2005-HY2: S&P Cuts Rating on 4 Note Classes to 'D(sf)' ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on eight classes from Anthracite 2005-HY2 Ltd., a U.S. commercial real estate collateralized debt obligation (CRE CDO) transaction. "At the same time, we removed the ratings from CreditWatch with negative implications. The downgrades reflect our analysis of the transaction's liability structure and the credit characteristics of the underlying collateral using our global CDOs of pooled structured finance assets criteria. The downgrades also reflect the results of the largest obligor default test, part of the supplemental stress test," S&P said. The largest obligor default test assesses the ability of a rated CDO of pooled structured finance liability tranche to withstand the default of a minimum number of the largest credit or obligor exposures within an asset pool, factoring in the underlying assets' credit quality. "The global CDOs of pooled structured finance assets criteria include revisions to our assumptions on correlations, recovery rates, and the collateral's default patterns and timings. The criteria also include supplemental stress tests in our analysis," S&P said. "We lowered our ratings on the class D-FL, D-FX, E, and F notes to 'D (sf)' based on our expectation that the classes are not likely to be repaid in full. According to the June 26, 2012, trustee report, Anthracite 2005-HY2 Ltd. was collateralized by 48 commercial mortgage-backed securities (CMBS) classes ($270.6 million, 87.7%) from 14 distinct transactions, issued between 1998 and 2005, and seven real estate investment trust (REIT) securities ($37.9 million, 12.3%). The transaction's liabilities, including capitalized interest, totaled $463.8 million," S&P said. The transaction has exposure to 14 CMBS classes from eight distinct transactions comprising 30.5% of the collateral pool that Standard & Poor's has downgraded. The following three transactions represent 16.4% of the downgraded collateral: GE Commercial Mortgage Corp.'s series 2005-C3 (classes K, L, M, N, and O; $24.5 million, 8.0%); Banc of America Commercial Mortgage Inc.'s series 2004-6 (classes H and K; $12.9 million, 4.2%); and LB-UBS Commercial Mortgage Trust's series 2002-C2 (classes P and Q; $12.1 million, 3.9%). Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it determines necessary. Anthracite 2005-HY2 Ltd. Rating Rating Class To From A BB+ (sf) BBB (sf)/Watch Neg B CCC- (sf) BB+ (sf)/Watch Neg C-FL CCC- (sf) B+ (sf)/Watch Neg C-FX CCC- (sf) B+ (sf)/Watch Neg D-FL D (sf) CCC- (sf)/Watch Neg D-FX D (sf) CCC- (sf)/Watch Neg E D (sf) CCC- (sf)/Watch Neg F D (sf) CCC- (sf)/Watch Neg APHEX CAPITAL 2006-2: S&P Lowers Rating on 4 Note Classes to 'D' ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on four classes of notes issued by Aphex Capital NSCR 2006-2 Ltd., a synthetic collateralized debt obligation (CDO) transaction backed by commercial mortgage-backed securities (CMBS), to 'D (sf)'. "At the same time, we removed the ratings from CreditWatch where we placed them with negative implications on March 19, 2012. We lowered our ratings to 'D (sf)' on the classes due to interest shortfalls detailed in the trustee's April 2012 report," S&P said. Rating and Creditwatch Actions Aphex Capital NSCR 2006-2 Ltd. Rating Class To From A D (sf) CCC (sf)/Watch Neg B D (sf) CCC- (sf)/Watch Neg C D (sf) CCC- (sf)/Watch Neg D D (sf) CCC- (sf)/Watch Neg APIDOS CLO IX: S&P Assigns 'BB(sf)' Rating to $17.4MM Cl. E Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Apidos CLO IX/Apidos CLO IX LLC's $370.825 million floating-rate notes (see list). The note issuance is collateralized loan obligation transaction backed by a revolving pool consisting primarily of broadly syndicated senior-secured loans. Ratings Assigned Apidos CLO IX/Apidos CLO IX LLC Class Rating Amount (mil. $) A AAA (sf) 267.375 B AA (sf) 37.90 C (deferrable) A (sf) 26.65 D (deferrable) BBB (sf) 21.50 E (deferrable) BB (sf) 17.40 Subordinated notes NR 38.925 ARCAP 2005-1: S&P Lowers Rating on Class A Notes to 'CCC+(sf)' -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on class A from ARCap 2005-1 Resecuritization Trust, a commercial real estate collateralized debt obligation (CRE CDO) transaction. "At the same time, we affirmed our ratings on nine other classes from the same transaction. Concurrently, we removed all of the ratings from CreditWatch with negative implications," S&P said. "The downgrade and affirmations reflect our analysis of the transaction's liability structure and the credit characteristics of the underlying collateral using our criteria for rating global collateralized debt obligations (CDOs) of pooled structured finance assets. These criteria include revised assumptions on correlations, recovery rates, default patterns, and timings of the collateral," S&P said. "The criteria also include supplemental stress tests (the largest obligor default test and the largest industry default test), which we considered in our analysis," S&P said. The downgrade also reflects the credit characteristics of the assets in the collateral pool, 49.4% of which are rated or credit estimated to be 'D (sf)', and the susceptibility of class A to experience interest shortfalls. "In addition, the downgrade reflects the transaction's exposure to rated commercial mortgage-backed securities (CMBS) that we have downgraded ($36.5 million, 11.1%)," S&P said. According to the June 21, 2012, trustee report, ARCap 2005-1 was collateralized by 79 CMBS classes ($329.7 million, 100%) from 14 distinct transactions issued between 1999 and 2005. Approximately 49.4% of the collateral assets are rated or credit estimated to be 'D (sf)'. The transaction's liabilities, including deferred interest, totaled $620.3 million. The transaction has exposure to 13 CMBS classes from three distinct transactions comprising 11.1% of the collateral pool that Standard & Poor's has downgraded. The downgraded collateral are: Morgan Stanley Capital I Trust 2005-TOP17 (classes H through N; $19.6 million; 6.0%); Morgan Stanley Capital I Trust 2004- TOP15 (classes H through N; $15.6 million; 4.7%); and Bear Stearns Commercial Mortgage Securities Trust 2004-PWR6 (class P; $1.3 million; 0.4%). Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it determines necessary. Rating Lowered and Removed From Creditwatch Negative ARCap 2005-1 Resecuritization Trust Rating Rating Class To From A CCC+ (sf) B+ (sf)/Watch Neg Ratings Affirmed and Removed From Creditwatch Negative ARCap 2005-1 Resecuritization Trust Rating Rating Class To From C CCC- (sf) CCC- (sf)/Watch Neg D CCC- (sf) CCC- (sf)/Watch Neg E CCC- (sf) CCC- (sf)/Watch Neg F CCC- (sf) CCC- (sf)/Watch Neg G CCC- (sf) CCC- (sf)/Watch Neg H CCC- (sf) CCC- (sf)/Watch Neg J CCC- (sf) CCC- (sf)/Watch Neg K CCC- (sf) CCC- (sf)/Watch Neg L CCC- (sf) CCC- (sf)/Watch Neg ASSET REPACKAGING: S&P Cuts Ratings on Class B Notes to 'B(sf)' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit ratings on Asset Repackaging Vehicle Ltd.'s (ARV) series 2010-4 and 2010-5 class A1, A2, A3, A4, A5, A6, A7, and B notes. "At the same time, we have removed from CreditWatch negative our ratings on the class A1 notes in both transactions. These two transactions are resecuritizations of GEMINI (ECLIPSE 2006-3) PLC's class A notes. At closing, the respective sellers -- Lazuli Ltd. in ARV's series 2010-4, and HSBC Bank PLC (AA-/Stable/A-1+) in ARV's series 2010-5 -- each sold to ARV a portion of GEMINI (ECLIPSE 2006-3)'s class A commercial mortgage-backed securities (CMBS) floating-rate notes," S&P said. The issuance of ARV's series 2010-4 and 2010-5 notes funded the purchase of each portion of the notes. "Our ratings in ARV's series 2010-4 and 2010-5 notes reflect our opinion on the expected performance of the underlying collateral, and on the transaction structure and payment priorities. The rating actions in ARV's series 2010-4 and 2010-5 follow our downgrade earlier of GEMINI (ECLIPSE 2006-3)'s class A notes Class A To C U.K. CMBS Notes Downgraded Due To Reduced Recovery Expectations"). "Our rating action earlier in GEMINI (ECLIPSE 2006-3) followed our regular surveillance review of the recovery value of the remaining properties backing the single loan in the transaction, the cash flows from those properties, the likelihood that the liquidity facility will be available to service the ongoing swaps in the transaction, and the potential swap breakage costs," S&P said. "Based on our assessment of these factors in the GEMINI (ECLIPSE 2006-3) transaction, and our subsequent rating action on its class A notes, we have lowered all of our ratings in ARV's series 2010-4 and 2010-5, to reflect our view that the likelihood of principal losses has increased," S&P said. "The rating actions resolve our Jan. 31, 2012 CreditWatch negative placements of ARV's series 2010-4 and 2010-5 class A1 notes, as our ratings on these classes of notes are now below our ratings on the counterparties in these transactions," S&P said. Potential Effects of Proposed Criteria Changes "We have taken the rating actions based on our criteria for rating European CMBS. However, these criteria are under review (see "Advance Notice Of Proposed Criteria Change: Methodology And Assumptions For Rating European Commercial Mortgage-Backed Securities," published on Nov. 8, 2011)," S&P said. "As highlighted in the Nov. 8 Advance Notice Of Proposed Criteria Change, we expect to publish a request for comment (RFC) outlining our proposed criteria changes for rating European CMBS transactions. On June 4, we published a request for comment (RFC) outlining our proposed criteria changes for CMBS Global Property Evaluation Methodology (see "Request For Comment: CMBS Global Property Evaluation Methodology," published on June 4, 2012). The proposed criteria do not significantly change Standard & Poor's longstanding approach to deriving property net cash flow (S&P NCF) and value (S&P Value)," S&P said. "We therefore anticipate limited impact for European outstanding ratings when the updated CMBS Global Property Evaluation Methodology criteria are finalized. However, because of its global scope, the proposed CMBS Global Property Evaluation Methodology does not include certain market-specific adjustments," S&P said. "An application of these criteria to European transactions will therefore be published when we release our updated rating criteria. Until such time that we adopt new criteria for rating European CMBS, we will continue to rate and surveil these transactions using our existing criteria," S&P said. Ratings List Class Rating Rating To From Asset Repackaging Vehicle Ltd. GBP69.41 Million Resecuritization Notes Series 2010-4 Rating Lowered And Removed From CreditWatch Negative A1 A (sf) AA (sf)/Watch Neg Ratings Lowered A2 BB (sf) BBB (sf) A3 B (sf) BB+ (sf) A4 B (sf) BB+ (sf) A5 B (sf) BB+ (sf) A6 B (sf) BB+ (sf) A7 B (sf) BB+ (sf) B B (sf) BB+ (sf) Asset Repackaging Vehicle Ltd. GBP14.81 Million Resecuritization Notes Series 2010-5 Rating Lowered And Removed From CreditWatch Negative A1 A (sf) AA (sf)/Watch Neg Ratings Lowered A2 BB (sf) BBB (sf) A3 B (sf) BB+ (sf) A4 B (sf) BB+ (sf) A5 B (sf) BB+ (sf) A6 B (sf) BB+ (sf) A7 B (sf) BB+ (sf) B B (sf) BB+ (sf) ASSET SECURITIZATION 1997-D5: Fitch Keeps Rating on 5 Cert Classes ------------------------------------------------------------------ Fitch Ratings affirms five classes of Asset Securitization Corporation commercial mortgage pass through certificates, series 1997-D5. The affirmations are due to sufficient credit enhancement after consideration for both defeased loans and expected paydown of maturing loans. As of the June 2012 distribution date, the pool's certificate balance has paid down 92.2% to $139.4 million from $1.79 billion at issuance. There are 27 remaining loans from the original 155 loans at issuance. Of the remaining loans, nine loans (35.7%) have defeased. Additionally, 13 loans (51.4%) are fully amortizing, and 12 loans (56.6%) are ARD loans. The Bellaire loan is currently the only loan (1.45%) in special servicing. The loan is secured by an 85-unit independent senior living apartment building located in Riverview, MI. The loan transferred to special servicing for maturity default. The borrower is marketing the property for sale and is in negotiations on a forbearance agreement. Fitch affirms, assigns Recovery Estimates and revises Outlooks on the following classes as indicated: -- $28.1 million class A-5 at 'AAsf'; Outlook Stable; -- $43.9 million class A-6 at 'BBB+sf'; Outlook Stable; -- $21.9 million class A-7 at 'BB+sf'; Outlook Stable; -- $39.5 million class B-1 at 'Bsf'; Outlook Stable from Negative; -- $6 million class B-2 at 'Dsf'; RE 15%. Fitch does not rate classes B-7, B-7H and A-8Z. Classes A-1A, A- 1B, A-1C, A-1D, A-1E, A-2, A-3, A-4, B-3SC and interest only class A-CS1 have paid in full. Additionally, Fitch has previously withdrawn the ratings on classes B-3, B-4, B-5 and B-6 and interest only class PS-1. BALDWIN PARK: Fitch Cuts Rating on $4.1-Mil. Bonds to 'BB' ---------------------------------------------------------- Fitch Ratings has downgraded the following Baldwin Park Financing Authority, CA's sales tax and tax allocation bonds (TABS): -- $4.1 million sales tax and tax allocation refunding bonds, series 2003 to 'BB' from 'BBB'; The TABS are placed on Rating Watch Negative. Security The series 2003 bonds are limited obligations of the authority, payable from a first lien on sales tax and incremental property tax revenues derived from the Puente Merced project area and surplus tax increment revenues of the San Gabriel River, Delta and Sierra Vista project areas. These three project areas were merged with the Puente Merced project area in April 2000 by ordinance of the City of Baldwin Park (the city). The bonds are additionally secured by a cash-funded debt service reserve fund (DSRF) equal to maximum annual debt service (MADS). Key Rating Drivers REVENUE DISRUPTION; DSRF DRAW: The downgrade reflects information received by the Successor Agency to the Baldwin Park RDA (SA) that it will tap its DSRF to pay upcoming August and September debt service requirements on three of its four outstanding TABS. The draw is due to much lower than expected tax increment distributions from the county under AB 1X 26, insufficient available cash reserves and lack of clarity as to the nature of the discrepancies. Payment of series 2003 August 1st debt service will not require a DSRF draw due to pledged sales tax revenues on hand and an advance on budgeted/anticipated sales tax revenues. INCREASED RELIANCE ON SALES TAX: Credit quality is further eroded by the increased dependence upon volatile sales taxes to pay series 2003 debt service as a result of the shortfall in tax- increment distributions. Sales taxes generated within a small commercial development have fluctuated falling 40% between fiscals 2007 and 2008. Collections have failed to fully cover maximum annual debt service (MADS) in recent years. ADEQUATE HISTORIC DEBT SERVICE COVERAGE: Coverage of series 2003 annual debt service from pledged Puente Merced tax project area increment and sales taxes and surplus revenues from the merged project areas has averaged an adequate 1.6x over the past two years. DECLINING TAXABLE VALUES: Taxable assessed values (AV) within the merged project area (Puente Merced, San Gabriel River, Delta and Sierra Vista) have fallen by 5.6% over the past two years. A recent increase in appeals activity may signal further AV reductions, although expected AV losses would total a moderate $25 million or 4% of incremental assessed value (IV) based on average historical rates of success. TAXPAYER CONCENTRATION RISK: Moderately high concentration exists within the merged project area, with the top ten taxpayers representing 26% of IV. Top taxpayers include Wal-Mart ('AA' with a Stable Outlook by Fitch Ratings), Home Depot ('A-'; Stable Outlook), and several multi-tenant offices and retail buildings. INCREMENTAL REVENUE STABLITY: The merged project area is mature with a high IV ($614.2 million) relative to the base year ($88 million). As a result, tax increment revenues respond less dramatically to changes in total AV. BELOW AVERAGE SOCIOECONOMIC PROFILE: Baldwin Park is a lower income community, exhibiting a high incidence of individual poverty, and high levels of unemployment. What Could Trigger A Rating Action ADDITIONAL REVENUE SHORTFALLS: The SA plans to have enough funds from sales tax revenues both on hand and expected over the course of the year, to fully cover the $430,000 series 2003 debt service payment on Aug. 1, 2012. If issues between the county and SA remain unresolved, further draws on the DSRF to pay non Fitch- rated bonds are likely, putting overall downward pressure on the rating. Credit Profile SUCCESSOR AGENCY PLANS ON EXTENSIVE DSRF DRAWDOWN; BURGEONING CASH NEEDS The Baldwin Park Successor Agency (SA), the designated successor agency to the RDA, is planning to draw approximately $1.4 million from its pooled debt service reserve funds (DSRF) to cover debt service coming due on either August 1 or September 1 for three of its four outstanding TABS. The Fitch-rated series 2003 TABs, however, will be paid from a combination of pledged sales taxes already received from the Puente Merced project area and a loan from the city for sales tax receipts budgeted for fiscal 2013 without resort to DSRF monies. The RDA historically borrowed internally from either RDA reserves or the city to cover timing mismatches between tax revenue receipts and debt service payments. The internal loans were repaid from subsequent tax increment revenues. However, lack of available RDA cash reserves and lower than expected tax distributions have significantly raised the SA's borrowing needs. Cash in the pooled DSRFs totals $2.9 million which is more than sufficient to fund approximately $1.4 million of August and September debt service requirements ($1.8 million total less $430,000 attributable to the series 2003 bonds). City officials decided to tap the DSRF rather than lend funds to the SA for upcoming debt service due to uncertainty that future tax distributions from the county will be sufficient to repay the loan. Officials are projecting that the SA will receive $1.8 million net of prior tax increment allocations for their January 2013 tax distribution that would be sufficient to replenish the DSRF draw and, with expected sales tax collections, meet all requirements for their February and March bond payments. Fitch believes that this projection may be overoptimistic given recent trends. Lower Than Expected Tax Payments From The County The downgrade to 'BB' reflects the SA's extensive use of the DSRF to fund debt service costs as a result of much lower than expected June 1st tax-increment distribution received by the SA from the county. Fitch notes as a key credit concern the fact that officials from the county and the SA have yet to mutually establish the reasons for the discrepancy which calls into question the adequate and continuous flow of sufficient revenue to cover obligations. The state department of finance approved the SA's Recognized Payment Schedule (ROPS) for both the January through June and July through December periods. The amount approved for the latter period was approximately $2.6 million. The SA's $1.7 million June 1st distribution from the Redevelopment Property Tax Trust Fund (RPTTF) represented tax increment collected within four project areas from February to May. The distribution was approximately 27% below the $2.3 million available to the RDA for the same period in 2011 and below the $2.6 million approved on the ROPs. Based on 2012 taxable values among the four merged project areas, tax increment revenues should be about 5% lower than the prior year level. After payment of senior lien pass-through payments and administration fees to Los Angeles County, about $790,000 was actually distributed to the SA. Most of those funds were used to repay prior obligations. This resulted in only a token amount remaining for current needs. PLEDGED SALES TAX PROVIDES ADDITIONAL BUT VOLATILE SECURITY The shortfall in tax-increment distributions has increased reliance upon sales taxes to meet series 2003 debt service requirements; the only outstanding RDA TABS additionally secured by a sales tax derived the pledged project area. The use of pledged sales taxes to pay RDA debt service is not subject to semi-annual state approval. The city will provide a small loan (advance of budgeted sales tax receipts) along with sales tax revenues on hand, to pay the series 2003 August 1st debt service requirement without drawing on the DSRF. Officials indicate that the availability of sales tax revenues offers a higher probability that the loan will be repaid, given the still unresolved issue of lower tax receipts received in the June 1 disbursement than expected. Sales tax collections are derived from the Puente Merced project area; a small commercial district. Collections have proven volatile, declining by 40% between fiscals 2007 and 2008 although collections have since been more stable. Sales taxes did increase by about 8% in fiscal 2011. Credit quality is further eroded by the resulting increased dependence upon volatile sales taxes to pay series 2003 bond debt service. Project Area Profile The Puente Merced project area consists of 16 acres adjacent to the San Bernardino I-10 Freeway. Development includes the Baldwin Park Towne Shopping Center with Home Depot as its main anchor, and a Marriott Courtyard Hotel. Fiscal 2012 project area AV totalled $39 million, down 0.4% from the prior year. The tax base is highly concentrated with the top 10 taxpayers accounting for 98% of AV. Five of the city's six project areas were merged in 2000 including the Puente Merced project area. The merged project area totals 788 non-contiguous acres in the city's downtown area, largely comprising commercial and industrial properties with a small residential component. The merged project area IV for fiscal 2012 totals $614.2 million or 7.0 times the base year AV of $88 million. The ratio of incremental AV over the base year AV reduces volatility in incremental tax revenue to changes in the AV of the project area. The merged project area AV has declined by a total of 5.6% over fiscals 2011 and 2012, preceded by two years of robust growth. The merged project area tax base is somewhat concentrated although much more diverse than Puente Merced valuations as the top 10 taxpayers account for 23% of AV and 26% of IV. Wal-Mart and Home Depot are the two largest taxpayers at 4.3% and 2.7% of AV, respectively. Pending appeals within merged project area increased significantly in both number and value in fiscal 2011, particularly in the San Gabriel River and Sierra Vista project areas. The AV of pending appeals more than doubled from $54 million (8.6% of IV) in fiscal 2010 to $116 million in fiscal 2011 (16% of AV) while the average success rate jumped from 14% to 22%. The heightened level of appeals signals further reductions in AV although based on average success rates, the tax base would lose about $25 million or a more manageable 4% of IV. Below-Average Socioeconomic Profile Fitch considers the city's economic and demographic profile weak. A very young population contributes to per capita income levels that equal 52%-56% of the state and U.S. average. Median household income approaches the national average but is only 84% of the state. The city's individual poverty rate is also high. The educational achievement of the local labor force is well below the state and nation, contributing to high levels of unemployment. Unemployment remains high at 13.8% in May 2012 compared to 10.4% in California and 7.9% nationally, although lower than the prior year's unemployment rate of 14.9%. Baldwin Park is located in western Los Angeles County, approximately 20 miles east of downtown Los Angeles. The city encompasses 6.7 sq. miles in area and is near fully built-out. The city had previously experienced strong growth due to infill development, but the city's population trends were static between 2000 and 2010. The city is served by I-10 (the San Bernardino Freeway), I-605 (the San Gabriel River Freeway), and I-210 (the Foothill Freeway) making the greater Los Angeles metro area easily accessible for local residents. BANC OF AMERICA 2007-1: Moody's Cuts Ratings on 3 Certs. to Caa3 ---------------------------------------------------------------- Moody's Investors Service downgraded the ratings of eight classes and affirmed 15 classes of Banc of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2007-1 as follows: Cl. A-2, Affirmed at Aaa (sf); previously on Mar 8, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-3, Affirmed at Aaa (sf); previously on Mar 8, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-AB, Affirmed at Aaa (sf); previously on Mar 8, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-4, Affirmed at Aaa (sf); previously on Mar 8, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-1A, Affirmed at Aaa (sf); previously on Mar 8, 2007 Definitive Rating Assigned Aaa (sf) Cl. A-MFX, Downgraded to Baa1 (sf); previously on Dec 9, 2010 Downgraded to Aa2 (sf) Cl. A-MFL, Downgraded to Baa1 (sf); previously on Dec 9, 2010 Downgraded to Aa2 (sf) Cl. A-J, Downgraded to B2 (sf); previously on Dec 9, 2010 Downgraded to Baa3 (sf) Cl. B, Downgraded to B3 (sf); previously on Dec 9, 2010 Downgraded to Ba1 (sf) Cl. C, Downgraded to Caa2 (sf); previously on Dec 9, 2010 Downgraded to Ba3 (sf) Cl. D, Downgraded to Caa3 (sf); previously on Dec 9, 2010 Downgraded to B2 (sf) Cl. E, Downgraded to Caa3 (sf); previously on Dec 9, 2010 Downgraded to Caa1 (sf) Cl. F, Downgraded to Caa3 (sf); previously on Dec 9, 2010 Downgraded to Caa2 (sf) Cl. G, Affirmed at C (sf); previously on Dec 9, 2010 Downgraded to C (sf) Cl. H, Affirmed at C (sf); previously on Dec 9, 2010 Downgraded to C (sf) Cl. J, Affirmed at C (sf); previously on Dec 9, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Dec 9, 2010 Downgraded to C (sf) Cl. L, Affirmed at C (sf); previously on Dec 9, 2010 Downgraded to C (sf) Cl. M, Affirmed at C (sf); previously on Dec 9, 2010 Downgraded to C (sf) Cl. N, Affirmed at C (sf); previously on Dec 9, 2010 Downgraded to C (sf) Cl. O, Affirmed at C (sf); previously on Dec 9, 2010 Downgraded to C (sf) Cl. P, Affirmed at C (sf); previously on Dec 9, 2010 Downgraded to C (sf) Cl. XW, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The downgrades are due to higher than expected realized and anticipated losses from specially serviced and troubled loans along with anticipated increases in interest shortfalls. The increase in expected losses and interest shortfalls is driven largely by the declining performance of the largest loan in the pool, the Skyline Portfolio Loan ($271MM - 9.6% of the pool). This loan is discussed further in the Deal Performance section of this press release. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 13.9% of the current balance. At last review, Moody's cumulative base expected loss was 8.4%. Realized losses have increased from 0.4% of the original balance to 0.5% since the prior review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating Structured Finance Interest- Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit assessment level, is incorporated for loans with similar credit assessments in the same transaction. The conduit model includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 27 compared the same as at Moody's prior review. 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 action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated August 8, 2011. Deal Performance As of the June 15, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 11% to $2.81 billion from $3.15 billion at securitization. The Certificates are collateralized by 150 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 55% of the pool. The pool contains no defeased loans or loans with credit assessments. Thirty-nine loans, representing 24% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Five loans have been liquidated from the pool, resulting in a realized loss of $15.7 million (76% loss severity). Currently 21 loans, representing 30% of the pool, are in special servicing. The largest specially serviced loan is the Skyline Portfolio Loan ($271.2 million -- 9.6% of the pool), which represents a 40% pari passu interest in a $678.0 million first mortgage loan with the other pieces securitized in GECMC 2007-C1 and JPMCC 2007-LDP10. The loan is secured by eight cross-collateralized and cross- defaulted properties totaling 2.6 million square feet (SF) which are located outside of Washington, DC in Falls Church, Viriginia. At securitization, over 55% of the space in the eight buildings was leased by the General Services Administration (GSA). The GSA has been vacating its space as leases expire with the largest vacancy to date being the 403,000 SF in Seven Skyline. Two additional GSA tenants with leases totaling 804,000 SF are expected to vacate this year bringing occupancy to 38%. Several other GSA tenants are expected to vacate when their leases expire. The special servicer is in preliminary discussions with the borrower regarding a loan modification. The loan sponsor is Vornado Realty Trust. The second largest specially serviced loan is the Solana Loan ($220.0 million -- 7.8% of the pool), which represents a 61% pari passu interest in a $360.0 million first mortgage loan. The loan is secured by a 1.9 million SF mixed use complex consisting of office, retail and a 198-room full service hotel located in Westlake, Texas. The property is currently 64% leased, down from 84% in December 2011 as a result of the lease expiration and departure of a major tenant (Sabre, 20% of NRA). The borrower executed a forbearance agreement in December 2010 which was later extended through 2011. Modification discussions were underway but at this time there are currently no modifications on the table. A receiver was appointed in November 2011 and has replaced the management and leasing teams. The special servicer is determining next steps. The third largest specially serviced loan is the Sussex Commons I & II Loan ($102.5 million -- 3.6% of the pool), which is secured by a Class A multifamily property with 556 units located in Alexandria, Virginia. The loan matured in January 2012 but the borrowers were unable to refinance. The servicer then provided an extension till October 2012 with open prepayment during the extension period. The property was sold in June 2012 and the loan was paid off in full. This will be reflected in the July 2012 remittance statement. The remaining 18 specially serviced properties are secured by a mix of property types. Moody's estimates an aggregate $298.9 million loss for the specially serviced loans (36% expected loss on average). Moody's has assumed a high default probability for 21 poorly performing loans representing 5% of the pool and has estimated an aggregate $34.0 million loss (22% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2011 operating results for 95% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 110% the same as at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 11% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 8.8%. Excluding special serviced and troubled loans, Moody's actual and stressed DSCRs are 1.23X and 0.90X, respectively, compared to 1.30X and 0.88X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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. The top three loans represent 18% of the pool. The largest loan is the StratReal Industrial Portfolio I Loan ($190.0 million -- 6.8% of the pool), which is secured by a portfolio of 12 industrial properties, totaling 5.5 million SF, located in Ohio (8), Tennessee (3) and California (1). Occupancy as of December 2011 was 77%, down from 80% at year-end 2010 primarily due to Accel vacating 304,000 SF (5.4% of NRA). Ford Motor Co. which occupies 14% of the GLA renewed its lease which expired in March 2012 through May 2018. The loan has been on the watchlist since May 2011 due to significant lease rollover. However, many tenants have renewed their leases. Moody's LTV and stressed DSCR are 124% and 0.76X, respectively, compared to 132% and 0.72X, at last review. The second largest loan is the Hirschfield Portfolio Loan ($167.0 million -- 5.9% of the pool), which is secured by four multifamily properties, totaling 1,841 units, located in three submarkets in the Baltimore metropolitan area. Performance has been stable to slightly improving since 2009. Occupancy as of year-end 2001 was 93%. The loan matures in January 2013. Moody's LTV and stressed DSCR are 129% and 0.72X, respectively, compared to 131% and 0.70X at last review. The third largest loan consists of the cross collateralized and cross-defaulted Inland -- Bradley Portfolio Pool A & B Loans (total $156.6 million -- 5.6% of the pool), which was originally secured by 26 office, industrial, and retail properties located across 13 states. One property with an original allocated balance of $25.6 million has been released. Largest tenants include Pearson Education (1.1MM SF, 10/2016 expiration), Dopaco Inc. (299,000 SF, 12/2015 expiration), and Lamos Metal (224,000 SF, 1/2022 expiration). Moody's LTV and stressed DSCR are 93% and 0.99X, respectively, compared to 99% and 0.95X at last review. BAYVIEW FINANCIAL: Moody's Takes Action on $115-Mil. U.S. RMBS -------------------------------------------------------------- Moody's Investors Service has downgraded the rating of 1 tranche, upgraded the ratings of 2 tranches, and confirmed the ratings of 3 tranches from three RMBS transactions, backed by Scratch and Dent loans, sponsored by Bayview. Ratings Rationale The actions are a result of the recent performance review of Scratch and Dent pools and reflect Moody's updated loss expectations on these pools. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "US RMBS Surveillance Methodology for Scratch and Dent" published in May 2011. The rating action constitute of two upgrades as well as one downgrade. The upgrades are due to an increase in the available credit enhancement. The downgrade is primarily due to deteriorating collateral performance. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications. As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. When assigning the final ratings to the bonds, in addition to the methodologies described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in May 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. Complete rating actions are as follows: Issuer: Bayview Financial Mortgage Pass-Through Trust 2006-B Cl. 1-A3, Confirmed at Aaa (sf); previously on Apr 19, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. M-1, Downgraded to B3 (sf); previously on Apr 19, 2012 B1 (sf) Placed Under Review for Possible Downgrade Issuer: Bayview Financial Mortgage Pass-Through Trust 2006-D Cl. 1-A4, Confirmed at Caa1 (sf); previously on Apr 19, 2012 Caa1 (sf) Placed Under Review for Possible Downgrade Cl. 1-A5, Confirmed at B3 (sf); previously on Apr 19, 2012 B3 (sf) Placed Under Review for Possible Downgrade Issuer: Bayview Financial Mortgage Pass-Through Trust 2007-A Cl. 1-A2, Upgraded to A3 (sf); previously on Apr 19, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade Cl. 1-A3, Upgraded to Ba1 (sf); previously on Apr 19, 2012 B2 (sf) Placed Under Review for Possible Upgrade A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF291386 A list of updated estimated pool losses and sensitivity analysis is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF247004 BEAR STEARNS 1999-WF2: Fitch Affirms 'D' Ratings on 2 Cert Classes ------------------------------------------------------------------ Fitch Ratings has affirmed eight classes of Bear Stearns Commercial Mortgage Securities Trust's commercial mortgage pass- through certificates, series 1999-WF2. The affirmations are due to sufficient credit enhancement after consideration of expected losses. Fitch expects losses of 2.2% of the original pool balance, including losses incurred to date. As of the June 2012 distribution date, the pool's certificate balance has been reduced by 91% (including 2% in realized losses) to $96.9 million from $1.1 billion at issuance. There are cumulative interest shortfalls in the amount of $1.3 million currently affecting classes K through M. The largest contributor to Fitch-modeled losses is secured by an office building (4.4%of the pool) located in Syracuse, NY. The loan transferred to special servicing in January 2010 following a dispute with the borrower over a lockbox agreement. The negotiations are on-going and the loan remains current. Fitch affirms the following classes: -- $22.7 million class E at 'AAAsf'; Outlook Stable; -- $10.8 million class F at 'AAAsf'; Outlook Stable; -- $21.6 million class G at 'AAAsf'; Outlook Stable; -- $16.2 million class H at 'Asf'; Outlook Stable; -- $8.1 million class I at 'BBsf'; Outlook Stable; -- $9.5 million class J at 'B-sf'; Outlook Negative; -- $7.9 million class K at 'Dsf'; RE 30%; -- Class L at 'Dsf'; RE 0%. Fitch does not rate class M. Classes A-1, A-2 and B through D have paid in full. Fitch previously withdrew the rating on class X. BLACKROCK SENIOR: Moody's Lifts Ratings on 2 Note Classes to Ba2 ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Blackrock Senior Income Series: U.S. $29,500,000 Class B-1 Second Priority Secured Floating Rate Deferrable Notes Due 2016, Upgraded to Aa2 (sf); previously on September 19, 2011 Upgraded to A2 (sf); U.S. $4,500,000 Class B-2 Second Priority Secured Fixed Rate Deferrable Notes Due 2016, Upgraded to Aa2 (sf); previously on September 19, 2011 Upgraded to A2 (sf); U.S. $18,000,000 Class C Third Priority Secured Floating Rate Deferrable Notes due 2016, Upgraded to Baa2 (sf); previously on September 19, 2011 Upgraded to Ba2 (sf); U.S. $6,000,000 Class D-1 Fourth Priority Secured Floating Rate Deferrable Notes due 2016 (current balance of $2,476,961), Upgraded to Ba2 (sf); previously on September 19, 2011 Upgraded to Ba3 (sf); U.S. $6,000,000 Class D-2 Fourth Priority Secured Fixed Rate Deferrable Notes due 2016 (current balance of $2,476,961), Upgraded to Ba2 (sf); previously on September 19, 2011 Upgraded to Ba3 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes are primarily a result of deleveraging of the senior notes and an increase in the transaction's overcollateralization ratios since the rating action in September 2011. Moody's notes that the Class A Notes have been paid down by approximately 43% or $118.2 million since the last rating action. The balance on the Class A Notes reflects issuer buybacks of securities in the amounts of $11 million on March 20, 2012, $33 million on May 11, 2012, and $7.5 million on June 12, 2012. Based on the latest trustee report dated June 15, 2012, the Class A, Class B, Class C and Class D overcollateralization ratios are reported at 147.40% 121.65%, 111.35% and 108.66% respectively, versus July 2011 levels of 126.69%,112.89%, 106.74% and 104.73% respectively. In addition, the trustee reported WARF has been relatively stable since the last rating action. Moody's notes that the underlying portfolio includes a number of investments in securities that mature after the maturity date of the notes. Based on the June 2012 trustee report, securities that mature after the maturity date of the notes currently make up approximately 11% of the underlying portfolio. 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" published in June 2011, 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. In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds balance of $235.5 million, defaulted par of $2.8 million, a weighted average default probability of 12.54% (implying a WARF of 2418) a weighted average recovery rate upon default of 49.46%, and a diversity score of 45. The default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed. The default probability is derived from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate to be realized on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance trends and collateral manager latitude for trading the collateral are also factors. Blackrock Senior Income Series, issued in October 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (1934) Class A: 0 Class B-1: +2 Class B-2: +2 Class C: +1 Class D-1: +1 Class D-2: +1 Moody's Adjusted WARF + 20% (2901) Class A: 0 Class B-1: -2 Class B-2: -2 Class C: -2 Class D-1: -1 Class D-2: -1 Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of speculative-grade debt maturing between 2014 and 2016 which may create challenges for issuers to refinance. CLO notes' performance may also be impacted by 1) the manager's investment strategy and behavior and 2) divergence in legal interpretation of CLO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging may accelerate due to high prepayment levels in the loan market and/or collateral sales by the manager, which may have significant impact on the notes' ratings. 2) Long-dated assets: The presence of assets that mature beyond the CLO's legal maturity date exposes the deal to liquidation risk on those assets. Moody's assumes an asset's terminal value upon liquidation at maturity to be equal to the lower of an assumed liquidation value (depending on the extent to which the asset's maturity lags that of the liabilities) and the asset's current market value. 3) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell defaulted assets create additional uncertainties. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. C-BASS MORTGAGE: Moody's Takes Action on $24-Mil. US RMBS --------------------------------------------------------- Moody's Investors Service has downgraded the rating of 1 tranche, and upgraded the rating of 1 tranche from two RMBS transactions, backed by Scratch and Dent loans, issued by C-BASS. Ratings Rationale The actions are a result of the recent performance review of Scratch and Dent pools and reflect Moody's updated loss expectations on these pools. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "US RMBS Surveillance Methodology for Scratch and Dent" published in May 2011. The rating action constitute of one upgrade as well as one downgrade. The upgrade is due to an increase in the available credit enhancement. The downgrade is primarily due to deteriorating collateral performance. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications. As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. When assigning the final ratings to the bonds, in addition to the methodologies described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in May 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. Complete rating actions are as follows: Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series 2007-SP1 Cl. M-1, Downgraded to Caa2 (sf); previously on Apr 19, 2012 B3 (sf) Placed Under Review for Possible Downgrade Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series 2007-SP2 Cl. A-3, Upgraded to Ba2 (sf); previously on Apr 19, 2012 B1 (sf) Placed Under Review for Possible Upgrade A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF291387 A list of updated estimated pool losses and sensitivity analysis is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF247004 CHASE MORTGAGE: Moody's Cuts Rating on Class B-3 Secs. to 'C' ------------------------------------------------------------- Moody's Investors Service has downgraded 13 tranches, confirmed three tranches, and placed the rating of one tranche on review for downgrade from Chase Mortgage Finance Trust, Series 2003-S15. The transaction is backed by fixed-lien, fixed rate prime jumbo residential mortgages. Complete rating actions are as follows: Issuer: Chase Mortgage Finance Trust, Series 2003-S15 Cl. IA-3, Downgraded to A2 (sf); previously on Apr 22, 2011 Downgraded to Aa2 (sf) Cl. IA-4, Downgraded to A2 (sf); previously on Apr 22, 2011 Downgraded to Aa2 (sf) Cl. IIA-1, Downgraded to A3 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Underlying Rating: Downgraded to A3 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Financial Guarantor: MBIA Insurance Corporation (B3 placed on review for possible downgrade on Dec 19, 2011) Cl. IIA-6, Downgraded to A2 (sf); previously on Apr 22, 2011 Downgraded to Aa1 (sf) Cl. IIA-7, Downgraded to A2 (sf); previously on Apr 22, 2011 Downgraded to Aa1 (sf) Cl. IIA-10, Downgraded to Aa1 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. IIA-11, Downgraded to A3 (sf); previously on Feb 22, 2012 Aa1 (sf) Placed Under Review for Possible Downgrade Cl. IIA-15, Downgraded to A2 (sf); previously on Apr 22, 2011 Downgraded to Aa2 (sf) Cl. IIA-16, Downgraded to A3 (sf); previously on Apr 22, 2011 Downgraded to Aa2 (sf) Cl. IIA-17, Downgraded to A3 (sf); previously on Apr 22, 2011 Downgraded to Aa2 (sf) Cl. A-P, A1 (sf) Placed Under Review for Possible Downgrade; previously on Apr 22, 2011 Downgraded to A1 (sf) Cl. IA-X, Confirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) and Placed Under Review for Possible Downgrade Cl. IIA-X, Confirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) and Placed Under Review for Possible Downgrade Cl. M, Confirmed at Ba3 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. B-1, Downgraded to B3 (sf); previously on Jan 31, 2012 B1 (sf) Placed Under Review for Possible Downgrade Cl. B-2, Downgraded to Ca (sf); previously on Apr 22, 2011 Downgraded to Caa1 (sf) Cl. B-3, Downgraded to C (sf); previously on Apr 22, 2011 Downgraded to Ca (sf) Ratings Rationale The actions are a result of the recent performance of prime jumbo pools originated before 2005 and reflect Moody's updated loss expectations on these pools. The downgrades are a result of deteriorating performance and structural features resulting in higher expected losses for certain bonds than previously anticipated. For e.g., for shifting interest structures, back- ended liquidations could expose the seniors to tail-end losses. The subordinate bonds in the majority of these deals are currently receiving 100% of their principal payments, and thereby depleting the dollar enhancement available to the senior bonds. In its current approach, Moody's captures this risk by running each individual pool through a variety of loss and prepayment scenarios in the Structured Finance Workstation(R) (SFW), 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 nuances of the transaction. In addition, Moody's is placing the Class A-P tranche on downgrade review due to miscalculation of the Class A-P collateral balance as reported in the trustee remittance report. The final action on the tranche will be resolved once clarification is obtained on the bond collateral balance. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Pre-2005 US RMBS Surveillance Methodology" published in January 2012. The methodology used in rating Interest-Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. The above mentioned approach "Pre-2005 US RMBS Surveillance Methodology" is adjusted slightly when estimating losses on pools left with a small number of loans to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is set at 3% for Jumbo and which is typically higher than the average rate of new delinquencies for larger 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 in performance. Once the loan count in a pool falls below 76, the rate of delinquency is increased by 1% for every loan less than 76. For example, for a pool with 75 loans, the adjusted rate of new delinquency would be 3.03%. In addition, 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 0.75 to 2.5 for current delinquencies ranging from less than 2.5% to greater than 10% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication listed above. When assigning the final ratings to senior bonds, in addition to the methodologies described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. For bonds backed by small pools, Moody's also considered the current pipeline composition as well as any specific loss allocation rules that could preserve or deplete the overcollateralization available for the senior bonds at different pace. The above methodology only applies to pools with at least 40 loans and a pool factor of greater than 5%. Moody's may withdraw its rating when the pool factor drops below 5% and the number of loans in the pool declines to 40 loans or lower unless specific structural features allow for a monitoring of the transaction (such as a credit enhancement floor). Certain securities are insured by financial guarantors. 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. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.1% in April 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of the transaction. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF290366 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF243269 CREDIT SUISSE 2001-CKN5: Moody's Cuts Rating on K Certs. to 'C' --------------------------------------------------------------- Moody's Investors Service downgraded eight and affirmed three classes of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2001-CKN5 as follows: Cl. D, Downgraded to Baa3 (sf); previously on Jun 15, 2012 Downgraded to A1 (sf) and Placed Under Review for Possible Downgrade Cl. E, Downgraded to B1 (sf); previously on Jun 15, 2012 Downgraded to Ba1 (sf) and Placed Under Review for Possible Downgrade Cl. F, Downgraded to B3 (sf); previously on Jun 15, 2012 B1 (sf) Placed Under Review for Possible Downgrade Cl. G, Downgraded to Caa2 (sf); previously on Jun 15, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. H, Downgraded to Caa3 (sf); previously on Jun 15, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Cl. J, Downgraded to Ca (sf); previously on Jun 15, 2012 Caa3 (sf) Placed Under Review for Possible Downgrade Cl. K, Downgraded to C (sf); previously on Jun 15, 2012 Ca (sf) Placed Under Review for Possible Downgrade Cl. L, Affirmed at C (sf); previously on Dec 16, 2011 Downgraded to C (sf) Cl. N, Affirmed at C (sf); previously on Aug 4, 2010 Downgraded to C (sf) Cl. A-X, Downgraded to Caa3 (sf); previously on Jun 15, 2012 Caa2 (sf) Remained On Review for Possible Downgrade Cl. A-Y, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Ratings Rationale The downgrades of Classes D through N are due to an increase in interest shortfalls and lower estimated recoveries from the Macomb Mall Loan ($41.3 million; 34.2% of the pool) and One Sugar Creek Place Loan ($40.4 million; 33.5% of the pool) resulting from the continued credit deterioration and servicer advancements. The downgrade of the IO class A-X is due to the lower credit performance of its referenced classes. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. The IO class, A-Y, is backed by New York City co-op loans and thus is affirmed. In June 2012, Moody's downgraded Classes D and E and placed eight classes on review for possible downgrade in order to further evaluate the ongoing risk of future interest shortfalls from specially serviced loans and the timing and severity of losses on the two largest exposures in the pool - Macomb Mall Loan and One Sugar Creek Place. The downgrades taken at this review are a result of this evaluation. Previously, at Moody's review in March 2012, interest shortfalls affected Classes N through H. Moody's analysis determined that shortfalls would likely increase and affect Class F. Interest shortfalls however have increased to Class E. This is primarily due to the One Sugar Creek Place Loan being determined non-recoverable by the master servicer. Moody's rating action reflects a cumulative base expected loss of 66.2% of the current balance. At last review, Moody's cumulative base expected loss was 51.9%. Realized losses have increased from 9.7% of the original balance to 8.9% since the prior review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit assessment level, is incorporated for loans with similar credit assessments in the same transaction. The conduit model includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 3 compared to 4 at Moody's prior review. In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.4 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. 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 action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated June 15, 2012. Deal Performance As of the June 15, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 89% to $120.7 million from $1.07 billion at securitization. The Certificates are collateralized by 17 mortgage loans ranging in size from less than 1% to 34% of the pool, with the top ten loans representing 99.7% of the pool. Three loans, representing 24% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Twenty-eight loans have been liquidated from the pool, resulting in a realized loss of $24.4 million (17% loss severity on average). Currently three loans, representing 74% of the pool, are in special servicing. The largest exposure in the pool is the Macomb Mall Loan ($41.3 million -- 34.2% of the pool), which is secured by a Class B mall located 15 miles north of downtown Detroit, Michigan. Three additional regional malls operate within ten miles of the subject property. In September 2009, the loan was transferred to special servicing due to imminent monetary default. As recently as May 2011 the sponsor and special servicer appeared to be close to a modification agreement but negotiations faltered and a foreclosure suit was filed. The property became real estate owned (REO) in October 2011. Since the onset of the recession, the property has struggled to maintain strong occupancy and was 69% leased (86% including temporary tenants) as of April 2012. Not included in the collateral is shadow anchor tenant Sears, which occupies 385,000 square feet (SF) at the property. The second largest exposure in the pool is the One Sugar Creek Place Loan ($40.4 million -- 33.5% of the pool). The loan is secured by a 509,428 SF office property located 20 miles from downtown Houston, Texas. The property was 100% occupied by Unocal until the tenant vacated at it's lease expiration in March 2010. The property was transferred to special servicing in April 2010 and became REO in January 2011. As of February 2012, the property was 18% leased. The building has inadequate parking, with a parking ratio of only 2.1 spaces per thousand square feet. While the sole tenant occupies just 18% of the NRA (net rentable area), it is allocated approximately 50% of all parking spaces at the property, hindering the lease-up process of the remainder of the building. Moody's estimates an aggregate $75.8 million loss for the three specially serviced loans (74% expected loss on average). Moody's was provided with full year 2010 operating results for 87% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 121% compared to 120% at Moody's prior review. Moody's value reflects a weighted average capitalization rate of 10.0%. Excluding special serviced and troubled loans, Moody's actual and stressed DSCRs are 0.84X and 1.03X, respectively, compared to 0.87X and 1.03X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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. The largest conduit loan represents 24% of the pool, with no other loan accounting for more than 1.3% of the pool. The largest loan is the Bayshore Mall Loan ($29.0 million -- 24.0% of the pool), which is secured by a 430,000 SF regional mall located in Eureka, California. Originally a GGP sponsored loan, the asset is one of 30 properties that was spun off to Rouse Properties. The loan term was extended until September 2016 as part of GGP's restructuring. Property performance has deteriorated as the property was 69% leased as of March 2012 compared to 80% leased at year-end 2010. Financial performance has suffered from higher vacancy along with lower base rents and expense recoveries. Moody's LTV and stressed DSCR are 126% and 0.86X, respectively, compared to 127% and 0.85X at last review. CREDIT SUISSE 2006-C2: Moody's Affirms 'C' Ratings on 11 Certs. --------------------------------------------------------------- Moody's Investors Service downgraded the ratings of two classes and affirmed 16 classes of Credit Suisse Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2006- C2 as follows: Cl. A-2, Affirmed at Aaa (sf); previously on Jul 5, 2006 Definitive Rating Assigned Aaa (sf) Cl. A-3, Affirmed at Aaa (sf); previously on Jul 5, 2006 Definitive Rating Assigned Aaa (sf) Cl. A-1-A, Downgraded to A1 (sf); previously on Dec 10, 2010 Downgraded to Aa3 (sf) Cl. A-M, Downgraded to Ba1 (sf); previously on Dec 10, 2010 Downgraded to Baa2 (sf) Cl. A-J, Affirmed at Caa3 (sf); previously on Dec 10, 2010 Downgraded to Caa3 (sf) Cl. B, Affirmed at Ca (sf); previously on Dec 10, 2010 Downgraded to Ca (sf) Cl. C, Affirmed at C (sf); previously on Dec 10, 2010 Downgraded to C (sf) Cl. D, Affirmed at C (sf); previously on Dec 10, 2010 Downgraded to C (sf) Cl. E, Affirmed at C (sf); previously on Dec 10, 2010 Downgraded to C (sf) Cl. F, Affirmed at C (sf); previously on Oct 29, 2009 Downgraded to C (sf) Cl. G, Affirmed at C (sf); previously on Oct 29, 2009 Downgraded to C (sf) Cl. H, Affirmed at C (sf); previously on Oct 29, 2009 Downgraded to C (sf) Cl. J, Affirmed at C (sf); previously on Oct 29, 2009 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Oct 29, 2009 Downgraded to C (sf) Cl. L, Affirmed at C (sf); previously on Oct 29, 2009 Downgraded to C (sf) Cl. M, Affirmed at C (sf); previously on Oct 29, 2009 Downgraded to C (sf) Cl. N, Affirmed at C (sf); previously on Oct 29, 2009 Downgraded to C (sf) Cl. A-X, Affirmed at B1 (sf); previously on Feb 22, 2012 Downgraded to B1 (sf) Ratings Rationale The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and troubled loans. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 17.5% of the current balance. At last full review, Moody's cumulative base expected loss was 16.1%. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating Structured Finance Interest- Only Securities" published in February 2012. Moody's review incorporated the use of the Excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit assessment level, is incorporated for loans with similar credit assessments in the same transaction. The conduit model includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 48 compared to 39 at Moody's prior full review. 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 action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated July 20, 2011. Deal Performance As of the June 11, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 14% to $1.24 billion from $1.44 billion at securitization. The Certificates are collateralized by 177 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top ten loans representing 33% of the pool. Fifty-nine 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 (CREFC) monthly reporting package. As part of its 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 since securitization, resulting in an aggregate $28.1 million loss (25% loss severity on average). Currently 14 loans, representing 21% of the pool, are in special servicing. The largest specially serviced loan is the Babcock & Brown FX 1 Loan ($112.3 million -- 9.1% of the pool), which was originally secured by a 4,990 unit portfolio of Class B multi-family properties located in Texas (8 properties), South Carolina (4 properties) and Alabama (1 property). The loan transferred to special servicing in March 2009 due to imminent default. Nine of the properties in the portfolio have been sold and three are currently under contract for sale. The remaining property is not yet under contract but is going to REO committee to obtain approval for sale. The second largest specially serviced loan is the Fortunoff Portfolio Loan ($69.5 million -- 5.6% of the pool), which was secured by two vacant department stores located in New Jersey and New York that were formerly occupied by Fortunoff, a luxury home goods and jewelry retailer. The loan was transferred to special servicing in January 2009 after the tenant declared bankruptcy and subsequently vacated the properties. The New Jersey property was sold in August 2011 and the proceeds were used to pay down a substantial amount of servicer advances. The New York property is currently for sale. The remaining 12 specially serviced loans are secured by a mix of property types. The master servicer has recognized an aggregate $157.6 million appraisal reduction for the specially serviced loans. Moody's has estimated an aggregate loss of $158.0 million (68% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for 37 poorly performing loans representing 14% of the pool and has estimated a $28.4 million loss (16% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2010 and partial year 2011 operating results for 99% and 97% of the performing pool, respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 101% compared to 107% at last full review. Moody's net cash flow reflects a weighted average haircut of 11% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.1%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.29X and 1.01X, respectively, compared to 1.24X and 0.96X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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. The top three performing loans represent 9.6% of the pool. The largest loan is the Lincoln Road Retail Loan ($49.0 million -- 4.0% of the pool), which is secured by a 53,200 square feet (SF) of retail space located in Miami Beach, Florida. The collateral consists of three non-adjacent properties located on Lincoln Road, a primary dining and shopping district in South Beach. Performance has been stable since last review. As of March 2012, the property was 91% leased, the same as at last review. The loan is interest only for the full term. Moody's LTV and stressed DSCR are 129% and 0.75X, respectively, compared to 121% and 0.80X at last review. The second largest loan is the Gettysburg Village Loan ($40.5 million -- 3.3% of the pool), which is secured by a 310,285 SF outlet center located in Gettysburg, Pennsylvania. The property benefits from a low tenant concentration with no tenant accounting for more than 5% of the net rentable area (NRA). As of March 2012, the property was 97% leased compared to 92% at last review; of the 97% leased space, 7% consists of month-to-month tenancy. Approximately 17% of the NRA expires in 2012; the borrower is currently in negotiations with tenants leasing these spaces for lease renewals. Although occupancy increased, property performance declined due to lower rental revenue. Moody's LTV and stressed DSCR are 118% and 0.85X, respectively, compared to 118% and 0.85X at last review. The third largest conduit loan is the 75 Maiden Lane Loan ($29.1 million -- 2.4% of the pool), which is secured by a 172,000 SF Class B office building located in the downtown Manhattan neighborhood of New York City. As of March 2012, the property was 94% leased compared to 87% leased at last review. Although occupancy has increased, property performance has declined due to a 39% increase in real estate taxes amongst other operating expense increases. Moody's LTV and stressed DSCR are 111% and 0.93X, respectively, compared to 110% and 0.94X at last review. CREDIT SUISSE 2006-TFL2: Fitch Raises Rating on 12 Note Classes --------------------------------------------------------------- Fitch Ratings has upgraded 12 classes and affirmed the remaining classes from Credit Suisse First Boston Mortgage Securities Corp., series 2006-TFL2 (CSFB 2006-TFL2), reflecting Fitch's base case loss expectation of 1.4% for the pooled classes. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. The revised Rating Outlooks reflect the increases in credit enhancement as the result of the pay off/disposition of four loans since Fitch's last rating action. Under Fitch's methodology, approximately 62.7% of the pool is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 13.3%. To determine a sustainable Fitch cash flow and stressed value, Fitch analyzed servicer-reported operating statements and rent rolls, updated property valuations, and recent sales comparisons. Based on improving loan performance as well as greater stability in commercial real estate fundamentals (as compared to the recessionary years), Fitch estimates the average recoveries on the pooled loans will be greater than 95% in the base case. The transaction on a pooled level is collateralized by four loans, three of which are secured by hotels (99%), and one by a multifamily/condominium project (1.6%). The Kerzner Portfolio (74.5%) and NH Krystal Hotel portfolio (8.1%) have loan extensions through 2014. Metropolitan Warner Center (0.9%) is expected to pay off at the July 2012 maturity. The JW Marriott Starr Pass (16.5%) remains in maturity default. The transaction's final rated maturity date is October 2021. The Kerzner Portfolio is secured by a diverse portfolio of real estate. The main collateral interests consist of: 3,023-key Atlantis Resort and casino, Paradise Island; 600-room all-suite hotel tower, 495-unit condominium hotel; 40 acres of water attractions; 106-key One & Only Ocean Club and 18-hole Ocean Club Golf Course; water treatment and desalinization facility; 63-slip Marina at Atlantis and associated retail at Marina Village. For the trailing 12 months ending September 2011, the Atlantis Resort's occupancy, ADR, and RevPAR were 64%, $310, and $199, respectively, in line with the 2010 performance of 62.2%, $313, and $195. At origination, the issuer anticipated a stabilized occupancy, ADR and RevPAR of 81%, $323, and $262. While operating cash flow for the collateral is below expectations from issuance, a recent value estimate indicates the collective value of the collateral would result in full repayment of the rated debt. A recent modification of the loan included an extension of the loan's final maturity for three years through September, 2014. The JW Marriott Starr Pass consists of a 575-room full-service hotel and a 27-hole Arnold Palmer-designed championship golf course, located in Tucson, AZ. The loan has remained in special servicing since its initial transfer for imminent default in April 2010. The loan has underperformed expectations from issuance, and the Tucson hotel market has lagged the recovery experienced by the greater U.S. lodging market. The special servicer is pursuing foreclosure. The CSFB 2006-TFL2 trust also includes the non-pooled Sava/Fundamental Portfolio. The loan is secured by two portfolios of health care facilities; the Sava Portfolio (86% of allocated loan amount) and the Fundamental Portfolio (14%). The collateral is comprised of over 150 skilled nursing facilities; mixed-use facilities, long-term care hospitals, and assisted living. The properties are located in over 20 states, the largest concentration of which lies in Texas. The portfolio has demonstrated stable performance since issuance, and servicer- reported cash flows indicate the portfolio's net operating income (NOI) is approximately 22% above Fitch's stressed cash flow from securitization. Fitch upgrades the following classes and revises or assigns Rating Outlooks and Recovery Estimates as indicated: -- $41 million class B to 'AAAsf' from 'AAsf'; Outlook to Stable from Positive; -- $41 million class C to 'AAAsf' from 'Asf'; Outlook Stable; -- $33 million class D to 'AAsf' from 'BBBsf'; Outlook Stable; -- $25 million class E to 'Asf' from 'BBBsf'; Outlook Stable; -- $19 million class F to 'BBB-sf' from 'BBsf'; Outlook Stable; -- $19 million class G to 'BBsf' from 'CCCsf'; assigned Stable Outlook; -- $19 million class H to 'CCCsf' from 'Csf'; RE 100%; -- $20 million class J to 'CCCsf' from 'Csf'; RE 100%; -- $22 million class K to 'CCCsf' from 'Csf'; RE 100%; -- $35.2 million class KER-C to 'BBBsf' from 'BBsf'; Outlook to Stable from Negative; -- $43.4 million class KER-D to 'BBB-sf' from 'BBsf'; Outlook to Stable from Negative; -- $43.7 million class KER-E to 'BBsf' from 'Bsf'; Outlook to Stable from Negative. In addition, Fitch affirms the following classes and revises the Rating Outlooks and Recovery Estimates as indicated: -- $217.1 million class A-2 at 'AAAsf'; Outlook Stable; -- $56.4 million class KER-A at 'A-sf'; Outlook to Stable from Negative; -- $40.2 million class KER-B at 'BBBsf'; Outlook to Stable from Negative; -- $58.1 million class KER-F at 'CCCsf'; RE 100%; -- $1.1 million class MW-A at 'Bsf'; Outlook Stable; -- $671,129 class MW-B at 'Bsf; Outlook Stable; -- $3.1 million class NHK-A at 'CCCsf'; RE 100%; -- $16.1 million class L at 'Dsf'; RE 40%. Furthermore, the following classes are affirmed by Fitch, and are non-pooled components of the trust: -- $375.7 million class SV-A1 at 'AAAsf'; Outlook Stable; -- $126 million class SV-A2 at 'AAAsf'; Outlook Stable; -- $61 million class SV-B at 'AA+sf'; Outlook Stable; -- $31 million class SV-C at 'AAsf'; Outlook Stable; -- $31 million class SV-D at 'AA-sf'; Outlook Stable; -- $30 million class SV-E at 'A+sf'; Outlook Stable; -- $31 million class SV-F at 'Asf'; Outlook Stable; -- $30 million class SV-G at 'A-sf'; Outlook Stable; -- $54 million class SV-H at 'BBB+sf'; Outlook Stable; -- $34 million class SV-J at 'BBBsf'; Outlook to Stable from Negative; -- $39 million class SV-K at 'BBsf';' Outlook to Stable from Negative. DEUTSCHE MORTGAGE 1998-C1: Fitch Affirms 'D' Rating on Cl. K Certs ------------------------------------------------------------------ Fitch Ratings has affirmed all classes of Deutsche Mortgage & Asset Receiving Corporation (DMARC 1998-C1) commercial mortgage pass-through certificates, series 1998-C1. Fitch's affirmations are the result of stable performance and sufficient credit enhancement to offset concentration risk and adverse selection with twenty-four loans remaining in the pool. Fitch modeled losses of 9.0% of the remaining pool; modeled losses of the original pool are at 5.3%, including losses already incurred to date. As of the June 2012 distribution date, the transaction has paid down 96% to $72 million from $1.8 billion at issuance. Twenty- four loans remain in the transaction, of which one (8.1%) is in special servicing and five are defeased (13.12%). Interest Shortfalls totaling $14,769,127 are currently affecting classes J through M. The largest contributor to Fitch modeled losses is secured by a 118,664 square foot (SF) combination retail/entertainment venue comprised of 75 specialty shops, eight restaurants, and 18 thrill rides in Kissimmee, FL. The loan transferred to the special servicer in February 2012 due to monetary default. As of third- quarter 2011 the DSCR was .70x and the occupancy as of November 2011 was 87%. The special servicer is currently dual tracking workout negotiations with the foreclosure process. Fitch affirms the following classes and assigns Recovery Estimates (RE) as indicated: -- $16.1 million class G at 'AAsf'; Outlook Stable; -- $18.2 million class H at 'BBB-sf'; Outlook Stable; -- $22.7 million class J at 'B+sf'; Outlook Negative; -- $15.2 million class K at 'Dsf'; RE 65%. Fitch does not rate class M. Classes A-1, A-2, B, C, D, E, and F have all paid in full. DLJ COMMERCIAL 1998-CG1: Fitch Affirms B- Rating on Cl. B-7 Certs. ------------------------------------------------------------------ Fitch Ratings has affirmed all classes of DLJ Commercial Mortgage Corp.'s commercial mortgage pass-through certificates, series 1998-CG1. The affirmations are the result of stable performance and sufficient credit enhancement to offset Fitch expected losses. Fitch's modeled losses are 4.45% of the remaining pool; modeled losses of the original pool are at 1.43%, including losses already incurred to date. As of the June 2012 distribution date, the pool's aggregate principal balance has been reduced by 90.6% to $147.7 million from $1.56 billion at issuance. Forty loans remain in the transaction, of which three (9.2%) are in special servicing. Interest shortfalls totaling $1,456,929 are currently affecting class C. Seven loans (37.6%) have been fully defeased. The largest contributor to Fitch modeled losses is a loan (2.7%) secured by a 166-room limited service hotel located in Lancaster, PA. The property has not generated sufficient cash flow to service the debt for several years but remains current. In addition, the hotel has been operating without a corporate franchise flag since 2008. The second largest contributor to modeled losses is a specially serviced loan (2.3%) secured by a 59,238 square foot (sf) retail shopping center located in Casselberry, FL, about 20 miles north of Orlando. The loan was transferred to special servicing in November 2009 due to monetary default. A modification of the loan was completed in February 2012 and the terms included a rate change from 7% to 6.25%, interest only for two years, maturity extension to October 2017, and a hard lockbox has been implemented. Fitch has affirmed the following classes as indicated: -- $14.9 million class B-3 at 'AAA'; Outlook Stable; -- $66.5 million class B-4 at 'AAA'; Outlook Stable; -- $15.6 million class B-5 at 'AAA'; Outlook Stable; -- $27.4 million class B-6 at 'BBB-'; Outlook Stable; -- $15.6 million class B-7 at 'B-'; Outlook Stable. The $7.7 million class C is not rated by Fitch. Classes A-1A, A- 1B, A-1C, A-2, A-3, A-4, B-1, and B-2 have paid in full. DLJ COMMERCIAL 1998-CF1: Fitch Affirms 'B-' Rating on B-7 Certs. ---------------------------------------------------------------- Fitch Ratings has affirmed the ratings of DLJ Commercial Mortgage Corp.'s commercial mortgage pass-through certificates, series 1998-CF1. The affirmations are a result of the pool's stable performance following Fitch's prospective review of the potential stresses to the transaction. As of the June 2012 distribution date, the pool's certificate balance has been reduced 93.3% to $56.1million from $838.8 million at issuance (which includes 1.33% in realized losses). There are 20 of the original 168 loans remaining in the transaction. Two loans (12.8% of the pool balance) are fully defeased. The remaining pool contains a high concentration of retail properties (73.3%), among which nine loans (35.4%) are secured by single tenant Walgreen properties. Fitch modeled losses of 9.3% of the remaining pool; expected losses based on the original pool size are 1.96%, which also reflect losses already incurred to date. Fitch has identified five loans of concern (37.2%), which includes one loan currently in special servicing (12%). Interest shortfalls are affecting class C. The specially serviced asset (12% of the pool balance) is a 70,325 square foot (sf) retail center in St. Louis, MO and is the second largest asset in the pool. The loan had transferred to special servicing in November 2009 due to imminent maturity default and had subsequently matured in December 2009 without repayment. The property had converted to real estate owned (REO) via foreclosure in August 2010. Upon foreclosure the servicer had retained a third party asset manager to manage and lease the property. The property is currently 100% occupied -- a significant improvement from 64% at year-end (YE) December 2010. The property has been listed and continues to be marketed for sale; however according to the servicer, a pending lease expiration of the properties third largest tenant (14.79% of the net rentable area [NRA]) has negatively impacted investor interest. The servicer is currently evaluating recently received purchase offers. The largest loan in the pool (16.1%) is secured by an 114,640sf retail center in Richfield, MN. Fitch identified the loan as a Loan of Concern after Border's Books (previously 22.2% of the NRA), filed for bankruptcy and subsequently vacated the subject property in 2011. The borrower was able to temporarily back-fill the Borders space with a seasonal items retailer which eventually vacated in November 2011. Other major tenants include Toys R Us (39% NRA) expiring in January 2014; David's Bridal's (10.7% NRA) lease expiring in November 2016; and Land's End (10% NRA) expiring in February 2013. The YE December 2011 servicer-reported debt service coverage ratio (DSCR) was 0.65 times (x), a significant decline from 1.01x at YE December 2010. The loan remains current as of the June 2012 payment date. Fitch affirms the following classes: -- $14.2 million class B-4 at 'AAAsf'; Outlook Stable; -- $6.3 million class B-7 at 'B-sf'; Outlook Negative. Classes B-2, B-5, B-6 and C are not rated by Fitch. Due to realized losses, class C has been reduced to $5.61 million from $16.8 million at issuance. Classes A-1A, A-1B, A-2, A-3, B-1, B-3 and the interest only class CP have paid in full. Fitch had previously withdrawn the rating on the interest-only class S. DLJ COMMERCIAL 1998-CF2: Fitch Affirms 'C' Rating on B-6 Certs. --------------------------------------------------------------- Fitch Ratings has affirmed four classes of DLJ Commercial Mortgage Corporation's commercial mortgage pass-through certificates, series 1998-CF2. The affirmations are due to sufficient credit enhancement after consideration of expected losses. As of the June 2012 distribution date, the pool's certificate balance has been reduced by 92.4% (including 1.8% in realized losses) to $84.6 million from $1.1 billion at issuance. Although credit enhancement has increased, the pool has become more concentrated. There are 39 loans remaining, four of which (26.7% of the pool) are in special servicing. There are cumulative interest shortfalls in the amount of $6.1 million currently affecting classes B-5 through C. The largest contributor to Fitch-modeled losses (14.9%) is secured by a hotel located in Louisville, KY. The loan transferred to special servicing in October 2009. The borrower filed bankruptcy in October 2010 and the special servicer is pursuing a sale of the property. The second largest contributor to Fitch-modeled losses (6.8%) is secured by 93,691 square foot (sf) office park located in Flint Township, MI. The loan transferred to special servicing in January 2009 and the asset is real estate owned (REO). The special servicer is focused on stabilizing the occupancy prior to putting the property up for sale. Fitch affirms the following classes: -- $35 million class B-3 at 'AAAsf'; Outlook Stable; -- $11.1 million class B-4 at 'AAsf'; Outlook Stable; -- $22.2 million class B-5 at 'BB+sf'; Outlook Negative; -- $13.8 million class B-6 at 'Csf'; RE 60%. Classes A-1A through B-2 have paid in full. Fitch does not rate class C. Fitch previously withdrew the rating on class S. DSLA MORTGAGE: Moody's Cuts Rating on Cl. A-2B Tranche to 'Caa2' ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of four tranches, upgraded the rating of one tranche, and confirmed the ratings of four tranches from two RMBS transactions, backed by Alt-A loans, issued by DSLA. Ratings Rationale The actions are a result of the recent performance of Alt-A pools originated before 2005 and reflect Moody's updated loss expectations on these pools. The downgrades are a result of structural features resulting in higher expected losses for certain bonds than previously anticipated. Particularly, in shifting interest structures, back-ended liquidations expose the senior bond holders to tail-end losses. In its current approach, Moody's captures this risk by running each individual pool through a variety of loss and prepayment scenarios in the Structured Finance Workstation(R) (SFW), 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 nuances of the transaction The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Pre-2005 US RMBS Surveillance Methodology" published in January 2012. The methodology used in rating Interest-Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications 2) small pool volatility. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. When assigning the final ratings to senior bonds, in addition to the methodologies described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. For bonds backed by small pools, Moody's also considered the current pipeline composition as well as any specific loss allocation rules that could preserve or deplete the overcollateralization available for the senior bonds at different pace. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. Complete rating actions are as follows: Issuer: DSLA Mortgage Loan Trust 2004-AR1 Cl. A-2B, Downgraded to Caa2 (sf); previously on Feb 28, 2011 Downgraded to B3 (sf) Underlying Rating: Downgraded to Caa2 (sf); previously on Feb 28, 2011 Downgraded to B3 (sf) Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) Cl. A-2A, Upgraded to Baa2 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. X-2, Confirmed at Caa1 (sf); previously on Feb 22, 2012 Caa1 (sf) Placed Under Review Direction Uncertain Issuer: DSLA Mortgage Loan Trust 2004-AR3 Cl. 1-A1A, Downgraded to A1 (sf); previously on Jan 31, 2012 Aa2 (sf) Placed Under Review for Possible Downgrade Cl. 1-A1B, Downgraded to Baa2 (sf); previously on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A1, Confirmed at A3 (sf); previously on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A2B, Downgraded to Baa2 (sf); previously on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. X, Confirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) and Placed Under Review Direction Uncertain Cl. B-1, Confirmed at Ba3 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF291120 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237256 FFCA 2000-1: Fitch Affirms Ratings on Four Note Classes ------------------------------------------------------- Fitch Ratings has affirmed four classes of FFCA Secured Lending Corporation 2000-1 as follows: -- Class B at 'Bsf'; Outlook Stable; -- Class C at 'CCCsf'; RE 100%; -- Class D at 'Csf'; RE 20%; -- Class E at 'Dsf' RE 0%. The affirmations reflect each class of notes' ability to pass stress case scenarios consistent with the current rating levels. Additionally, the assigned recovery estimates (RE) represent Fitch's current expectations of principal payments to the outstanding balance of the respective notes. The Stable Outlook assigned to the class B rating reflects Fitch's view that the current ratings are not expected to change within the next 12 - 24 months, based on recent performance trends and available credit enhancement. Fitch will continue to closely monitor this transaction and may take additional rating actions in the event of changes in performance and credit enhancement measures. FIELDSTONE MORTGAGE: Moody's Confirms 'B1' Rating on M3 Secs. ------------------------------------------------------------- Moody's Investors Service has confirmed the ratings of two tranches from one RMBS transaction backed by Subprime loans issued by Fieldstone Mortgage Investment Trust. Ratings Rationale The actions are a result of the recent performance review of Subprime pools originated before 2005 and reflect Moody's updated loss expectations on these pools. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Pre-2005 US RMBS Surveillance Methodology" published in January 2012. The rating actions reflect recent collateral performance, Moody's updated loss timing curves and detailed analysis of timing and amount of credit enhancement released due to step-down. Moody's captures structural nuances by running each individual pool through a variety of loss and prepayment scenarios in the Structured Finance Workstation(R) (SFW), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variations across the different pools and the structure of the transaction. The above mentioned approach "Pre-2005 US RMBS Surveillance Methodology" is adjusted slightly when estimating losses on pools left with a small number of loans to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies for the pool that is dependent on the vintage of loan origination (11% for all vintages 2004 and prior). The baseline rates are higher than the average rate of new delinquencies for larger pools for the respective vintages. 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 volatility of pool performance increases as the number of loans remaining in the pool decreases. 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 2004 vintage, the adjusted rate of new delinquency would be 11.11%. In addition, 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 0.85 to 2.25 for current delinquencies ranging from less than 10% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication listed above. When assigning the final ratings to senior bonds, in addition to the methodologies described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. For bonds backed by small pools, Moody's also considered the current pipeline composition as well as any specific loss allocation rules that could preserve or deplete the overcollateralization available for the senior bonds at different pace. The above methodology only applies to pools with at least 40 loans and a pool factor of greater than 5%. Moody's may withdraw its rating when the pool factor drops below 5% and the number of loans in the pool declines to 40 loans or lower unless specific structural features allow for a monitoring of the transaction (such as a credit enhancement floor). The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.0% in May 2011 to 8.2% in May 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions . Complete rating actions are as follows: Issuer: Fieldstone Mortgage Investment Trust 2004-4 Cl. M2, Confirmed at A1 (sf); previously on Jan 31, 2012 A1 (sf) Placed Under Review for Possible Downgrade Cl. M3, Confirmed at B1 (sf); previously on Jan 31, 2012 B1 (sf) Placed Under Review for Possible Downgrade A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF291381 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237255 FLAGSHIP CLO III: Moody's Raises Rating on Class D Notes to 'Ba1' ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Flagship CLO III: U.S.$29,400,000 Class B Second Priority Deferrable Floating Rate Notes Due September 12, 2016, Upgraded to Aa1 (sf); previously on December 14, 2011 Upgraded to Aa3 (sf); U.S.$13,000,000 Class C Third Priority Deferrable Floating Rate Notes Due September 12, 2016, Upgraded to A2 (sf); previously on December 14, 2011 Upgraded to Baa2 (sf); U.S.$10,600,000 Class D Fourth Priority Deferrable Floating Rate Notes Due September 12, 2016, Upgraded to Ba1 (sf); previously on December 14, 2011 Upgraded to Ba2 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes are primarily a result of deleveraging of the senior notes and an increase in the transaction's overcollateralization ratios since the rating action in December 2011. Moody's notes that the Class A Notes have been paid down by approximately $43.3 million or 37.4% since the last rating action. Based on the latest trustee report dated June 5, 2012, the Class A, Class B, Class C and Class D overcollateralization ratios are reported at 188.84%, 134.25%, 119.04% and 108.97%, respectively, versus November 2011 levels of 156.37%, 124.66%, 114.40% and 107.21%, respectively. Notwithstanding benefits of the deleveraging, Moody's notes that the credit quality of the underlying portfolio has deteriorated since the last rating action. Based on the June 2012 trustee report, the weighted average rating factor is currently 3153 compared to 2897 in November 2011. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011, 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. In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds balance of $134 million, defaulted par of $9.5 million, a weighted average default probability of 15.69% (implying a WARF of 3088), a weighted average recovery rate upon default of 50.99%, and a diversity score of 30. The default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed. The default probability is derived from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate to be realized on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance trends and collateral manager latitude for trading the collateral are also factors. Flagship CLO III, issued in August 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (2470) Class AR: 0 Class A: 0 Class B: +1 Class C: +2 Class D: +2 Moody's Adjusted WARF + 20% (3705) Class AR: 0 Class A: 0 Class B: 0 Class C: -2 Class D: -1 Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of speculative-grade debt maturing between 2014 and 2016, which may create challenges for issuers to refinance. CLO notes' performance may also be impacted by 1) the manager's investment strategy and behavior and 2) divergence in legal interpretation of CLO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging may accelerate due to high prepayment levels in the loan market and/or collateral sales by the manager, which may have significant impact on the notes' ratings. 2) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell defaulted assets create additional uncertainties. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. FLAGSHIP CREDIT: S&P Rates $7.10MM Class D Subordinate Notes 'BB' ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Flagship Credit Auto Trust 2012-1's $109 million auto receivables- backed notes. The note issuance is an asset-backed securities transaction backed by subprime auto loan receivables. "The ratings reflect: The availability of approximately 35.1%, 27.5%, and 21.7% credit support (including excess spread) for the class B, C, and D notes, respectively, based on stress cash flow scenarios, which provide approximately 2.5x, 1.9x, and 1.5x coverage of our 13.75%-14.25% expected cumulative net loss for the class A, B, C, and D notes, respectively," S&P said. The availability of approximately 70.62% hard credit enhancement at closing for the class A notes. "While the credit enhancement afforded to this class exceeds our stressed 'A+' scenario of approximately 2.5x expected losses, our rating on the class A notes reflects other limiting factors. The timely interest and principal payments made under stress cash flow modeling scenarios that are appropriate to the rating categories," S&P said. "Our expectation that under a moderate ('BBB') stress scenario, all else being equal, our rating on the class A notes will not be lowered, and our ratings on the class B, C, and D notes will remain within two rating categories of the assigned ratings," S&P said. "This is within the two-category rating tolerance for 'A', 'BBB', and 'BB' rated securities, as outlined in our credit stability criteria (see "Methodology: Credit Stability Criteria," published May 3, 2010). The credit enhancement in the form of subordination, overcollateralization, a reserve account, and excess spread," S&P said. The characteristics of the collateral pool being securitized. The transaction's payment and legal structures. Ratings Assigned Flagship Credit Auto Trust 2012-1 Class Rating Type Interest Amount rate (mil. $) A A+ (sf) Senior Fixed 36.00 B A (sf) Subordinate Fixed 55.00 C BBB (sf) Subordinate Fixed 10.90 D BB (sf) Subordinate Fixed 7.10 GE CAPITAL 2001-1: Fitch Affirms Junk Rating on 3 Cert. Classes --------------------------------------------------------------- Fitch Ratings affirms GE Capital Commercial Mortgage Corporation (GECC) commercial mortgage pass-through certificates, series 2001-1. The rating affirmations reflect stable performance and sufficient credit enhancement to the rated classes. There are 12 loans remaining in the pool; nine loans (80.4%) are Fitch Loans of Concern, including seven (69.4%) in special servicing. Fitch modeled losses of 30.8% of the remaining pool; expected losses of the original pool balance are at 5.9% including realized losses of 3.7%. As of the June 2011 distribution date, the pool's aggregate principal balance has been reduced by approximately 93% to $78.8 million from $1.13 billion at issuance. Interest shortfalls are affecting classes I through N with cumulative unpaid interest totaling $4 million. The largest contributor to Fitch modeled losses (19.35%) is a 280 key hotel located in Atlanta, GA. The loan was transferred to the special servicer in April 2009 due to imminent default. A receiver has been appointed to manage the property. The loan matured on Nov. 1, 2010. The second largest contributor to Fitch modeled losses (17.8%) is a 163,798 square feet (SF) retail property in Federal Way, WA. It became a real estate owned (REO) asset in April 2011. The property has lost three major tenants due to lease expirations and bankruptcy filings. The most recent occupancy rate reported by the servicer is 15%, with two new leases representing 37% under negotiations. Fitch affirms the following ratings: -- $8 million class F at 'AAAsf'; Outlook Stable; -- $14.1 million class G at 'Asf'; Outlook Stable; -- $25.4 million class H at 'CCCsf'; RE 100%; -- $18.3 million class I at 'CCsf'; RE 5%; -- $9.9 million class J at 'Csf'; RE 0%. Fitch does not rate classes K, L, M, and N. Classes A-1, A-2, B, C, D, E and X-2 have paid in full. Fitch has previously withdrawn the rating on the interest-only classes X-1. GRAMERCY REAL 2005-1: Fitch Affirms Rating on All Note Classes -------------------------------------------------------------- Fitch Ratings has affirmed all classes of Gramercy Real Estate CDO 2005-1, Ltd./LLC (Gramercy 2005-1) reflecting Fitch's base case loss expectation of 29.2%. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. Since last review, four assets are no longer in the pool, including one loan that paid in full, two discounted payoffs, and a mezzanine interest that took a full loss. Total paydown to class A-1 from loan payoffs, scheduled amortization, diverted interest, and asset sales since last review was $73.9 million resulting in increased credit enhancement to all the rated classes. As of the May 2012 trustee report, all overcollaterization and interest coverage tests are in compliance. In December 2011, $6.1 million of notes were surrendered to the trustee for cancellation, including partial amounts of classes E, F, G and H. Commercial real estate loans (CREL) comprise the majority of the collateral. Approximately 52.7% of the total collateral is whole loans or A-notes while 8.1% is B-notes, 4.3% mezzanine debt, and 2.9% preferred equity interests. CMBS represent 29.8% of the collateral. Since last review, the average Fitch derived rating for the underlying CMBS collateral declined to 'BB/BB-'from 'BB+/BB'. The combined percentage of defaulted loans and assets of concern has increased to 40.2% from 32.5% at last review. Under Fitch's methodology, approximately 60% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 12.6% from, generally, year-end 2011 or trailing 12- month first quarter 2012. Recoveries are modeled slightly above average at 51.4% due to the high percentage of senior debt. The asset manager provided limited information on the non-cash flowing properties; Fitch made conservative assumptions in modeling those loans. The largest component of Fitch's base case loss expectation is the modeled losses on the CMBS bond collateral (29.8% of the pool). The next component of Fitch's base case loss expectation is a defaulted mezzanine loan (4.3%) secured by ownership interests in a multifamily property located in New York, NY. The property contains over 11,000 residential units and approximately 120,000 square feet of office and retail space. The sponsors' plan was to convert the majority of rent controlled units to market rates; however, the plan has faced significant economic and legal hurdles. The loan became delinquent in January 2010. Fitch modeled no recovery on this highly leveraged mezzanine position. The third largest component of Fitch's base case loss expectation is a whole loan (8.7%) secured by undeveloped land located within the Coyote Valley of southern San Jose, CA. The original business plan was to market the 279 developable acres for lot sales; however, to date, no sales have occurred. The loan matured July 2, 2012. Fitch modeled a substantial loss on this property in its base case scenario. This transaction was analyzed according to the 'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions', which applies stresses to property cash flows and 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. 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'. The breakeven rates for classes A-1 through F pass the cash flow model at the ratings listed below. The Stable Outlooks on classes A-1 through D generally reflect the classes' senior position in the capital structure and cushion in the modeling. The 'CCC' ratings for classes G through K are based on a deterministic analysis that considers Fitch's base case loss expectation for the pool and the current percentage of defaulted assets and Fitch Loans of Concern factoring in anticipated recoveries relative to each classes credit enhancement. Gramercy 2005-1 is a commercial real estate (CRE) CDO managed by GKK Manager LLC (GKKM), an affiliate of Gramercy Capital Corp. Fitch affirms the following classes as indicated: -- $315,959,163 class A-1 at 'BBBsf'; Outlook Stable; -- $57,000,000 class A-2 at 'BBsf'; Outlook Stable; -- $102,500,000 class B at 'BBsf'; Outlook Stable; -- $ 47,000,000 class C at 'Bsf'; Outlook Stable; -- $ 12,500,000 class D at 'Bsf'; Outlook Stable; -- $ 14,993,000 class E at 'Bsf'; Outlook Negative; -- $ 15,000,000 class F at 'Bsf'; Outlook Negative; -- $ 15,500,000 class G at 'CCCsf'; RE 95%; -- $ 27,000,000 class H at 'CCCsf'; RE 10%; -- $ 49,500,000 class J at 'CCsf'; RE 0%; -- $ 35,000,000 class K at 'CCsf''; RE 0%. GS MORTGAGE 2006-GSFL: Moody's Affirms 'B3' Rating on H Certs. -------------------------------------------------------------- Moody's Investors Service affirms five classes of GS Mortgage Securities Corporation II, Commercial Mortgage Pass-Through Certificates, Series 2006-GSFL VIII. Moody's rating action is as follows: Cl. E, Affirmed at Aaa (sf); previously on Sep 8, 2011 Upgraded to Aaa (sf) Cl. F, Affirmed at Baa1 (sf); previously on Sep 8, 2011 Upgraded to Baa1 (sf) Cl. G, Affirmed at B2 (sf); previously on Sep 8, 2011 Upgraded to B2 (sf) Cl. H, Affirmed at B3 (sf); previously on Sep 8, 2011 Upgraded to B3 (sf) Cl. X, Affirmed at B2 (sf); previously on Feb 22, 2012 Downgraded to B2 (sf) Ratings Rationale The affirmation is due to key parameters, including Moody's loan to value (LTV) ratio and Moody's stressed debt service coverage ratio (DSCR), remaining within acceptable ranges. 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies. Moody's review incorporated the use of the excel-based Large Loan Model v 8.4. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. The model incorporates the CMBS IO calculator ver1.0 which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point . For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.0 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and Remittance Statements. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated September 8, 2011. Deal Performance As of the July 6, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 90% to $65.0 million from $661.2 million at securitization. The Certificates are collateralized by one mortgage loan. The pool has not experienced losses to date and there are no interest shortfalls. The 4400-4460 Rosewood Drive Loan ($65.0 million; 100% of the pool) is secured by a campus of eight Class A office buildings with 1,013,280 square feet of net rentable area (NRA) located in Pleasanton, California. The largest tenants include AT&T and Ross Stores. As of December 2011, the occupancy rate was 50% compared to 51% in December 2010 and 73% at securitization. Net cash flow has fallen to $1.9 million from $3.7 million in 2010 due to increased expenses and decreased revenue. Moody's is concerned about the upcoming November 2012 maturity and the decrease in net cash flow. The servicer is actively following up with Borrower regarding their intentions at loan maturity. The loan was modified in December 2010 which included an extension through November 2012 and a $10 million paydown. At the time of the modification, a new appraisal valued the subject at $130 million. Moody's current LTV is over 100%. Moody's credit assessment is Caa3. GS MORTGAGE 2006-RR2: S&P Affirms 'CCC-' Ratings on 3 CMBS Classes ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'CCC- (sf)' ratings on three classes of commercial mortgage-backed securities (CMBS) pass-through certificates from GS Mortgage Securities Corp. II's series 2006-RR2 (GSMS 2006-RR2), a U.S. resecuritized real estate mortgage investment conduit (re-REMIC) transaction. "At the same time, we removed the ratings from CreditWatch with negative implications, where we placed them on March 20, 2012. The affirmations reflect our analysis of the transaction's liability structure and the credit characteristics of the underlying collateral using our criteria for rating global collateralized debt obligations (CDOs) of pooled structured finance assets. The criteria for rating global CDOs of pooled structured finance assets include revised assumptions on correlations, recovery rates, and the collateral's default patterns and default timings. The criteria also include supplemental stress tests in our analysis," S&P said. According to the June 25, 2012, trustee report, GSMS 2006-RR2 was collateralized by 73 CMBS classes ($709.5 million, 100%) from 55 distinct transactions issued between 1998 and 2006. The transaction has exposure to 38 CMBS classes from 25 distinct transactions comprising 54.5% of the collateral pool that Standard & Poor's has downgraded. The following three transactions represent 16.4% of the downgraded collateral: Greenwich Capital Commercial Funding Corp.'s series 2005-GG5 (classes F & G; $46.6 million, 6.6%); GS Mortgage Securities Trust's series 2006-GG6 (classes G, H & J; $40.0 million, 5.6%); and Wachovia Bank Commercial Mortgage Trust's series 2005-C20 (class F; $30.0 million, 4.2%). Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it determines necessary Ratings Affirmed And Removed From Creditwatch Negative GS Mortgage Securities Corp. II Commercial mortgage-backed securities pass-through certificates series 2006-RR2 Rating Class To From A-1 CCC- (sf) CCC- (sf)/Watch Neg A-2 CCC- (sf) CCC- (sf)/Watch Neg B CCC- (sf) CCC- (sf)/Watch Neg GS MORTGAGE 2007-GKK1: S&P Cuts Rating on A-1 CMBS to 'D(sf)' ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating to 'D (sf)' from 'CCC- (sf)' on the class A-1 commercial mortgage-backed securities (CMBS) pass-through certificates from GS Mortgage Securities Trust 2007-GKK1 (GSMST 2007-GKK1), a U.S. resecuritized real estate mortgage investment conduit (re-REMIC) transaction. "At the same time, we removed the rating from CreditWatch with negative implications. The downgrade reflects our analysis of the transaction's liability structure and the credit characteristics of the underlying collateral using our global criteria for rating collateralized debt obligations (CDOs) of pooled structured finance assets," S&P said. The downgrade also reflects the deferred interest on the class that we expect will continue for the foreseeable future. "The global CDOs of pooled structured finance assets criteria include revisions to our assumptions on correlations, recovery rates, and the collateral's default patterns and timings," S&P said. The criteria also include supplemental stress tests (largest obligor default test and largest industry default test). According to the June 21, 2012, trustee report, GSMST 2007-GKK1 was collateralized by 71 CMBS classes ($601.8 million, 100%) from 45 distinct transactions issued between 1998 and 2007. Approximately 53.1% of the collateral is rated or credit estimated to be 'D (sf)'. According to the June trustee report, accumulated deferred interest totaled $21.9 million and have affected class A-1 and the classes subordinate to it. The deferred interest to GSMST 2007-GKK1 resulted from interest shortfalls on the underlying CMBS certificates, primarily due to the master servicer's recovery of prior advances, appraisal subordinate entitlement reductions (ASERs), servicers' nonrecoverability determinations for advances, and special servicing fees. Class A-1 has remaining deferred interest of $772,774 for the most recent period. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it determines necessary. GUGGENHEIM PRIVATE: Fitch Rates Two Note Classes at Low-B --------------------------------------------------------- Fitch Ratings assigned the following ratings to Guggenheim Private Debt Fund Note Issuer, LLC (Guggenheim PDFNI) on July 11, 2012: -- $292,499,994 class A notes, series A-1, 'Asf'; Outlook Stable; -- $48,749,993 class B notes, series B-1, 'BBBsf'; Outlook Stable; -- $60,124,994 class C notes, series C-1, 'BBsf'; Outlook Stable; -- $40,624,994 class D notes, series D-1, 'Bsf'; Outlook Stable. The class sizes above are based on $650 million of issuance proceeds raised at the first funding date. The transaction also includes an aggregate $208 million of class E1 notes, class E2 notes and limited liability company membership interests that together form a first-loss position (the 'first-loss position') that will not be rated by Fitch. Rating Rationale Fitch's analysis focused primarily on a 'Fitch-stressed' portfolio, which accounts for many of the worst-case portfolio concentrations permitted by the indenture. Fitch's cash flow modeling results indicated performance in-line with the assigned ratings in all modeling scenarios. Fitch notes that the subordination levels available to each class of notes exceed the levels typically seen on like-rated tranches in recent CLO issuance, which helps mitigate the significant obligor concentration and the 'B-/CCC+' credit quality portfolio that Fitch modeled in its stressed portfolio analysis. Additionally, Fitch's analysis assumed assets would pay interest at the minimum required floating and fixed rate coupon test levels, while the yield on the middle-market assets that will constitute the majority of the portfolio will likely exceed these minimum requirements. As in most CLOs, excess spread may be used to redeem principal on the notes if sufficient portfolio deterioration occurs. Transaction Summary Guggenheim PDFNI is a collateralized loan obligation (CLO) transaction that will initially invest in a portfolio comprised of a combination of broadly syndicated loans and middle market private debt investments (PDIs), ultimately migrating to a portfolio concentrated in middle market PDIs. The manager, Guggenheim Partners Investment Management, LLC (GPIM) has raised approximately $980 million of commitments from investors to fund the transaction. The commitments will be drawn upon at three separate funding dates during the approximately 18-month ramp-up period. At each funding date, notes and the first-loss position in the amount of the issuance proceeds will be issued in proportions that maintain the relative class sizes of the initial capital structure (thereby maintaining the initial subordination levels for each class of notes) as follows: -- Class A notes: 45% of capital structure; 55% subordination; -- Class B notes: 7.5% of capital structure; 47.5% subordination; -- Class C notes: 9.25% of capital structure; 38.25% subordination; -- Class D notes: 6.25% of capital structure; 32% subordination; -- First-loss position: 32% of capital structure; 0% subordination. The first funding occurred yesterday at closing and resulted in $650 million of issuance proceeds, which will be used to purchase the issuer's initial portfolio of PDIs and broadly syndicated loans, to pay certain expenses and to fund certain accounts. The two subsequent funding dates are expected to occur approximately nine months and 18 months after close, respectively. Together, these subsequent fundings are expected to result in aggregate draws of no less than $330 million. The issuer also has the flexibility to raise an additional $370 million of commitments during the ramp-up period and issue a commensurate amount of notes and first-loss position for a total authorized capital structure of $1.35 billion. Investors will earn class-specific commitment fees on the undrawn portions of their commitments. Fitch will assess the creditworthiness of the notes at each of the funding dates. The manager may reinvest proceeds during the transaction's four- year reinvestment period. Fitch's Funds and Asset Managers group has conducted an operational review on GPIM and views GPIM as an acceptable manager for the transaction. Portfolio Concentrations The degree of portfolio obligor concentration permitted by the transaction documents vary slightly at each of the three funding dates. The largest-permitted concentration in one obligor at the first funding date is 14% of the funded amount, with this figure decreasing to 13.5% and 12% at the second and third funding dates, respectively. The allowable concentration in the five-largest obligors totals at least 50% of the portfolio at each of the three funding dates. If managed to the highest permitted obligor concentrations, Fitch estimates the portfolio could consist of as few as 19, 22, and 24 obligors at each of the three funding dates, respectively. The degree of permitted obligor concentration is greater than what Fitch has seen in recent CLO issuance, and has been incorporated into Fitch's stressed portfolio analysis. The transaction's other portfolio covenants, such as a 30% 'CCC'-rated bucket and specified industry concentration limitations, are static at each funding date. Furthermore, the issuer is covenanted to maintaining an average recovery rating in the underlying portfolio equivalent to an 'RR3' on Fitch's recovery rating scale (40% recovery assumption in 'Asf' scenario), targeting a minimum level of expected recoveries in the event of collateral defaults. Fitch Analysis Analysis was conducted on a Fitch-stressed portfolio, which was created by Fitch and designed to address the impact of the most prominent risk-presenting concentration allowances and targeted test levels to ensure that the transaction's expected performance is in-line with the ratings assigned. The Fitch-stressed portfolio was assumed to contain $630.5 million par amount of loans, which did not include an assumed $19.5 million 'specified item' bucket for which Fitch gave no credit. The assumptions for the Fitch-stressed portfolio reflected the permitted obligor concentrations on the first funding date and the maximum 'CCC' bucket as described in the 'Portfolio Concentrations' section above. All remaining assets were assumed to be rated 'B-', and Fitch assumed a weighted average life (WAL) of 8.5 years on the first funding date, which is the maximum permitted WAL. Fitch also maximized the permitted industry concentrations and assumed the investments are within industries considered by Fitch to be relatively highly-correlated, thereby increasing the overall level of correlation in the hypothetical portfolio. All assets were assumed to have a Fitch recovery rating of 'RR3'. Projected default and recovery statistics of the Fitch-stressed portfolio were generated using Fitch's portfolio credit model (PCM). The PCM default rate hurdles were 86%, 80%, 68%, and 58% at the 'Asf', 'BBBsf', 'BBsf', and 'Bsf' rating levels, respectively. These PCM outputs were used as inputs into Fitch's proprietary cash flow model, which was customized to reflect Guggenheim PDFNI's specific transaction structure. In the analysis of the Fitch-stressed portfolio, the cash flow model was also adjusted to account for possible risk-presenting allowances such as the maximum permitted amounts of fixed-rate assets and semi-annual-pay assets (10% each). The fixed-rate collateral assets were assumed to pay the minimum weighted average coupon of 8%, while the floating-rate assets were assumed to pay the minimum floating spread over LIBOR of 4.25%. Fitch's cash flow model runs include 12 stress scenarios encompassing different combinations of default timing and interest rate stresses, as described in Fitch's cash flow analysis criteria. The break-even default rates (BDRs) for each class of notes in each scenario were compared to the PCM default hurdle rates at the appropriate rating stresses. The cash flow analysis of the Fitch-stressed portfolio demonstrated that each class of rated notes passed all 12 stress scenarios at levels consistent with the ratings assigned above, with minimum breakeven cushions (BDR minus PCM hurdle rate) of 2.2%, 3.1%, 1%, and 1.3% for the class A, B, C, and D notes, respectively. Fitch also analyzed a portfolio that was provided by the manager representing the intended portfolio composition after the first funding date (the 'indicative portfolio'). The indicative portfolio identified $557.6 million of investments, with the remaining $92.4 million of assets to be purchased with the issuance proceeds yet to be identified. The identified investments consist of 31 obligors, with approximately 27.3% rated in the 'CCC' rating category. Approximately 82.1% of the identified assets consist of PDIs and 17.9% of broadly syndicated loans. As in the analysis of the Fitch-stressed portfolio, projected default and recovery statistics for the indicative portfolio were generated using PCM. The actual collateral attributes, such as asset maturities and coupons, were used in the analysis of the indicative portfolio. The PCM outputs, including default rate hurdles of 74.5%, 68.7%, 56.5% and 46.6% at the 'Asf', 'BBBsf', 'BBsf', and 'Bsf' rating levels, respectively, were then used as inputs into Fitch's cash flow model. The cash flow analysis of the indicative portfolio indicated performance that compared favorably to the Fitch-stressed portfolio analysis, as the minimum breakeven cushions were 23.6%, 16.1%, 17%, and 20.8% for the class A, B, C, and D notes, respectively. Finally, standard sensitivity analysis was conducted on the Fitch- stressed portfolio as described in Fitch's corporate CDO criteria, with the transaction's performance in these scenarios deemed to be within the expectations of each respective rating. Fitch also analyzed the impact of a reduced WAL and whether a related decrease of aggregate available excess spread over the lifetime of the transaction would negatively impact the expected performance of the notes; the results of this scenario remained consistent with the assigned ratings. Each class of notes has been assigned a Stable Outlook due to Fitch's expectation of steady performance through anticipated levels of default and the various forms of credit enhancement available to the notes. Fitch also notes the degree of cushion between the cash flow model outputs on the Fitch-stressed portfolio as compared to the cash flow model outputs from the indicative portfolio analysis. The results of the sensitivity analysis also contributed to Fitch's assignment of Stable Outlooks on each class of notes. Legal Analysis Standard legal opinions and a memorandum of law were reviewed by Fitch's counsel and were deemed to sufficiently address the relevant legal issues presented, consistent with the ratings assigned. Six of the investors in the transaction will be selling assets to the portfolio in exchange for cash and/or notes of the issuer. Five out of the six initial seller/investors are state-chartered insurance companies and are not eligible to be debtors under the United States Bankruptcy Code. For the entity eligible as a debtor under the bankruptcy code, an opinion of counsel was provided that the sale of assets into the transaction would be treated as a true sale, and that the issuer's assets would not be substantively consolidated with the assets of that entity. As to the five state-chartered insurance companies, a memorandum of law was provided in lieu of a legal opinion, which concluded that the sale of assets into the transaction by each insurance company seller would be treated as a true sale, and that the issuer's assets would not be substantively consolidated with the assets of such insurance company, under applicable state insurance company insolvency law. An assessment of the transaction's representations and warranties was also completed and found to be consistent with the ratings assigned to the certificates. For further information, see 'Guggenheim Private Debt Fund Note Issuer, LLC Representations and Warranties Appendix', dated July 12, 2012. Performance Analytics Fitch expects to have credit views, via either public ratings or credit opinions, on all of the private debt investments that will be purchased into the portfolio. Fitch will rely on the issuer to provide it with relevant financial information on such borrowers on an ongoing basis so that Fitch may maintain its ratings on the transaction. Fitch will monitor the transaction regularly and as warranted by events with a review. Events that may trigger a review include the following: -- Additional funding dates/note issuances; -- Portfolio migration; -- Breach of concentration limitations or portfolio quality covenants; -- Future changes to Fitch's rating criteria. Surveillance analysis is conducted on the basis of the then- current portfolio. Fitch's goal is to ensure that the assigned ratings remain an appropriate reflection of the issued notes' credit risk. GULF STREAM 2004-1: Moody's Raises Rating on D Notes From 'Ba2' --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Gulf Stream -- Compass 2004-1, Ltd.: U.S.$20,000,000 Class D Floating Rate Deferrable Notes Due July 15, 2016 (current outstanding balance of $21,204,405), Upgraded to Baa3 (sf); previously on December 9, 2011 Upgraded to Ba2 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes are primarily a result of deleveraging of the senior notes and an increase in the transaction's overcollateralization ratios since the rating action in December 2011. Moody's notes that the Class A Notes have been paid down by approximately $28.3 million or 48% million since the last rating action. Based on the latest trustee report dated June 4, 2012, the Senior Overcollateralization Ratio is reported at 298.90% versus a November 2011 level of 203.20%. Moody's notes that the Class D Notes continue to defer interest due to a Loss Replenishment feature that diverts interest to the principal collection account. However, since the last rating action in November 2011, the Loss Replenishment Amount (LRA) continues to be reduced. The Loss Replenishment Amount is $5.9 million versus $7.6 million in December 2011. Once the LRA is reduced to $0 the Class D Notes are expected to resume interest payments. Additionally, Moody's notes that the underlying portfolio includes a number of investments in securities that mature after the maturity date of the notes. According to the trustee report dated June 4, 2012, securities that mature after the maturity date of the notes currently make up approximately 5.6% of the underlying portfolio. 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" published in June 2011, 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. In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds balance of $95.4 million, defaulted par of $5.4 million, a weighted average default probability of 16.89% (implying a WARF of 3076), a weighted average recovery rate upon default of 48.4%, and a diversity score of 34. The default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed. The default probability is derived from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate to be realized on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance trends and collateral manager latitude for trading the collateral are also factors. Gulf Stream -- Compass 2004-1, Ltd., issued in August 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (2461) Class A: 0 Class C: 0 Class D: +2 Moody's Adjusted WARF + 20% (3691) Class A: 0 Class C: 0 Class D: -2 Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of speculative-grade debt maturing between 2014 and 2016, which may create challenges for issuers to refinance. CLO notes' performance may also be impacted by 1) the manager's investment strategy and behavior and 2) divergence in legal interpretation of CLO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below : 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging may accelerate due to high prepayment levels in the loan market and/or collateral sales by the manager, which may have significant impact on the notes' ratings. 2) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell defaulted assets create additional uncertainties. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. 3) Long-dated assets: The presence of assets that mature beyond the CLO's legal maturity date exposes the deal to liquidation risk on those assets. Moody's assumes an asset's terminal value upon liquidation at maturity to be equal to the lower of an assumed liquidation value (depending on the extent to which the asset's maturity lags that of the liabilities) and the asset's current market value. 4) Exposure to credit estimates: The deal is exposed to a large number of securities whose default probabilities are assessed through credit estimates. In the event that Moody's is not provided the necessary information to update the credit estimates in a timely fashion, the transaction may be impacted by any default probability stresses Moody's may assume in lieu of updated credit estimates. HARBORVIEW MORTGAGE: Moody's Confirms Caa2 Rating on A-X Secs. -------------------------------------------------------------- Moody's Investors Service has confirmed the ratings of two tranches from one RMBS transaction, backed by Option ARM loans, issued by HarborView Mortgage Loan Trust. Ratings Rationale The actions are a result of the recent performance review of Alt-A and Option ARM pools originated before 2005 and reflect Moody's updated loss expectations on these pools. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Pre-2005 US RMBS Surveillance Methodology" published in January 2012. The methodology used in rating Interest-Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications 2) small pool volatility Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on Alt-A pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For Alt-A and Option Arm pools, Moody's first applies a baseline delinquency rate of 10% for 2004, 5% for 2003 and 3% for 2002 and prior. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2004 pool with 75 loans, the adjusted rate of new delinquency is 10.1%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.50 to 2.0 for current delinquencies that range from less than 2.5% to greater than 30% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. When assigning the final ratings to senior bonds, in addition to the methodologies described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. For bonds backed by small pools, Moody's also considered the current pipeline composition as well as any specific loss allocation rules that could preserve or deplete the overcollateralization available for the senior bonds at different pace. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. Complete rating actions are as follows Issuer: HarborView Mortgage Loan Trust 2003-3 Cl. 2A-2, Confirmed at Aaa (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. A-X, Confirmed at Caa2 (sf); previously on Feb 22, 2012 Caa2 (sf) Placed Under Review Direction Uncertain A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF291308 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237256 HELLER FINC'L. 1999PH-1: Fitch Affirms 'D' Rating on Cl. J Certs. ----------------------------------------------------------------- Fitch Ratings affirms three classes of Heller Financial Commercial Mortgage Asset Corp. commercial mortgage pass through certificates, series 1999PH-1. The affirmations reflect stable performance of the pool and sufficient credit enhancement after consideration for defeasance and anticipated paydown from maturing loans. As of the June 2012 distribution date, the pool's certificate balance has paid down 93.4% to $66.3 million from $1 billion at issuance. There are 12 remaining loans from the original 190 loans at issuance. Of the remaining loans, five loans (27.5%) have defeased. Additionally, two loans (6%) are fully amortizing and six loans (76.7%) are ARD loans. The largest loan in the pool is a 244,244 sf retail and entertainment center in North Myrtle Beach, SC (40.3% of the transaction). Performance of the property has improved, with occupancy increasing to 97% as of March 2012 from 91% at YE 2010 and DSCR increasing to 1.21x from 1.09x in the same period. Fitch affirms the following classes and revises Outlooks as indicated: -- $17.7 million class G at 'AAAsf'; Outlook Stable; -- $35.3 million class H at 'A-sf'; Outlook to Stable from Negative; -- $16.4 million class J at 'Dsf'; RE 80%. Fitch does not rate class N. Classes A-1, A-2, B, C, D, E and F have paid in full. Fitch maintains the rating of 'Dsf, RE 0%' on classes K, L and M. Additionally, Fitch has previously withdrawn the rating of the interest only class X. HEWETT'S ISLAND: Moody's Lifts Rating on $11-Mil. Notes From Ba1 ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Hewett's Island CLO II, Ltd.: U.S.$8,000,000 Class A-2A Floating Rate Senior Secured Notes Due December 15, 2016, Upgraded to Aaa (sf); previously on September 14, 2011, Upgraded to Aa3 (sf); U.S.$7,000,000 Class A-2B Fixed Rate Senior Secured Notes Due December 15, 2016, Upgraded to Aaa (sf); previously on September 14, 2011, Upgraded to Aa3 (sf); U.S.$2,500,000 Class B-1A Floating Rate Deferrable Amortizing Senior Secured Notes Due December 15, 2016 (current outstanding balance of $83,333), Upgraded to Aaa (sf); previously on September 14, 2011, Upgraded to Aa1 (sf); U.S.$7,500,000 Class B-1B Fixed Rate Deferrable Amortizing Senior Secured Notes Due December 15, 2016 (current outstanding balance of $250,000), Upgraded to Aaa (sf); previously on September 14, 2011, Upgraded to Aa1 (sf); U.S.$11,000,000 Class B-2 Deferrable Senior Secured Notes Due December 15, 2016, Upgraded to Aa3 (sf); previously on September 14, 2011, Upgraded to A3 (sf); U.S.$11,000,000 Class C Secured Notes Due December 15, 2016, Upgraded to Baa3 (sf); previously on September 14, 2011, Upgraded to Ba1 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes are primarily a result of deleveraging of the senior notes and an increase in the transaction's overcollateralization ratios since the rating action in September 2011. Moody's notes that the Class A-1 Notes have been paid down by approximately $111.6 million or 68% since the last rating action. Based on the latest trustee report dated June 7, 2012, the Class A, Class B, Class C and Class D overcollateralization ratios are reported at 138.97%, 124.89%, 113.40% and 105.23%, respectively, versus July 2011 levels of 122.64%, 115.55%, 109.24% and 104.36%, respectively. The overcollateralization levels reported in the June 2012 trustee report do not reflect deleveraging of the Class A-1 Notes on the June 16, 2012 payment date. Notwithstanding benefits of the deleveraging, Moody's notes that the credit quality of the underlying portfolio has deteriorated since the last rating action. Based on the June 2012 trustee report, the weighted average rating factor is currently 2439 compared to 2213 in July 2011. The rating upgrades due to deleveraging are limited by the impact of a correction to Moody's modeling of the Interest Coverage Tests in its cash flow analysis. The Interest Coverage Tests for the Class B-2 Notes, Class C Notes and Class D Notes were not modeled properly during previous rating actions, thereby causing failure of the Interest Coverage Tests and diversion of the interest and principal proceeds to deleveraging the Class A-1 Notes. The rating actions reflect correct modeling of the Interest Coverage Tests for the Class B-2 Notes, Class C Notes and Class D Notes. Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011, 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. In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds balance of $101.6 million, defaulted par of $10.0 million, a weighted average default probability of 13.5% (implying a WARF of 2876), a weighted average recovery rate upon default of 47.54%, and a diversity score of 28. The default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed. The default probability is derived from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate to be realized on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance trends and collateral manager latitude for trading the collateral are also factors. Hewett's Island CLO II, Ltd., issued in December 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (2301) Class A-1: 0 Class A-2A: 0 Class A-2B: 0 Class B-1A: 0 Class B-1B: 0 Class B-2: +2 Class C: +2 Class D: +2 Moody's Adjusted WARF + 20% (3451) Class A-1: 0 Class A-2A: 0 Class A-2B: 0 Class B-1A: 0 Class B-1B: 0 Class B-2: -2 Class C: -1 Class D: -2 Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of speculative-grade debt maturing between 2014 and 2016, which may create challenges for issuers to refinance. CLO notes' performance may also be impacted by 1) the manager's investment strategy and behavior and 2) divergence in legal interpretation of CLO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging may accelerate due to high prepayment levels in the loan market and/or collateral sales by the manager, which may have significant impact on the notes' ratings. 2) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell defaulted assets create additional uncertainties. 3) Exposure to credit estimates: The deal is exposed to a large number of securities whose default probabilities are assessed through credit estimates. In the event that Moody's is not provided the necessary information to update the credit estimates in a timely fashion, the transaction may be impacted by any default probability stresses Moody's may assume in lieu of updated credit estimates. IMPAC CMB: Moody's Takes Action on $865MM of US Alt-A RMBS ---------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 41 tranches, upgraded the ratings of eight tranches and confirmed the ratings of 14 tranches from 18 RMBS transactions, backed by Alt-A loans, issued by Impac. Ratings Rationale The actions are a result of the recent performance of Alt-A pools originated before 2005 and reflect Moody's updated loss expectations on these pools. The actions taken on the following transactions also reflect a correction to Moody's prior analysis: Impac CMB Trust Series 2003-11, 2003-8, 2003-9F, 2004-10, 2004-11, 2004-4, 2004-5, 2004-7, 2004-9 and Impac Secured Assets Corp. Series 2003-1 and 2003-3. In these transactions, principal is always distributed pro-rata to the subordinate and senior tranches. Due to the pro-rata payment, credit enhancement for the senior bonds erodes over time, and these bonds could be exposed to tail-end losses. In Moody's prior rating analysis, credit enhancement to the bonds was not adjusted to reflect the pro-rata pay structure. Moody's current cash-flow approach captures the structural nuances of the transaction by projecting losses to the bonds under a variety of loss and prepayment scenarios using Structured Finance Workstation(R) (SFW), the cash flow model developed by Moody's Wall Street Analytics. The final ratings on the bonds reflect the estimated losses under the different scenarios. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Pre-2005 US RMBS Surveillance Methodology" published in January 2012. Moody's adjusts the methodologies noted above for (1) Moody's current view on loan modifications, (2) small pool volatility, and (3) bonds that financial guarantors insure. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on Alt-A pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For Alt-A and Option Arm pools, Moody's first applies a baseline delinquency rate of 10% for 2004, 5% for 2003 and 3% for 2002 and prior. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2004 pool with 75 loans, the adjusted rate of new delinquency is 10.1%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.50 to 2.0 for current delinquencies that range from less than 2.5% to greater than 30% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. Bonds insured by financial guarantors The credit quality of RMBS that a financial guarantor insures reflect the higher of the credit quality of the guarantor or the RMBS without the benefit of the guarantee. As a result, the rating on the securities is the higher of 1) the guarantor's financial strength rating and 2) the current underlying rating, which is what the rating of the security would be absent consideration of the guaranty. The principal methodology Moody's uses in determining the underlying rating is the same methodology for rating securities that do not have financial guaranty, described earlier. When assigning the final ratings to senior bonds, in addition to the methodologies described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. For bonds backed by small pools, Moody's also considered the current pipeline composition as well as any specific loss allocation rules that could preserve or deplete the overcollateralization available for the senior bonds at different pace. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. Complete rating actions are as follows: Issuer: Impac CMB Trust Series 2002-9F Cl. A-1, Downgraded to A1 (sf); previously on Mar 30, 2011 Downgraded to Aa3 (sf) Cl. M-1, Downgraded to Baa1 (sf); previously on Jan 31, 2012 A2 (sf) Placed Under Review for Possible Downgrade Issuer: Impac CMB Trust Series 2003-11 Cl. 1-A-2, Downgraded to Baa2 (sf); previously on Mar 30, 2011 Downgraded to A3 (sf) Cl. 1-M-3, Confirmed at B2 (sf); previously on Jan 31, 2012 B2 (sf) Placed Under Review for Possible Upgrade Issuer: Impac CMB Trust Series 2003-2F Cl. A-1, Downgraded to A2 (sf); previously on Jan 31, 2012 Aa3 (sf) Placed Under Review for Possible Downgrade Cl. M-1, Downgraded to Baa3 (sf); previously on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. M-2, Downgraded to B3 (sf); previously on Jan 31, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade Issuer: Impac CMB Trust Series 2003-4 Cl. 3-A-1, Downgraded to Baa1 (sf); previously on Jan 31, 2012 Aa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-M-1, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 3-M-2, Confirmed at B2 (sf); previously on Jan 31, 2012 B2 (sf) Placed Under Review for Possible Downgrade Issuer: Impac CMB Trust Series 2003-8 Cl. 1-A-2, Downgraded to A1 (sf); previously on Jan 31, 2012 Aa3 (sf) Placed Under Review for Possible Downgrade Cl. 1-M-4, Upgraded to Baa3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Issuer: Impac CMB Trust Series 2003-9F Cl. A-1, Downgraded to A1 (sf); previously on Jan 31, 2012 Aa3 (sf) Placed Under Review for Possible Downgrade Issuer: Impac CMB Trust Series 2004-10 Cl. 1-A-1, Upgraded to B2 (sf); previously on Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Underlying Rating: Upgraded to B2 (sf); previously on Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn Mar 25, 2009) Cl. 1-A-2, Upgraded to Caa3 (sf); previously on Mar 30, 2011 Downgraded to C (sf) Underlying Rating: Upgraded to Caa3 (sf); previously on Mar 30, 2011 Downgraded to C (sf) Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn Mar 25, 2009) Cl. 3-A-1, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-2, Downgraded to B1 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-M-1, Downgraded to Caa2 (sf); previously on Jan 31, 2012 B2 (sf) Placed Under Review for Possible Downgrade Issuer: Impac CMB Trust Series 2004-11 Collateralized Asset-Backed Bonds, Series 2004-11 Cl. 2-A-1, Confirmed at Caa2 (sf); previously on Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Issuer: Impac CMB Trust Series 2004-4 Collateralized Asset-Backed Bonds, Series 2004-4 Cl. 1-A-1, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 1-A-2, Downgraded to Ba1 (sf); previously on Mar 30, 2011 Downgraded to A3 (sf) Cl. 1-A-3, Downgraded to B3 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 2-A-1, Downgraded to Ba2 (sf); previously on Jan 31, 2012 A2 (sf) Placed Under Review for Possible Downgrade Cl. 2-A-2, Downgraded to Ba2 (sf); previously on Jan 31, 2012 A2 (sf) Placed Under Review for Possible Downgrade Cl. 2-M-1, Downgraded to Caa3 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 1-M-1, Downgraded to Caa2 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 1-M-2, Downgraded to Caa3 (sf); previously on Mar 30, 2011 Downgraded to Ba3 (sf) Cl. 1-M-3, Downgraded to Caa3 (sf); previously on Mar 30, 2011 Downgraded to B2 (sf) Cl. 1-M-4, Confirmed at Ca (sf); previously on Jan 31, 2012 Ca (sf) Placed Under Review for Possible Upgrade Cl. 2-M-2, Downgraded to Ca (sf); previously on Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Issuer: Impac CMB Trust Series 2004-5 Collateralized Asset-Backed Bonds, Series 2004-5 Cl. 1-A-1, Downgraded to Baa2 (sf); previously on Mar 30, 2011 Downgraded to A1 (sf) Cl. 1-A-2, Downgraded to A3 (sf); previously on Mar 30, 2011 Downgraded to Aa3 (sf) Cl. 1-A-3, Downgraded to Baa3 (sf); previously on Jan 31, 2012 A1 (sf) Placed Under Review for Possible Downgrade Cl. 1-M-1, Downgraded to Ba2 (sf); previously on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. 1-M-2, Downgraded to B1 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 1-M-3, Downgraded to B2 (sf); previously on Mar 30, 2011 Downgraded to Baa3 (sf) Cl. 1-M-4, Downgraded to Caa1 (sf); previously on Mar 30, 2011 Downgraded to B1 (sf) Cl. 1-M-5, Downgraded to Caa3 (sf); previously on Mar 30, 2011 Downgraded to B2 (sf) Cl. 1-M-6, Confirmed at C (sf); previously on Jan 31, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: Impac CMB Trust Series 2004-7 Collateralized Asset-Backed Bonds, Series 2004-7 Cl. 1-A-2, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. M-1, Downgraded to B1 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. M-3, Upgraded to Caa3 (sf); previously on Mar 30, 2011 Downgraded to C (sf) Cl. M-2, Confirmed at B2 (sf); previously on Jan 31, 2012 B2 (sf) Placed Under Review for Possible Downgrade Issuer: Impac CMB Trust Series 2004-8 Collateralized Asset-Backed Bonds, Series 2004-8 Cl. 1-A, Confirmed at Caa2 (sf); previously on Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Underlying Rating: Confirmed at Caa2 (sf); previously on Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn Mar 25, 2009) Cl. 2-A-2, Confirmed at C (sf); previously on Jan 31, 2012 C (sf) Placed Under Review for Possible Upgrade Underlying Rating: Confirmed at C (sf); previously on Jan 31, 2012 C (sf) Placed Under Review for Possible Upgrade Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn Mar 25, 2009) Issuer: Impac CMB Trust Series 2004-9 Collateralized Asset-Backed Bonds, Series 2004-9 Cl. 1-A-1, Downgraded to Ba2 (sf); previously on Mar 30, 2011 Downgraded to Baa3 (sf) Cl. 1-A-2, Downgraded to Caa3 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Issuer: Impac Secured Assets Corp. Mortgage Pass-Through Certificates, Series 2002-3 Cl. M-2, Upgraded to Aa1 (sf); previously on Jan 31, 2012 A2 (sf) Placed Under Review for Possible Upgrade Issuer: Impac Secured Assets Corp. Mortgage Pass-Through Certificates, Series 2003-1 Cl. A-1, Downgraded to A2 (sf); previously on Mar 30, 2011 Downgraded to Aa3 (sf) Cl. M-1, Downgraded to Baa3 (sf); previously on Mar 30, 2011 Downgraded to A3 (sf) Cl. M-2, Downgraded to B3 (sf); previously on Mar 30, 2011 Downgraded to Ba3 (sf) Cl. B, Confirmed at Ca (sf); previously on Jan 31, 2012 Ca (sf) Placed Under Review for Possible Upgrade Issuer: Impac Secured Assets Corp. Mortgage Pass-Through Certificates, Series 2003-3 Cl. A-1, Downgraded to A3 (sf); previously on Jan 31, 2012 Aa2 (sf) Placed Under Review for Possible Downgrade Cl. M-1, Downgraded to Ba2 (sf); previously on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. M-2, Downgraded to Caa2 (sf); previously on Jan 31, 2012 B1 (sf) Placed Under Review for Possible Downgrade Issuer: Impac Secured Assets Corp. Mortgage Pass-Through Certificates, Series 2004-1 Cl. A-5, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. A-6, Upgraded to A2 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Upgrade Cl. M-1, Confirmed at B3 (sf); previously on Jan 31, 2012 B3 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Confirmed at C (sf); previously on Jan 31, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: Impac Secured Assets Corp. Mortgage Pass-Through Certificates, Series 2004-4 Cl. M-1, Confirmed at A3 (sf); previously on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Upgraded to Baa3 (sf); previously on Jan 31, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Upgraded to B3 (sf); previously on Jan 31, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Cl. M-4, Confirmed at C (sf); previously on Jan 31, 2012 C (sf) Placed Under Review for Possible Upgrade A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF291222 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237256 KHALEEJ II: S&P Lowers Rating on Class A Notes to 'D(sf)' --------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class A notes from Khaleej II CDO Ltd. to 'D (sf)' from 'CC (sf)'. Khaleej II CDO Ltd. is a collateralized debt obligation (CDO) transaction backed by hybrid mezzanine structured finance assets. The downgrade reflects the transaction's inability to pay the interest and principal due for the class A notes, as of the June 18, 2012, liquidation report. Rating Action Khaleej II CDO Ltd. Rating Class To From A D (sf) CC (sf) Other Ratings Outstanding Khaleej II CDO Ltd. Class Rating B D (sf) C D (sf) D D (sf) IMSCI COMMERCIAL: Fitch Issues Presale Report on Several Certs. --------------------------------------------------------------- Fitch Ratings has issued a presale report on IMSCI Commercial Mortgage Pass-Through Certificates, series 2012-2. Fitch expects to rate the transaction and assign Outlooks as follows: -- $141,160,000 class A-1 'AAAsf'; Outlook Stable; -- $62,990,000 class A-2 'AAAsf'; Outlook Stable; -- $199,752,000a class XP 'AAAsf'; Outlook Stable; -- $6,008,000 class B 'AAsf'; Outlook Stable; -- $8,406,000 class C 'Asf'; Outlook Stable; -- $7,205,000 class D 'BBBsf'; Outlook Stable; -- $3,603,000 class E 'BBB-sf'; Outlook Stable; -- $3,002,257b class F 'BBsf'; Outlook Stable; -- $2,401,806b class G 'Bsf'; Outlook Stable. a Notional amount and interest only b Non-offered certificates The expected ratings are based on information provided by the issuer as of July 11, 2012. Fitch does not expect to rate the following non-offered certificates: the $240,180,593 interest-only class XC and the $5,404,530 class H. The certificates represent the beneficial ownership in the trust, primary assets of which are 31 loans secured by 31 Canadian commercial properties having an aggregate principal balance of approximately $240.2 million as of the cutoff date. The loans were contributed to the trust by Institutional Mortgage Capital, LP. Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 79.8% of the properties by balance, cash flow analysis of 91.9%, and asset summary reviews on 100% of the pool. The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.12 times (x), a Fitch stressed loan-to-value (LTV) of 102.2%, and a Fitch debt yield of 9%. Fitch's aggregate net cash flow represents a variance of 7% to issuer cash flows. The Master Servicer and Special Servicer will be Midland Loan Services, N.A., rated 'CMS1' and 'CSS1', respectively, by Fitch. LB-UBS COMMERCIAL 2000-C3: Fitch Cuts Rating on $16MM Notes to BB ----------------------------------------------------------------- Fitch Ratings downgrades one distressed class of LB-UBS Commercial Mortgage Trust, series 2000-C3 commercial mortgage pass-through certificates. As of the June 2012 distribution date, the pool's collateral balance has paid down 97% to $37.7 million from $1.3 billion at issuance. Of the 10 remaining loans in the transaction, two are defeased (27%) and four are specially serviced (58%). Fitch expected losses of the original pool balance are 3.4%, including 2.9% in realized losses. In addition, there is $6 million in outstanding unpaid interest shortfalls to classes J through P. The Rating Outlook on class J was revised to Negative as this class is currently not receiving interest. Fitch downgrades the following class: -- $9.8 million class K to 'Csf' from 'CCsf'; RE 40%. Fitch also affirms the following classes and revises Outlooks as indicated: -- $20.9 million class H at 'Asf'; Outlook Stable; -- $16.3 million class J at 'BBsf'; Outlook to Negative from Positive. Classes A-1, A-2, B,C,D,E,F and G have paid in full. Fitch does not rate Classes L, M, N and P. Fitch previously withdrew the rating of the interest only Class X. LB-UBS COMMERCIAL 2004-C4: Moody's Keeps 'C' Ratings on 6 Certs. ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 19 classes of LB-UBS Commercial Mortgage Pass-Through Certificates, Series 2004- C4 as follows: Cl. A-3, Affirmed at Aaa (sf); previously on Jun 11, 2004 Definitive Rating Assigned Aaa (sf) Cl. A-4, Affirmed at Aaa (sf); previously on Jun 11, 2004 Definitive Rating Assigned Aaa (sf) Cl. A-1b, Affirmed at Aaa (sf); previously on Jun 11, 2004 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed at Aaa (sf); previously on Dec 10, 2010 Confirmed at Aaa (sf) Cl. C, Affirmed at Aa1 (sf); previously on Dec 10, 2010 Confirmed at Aa1 (sf) Cl. D, Affirmed at Aa2 (sf); previously on Dec 10, 2010 Confirmed at Aa2 (sf) Cl. E, Affirmed at A2 (sf); previously on Dec 10, 2010 Downgraded to A2 (sf) Cl. F, Affirmed at A3 (sf); previously on Dec 10, 2010 Downgraded to A3 (sf) Cl. G, Affirmed at Baa2 (sf); previously on Dec 10, 2010 Downgraded to Baa2 (sf) Cl. H, Affirmed at Ba2 (sf); previously on Dec 10, 2010 Downgraded to Ba2 (sf) Cl. J, Affirmed at Caa2 (sf); previously on Dec 10, 2010 Downgraded to Caa2 (sf) Cl. K, Affirmed at Ca (sf); previously on Dec 10, 2010 Downgraded to Ca (sf) Cl. L, Affirmed at C (sf); previously on Dec 10, 2010 Downgraded to C (sf) Cl. M, Affirmed at C (sf); previously on Dec 10, 2010 Downgraded to C (sf) Cl. N, Affirmed at C (sf); previously on Dec 10, 2010 Downgraded to C (sf) Cl. P, Affirmed at C (sf); previously on Dec 10, 2010 Downgraded to C (sf) Cl. Q, Affirmed at C (sf); previously on Dec 10, 2010 Downgraded to C (sf) Cl. S, Affirmed at C (sf); previously on Dec 10, 2010 Downgraded to C (sf) Cl. X, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 5% of the current balance, the same as at last review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to assessment Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit assessment level, is incorporated for loans with similar credit assessments in the same transaction. The conduit model includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 6 compared to 7 at Moody's prior review. In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.4 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. 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 action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated August 11, 2011. Deal Performance As of the June 15, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 45% to $771.6 million from $1.41 billion at securitization. The Certificates are collateralized by 74 mortgage loans ranging in size from less than 1% to 34% of the pool, with the top ten loans representing 67% of the pool. Seven loans, representing 6% of the pool, have defeased and are secured by U.S. Government securities. The pool contains two loans with investment grade credit assessments, representing 46% of the pool. Fourteen loans, representing 22% 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 (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Eleven loans have been liquidated from the pool, resulting in a realized loss of $11.4 million (17% loss severity on average). Currently three loans, representing 4% of the pool, are in special servicing. The largest specially serviced loan is the Enterprise Technology Center Loan ($30.6 million -- 4% of the pool), which is secured by a 343,600 square foot office park located in Scotts Valley California. The property was originally developed in 1993 as headquarters for Borland International, a computer software company, and was converted into a multi tenant building in 2010 when Borland vacated its space. Shortly thereafter, the loan was transferred to special servicing, and became real estate owned (REO) in November 2011. Amenities at the property include an auditorium, dining hall facilities, fitness center, basketball courts, tennis courts, an Olympic pool, as well as a land component for additional development. As of March 2012, the property was 12% leased compared to 65% at last review. The other two specially serviced loans are secured by unanchored retail properties located in Minnesota and Georgia. The master servicer has recognized an aggregate $20.8 million appraisal reduction for the specially serviced loans. Moody's estimates an aggregate $25 million loss for the specially serviced loans (75% expected loss on average). Moody's has assumed a high default probability for five poorly performing loans representing 3% of the pool and has estimated a $3 million aggregate loss (15% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2011 operating results for 85% of the pool. Excluding specially serviced loans, troubled loans and loans with credit assessments, Moody's weighted average LTV is 84%, the same as at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.0%. Excluding special serviced loans, troubled loans and loans with credit assessments, Moody's actual and stressed DSCRs are 1.36X and 1.24X, respectively, compared to 1.33X and 1.24X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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. The largest loan with a credit assessment is the Westfield Shoppingtown Garden State Plaza Loan ($260 million -- 33.7% of the pool), which represents a 50% pari-passu interest in a first mortgage loan. The loan is secured by the borrower's interest in an enclosed 2.0 million square foot (SF) super-regional shopping mall located in Paramus, New Jersey. The mall is anchored by Macy's, Nordstrom, J.C. Penney, Neiman Marcus and Lord & Taylor. As of December 2011, the property was 97% leased compared to 98% at the prior review. Westfield is the loan sponsor. The loan is interest-only for its entire 10-year term. Performance improved since last review due an increase in base rental revenue. Moody's current credit assessment and stressed DSCR are A1 and 1.58X, respectively, compared to A1 and 1.52X at last review. The second loan with a credit assessment is the Town East Mall Loan ($96.5 million -- 12.5% of the pool) which is secured by a 1.2 million SF regional shopping mall located in Mesquite, Texas. The mall is anchored by Macy's, Sears, Dillard's and J.C. Penney. Property performance remains stable. As of December 2011, the property was 99% leased compared to 97% at the prior review. GGP is the loan sponsor. Per the GGP bankruptcy this loan was extended until January 2014. Moody's current credit assessment and stressed DSCR are Baa2 and 1.58X, respectively, compared to Baa2 and 1.52X at last review. The top three performing conduit loans represent 10% of the pool balance. The largest loan is the Ritz-Carlton Chicago Loan ($37.2 million -- 4.8% of the pool), which is secured by a 435-key luxury hotel located in Chicago's Magnificent Mile. The hotel portion of the mixed use property occupies the mid 22 floors, with the remaining floors being condos and the two ground floors occupied by restaurants and retail space. At the prior review, Moody's classified this as a troubled loan due to the poor property performance. However, since then, performance has significantly improved due to the increased rooms revenue (+10%) and food and beverage (+14%) revenue. Overall departmental income has increased 15% in 2011 when compared to 2010 and expenses have remained relatively similar. Occupancy and RevPar as of December 2011 were 67% and $193, respectively, compared to 64% and $176 at the prior review. Moody's LTV and stressed DSCR are 77% and 1.4X, respectively, compared to 177% and 0.61 at the prior review. The second largest loan is the Park Parthenia Apartments Loan ($21.3 million -- 2.8% of the pool), which is secured by a 399- unit apartment property located in Northridge, California. The property's financial performance has remained stable as the property is subject to rent controlled units. While all units are not at market levels, tax abatements are in place so long as 20% of the property is considered affordable housing. As of December 2011, the property was 93% leased, essentially the same at the prior review. Moody's LTV and stressed DSCR are 75% and 1.30X, respectively, compared to 73% and 1.09X at last review. The third largest loan is the Rivercrest Village Loan ($20 million -- 2.6% of the pool), which is secured by a 328-unit apartment property located in Sacramento, California. Located about a quarter mile east of Sacramento State University, the property historically was about 40% leased to students. Recently student occupancy has been declining due marketing strategies geared towards more professionals and families. The occupancy declined to 91% leased as of March 2012 compared to 94% at last review. At the prior review, Moody's classified this as a troubled loan due to the poor property performance, however since then performance has improved due to declines in expenses. The loan matures in 22 months. Moody's LTV and stressed DSCR are 115% and 0.84X, respectively, compared to 130% and 0.71X at last review. LEHMAN BROTHERS 1998-C1: Fitch Keeps Dsf Rating on 2 Note Classes ----------------------------------------------------------------- Fitch Ratings has affirmed all classes of Lehman Brothers (LB) Commercial Mortgage Trust's commercial mortgage pass-through certificates, series 1998-C1. The affirmations are a result of the pools stable performance following Fitch's prospective review of the potential stresses to the transaction. Fitch expects minimal losses to the remaining pool balance. As of the June 2012 distribution date, the pool's certificate balance has been reduced 89% to $189.58 million from $1.73 billion at issuance (which includes 2.75% in realized losses). There are 38 of the original 260 loans remaining in the transaction. Eight loans (14%) are fully defeased. Fitch has identified six loans as Loans of Concern (6.6% of pool balance), which include one loan currently in special servicing (2.1%). Interest shortfalls are affecting classes K, L and M as of the June 2012 remittance date. The specially serviced loan (2.1%) is secured by a 194 bed senior housing facility in Long Beach, NY. The servicer reported occupancy at 56% as of November 2011. The loan had transferred to special servicing in August 2009 due to monetary default. The special servicer is dual tracking foreclosure and working with the borrower to cure the default. The borrower is negotiating with a new third party operator to manage the property and is seeking refinancing. The largest loan in the pool is the Ohio Valley Plaza loan (17.26%) which is secured by a 576,639 square foot retail property in St. Clairsville, OH. The property is well located off interstate 70 directly across from the Ohio Valley Mall. Anchors at the subject property include Walmart Super Center (35% net rentable area [NRA]), Lowe's (23% NRA), and Sam's Club (20% NRA). The March 2012 rent roll reported occupancy at 98%. Debt service coverage ratio (DSCR) reported at 1.38 times (x) for year-end December 2011. Fitch affirms the following classes: -- $30.9 million class E at 'AAAsf'; Outlook Stable; -- $51.8 million class F at 'AAAsf'; Outlook Stable; -- $34.6 million class G at 'AAAsf'; Outlook Stable; -- $17.3 million class H at 'Asf'; Outlook Stable; -- $43.2 million class J at 'Bsf'; Outlook Stable; -- $11.8 million class K at 'Dsf'; RE 35%; -- Class L at 'Dsf'; RE 0%. Class L and the unrated class M have been reduced to zero due to realized losses. Classes A-1, A-2, A-3, B, C, and D have paid in full. Fitch previously withdrew the rating on the interest-only class IO. MERRILL LYNCH 2004-KEY2: Fitch Cuts Rating on Four Note Classes --------------------------------------------------------------- Fitch Ratings has downgraded four speculative classes of Merrill Lynch Mortgage Trust 2004-KEY2. The downgrades are primarily due to an increase in Fitch expected losses on the specially serviced loans. Fitch modeled losses of 7.7% of the remaining pool; expected losses of the original pool are at 8.5%, including losses already incurred to date. Fitch has designated 19 loans (15.1%) as Fitch Loans of Concern, which includes four specially serviced loans (9.7%). As of the June 2012 distribution date, the pool's aggregate principal balance has been reduced by approximately 33.5% to $739.8 million from $1.12 billion at issuance. Interest shortfalls are affecting classes G through Q with cumulative unpaid interest totaling $2.8 million. The largest contributor to Fitch modeled losses (2%) is a 59,436 square foot (SF) retail property in Los Angeles, CA. The loan transferred to the special servicer in December 2010 due to monetary default. The special servicer is working with the borrower to cure the default while moving forward with foreclosure. The second largest contributor to Fitch modeled losses (2.9%) is a 212,804 SF office property in Secaucus, NJ. The loan was transferred to the Special Servicer in February 2012 due to imminent default. The loan is now over 90 days past due. As of the end of 3Q'11, the property was 85.85% occupied. The third largest contributor to Fitch modeled losses (1.4%) is a 136 unit full service hotel in Providence, RI. The property has poor historical performance with debt service coverage ratio (DSCR) below 1.0x due to soft market conditions. The loan has been modified and returned to the master servicer. As of year-end (YE) 2011, DSCR was 0.31x with occupancy of 37.5% and RevPar of $29.47. Fitch has downgraded the following classes: -- $22.3 million class D to 'Bsf' from 'BBsf'; Outlook Stable; -- $12.5 million class E to 'CCCsf' from 'Bsf'; RE30%; -- $15.3 million class F to 'CCsf' to 'CCCsf; RE0%; -- $11.1 million class G to 'Csf' from 'CCsf';RE0%. Fitch has affirmed the following classes: -- $159.3 million class A-1A at 'AAAsf'; Outlook Stable; -- $59.6 million class A-2 at 'AAAsf'; Outlook Stable; -- $92.1 million class A-3 at 'AAAsf'; Outlook Stable; -- $345.7 million class A-4 at 'AAAsf'; Outlook Stable; -- $26.5 million class B at 'AAsf'; Outlook Negative; -- $8.4 million class C at 'Asf'; Outlook Stable; -- $15.3 million class H at 'Csf'; RE0%; -- $6.8 million class J at 'Dsf'; RE0%; Classes K, L, M, N and P have been depleted due to losses and remain at 'Dsf/RE0%'. 'Class A1 has paid in full. Fitch does not rate the classes Q or DA. Fitch has previously withdrawn the ratings on the interest-only classes XC and XP. MERRILL LYNCH 2008-C1: Moody's Lowers Rating on J Certs. to Caa1 ---------------------------------------------------------------- Moody's Investors Service downgraded the ratings of six class and affirmed 22 classes of Merrill Lynch Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2008-C1 as follows: Cl. A-2, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. A-3, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. A-SB, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. A-4, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. A-1A, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. A-1AF, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. AM-AF, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. AM, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. AM-A, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf) Cl. AJ, Affirmed at A2 (sf); previously on Nov 18, 2010 Downgraded to A2 (sf) Cl. AJ-A, Affirmed at A2 (sf); previously on Nov 18, 2010 Downgraded to A2 (sf) Cl. AJ-AF, Affirmed at A2 (sf); previously on Nov 18, 2010 Downgraded to A2 (sf) Cl. B, Affirmed at A3 (sf); previously on Nov 18, 2010 Downgraded to A3 (sf) Cl. C, Affirmed at Baa1 (sf); previously on Nov 18, 2010 Downgraded to Baa1 (sf) Cl. D, Downgraded to Baa3 (sf); previously on Nov 18, 2010 Downgraded to Baa2 (sf) Cl. E, Downgraded to Ba1 (sf); previously on Nov 18, 2010 Downgraded to Baa3 (sf) Cl. F, Downgraded to Ba3 (sf); previously on Nov 18, 2010 Downgraded to Ba2 (sf) Cl. G, Downgraded to B1 (sf); previously on Nov 18, 2010 Downgraded to Ba3 (sf) Cl. H, Downgraded to B3 (sf); previously on Nov 18, 2010 Downgraded to B2 (sf) Cl. J, Downgraded to Caa1 (sf); previously on Nov 18, 2010 Downgraded to B3 (sf) Cl. K, Affirmed at Caa2 (sf); previously on Nov 18, 2010 Downgraded to Caa2 (sf) Cl. L, Affirmed at Caa3 (sf); previously on Nov 18, 2010 Downgraded to Caa3 (sf) Cl. M, Affirmed at C (sf); previously on Nov 18, 2010 Downgraded to C (sf) Cl. N, Affirmed at C (sf); previously on Nov 18, 2010 Downgraded to C (sf) Cl. P, Affirmed at C (sf); previously on Nov 18, 2010 Downgraded to C (sf) Cl. Q, Affirmed at C (sf); previously on Nov 18, 2010 Downgraded to C (sf) Cl. S, Affirmed at C (sf); previously on Nov 18, 2010 Downgraded to C (sf) Cl. X, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Ratings Rationale The downgrades are due to an increase in expected and realized losses from specially serviced and troubled loans. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 6.7% of the current balance. At last review, Moody's cumulative base expected loss was 6.6%. Realized losses have increased from 0.8% of the original balance to 1.3% since the prior review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating Structured Finance Interest- Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit estimate level, is incorporated for loans with similar credit estimates in the same transaction. The conduit model includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 20, the same as at last review. 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 action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated August 11, 2011. Deal Performance As of the June 14, 2012 distribution date, the transaction's aggregate certificate balance has decreased by 4% to $909.2 million from $948.8 million at securitization. The Certificates are collateralized by 88 mortgage loans ranging in size from less than 1% to 16% of the pool, with the top ten loans representing 53% of the pool. One loan, representing 0.3% of the pool, has defeased and is secured by U.S. Government securities. Twenty-five loans, representing 19% 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 (CREFC) monthly reporting package. As part of its 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, resulting in an aggregate realized loss of $11.9 million (60% loss severity on average). Five loans, representing 5% of the pool, are currently in special servicing. The largest specially serviced loan is the 2550 North Hollywood Way Loan ($19.1 million -- 2.1% of the pool), which is secured by a 88,063 square foot (SF) office building located in Burbank, California. The loan transferred to special servicing in November 2011 when the borrower indicated its unwillingness to fund any future leasing costs or debt service shortfalls. Tenants representing 24% of the net rentable area (NRA) are due to expire in 2012 and the special servicer indicated several tenants plan to vacate or downsize at their upcoming lease termination. The loan is paid current and the borrower and special servicer are negotiating a loan modification. The remaining four specially serviced properties are secured by a mix of property types. Moody's estimates an aggregate $17.0 million loss for the specially serviced loans (38% expected loss on average). Moody's has assumed a high default probability for seventeen poorly performing loans representing 15% of the pool and has estimated an aggregate $20.7 million loss (16% expected loss on average) from these troubled loans. Moody's was provided with full and/or partial year 2011 operating results for 94% of the pool's non-specially serviced and non- defeased loans. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 111% compared to 112% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.8%. Excluding special serviced and troubled loans, Moody's actual and stressed DSCRs are 1.27X and 0.98X, respectively, compared to 1.26X and 0.96X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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. The top three conduit loans represent 30% of the pool. The largest conduit loan is the Farrallon Portfolio Loan ($149.1 million -- 16.4% of the pool), which is secured by 273 cross-collateralized and cross-defaulted mobile home communities located throughout 23 states. The loan represents a 11% pari-passu interest in a $1.35 billion loan. There is subordinate debt of approximately $105.8 million held outside the trust that the borrower agreed to subordinate as part of the April 2011 modification. The loan was transferred to special servicing in June 2010 due to the maturity default of the floating rate portion of the debt, which is held outside the trust in BALL 2007-BMB1. Loan modification was completed in April 2011; the maturities on the floating-rate and fixed-rate portions of the loan were extended to August 2015 and a 2-year extension option was granted. Other key modification terms include capture of all excess cash above debt-service on a quarterly basis and the remittance of net proceeds from home and note sales to the lender. Moody's LTV and stressed DSCR are 112% and 0.89X, respectively, compared to 115% and 0.87X at last review. The second largest loan is the Apple Hotel Portfolio Loan ($63.1 million -- 6.9% of the pool), which is secured by a portfolio of 27 limited service and extended stay hotels located across 14 states. The loan represents a 18.3% pari-passu interest in a $344.85 million loan. Performance has improved since last review due to an approximate 5% increase in NOI. In 2011, the pool's revenue per available room (RevPAR) was $78.53 compared to $75.39 at last review. Moody's LTV and stressed DSCR are 122% and 1.00X, respectively, compared to 130% and 0.93X at last review. The third largest loan is the Arundel Mills Loan ($62.8 million -- 6.9% of the pool), which is secured by a 1.3 million square foot retail center located in Hanover, Maryland. The loan represents a 16.7% pari-passu interest in a $377 million loan. As of December 2011, the in-line mall space was 98% leased compared to 95% at last review. In-line sales for comparable stores less than 10,000 square feet were $375 in 2010. Net operating income (NOI) increased by slightly in 2011 due to an increase in base rent. The sponsor is Simon Property Group. The loan is benefitting from amortization and matures in August 2014. Moody's LTV and stressed DSCR are 116% and 0.84X, respectively, compared to 117% and 0.84X at last review. MKP CBO III: Fitch Affirms 'Dsf' Rating on $45MM Class B Notes -------------------------------------------------------------- Fitch Ratings has affirmed three classes of notes issued by MKP CBO III, Ltd. (MKP III), as follows: -- $18,171,227 class A-2 notes at 'Asf'; Outlook Negative; -- $45,000,000 class B notes at 'Dsf'; -- $14,175,960 class C notes at 'Csf'. This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Structured Finance Portfolio Credit Model (SF PCM) for projecting future default levels for the underlying portfolio. These default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. Fitch also considered additional qualitative factors into its analysis to conclude the rating actions for the rated notes. Since Fitch's last rating action in July 2011, the credit quality of the underlying collateral has declined further, with approximately 29% of the portfolio downgraded a weighted average of 3.6 notches and only 10.7% of the portfolio upgraded a weighted average of 1.5 notches. Currently, 81.3% of the portfolio has a Fitch derived rating below investment grade and 51.4% has a rating in the 'CCC' rating category or lower, compared to 69.1% and 55.5%, respectively, at last review. The transaction entered an Event of Default in July 2009 and subsequently, the majority holders of the class A-2 notes, the senior most class outstanding at that time, voted to accelerate the maturity of the transaction. As a result, since the November 2009 payment date, all principal amortizations and excess interest proceeds have been diverted to amortize the class A-2 notes, and will continue to do so until the notes are paid in full. The affirmation of the class A-2 notes is primarily attributed to the improved levels of credit enhancement (CE) to the rated notes resulting from the structural de-leveraging of the transaction, which in Fitch's view offsets the deterioration in the underlying portfolio. Since the last review, approximately $9 million, or 33.1% of the previous outstanding balance, has paid down through the use of principal proceeds and excess interest. Approximately $1.7 million of interest proceeds was used to amortize the notes over the same time period. As of the May 2012 distribution date, $31.8 million, or 63.7%, of the class A-2 notes' original principal balance has been repaid. Fitch maintains a Negative Outlook on the class A-2 notes to reflect the limited cushion in the breakevens to protect the notes against potential deterioration in the underlying portfolio. Fitch does not assign Rating Outlooks to classes rated 'CCC' or below. The class B notes have been affirmed at 'Dsf' because they have not received any interest payments since the November 2009 payment date due to acceleration, and are expected to continue experiencing interest shortfalls at least until the class A-2 notes are paid in full. Missed interest constitutes a default for this non-deferrable class. Breakeven levels for the class C notes were below SF PCM's 'CCC' default level, the lowest level of defaults projected by SF PCM. For this class, Fitch compared the credit enhancement level to the expected losses from the distressed and defaulted assets in the portfolio (rated 'CCsf' or lower). This comparison indicates that default continues to appear inevitable for this class of notes at or prior to maturity. MKP III is a cash flow structured finance collateralized debt obligation (SF CDO) that closed on April 7, 2004 and is monitored by MKP Capital Management, LLC. As per the May 2012 trustee report, the current portfolio is primarily composed of residential mortgage-backed securities (64.6%), commercial mortgage-backed securities (30.2%), SF CDOs (4.9%), and commercial asset-backed securities (0.3%), all from the 2002 through 2005 vintage transactions. MORGAN STANLEY 2004: Moody's Takes Action on $730MM US Alt-A RMBS ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 57 tranches, upgraded the ratings of 2 tranches, and confirmed the ratings of 23 tranches from 10 RMBS transactions, backed by Alt-A loans, issued by Morgan Stanley. Ratings Rationale The actions are a result of the recent performance review of Alt-A pools originated before 2005 and reflect Moody's updated loss expectations on these pools. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Pre-2005 US RMBS Surveillance Methodology" published in January 2012. The methodology used in rating Interest-Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. The rating action constitute of a number of downgrades as well as upgrades. The upgrades are due to significant improvement in collateral performance, and/ or rapid build-up in credit enhancement due to high prepayments. The downgrades are a result of deteriorating performance and/or structural features resulting in higher expected losses for certain bonds than previously anticipated. For example in shifting interest structures, back-ended liquidations could expose the senior bond holders to tail-end losses. The subordinate bonds in the majority of these deals are currently receiving 100% of their principal payments, and thereby depleting the dollar enhancement available to the senior bonds. In its current approach, Moody's captures this risk by running each individual pool through a variety of loss and prepayment scenarios in the Structured Finance Workstation(R) (SFW), 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 nuances of the transaction Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications 2) small pool volatility. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. Moody's has withdrawn the ratings of Morgan Stanley Mortgage Loan Trust 2004-8AR Loan Group 1 and Loan Group 2 pursuant to published rating methodologies that allow for the withdrawal of the rating if the size of the underlying collateral pool at the time of the withdrawal has fallen below a specified level. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on Alt-A pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For Alt-A and Option Arm pools, Moody's first applies a baseline delinquency rate of 10% for 2004, 5% for 2003 and 3% for 2002 and prior. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2004 pool with 75 loans, the adjusted rate of new delinquency is 10.1%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.50 to 2.0 for current delinquencies that range from less than 2.5% to greater than 30% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. When assigning the final ratings to senior bonds, in addition to the methodologies described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. For bonds backed by small pools, Moody's also considered the current pipeline composition as well as any specific loss allocation rules that could preserve or deplete the overcollateralization available for the senior bonds at different pace. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.1% in April 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. Complete rating actions are as follows: Issuer: Morgan Stanley Mortgage Loan Trust 2004-1 Cl. 1-A-1, Downgraded to Aa2 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. 1-A-3, Downgraded to Aa3 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. 1-A-5, Downgraded to Aa3 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. 1-A-6, Downgraded to A2 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. 1-A-7, Downgraded to Baa2 (sf); previously on Jan 31, 2012 Aa1 (sf) Placed Under Review for Possible Downgrade Cl. 1-A-8, Confirmed at Aaa (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. 1-A-9, Downgraded to Aa3 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. 1-A-10, Downgraded to Aa2 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. 1-A-11, Downgraded to Aa3 (sf); previously on Feb 22, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. 1-A-P, Downgraded to Aa3 (sf); previously on Mar 10, 2011 Confirmed at Aaa (sf) Cl. 1-A-X, Confirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) and Placed Under Review for Possible Downgrade Cl. 2-A-2, Downgraded to Baa1 (sf); previously on Feb 22, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. 2-A-4, Downgraded to Baa3 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Underlying Rating: Downgraded to Baa3 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Financial Guarantor: Radian Asset Assurance Inc. (Confirmed at Ba1, Outlook Negative on Apr 17, 2012) Cl. 2-A-5, Downgraded to Baa1 (sf); previously on Jan 31, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. 2-A-P, Downgraded to Baa3 (sf); previously on Mar 10, 2011 Confirmed at Aaa (sf) Cl. 2-A-X, Confirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) and Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Mortgage Loan Trust 2004-10AR Cl. 1-A, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A-1, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A-2, Confirmed at Baa2 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 2-A-3, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-X, Confirmed at Baa3 (sf); previously on Feb 22, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 4-A, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. B-1, Downgraded to Ca (sf); previously on Jan 31, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Cl. B-2, Downgraded to C (sf); previously on Mar 10, 2011 Downgraded to Ca (sf) Issuer: Morgan Stanley Mortgage Loan Trust 2004-11AR Cl. 1-A-1, Downgraded to Baa3 (sf); previously on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. 1-A-2A, Downgraded to Baa1 (sf); previously on Jan 31, 2012 Aa3 (sf) Placed Under Review for Possible Downgrade Cl. 1-A-2B, Downgraded to Ba2 (sf); previously on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. 1-X-2, Downgraded to Ba1 (sf); previously on Feb 22, 2012 Downgraded to A3 (sf) and Placed Under Review for Possible Downgrade Cl. 1-X-B, Downgraded to C (sf); previously on Feb 22, 2012 Downgraded to Ca (sf) Issuer: Morgan Stanley Mortgage Loan Trust 2004-2AR Cl. 1-A, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 4-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Mortgage Loan Trust 2004-3 Cl. 1-A-X, Confirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) and Placed Under Review for Possible Downgrade Cl. 2-A-1, Downgraded to Ba1 (sf); previously on Mar 10, 2011 Downgraded to Baa1 (sf) Cl. 2-A-2, Downgraded to Baa3 (sf); previously on Mar 10, 2011 Downgraded to Baa1 (sf) Cl. 2-A-3, Downgraded to Ba1 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf) Cl. 2-A-4, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Underlying Rating: Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Financial Guarantor: MBIA Insurance Corporation (B3 placed on review for possible downgrade on Dec 19, 2011) Cl. 2-A-6, Confirmed at Baa2 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 4-A, Confirmed at Baa2 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. C-A-P, Downgraded to Ba2 (sf); previously on Mar 10, 2011 Downgraded to Baa2 (sf) Cl. C-A-X, Confirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) and Placed Under Review for Possible Downgrade Cl. B-1, Downgraded to Caa2 (sf); previously on Jan 31, 2012 B2 (sf) Placed Under Review for Possible Downgrade Cl. B-2, Downgraded to C (sf); previously on Mar 10, 2011 Downgraded to Ca (sf) Issuer: Morgan Stanley Mortgage Loan Trust 2004-5AR Cl. 1-A-1, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 1-A-2, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 1-A-3, Downgraded to Ba3 (sf); previously on Feb 22, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 2-A, Confirmed at Ba1 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-1, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-2, Confirmed at Ba1 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-3, Downgraded to B1 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-5, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 4-A, Confirmed at Ba1 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. B-1, Downgraded to Ca (sf); previously on Mar 10, 2011 Downgraded to Caa3 (sf) Issuer: Morgan Stanley Mortgage Loan Trust 2004-6AR Cl. 1-A, Upgraded to Baa1 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. 2-A-1, Downgraded to B3 (sf); previously on Mar 10, 2011 Downgraded to B2 (sf) Cl. 2-A-3, Downgraded to Caa2 (sf); previously on Jan 31, 2012 B2 (sf) Placed Under Review for Possible Downgrade Cl. 1-M-1, Upgraded to B2 (sf); previously on Jan 31, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Cl. 1-M-2, Confirmed at C (sf); previously on Jan 31, 2012 C (sf) Placed Under Review for Possible Upgrade Cl. 1-M-3, Confirmed at C (sf); previously on Jan 31, 2012 C (sf) Placed Under Review for Possible Upgrade Cl. 1-B-1, Confirmed at C (sf); previously on Jan 31, 2012 C (sf) Placed Under Review for Possible Upgrade Cl. 1-B-2, Confirmed at C (sf); previously on Jan 31, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley Mortgage Loan Trust 2004-7AR Cl. 1-A, Downgraded to Caa1 (sf); previously on Mar 10, 2011 Downgraded to Ba3 (sf) Cl. 2-A-7, Downgraded to Caa1 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Mortgage Loan Trust 2004-8AR Cl. 1-A, Withdrawn (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 1-X, Withdrawn (sf); previously on Feb 22, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 2-A, Withdrawn (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 2-X, Withdrawn (sf); previously on Feb 22, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A, Confirmed at Ba3 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. 4-A-2, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 4-A-5, Downgraded to B1 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. S-B-1, Withdrawn (sf); previously on Mar 10, 2011 Confirmed at Ca (sf) Cl. S-B-2, Withdrawn (sf); previously on Mar 10, 2011 Downgraded to C (sf) Cl. S-B-4, Withdrawn (sf); previously on Apr 24, 2009 Downgraded to C (sf) Issuer: Morgan Stanley Mortgage Loan Trust 2004-9 Cl. 1-A, Downgraded to B2 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A, Downgraded to B1 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-1, Downgraded to B1 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-2, Downgraded to Caa1 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-3, Downgraded to B2 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-4, Downgraded to B2 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-5, Downgraded to B2 (sf); previously on Feb 22, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-6, Downgraded to B2 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-X, Downgraded to B1 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) and Placed Under Review for Possible Downgrade Cl. 3-A-P, Downgraded to B3 (sf); previously on Mar 10, 2011 Downgraded to Ba3 (sf) Cl. 4-A, Downgraded to B2 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. 5-A, Downgraded to B2 (sf); previously on Jan 31, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. 5-A-X, Downgraded to Caa1 (sf); previously on Feb 22, 2012 Ba3 (sf) Placed Under Review Direction Uncertain Cl. 5-A-P, Downgraded to B2 (sf); previously on Mar 10, 2011 Downgraded to Ba3 (sf) A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF291067 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237256 MORGAN STANLEY 2004-TOP13: Losses Cues Fitch to Lower Ratings ------------------------------------------------------------- Fitch Ratings has downgraded three classes of Morgan Stanley Capital I Trust commercial mortgage pass-through certificates, series 2004-TOP13. The downgrades reflect an increase in Fitch losses attributed to updated valuations of specially serviced loans as well as performing loans with performance declines. Fitch modeled losses of 3.48% of the original pool (including losses of 0.3% incurred to date). The Negative Rating Outlooks reflect the underperformance of the largest loans of concern. As of the June 2012 distribution date, the pool's aggregate principal balance was $778.5 million, down from $1.2 billion at issuance. There are 16 defeased loans (11% of the pool balance). There are cumulative interest shortfalls currently affecting the non-rated class P. There are currently three specially serviced loans (1.1%) in the pool. The largest Fitch Loan of Concern is the U.S. Bank Tower loan (8.4%), which is collateralized by an office building located in Los Angeles, CA. Occupancy decreased to 55% as of September 2011 compared to 90.5% at issuance. This was due to the turnover of the two largest tenants at the property (combined 38% of NRA) in 2009 and 2010. The most recent reported debt service coverage ratio (DSCR) is 1.07x. The loan remains current and is with the master servicer. Fitch expects the loan may default at its July 2013 loan maturity, although any losses may be mitigated by the high quality asset and lower leveraged loan. The second largest Loan of Concern is a seven multifamily portfolio (1.6% of the pool, 116 units total) located in the Allston-Brighton and South End sections of the Boston MSA. The majority of the tenants are students and the anticipated September occupancy is 100%. However, the 2011 NOI was 69% below what was originally underwritten at issuance, with a DSCR of 0.39x. The loan remains current and is with the master servicer. The loan matures in October 2018. Fitch downgrades the following classes as indicated: -- $9.1 million class H to 'Bsf' from 'BBsf'; Outlook to Negative from Stable; -- $9.1 million class J to 'CCCsf' from 'Bsf'; RE 70%; -- $3 million class O to 'CCsf' from 'CCCsf'; RE 0%. Fitch affirms the following classes as indicated: -- $46.1 million class A-3 at 'AAAsf'; Outlook Stable; -- $589.2 million class A-4 at 'AAAsf'; Outlook Stable; -- $31.8 million class B at 'AAAsf'; Outlook Stable; -- $12.1 million class C at 'AAAsf''; Outlook Stable; -- $24.2 million class D at 'AAsf'; Outlook to Negative from Stable; -- $12.1 million class E at 'Asf'; Outlook to Negative from Stable; -- $9.1 million class F at 'BBBsf'; Outlook to Negative from Stable; -- $10.6 million class G at 'BBsf'; Outlook to Negative from Stable; -- $3 million class K at 'CCCsf'; RE 0%; -- $3 million class L at 'CCCsf'; RE 0%; -- $3 million class M at 'CCCsf'; RE 0%; -- $4.5 million class N at 'CCCsf'; RE 0%. Fitch does not rate class P. Classes A-1, A-2 have paid in full. Fitch previously withdrew the rating on classes X-1 and X-2. MORGAN STANLEY 2012-C5: Fitch Releases Presale Report on Certs. --------------------------------------------------------------- Fitch Ratings has issued a presale report on Morgan Stanley Bank of America Merrill Lynch Trust 2012-C5 Commercial Mortgage Pass- Through Certificates. Fitch expects to rate the transaction and assign Outlooks as follows: -- $86,000,000 class A-1 'AAAsf'; Outlook Stable; -- $221,800,000 class A-2 'AAAsf'; Outlook Stable; -- $149,600,000 class A-3 'AAAsf'; Outlook Stable; -- $489,820,000 class A-4 'AAAsf'; Outlook Stable; -- $59,204,000b class A-S 'AAAsf'; Outlook Stable; -- $32,984,000b class B 'AAsf'; Outlook Stable; -- $116,714,000b class PST 'Asf'; Outlook Stable; -- $24,526,000b class C 'Asf'; Outlook Stable; -- $1,065,628,000a,c class X-A 'AAAsf'; Outlook Stable; -- $65,968,000a,c class X-B 'AAsf'; Outlook Stable; -- $27,064,000a class D 'BBB+sf'; Outlook Stable; -- $49,053,000a class E 'BBB-sf'; Outlook Stable; -- $8,457,000a class F 'BBB-sf'; Outlook Stable; -- $18,607,000a class G 'BB+sf'; Outlook Stable; -- $23,680,000a class H 'Bsf'; Outlook Stable. a. Privately placed pursuant to Rule 144A. b. Class A-S, class B, and class C certificates may be exchanged for class PST certificates, and class PST certificates may be exchanged for class A-S, class B and class C certificates. c. Notional amount and interest only. The expected ratings are based on information provided by the issuer as of July 6, 2012. Fitch does not expect to rate the $221,583,509 interest-only class X-C or the $45,670,509 class J. The certificates represent the beneficial ownership in the trust, primary assets of which are 72 loans secured by 98 commercial properties having an aggregate principal balance of approximately $1.35 billion as of the cutoff date. The loans were contributed to the trust by Morgan Stanley Mortgage Capital Holdings LLC and Bank of America, National Association. Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 80.5% of the properties by balance, cash flow analysis of 86%, and asset summary reviews on 86% of the pool. The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.15 times (x), a Fitch stressed loan-to-value (LTV) of 102.7%, and a Fitch debt yield of 9.2%. Fitch's aggregate net cash flow represents a variance of 5.6% to issuer cash flows. The Master Servicer and Special Servicer will be Bank of America, National Association and Midland Loan Services, a Division of PNC Bank, National Association, rated 'CMS2+' and 'CSS1', respectively, by Fitch. MULTI SECURITY: S&P Cuts Rating on Class N Notes to 'D(sf)' ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 11 classes from Multi Security Asset Trust L.P. series 2005-RR4 (MSAT 2005-RR4), a U.S. resecuritized real estate mortgage investment conduit (re-REMIC) transaction and removed them from CreditWatch with negative implications. "At the same time, we affirmed our ratings on three other classes from the same transaction and removed them from CreditWatch negative. We subsequently withdrew our rating on the class X-1 interest-only certificates based on our current criteria. We lowered our rating on class N to 'D (sf)' due to interest shortfalls that we expect will continue for the foreseeable future," S&P said. "The rating actions reflect our analysis of the transaction's liability structure and the credit characteristics of the underlying collateral using our criteria for rating global collateralized debt obligations (CDOs) of pooled structured finance assets," S&P said. "The downgrades also reflect results of the largest obligor default test, part of our supplemental stress test," S&P said. The largest obligor default test assesses the ability of a rated CDO of pooled structured finance liability tranche to withstand the default of a minimum number of the largest credit or obligor exposures within an asset pool, factoring in the underlying assets' credit quality. The ratings on classes C through J reflect the results of the largest obligor test. "The global CDOs of pooled structured finance assets criteria include revisions to our assumptions on correlations, recovery rates, and the collateral's default patterns and timings. The criteria also include supplemental stress tests (the largest obligor default test and the largest industry default test)," S&P said. According to the June 28, 2012, trustee report, MSAT 2005-RR4 was collateralized by 19 CMBS classes ($353.7 million, 100%) from seven distinct transactions issued between 1998 and 2001. Approximately $63.4 million (17.9%) of the collateral are credit estimated to be 'D (sf)'. According to the June trustee report, the transaction had accumulated interest shortfalls totaling $7.3 million, which had affected class M and the classes subordinate to it. Class N reported an accumulated interest shortfall of $255,217 for the most recent period. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it determines necessary. Ratings Lowered and Removed From Creditwatch Negative Multi Security Asset Trust L.P. US$740.566 mil commercial mortgage-backed securities pass-through certificates series 2005-RR4 Rating Rating Class To From A-3 A+ (sf) AA- (sf)/Watch Neg B BBB- (sf) BBB+ (sf)/Watch Neg C BB+ (sf) BBB+ (sf)/Watch Neg D BB- (sf) BBB (sf)/Watch Neg E B+ (sf) BBB- (sf)/Watch Neg F B- (sf) BBB- (sf)/Watch Neg G CCC+ (sf) BB+ (sf)/Watch Neg H CCC- (sf) B+ (sf)/Watch Neg J CCC- (sf) B- (sf)/Watch Neg K CCC- (sf) CCC (sf)/Watch Neg N D (sf) CCC- (sf)/Watch Neg Ratings Affirmed and Removed From Creditwatch Negative Multi Security Asset Trust L.P. US$740.566 mil commercial mortgage-backed securities pass-through certificates series 2005-RR4 Rating Rating Class To From L CCC- (sf) CCC- (sf)/Watch Neg M CCC- (sf) CCC- (sf)/Watch Neg Rating Affirmed, Removed from Creditwatch Negative, and Withdrawn Multi Security Asset Trust L.P. US$740.566 mil commercial mortgage-backed securities pass-through certificates series 2005-RR4 Rating Rating Class To Interim From X-1 NR AAA (sf) AAA (sf)/Watch Neg NOMURA ASSET: Moody's Lowers Rating on Cl. M-2 Tranche to 'Caa2' ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of three tranches from one RMBS transaction, backed by Alt-A loans, issued by Nomura Asset Acceptance Corporation, Series 2003-A3. Ratings Rationale The actions are a result of the recent performance of Alt-A pools originated before 2005 and reflect Moody's updated loss expectations on these pools. The actions also reflect a correction to the prior analysis on this transaction. In this transaction, principal is distributed pro rata to the subordinate and senior tranches. Due to the pro-rata payment, credit enhancement for the senior bonds erodes over time, and these bonds could be exposed to tail-end losses. In Moody's prior rating analysis, credit enhancement to the bonds was not adjusted to reflect the pro-rata pay structure. Moody's current cash-flow approach captures the structural nuances of the transaction by projecting losses to the bonds under a variety of loss and prepayment scenarios using Structured Finance Workstation(R) (SFW), the cash flow model developed by Moody's Wall Street Analytics. The final ratings on the bonds reflect the estimated losses under the different scenarios. The methodologies used in this rating were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Pre-2005 US RMBS Surveillance Methodology" published in January 2012. The methodology used in rating Interest-Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. When assigning the final ratings to senior bonds, in addition to the methodologies described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. For bonds backed by small pools, Moody's also considered the current pipeline composition as well as any specific loss allocation rules that could preserve or deplete the overcollateralization available for the senior bonds at different pace. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. Complete rating actions are as follows: Issuer: Nomura Asset Acceptance Corporation, Alternative Loan Trust, Series 2003-A3 Cl. A-1, Downgraded to A3 (sf); previously on Jan 31, 2012 Aa3 (sf) Placed Under Review for Possible Downgrade Cl. M-1, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. M-2, Downgraded to Caa2 (sf); previously on Feb 28, 2011 Downgraded to B1 (sf) A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF291069 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237256 OAK HILL III: Moody's Raises Rating on Class D Notes From 'Ba1' -------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Oak Hill Credit Partners III, Ltd.: U.S.$28,000,000 Class B-1 Senior Secured Deferrable Floating Rate Notes, Due 2015, Upgraded to Aaa (sf); previously on July 1, 2011 Upgraded to Aa1 (sf); U.S.$15,000,000 Class B-2 Senior Secured Deferrable Fixed Rate Notes, Due 2015, Upgraded to Aaa (sf); previously on July 1, 2011 Upgraded to Aa1 (sf); U.S.$17,500,000 Class C-1 Senior Secured Deferrable Floating Rate Notes, Due 2015, Upgraded to A1 (sf); previously on July 1, 2011 Upgraded to Baa2 (sf); U.S.$11,000,000 Class C-2 Senior Secured Deferrable Fixed Rate Notes, Due 2015, Upgraded to A1 (sf); previously on July 1, 2011 Upgraded to Baa2 (sf); U.S.$5,000,000 Class D Secured Deferrable Fixed Rate Notes, Due 2015, Upgraded to Baa1 (sf); previously on July 1, 2011 Upgraded to Ba1 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes are primarily a result of deleveraging of the senior notes, which resulted in an increase in the transaction's overcollateralization ratios since the last rating action in July 2011. Moody's notes that the Class A-1 Notes have been paid down by approximately 66% or $95.2 million since the last rating action. Based on the latest trustee report dated June 1, 2012, the Class A, Class B, Class C and Class D overcollateralization ratios are reported at 215.75%, 152.49%, 127.68% and 124.14%, respectively, versus June 1, 2011 levels of 161.65%, 132.42%, 118.24% and 116.06%, respectively. Moody's also notes that the deal has benefited from a slight improvement in the credit quality of the underlying portfolio since the last rating action in July 2011. The weighted average rating factor is currently 2302 compared to 2439 in July 2011, as calculated by Moody's. Additionally, Moody's notes that the underlying portfolio includes a number of investments in securities that mature after the maturity date of the notes. Based on the June 2012 trustee report, securities that mature after the maturity date of the notes currently make up approximately 36.26% of the underlying portfolio. 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" published in June 2011, 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. In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds balance of $183.6 million, defaulted par of $0.6 million, a weighted average default probability of 11.18% (implying a WARF of 2302), a weighted average recovery rate upon default of 47.48%, and a diversity score of 24. The default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed. The default probability is derived from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate to be realized on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance trends and collateral manager latitude for trading the collateral are also factors. Oak Hill Credit Partners III, Ltd., issued in December 2003, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (1842) Class A1a: 0 Class A1b: 0 Class B-1: 0 Class B-2: 0 Class C1: +3 Class C2: +3 Class D: +3 Moody's Adjusted WARF + 20% (2762) Class A1a: 0 Class A1b: 0 Class B-1: 0 Class B-2: 0 Class C1: -1 Class C2: -1 Class D: -1 Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, as evidenced by 1) uncertainties of credit conditions in the general economy and 2) the large concentration of speculative-grade debt maturing between 2014 and 2016 which may create challenges for issuers to refinance. CLO notes' performance may also be impacted by 1) the manager's investment strategy and behavior and 2) divergence in legal interpretation of CLO documentation by different transactional parties due to embedded ambiguities. Sources of additional performance uncertainties are described below (choose the ones that are applicable): 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging may accelerate due to high prepayment levels in the loan market and collateral sales by the manager, which may have significant impact on the notes' ratings. 2) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell defaulted assets create additional uncertainties. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. 3) Long-dated assets: The presence of assets that mature beyond the CLO's legal maturity date exposes the deal to liquidation risk on those assets. Moody's assumes an asset's terminal value upon liquidation at maturity to be equal to the lower of an assumed liquidation value (depending on the extent to which the asset's maturity lags that of the liabilities) and the asset's current market value. PRIMA CAPITAL: Fitch Affirms 'CCCsf' Ratings on 2 Note Classes -------------------------------------------------------------- Fitch Ratings has upgraded nine and affirmed two classes of Prima Capital CRE Securitization 2006-1 Ltd./Corp. (Prima 2006-1) reflecting Fitch's base case loss expectation of 9.1%. Fitch's performance expectation incorporates prospective views regarding commercial real estate market values and cash flow declines. In addition, Fitch has revised the Rating Outlooks on two classes of notes. The upgrades to classes A-1 through H reflect an overall increase in credit enhancement resulting from the full repayment of three commercial real estate (CRE) loans and from the continued scheduled portfolio amortization since Fitch's last rating action. The Stable Rating Outlooks on these classes reflect strong and steady performance of the remaining pool. Since the last rating action, principal paydowns to the capital structure totaled $88 million; of which $85 million were from loan repayments and $3 million were from scheduled portfolio amortization. Total principal paydowns to the class A-1 notes since issuance is $240.4 million (approximately 43% of the original transaction balance). The transaction currently has no defaulted assets; however, two assets (4.5%), one commercial mortgage-backed security (CMBS) and one real estate investment trust (REIT) bond, were classified as impaired as of the June 2012 trustee report. Prima 2006-1 is a static CRE collateralized debt obligation (CDO) managed by Prima Capital Advisors, LLC. The CDO was fully ramped at closing and had no reinvestment period. The CDO is primarily collateralized by fixed-rate subordinate CRE debt. As of the June 2012 trustee report and per Fitch categorizations, 49.8% of the total collateral consists of mezzanine loans, B-notes, or non- senior, single borrower CMBS bonds. In general, Fitch treats non- senior, single-borrower CMBS as CRE B-notes in its modeling. The CDO was substantially invested as follows: mezzanine loans (28%), B-notes (21.8%), whole loans (18.7%), CRE CDOs (17%), REIT bonds (13.1%), CMBS (1.3%), and principal cash (0.1%). Under Fitch's updated methodology, approximately 38.2% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 7.1% from the most recent available cash flows, generally from year-end (YE) 2011. Fitch estimates that recoveries will be 76.2%. The largest component of Fitch's base case loss expectation is a B-note (10%) secured by a portion of the retail, office, and parking garage space of a 1.2 million square foot regional mall located in St. Louis, MO. Although the YE 2011 net-operating income (NOI) has improved by 13% when compared to YE 2010, it still remains 9% below the NOI at issuance. Nordstrom opened a new store at the property in September 2011, which has contributed to the slight property NOI growth despite the occupancy declining to 86.9% at YE 2011 from 95.8% at YE 2010. The loan's maturity date was extended to January 2017 following the bankruptcy exit of General Growth Properties. The commercial real estate loan portion of the collateral was analyzed according to the 'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions', which applies stresses to property cash flows and 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. The non-commercial real estate loan portion of the collateral was analyzed according to the 'Global Rating Criteria for Structured Finance CDOs', whereby the default and recovery rates are derived from Fitch's Structured Finance Portfolio Credit Model. Rating default rates and rating recovery rates from both the commercial real estate and non- commercial real estate loan portions of the collateral are then combined on a weighted average basis. The ratings for classes J and K are generally based upon a deterministic analysis and are consistent with a 'CCCsf' rating, meaning default is a possibility, given that the credit enhancement to each of these classes falls below Fitch's base case loss expectation of 9.1%. Fitch has upgraded the following class and has assigned or revised Rating Outlook as indicated: -- $92.9 million class A-1 to 'AAsf' from 'Asf'; Outlook Stable; -- $64 million class A-2 to 'BBBsf' from 'BBsf'; revise Outlook to Stable from Positive; -- $27.8 million class B to 'BBBsf' from 'BBsf'; Outlook Stable; -- $22.3 million class C to 'BBsf' from 'Bsf'; Outlook Stable; -- $16.7 million class D to 'BBsf' from 'Bsf'; Outlook to Stable from Negative; -- $18.1 million class E to 'Bsf' from 'CCCsf'; assign Outlook Stable; -- $12.5 million class F to 'Bsf' from 'CCCsf'; assign Outlook Stable; -- $9.7 million class G to 'Bsf' from 'CCCsf'; assign Outlook Stable; -- $13.9 million class H to 'Bsf' from 'CCCsf'; assign Outlook Stable. In addition, Fitch has affirmed the following classes: -- $15.3 million class J at 'CCCsf' RE 80%; -- $5.6 million class K at 'CCCsf'; RE 0%. SALOMON BROTHERS 1999-C1: Fitch Affirms 'D' Rating on $4.2MM Secs. ------------------------------------------------------------------ Fitch Ratings has affirmed the ratings for Salomon Brothers Mortgage Securities VII, Inc., series 1999-C1. The affirmations are a result of the pool's stable performance following Fitch's prospective review of the potential stresses to the transaction. As of the June 2012 distribution date, the pool's certificate balance has been reduced 91.2% to $64.86 million from $734.85 million at issuance (which includes 2.67% in realized losses). There are 42 of the original 213 loans remaining in the transaction. Seven loans (29.7% of the pool balance) are defeased, including four (24.92%) of the top 10 loans. Fitch modeled losses of 2.50% of the remaining pool; expected losses based on the original pool size are 2.90%, which also reflect losses already incurred to date. Fitch has identified 15 loans of concern (27.55%), which includes two loans (3.67%) currently in special servicing. Interest shortfalls are affecting classes L and M. The largest specially serviced loan (2.45%) is secured by a 30,000 square foot (sf) single-tenant retail property in Casper, WY, which is occupied by Office Max. Office Max, whose lease had expired in March 2012, recently exercised its extension option to renew the lease for an additional five years. The loan remains current as of the June 2012 payment date, and is expected to be returned to the master servicer. The second loan in special servicing (1.23%) is secured by a 53,000 square foot (sf) mixed use property (retail, office and residential) in Troy, NY. The loan transferred to special servicing in December 2008 due to payment default. Both the borrower and loan guarantor subsequently filed for bankruptcy. An approved bankruptcy plan of reorganization is being implemented, which includes a payment plan to reduce the subject loan balance and insure payoff by the March 2016 maturity date. Absent payments, the lender will solicit court approval for relief from stay. Fitch has affirmed the following classes, revised the Rating Outlook on class H, and assigned Recovery Estimates (RE's) as indicated: -- $14.7 million class G at 'AAAsf'; Outlook Stable; -- $20.2 million class H at 'AAsf'; Outlook to Positive from Stable; -- $9.2 million class J at 'BBB-sf'; Outlook Stable; -- $16.5 million class K at 'CCCsf'; RE 100%; -- $4.2 million class L at 'Dsf'; RE 45%. Class M is not rated by Fitch, which due to realized losses has been reduced to zero from $16.5 million at issuance. Classes A-1, A-2, B, C, D, E and F have paid in full. Fitch previously withdrew the rating of the interest-only class X. SALOMON BROTHERS 2000-C2: Moody's Affirms 'C' Ratings on 2 Certs. ----------------------------------------------------------------- Moody's Investors Service affirmed the ratings of seven classes of Salomon Brothers Mortgage Securities VII, Inc., Commercial Mortgage Pass-Through Certificates, Series 2000-C2 as follows: Cl. D, Affirmed at Aaa (sf); previously on Jul 21, 2011 Confirmed at Aaa (sf) Cl. E, Affirmed at Baa1 (sf); previously on Jul 21, 2011 Downgraded to Baa1 (sf) Cl. F, Affirmed at B1 (sf); previously on Jul 21, 2011 Downgraded to B1 (sf) Cl. G, Affirmed at Caa1 (sf); previously on Jul 21, 2011 Downgraded to Caa1 (sf) Cl. J, Affirmed at C (sf); previously on Aug 4, 2010 Downgraded to C (sf) Cl. K, Affirmed at C (sf); previously on Aug 4, 2010 Downgraded to C (sf) Cl. X, Affirmed at Caa3 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Ratings Rationale The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on Moody's current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings. Moody's rating action reflects a cumulative base expected loss of 40.7% of the current balance. At last review, Moody's cumulative base expected loss was 30.7%. Realized losses have increased from 4.6% of the original balance to 4.7% since the prior review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255 Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes. 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth. The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.61 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in Moody's analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit assessment level, is incorporated for loans with similar credit assessments in the same transaction. The conduit model includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. 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 risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 5 compared to 6 at Moody's prior review. In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel-based Large Loan Model v 8.4 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. 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 action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST(R) (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated July 21, 2011. Deal Performance As of the June 18, 2012 distribution date, the transaction's aggregate certificate balance has decreased 90% to $77.3 million from $781.5 million at securitization. The Certificates are collateralized by 23 mortgage loans ranging in size from less than 1% to 33% of the pool, with the top ten non-defeased loans representing 87% of the pool. Three loans, representing 8% of the pool, have defeased and are secured by U.S. Government securities. The pool faces significant near-term refinance risk as loans representing 45% of the pool have either matured or mature within the next six months. Three loans, representing 0.7% 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 (CREFC) monthly reporting package. As part of its ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Seventeen loans have been liquidated from the pool, resulting in an aggregate realized loss of $36.5 million (53% loss severity on average). Eight loans, representing 83% of the pool, are currently in special servicing. The largest specially serviced loan is the 1615 Poydras Street Loan ($25.7 million -- 33.2% of the pool), which is secured by a 501,741 square foot (SF) office building located in downtown New Orleans, Louisiana. The loan was transferred to special servicing in April 2010 when the borrower requested forbearance on the interest rate increase after failing to pay off the loan by its anticipated repayment date (ARD). The loan's maturity date was modified from 2030 to 2020 and the accrued ARD interest was waived contingent on the borrower not defaulting on the loan in the future. The borrower was also required to fund a $1 million reserve account. A second modification was executed in March 2012 causing the loan to be interest only through January 2014. The loan is current. The property was 74% leased as of April 2012 compared to 87% at the prior review. The property performance has decreased from last review to a decrease in base rent. Moody's does not expect a loss from this loan. Moody's LTV and stressed DSCR are 104% and 1.10X, respectively, compared to 86% and 1.32X at last review. The second largest specially serviced loan is the Diamond Point Plaza Loan ($14.2 million -- 18.3% of the pool), which is secured by a 251,365 SF retail center located in suburban Baltimore, Maryland. The loan was transferred to special servicing in June 2002 and became real estate owned (REO) in February 2006. The trust initiated a suit against the borrower for fraud and Wal- Mart, the parent of Sam's Club, for vacating the center prior to its lease expiration. In December 2005 the trust was awarded $2.0 million from Wal-Mart, which it has collected, and a $20.9 million judgment against the borrower and its affiliates. The special servicer, ORIX Capital Markets LLC (OCM), is still pursuing legal action against the borrower to collect the settlement. The master servicer has been recouping funds previously advanced on this loan monthly. A total of $139,706 in trust expenses associated with this loan was recouped in the June 2012 remittance statement. The master servicer declared this loan non-recoverable in March 2012. The special servicer indicated that the property is currently listed for sale. The third largest specially serviced loan is the 250 Plaza Office Building Loan ($12.7 million -- 16.4% of the pool), which is secured by a 201,408 SF office property located in Milwaukee, Wisconsin. The property includes an attached 435 space, four-story parking garage. The loan was transferred to special servicing in February 2009 and is now REO. The property was 43% leased as of May 2012 compared to 47% leased at last review. The remaining five specially serviced properties are secured by a mix of property types. Moody's estimates an aggregate $29.98 million loss for the specially serviced loans (78% expected loss on average). Based on the most recent remittance statement, Classes F through P have experienced cumulative interest shortfalls totaling $15.5 million. Moody's anticipates that the pool will continue to experience interest shortfalls because of the high exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal entitlement reductions (ASERs) and extraordinary trust expenses. Moody's was provided with full year 2011 operating results for 100% of the pool's non-specially serviced and non-defeased loans. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 90% compared to 78% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 16.7% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.5%. Excluding special serviced and troubled loans, Moody's actual and stressed DSCRs are 1.03X and 1.87X, respectively, compared to 1.22X and 1.98X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) 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. SANTANDER DRIVE: S&P Raises Ratings on 17 Classes ------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on 17 classes from Santander Drive Auto Receivables Trust series 2010-2, 2010-3, 2010-B, 2011-S1, and 2011-S2, as well as Santander Consumer Acquired Receivables Trust ("SCART") series 2011-S1 and 2011-WO. "In addition, we affirmed our ratings on 52 classes from 15 Santander-related transactions. The raised and affirmed ratings reflect our view that the total credit support as a percent of the amortizing pool balances, compared with our expected remaining losses, is adequate for each of the raised or affirmed ratings," S&P said. "Each rating action also reflects the transaction's collateral performance to date, our views regarding future collateral performance, and the structure of each transaction. In addition, our analysis incorporated secondary credit factors such as credit stability, payment priorities under various scenarios, and sector- and issuer-specific analysis," S&P said. Ten of the SDART transactions are typical securitizations backed by subprime auto loans predominantly originated by Santander Consumer USA Inc. (SC USA). SDART 2011-S1 and 2011-S2 are resecuritizations of previous subprime auto loan issuances. For both, the overcollateralization from a previous Santander issuance was retranched as subordinate classes. SDART 2011-S1 is a retranching of SDART 2010-1, while SDART 2011-S2 is a retranching of SDART 2010-A. SCART 2011-WO is secured by a pool of auto loans originated by World Omni and purchased by SC USA. SCART 2011-S1 is a resecuritization of CitiFinancial Auto Issuance Trust 2009-1 (CFAIT 2009-1), a pool of auto loan receivables originated by CitiFinancial Auto Ltd. SC USA reached an agreement to purchase $3.2 billion of outstanding auto loans from CitiFinancial in June 2010. As is common for many issuers in the auto sector, total delinquencies have stabilized and default rates have decreased for each of the Santander-related securitizations. These factors, coupled with higher recovery rates (which have been driven by favorable used vehicle values), have led to improved performance. CitiFinancial Auto Issuance Trust and the two Santander Consumer Acquired Receivables Trust transactions also benefit from a stronger composition of collateral including higher FICO scores and lower loan-to-values. Table 1 Collateral Performance (%) As of the June 2012 distribution date Santander Drive Auto Receivables Trust Pool Current 60+ day Series Mo. factor CNL delinq. CRR 2010-1/2011-S1* 25 40.17 9.13 6.24 42.29 2010-A/2011-S2* 24 41.03 7.75 5.93 43.75 2010-2 22 45.72 6.43 5.32 44.27 2010-3 19 46.76 4.79 4.93 44.41 2010-B 18 55.53 4.92 4.37 43.50 2011-3 9 76.51 1.86 3.21 40.78 2011-4 8 82.09 1.56 2.77 43.19 2012-1 5 88.86 0.72 2.61 37.50 2012-2 3 94.14 0.06 2.12 53.03 Santander Consumer Acquired Receivables Trust & CitiFinancial Auto Issuance Trust Pool Current 60+ day Series Mo. factor CNL delinq. CRR 2011-WO 17 49.75 1.17 1.51 66.18 2011-S1/CFAIT 09-1* 32 33.82 4.27 2.66 55.63 * SDART 2011-S1, SDART 2011-S2 and SCART 2011-S1 are resecuritizations and share the same performance information as the series listed next to them in the table. Note: SDART 2012-3 only has one month of performance and has been omitted. CNL - cumulative net loss. CRR - cumulative recovery rate. "The collateral of the transactions has performed better than we initially expected and, as such, we have lowered our loss expectations for each transaction from the SDART 2010 vintage as well as series 2011-S1, 2011-S2, SCART 2011-S1, SCART-WO and CFAIT 2009-1 (see table 2)," S&P said. CNL exp. - Cumulative net loss expectations. N/A - not applicable. *Represents Initial lifetime CNL expectation on the underlying transaction (SDART 2010-1, SDART 2010-A and CFAIT 09-1) Given the short amount of securitized performance for SDART 2011-3, 2011-4, 2012-1, 2012-2, and 2012-3, S&P is maintaining its initial loss expectations and affirmed its ratings on these series. "Each transaction was structured with credit enhancement consisting of overcollateralization, non-amortizing reserve accounts, and excess spread, and the senior classes (excluding CFAIT 2009-1, SDART 2010-1, and SDART 2010-A) also benefit from subordination. The credit enhancement for each transaction is currently at its required level and we expect them to remain at their targets," S&P said. "In addition, the credit enhancement for each transaction has grown as a percentage of the amortizing collateral balances (see table 3). The increased level of credit enhancement coupled with our loss expectations for each of the transactions has led to higher loss coverage when compared to deal inception, which supports our raised and affirmed ratings. Table 3 Hard Credit Support (%) As of the June 2012 distribution date Santander Drive Auto Receivables Trust Total hard Current credit total hard support at credit support(i) Series Class issuance(i) (% of current) 2010-1 A 44.50 60.48 2010-A A 42.25 53.37 2010-2 A 45.25 85.85 2010-2 B 36.25 66.17 2010-2 C 24.00 39.37 2010-3 A 46.00 87.17 2010-3 B 37.75 69.53 2010-3 C 23.25 38.53 2010-B A 46.00 87.83 2010-B B 37.75 72.98 2010-B C 23.25 46.86 2010-B D 12.00 26.60 2011-S1 B 40.42 45.98 2011-S1 C 30.42 36.98 2011-S1 D 17.17 22.98 2011-S2 B 40.59 50.81 2011-S2 C 30.19 41.51 2011-S2 C 17.19 28.91 2011-S2 C 7.19 22.37 2011-3 A 41.00 61.33 2011-3 B 31.50 48.91 2011-3 C 19.50 33.23 2011-3 D 10.50 21.46 2011-3 E 7.50 17.54 2011-4 A 41.00 56.21 2011-4 B 31.50 44.64 2011-4 C 19.50 30.02 2011-4 D 10.50 19.06 2011-4 E 7.50 15.41 2012-1 A 44.00 53.82 2012-1 B 34.50 43.12 2012-1 C 22.50 29.62 2012-1 D 13.50 19.49 2012-1 E 10.50 16.11 2012-2 A 44.00 49.81 2012-2 B 34.50 39.72 2012-2 C 22.50 26.97 2012-2 D 14.50 18.47 2012-2 E 10.50 14.22 2012-3 A 44.00 45.86 2012-3 B 34.50 36.19 2012-3 C 22.50 23.98 2012-3 D 13.50 14.82 2012-3 E 10.50 11.77 Santander Consumer Acquired Receivables Trust Total hard Current credit total hard support at credit support (i) Series Class issuance (i) (% of current) 2011-WO A 31.95 58.66 2011-WO B 26.95 48.61 2011-WO C 18.60 31.83 2011-WO D 11.60 17.76 2011-S1 A 31.87 43.65 2011-S1 B 19.87 27.28 2011-S1 C 9.87 14.61 2011-S1 D 6.87 11.13 Citifinancial Auto Issuance Trust Total hard Current credit total hard support at credit support (i) Series Class issuance (i) (% of current) CFAIT 09-1 A 33.75 65.14 (i) Consists of overcollateralization, reserve account and includes subordination for the higher tranches, as a percent of the total pool balance. Excludes any excess spread which can also provide additional enhancement. "We incorporated cash flow analysis in the review of each series, which accounted for current and past performance to estimate future performance. The various cash flow scenarios included forward-looking assumptions on recoveries, timing of losses, and voluntary absolute prepayment speeds that we believe are appropriate given the transaction's current performance," S&P said. "The results demonstrated, in our view, that all of the classes have adequate credit enhancement at the raised and affirmed rating levels. We will continue to monitor the performance of the referenced portfolio to ensure that the credit enhancement remains sufficient, in our view, to cover our revised cumulative net loss expectations under our stress scenarios for each of the rated classes," S&P said. Ratings Raised Santander Drive Auto Receivables Trust Rating Rating Series Class To From 2011-S1 D A- (sf) BBB (sf) 2011-S2 C AA- (sf) A (sf) 2011-S2 D A+ (sf) BBB (sf) 2011-S2 E A- (sf) BB (sf) 2010-2 B AA+ (sf) AA (sf) 2010-2 C AA (sf) A (sf) 2010-3 B AA+ (sf) AA (sf) 2010-3 C AA (sf) A (sf) 2010-B B AA+ (sf) AA (sf) 2010-B C AA (sf) A (sf) 2010-B D AA- (sf) BBB (sf) Santander Consumer Acquired Receivables Trust Rating Rating Series Class To From 2011-S1 A AA+ (sf) AA (sf) 2011-S1 C AA- (sf) A (sf) 2011-S1 D A+ (sf) BBB (sf) 2011-WO B AA+ (sf) AA (sf) 2011-WO C AA (sf) A (sf) 2011-WO D AA- (sf) BBB (sf) Ratings Affirmed Santander Drive Auto Receivables Trust Series Class Rating 2010-1 A-3 AAA (sf) 2010-1 A-4 AAA (sf) 2010-A A-2 AAA (sf) 2010-A A-3 AAA (sf) 2010-A A-4 AAA (sf) 2010-2 A-2 AAA (sf) 2010-2 A-3 AAA (sf) 2010-3 A-3 AAA (sf) 2010-B A-2 AAA (sf) 2010-B A-3 AAA (sf) 2011-S1 B AA (sf) 2011-S1 C A (sf) 2011-S2 B AA (sf) 2011-3 A-2 AAA (sf) 2011-3 A-3 AAA (sf) 2011-3 B AA (sf) 2011-3 C A (sf) 2011-3 D BBB (sf) 2011-3 E BB (sf) 2011-4 A-2 AAA (sf) 2011-4 A-3 AAA (sf) 2011-4 B AA (sf) 2011-4 C A (sf) 2011-4 D BBB (sf) 2011-4 E BB (sf) 2012-1 A-1 A-1+ (sf) 2012-1 A-2 AAA (sf) 2012-1 A-3 AAA (sf) 2012-1 B AA (sf) 2012-1 C A (sf) 2012-1 D BBB (sf) 2012-1 E BB+ (sf) 2012-2 A-1 A-1+ (sf) 2012-2 A-2 AAA (sf) 2012-2 A-3 AAA (sf) 2012-2 B AA (sf) 2012-2 C A (sf) 2012-2 D BBB (sf) 2012-2 E BB+ (sf) 2012-3 A-1 A-1+ (sf) 2012-3 A-2 AAA (sf) 2012-3 A-3 AAA (sf) 2012-3 B AA (sf) 2012-3 C A (sf) 2012-3 D BBB (sf) 2012-3 E BB+ (sf) Santander Consumer Acquired Receivables Trust Series Class Rating 2011-S1 B AA (sf) 2011-WO A-2 AAA (sf) 2011-WO A-3 AAA (sf) 2011-WO A-4 AAA (sf) Citifinancial Auto Issuance Trust Series Class Rating 2009-1 A-3 AAA (sf) 2009-1 A-4 AAA (sf) SANTANDER DRIVE 2012-4: Moody's Rates $47MM Class E Notes 'Ba2' --------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to the notes issued by Santander Drive Auto Receivables Trust 2012-4 (SDART 2012-4). This is the fourth public subprime transaction of the year for Santander Consumer USA Inc. (SCUSA). The complete rating actions are as follows: Issuer: Santander Drive Auto Receivables Trust 2012-4 $281,000,000, 0.43232%, Class A-1 Notes, rated P-1 (sf) $398,660,000, 0.79%, Class A-2 Notes, rated Aaa (sf) $237,850,000, 1.04%, Class A-3 Notes, rated Aaa (sf) $150,290,000, 1.83%, Class B Notes, rated Aa1 (sf) $189,830,000, 2.94%, Class C Notes, rated Aa3 (sf) $142,370,000, 3.50%, Class D Notes, rated Baa2 (sf) $47,460,000, 4.99%, Class E Notes, rated Ba2 (sf) Ratings Rationale Moody's said the ratings are based on the quality of the underlying auto loans and their expected performance, the strength of the structure, the availability of excess spread over the life of the transaction, and the experience and expertise of SCUSA as servicer. The principal methodology used in this rating was "Moody's Approach to Rating U.S. Auto Loan-Backed Securities," published in May 2011. Moody's median cumulative net loss expectation for the SDART 2012- 4 pool is 15.0% and the Aaa level is 47.0%. The loss expectation was based on an analysis of SCUSA's portfolio vintage performance as well as performance of past securitizations, and current expectations for future economic conditions. The Assumption Volatility Score for this transaction is Low/Medium versus a Medium for the sector. This is driven by the a Low/Medium assessment for Governance due to the presence of an investment- grade rated parent, Banco Santander (Baa2 /P-2, Ratings Under Review for Possible Downgrade), in addition to the size and strength of SCUSA's servicing platform. Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches). Moody's Parameter Sensitivities: If the net loss used in determining the initial rating were changed to 19.0%, 25.5% or 29.0%, the initial model output for the Class A notes might change from Aaa to Aa1, A1, and Baa1, respectively. If the net loss used in determining the initial rating were changed to 15.5%, 19.5% or 22.5%, the initial model output for the Class B notes might change from Aa1 to Aa2, A2, and Baa2, respectively. If the net loss used in determining the initial rating were changed to 15.25%, 16.5% or 20%, the initial model output for the Class C notes might change from Aa3 to A1, Baa1, and Ba1, respectively. If the net loss used in determining the initial rating were changed to 15.25%, 17.5% or 20.0%, the initial model output for the Class D notes might change from Baa2 to Baa3, Ba3, and B3 respectively. If the net loss used in determining the initial rating were changed to 15.25%, 16.5% or 18.5%, the initial model output for the Class E notes might change from Ba2 to Ba3, B3, and B3 respectively. Parameter Sensitivities are not intended to measure how the rating of the security might migrate over time, rather they are designed to provide a quantitative calculation of how the initial rating might change if key input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. Parameter Sensitivities only reflect the ratings impact of each scenario from a quantitative/model-indicated standpoint. Qualitative factors are also taken into consideration in the ratings process, so the actual ratings that would be assigned in each case could vary from the information presented in the Parameter Sensitivity analysis. SLM STUDENT 2002-7: Fitch Affirms 'BBsf' Rating on Class B Notes ---------------------------------------------------------------- Fitch Ratings affirms the senior student loan notes at 'AAAsf' and subordinate notes at 'BBsf' issued by SLM Student Loan Trust 2002- 7. The Rating Outlook on the senior notes, which is tied to the sovereign rating of the U.S. government, remains Negative, while the Rating Outlook on the subordinate note remains Stable. Fitch used its 'Global Structured Finance Rating Criteria', and 'Rating U.S. Federal Family Education Loan Program Student Loan ABS' to review the ratings. The ratings on the senior and subordinate notes are affirmed based on the sufficient level of credit enhancement to cover the applicable risk factor stresses. Credit enhancement for the senior notes consists of overcollateralization, subordination provided by the class B note, and projected minimum excess spread, while the subordinated notes benefit from projected excess spread only. Fitch has taken the following rating actions: SLM Student Loan Trust 2002-7: -- Class A-5 affirmed at 'AAAsf'; Outlook Negative; -- Class A-6 affirmed at 'AAAsf'; Outlook Negative; -- Class A-7 affirmed at 'AAAsf'; Outlook Negative; -- Class A-8 affirmed at 'AAAsf'; Outlook Negative; -- Class A-9 affirmed at 'AAAsf'; Outlook Negative; -- Class A-10 affirmed at 'AAAsf'; Outlook Negative; -- Class A-11 affirmed at 'AAAsf'; Outlook Negative; -- Class B affirmed at 'BBsf'; Outlook Stable. SLM STUDENT 2002-7: Fitch Affirms 'BBsf' Rating on Class B Notes ---------------------------------------------------------------- Fitch Ratings affirms the senior student loan notes at 'AAAsf' and subordinate notes at 'BBsf' issued by SLM Student Loan Trust 2002- 7. The Rating Outlook on the senior notes, which is tied to the sovereign rating of the U.S. government, remains Negative, while the Rating Outlook on the subordinate note remains Stable. Fitch used its 'Global Structured Finance Rating Criteria', and 'Rating U.S. Federal Family Education Loan Program Student Loan ABS' to review the ratings. The ratings on the senior and subordinate notes are affirmed based on the sufficient level of credit enhancement to cover the applicable risk factor stresses. Credit enhancement for the senior notes consists of overcollateralization, subordination provided by the class B note, and projected minimum excess spread, while the subordinated notes benefit from projected excess spread only. Fitch has taken the following rating actions: SLM Student Loan Trust 2002-7: -- Class A-5 affirmed at 'AAAsf'; Outlook Negative; -- Class A-6 affirmed at 'AAAsf'; Outlook Negative; -- Class A-7 affirmed at 'AAAsf'; Outlook Negative; -- Class A-8 affirmed at 'AAAsf'; Outlook Negative; -- Class A-9 affirmed at 'AAAsf'; Outlook Negative; -- Class A-10 affirmed at 'AAAsf'; Outlook Negative; -- Class A-11 affirmed at 'AAAsf'; Outlook Negative; -- Class B affirmed at 'BBsf'; Outlook Stable. SLM STUDENT 2003-7: Fitch Affirms 'BBsf' Rating on Class B Notes ---------------------------------------------------------------- Fitch Ratings affirms the senior student loan notes at 'AAAsf' and subordinate notes at 'BBsf' issued by SLM Student Loan Trust 2003-7. The Rating Outlook on the senior notes, which is tied to the sovereign rating of the U.S. government, remains Negative, while the Rating Outlook on the subordinate note remains Stable. Fitch used its 'Global Structured Finance Rating Criteria', and 'Rating U.S. Federal Family Education Loan Program Student Loan ABS' to review the ratings. The ratings on the senior and subordinate notes are affirmed based on the sufficient level of credit enhancement to cover the applicable risk factor stresses. Credit enhancement for the senior notes consists of overcollateralization, subordination provided by the class B note, and projected minimum excess spread, while the subordinated notes benefit from projected excess spread only. Fitch has taken the following rating actions: SLM Student Loan Trust 2003-7: -- Class A-5A affirmed at 'AAAsf'; Outlook Negative; -- Class A-5B affirmed at 'AAAsf'; Outlook Negative; -- Class B affirmed at 'BBsf'; Outlook Stable. SLM STUDENT 2004-14: Fitch Affirms 'BBsf' Rating on Class B Notes ----------------------------------------------------------------- Fitch Ratings affirms senior student loan notes at 'AAAsf' and subordinate notes at 'BBsf' issued by SLM Student Loan Trust 2003- 14. The Rating Outlook on the senior notes, which is tied to the sovereign rating of the U.S. government, remains Negative, while the Rating Outlook on the subordinate note remains Stable. Fitch used its 'Global Structured Finance Rating Criteria', and 'Rating U.S. Federal Family Education Loan Program Student Loan ABS' to review the ratings. The ratings on the senior and subordinate notes are affirmed based on the sufficient level of credit enhancement to cover the applicable risk factor stresses. Credit enhancement for the senior notes consists of overcollateralization, subordination provided by the class B note, and projected minimum excess spread, while the subordinated notes benefit from projected excess spread only. Fitch has taken the following rating actions: SLM Student Loan Trust 2003-14: -- Class A-4 at 'AAAsf'; Outlook Negative; -- Class A-5 at 'AAAsf'; Outlook Negative; -- Class A-6 at 'AAAsf'; Outlook Negative; -- Class A-7 at 'AAAsf'; Outlook Negative; -- Class B at 'BBsf'; Outlook Stable. STRUCTURED ADJUSTABLE: Moody's Cuts Rating on 3 Tranches to 'C' --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 56 tranches, upgraded the rating of one tranche and confirmed the ratings of 20 tranches from 12 RMBS transactions, backed by Alt-A loans, issued by Structured Adjustable Rate Mortgage Loan Trust. Ratings Rationale The actions are a result of the recent performance of Alt-A pools originated before 2005 and reflect Moody's updated loss expectations on these pools.The downgrades in the rating action are a result of deteriorating performance and/or structural features resulting in higher expected losses for certain bonds than previously anticipated. For example, for shifting interest structures, back-ended liquidations could expose the seniors to tail-end losses. In its current approach, Moody's captures this risk by running each individual pool through a variety of loss and prepayment scenarios in the Structured Finance Workstation(R) (SFW), 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 nuances of the transaction. In addition, Moody's has corrected the ratings on bonds issued from the SARM 2004-1 transaction. Moody's prior rating action was based on credit enhancement calculated per the prospectus supplement, which allows for the subsequent losses on Pool 2 mortgage loans to be allocated sequentially to B2-I and B1-I, once subordinate tranches B3 through B6 have been depleted. The bond administrator, however, has confirmed that it is following the allocation rules set forth in the Pooling and Servicing Agreement (PSA), which allocates these losses sequentially to B2-II and B1- II, once subordinate tranches B3 through B6 have been depleted. Moody's has now calculated the credit enhancement per the PSA and corrected the ratings accordingly. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Pre-2005 US RMBS Surveillance Methodology" published in January 2012. The methodology used in rating Interest-Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications; and 2) small pool volatility. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on Alt-A pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For Alt-A and Option Arm pools, Moody's first applies a baseline delinquency rate of 10% for 2004, 5% for 2003 and 3% for 2002 and prior. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2004 pool with 75 loans, the adjusted rate of new delinquency is 10.1%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.50 to 2.0 for current delinquencies that range from less than 2.5% to greater than 30% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. When assigning the final ratings to senior bonds, in addition to the methodologies described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. For bonds backed by small pools, Moody's also considered the current pipeline composition as well as any specific loss allocation rules that could preserve or deplete the overcollateralization available for the senior bonds at different pace. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. Complete rating actions are as follows: Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-1 Cl. 1-A, Downgraded to B1 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 2-A, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 2-AX, Downgraded to Ba1 (sf); previously on Feb 22, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 3-A1, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A2, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A3, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 4-A2, Downgraded to Baa3 (sf); previously on Mar 10, 2011 Downgraded to Baa1 (sf) Cl. 4-A3, Downgraded to Baa3 (sf); previously on Mar 10, 2011 Downgraded to Baa1 (sf) Cl. 4-A4, Downgraded to Baa3 (sf); previously on Mar 10, 2011 Downgraded to Baa1 (sf) Cl. 5-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 6-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-10 Cl. 1-A1, Downgraded to B1 (sf); previously on Mar 10, 2011 Downgraded to Ba3 (sf) Cl. 3-A2, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-11 Cl. A, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-12 Cl. 1-A1, Downgraded to Ba2 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf) Cl. 1-A2, Downgraded to Ba3 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf) Cl. 2-A, Downgraded to Ba2 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf) Cl. 3-A1, Downgraded to Ba2 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf) Cl. 3-A2, Downgraded to Ba2 (sf); previously on Mar 10, 2011 Downgraded to Baa2 (sf) Cl. 4-A, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 5-A, Downgraded to Ba2 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf) Cl. 6-A, Downgraded to Ba2 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf) Cl. 7-A1, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. 7-A2, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. 7-A3, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. 8-A, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 9-A, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. B1, Downgraded to Ca (sf); previously on Mar 10, 2011 Downgraded to Caa3 (sf) Cl. B1-X, Downgraded to Ca (sf); previously on Mar 10, 2011 Downgraded to Caa3 (sf) Cl. B3, Downgraded to C (sf); previously on Mar 10, 2011 Downgraded to Ca (sf) Cl. B3-X, Downgraded to C (sf); previously on Mar 10, 2011 Downgraded to Ca (sf) Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-14 Cl. 1-A, Downgraded to Ba2 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf) Cl. 2-A, Downgraded to Ba1 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf) Cl. 3-A1, Downgraded to Baa3 (sf); previously on Mar 10, 2011 Downgraded to Baa2 (sf) Cl. 4-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. 6-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. B1, Confirmed at Ca (sf); previously on Jan 31, 2012 Ca (sf) Placed Under Review for Possible Upgrade Cl. B1-X, Confirmed at Ca (sf); previously on Feb 22, 2012 Ca (sf) Placed Under Review for Possible Upgrade Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-15 Cl. A, Downgraded to Caa1 (sf); previously on Jan 31, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. B1, Downgraded to C (sf); previously on Mar 10, 2011 Downgraded to Ca (sf) Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-17 Cl. A1, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. A1X, Confirmed at Baa3 (sf); previously on Feb 22, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. A2, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. A2X, Confirmed at Baa3 (sf); previously on Feb 22, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. A3, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-2 Cl. 1-A1, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 1-A2, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 1-AX, Downgraded to Ba2 (sf); previously on Feb 22, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 3-A, Downgraded to Ba1 (sf); previously on Mar 10, 2011 Downgraded to Baa3 (sf) Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-4 Cl. 1-A1, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 1-A2, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 2A, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A1, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A2, Downgraded to Ba2 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A3, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A4, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A5, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 4-A, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. 5-A, Downgraded to Ba3 (sf); previously on Jan 31, 2012 Ba1 (sf) Placed Under Review for Possible Downgrade Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-5 Cl. 1-A, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 2-A, Downgraded to Baa3 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A1, Downgraded to Baa1 (sf); previously on Jan 31, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A2, Downgraded to Baa3 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A3, Downgraded to Baa3 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A4, Downgraded to Baa3 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 3-A5, Downgraded to Baa3 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 4-A, Downgraded to Baa3 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 5-A, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 5-AX, Downgraded to Ba1 (sf); previously on Feb 22, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-6 Cl. 1-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A1, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A2, Confirmed at Baa2 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. 5-A3, Upgraded to A2 (sf); previously on Mar 10, 2011 Downgraded to Baa2 (sf) Cl. 6-A, Confirmed at Baa3 (sf); previously on Jan 31, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Issuer: Structured Adjustable Rate Mortgage Loan Trust 2004-9XS Cl. A, Downgraded to Ba1 (sf); previously on Jan 31, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF290453 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237256 TALMAGE 2006-3: Fitch Affirms 'CCCsf' Ratings on 3 Note Classes --------------------------------------------------------------- Fitch Ratings has upgraded one class and affirmed four classes of Talmage Structured Real Estate Funding 2006-3 Ltd./LLC (Talmage 2006-3) reflecting a significant increase in credit enhancement due to principal paydown since Fitch's last review. Fitch's base case loss expectation is currently 45.1% for the remaining assets. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. Since Fitch's last review, the transaction has benefited from repayments of approximately $30 million. The transaction is now considered concentrated with only 11 obligors. Talmage 2006-3 is primarily collateralized by commercial real estate (CRE) debt of which approximately 38.8% is subordinate debt or non-senior tranches from structured finance transactions. Fitch expects significant losses upon default for the subordinate positions, since they are generally highly leveraged. Two loans (13%) are currently defaulted and one loan (25.9%) is considered a Fitch Loan of Concern. Fitch expects significant losses on the defaulted assets. Talmage 2006-3 is a CRE collateralized debt obligation (CDO) managed by Talmage, LLC with approximately $154.4 million of collateral. The transaction had a five-year reinvestment period that ended in August 2011. As of the June 2012 trustee report and per Fitch categorizations, the CDO was substantially invested as follows: CRE subordinate debt (21.2%), A-notes/whole loans (47.7%), CMBS and CRE CDOs (31.1%). In general, Fitch treats non-senior, single-borrower CMBS as CRE B-notes. The average Fitch derived rating for the remaining collateral that carries a public rating is 'B-'. All overcollateralization (OC) and interest coverage (IC) tests, except for the class E OC test, are passing, as of the June 2012 trustee report. As a result of the class E OC test failure, available interest proceeds (after class E) are redirected to redeem class C which is now the senior class. In the June trustee report, however, due to the net interest rate swap payment by the CDO of $112,000, interest proceeds were insufficient to pay the class E interest and approximately $22,100 of principal was used. The swap terminates with the Aug. 25, 2012 payment date. Under Fitch's updated methodology, approximately 75.8% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 6.5% from the most recent available cash flows (generally from year-end 2011 or trailing 12 months ended April 2012). Fitch modeled average recoveries of 40.5%. The largest component of Fitch's base case loss expectation is a highly leveraged whole loan (25.9%) on a full-service hotel located one block east of Chicago's Magnificent Mile. The hotel's most recently reported trailing 12-month net cash flow is again lower than the prior year. Although the hotel is still covering its debt service payments given historically low LIBOR, Fitch modeled a term default and a substantial loss in its base case scenario. The second largest component of Fitch's base case loss expectation is the expected loss assigned to the CRE CDO collateral. The third largest component of Fitch's base case loss expectation is an A-note (12.1%) secured by an undeveloped land parcel in Orlando, FL. Fitch modeled a term default in its base case scenario with a substantial modeled loss. This transaction was analyzed according to the 'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions', which applies stresses to property cash flows and 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. The credit enhancement to class C and D was then compared to the modeled expected losses, and in consideration of the high concentration of the pool, the credit enhancement was determined to be consistent with the ratings assigned below. Based on prior modeling results, no material impact was anticipated from cash flow modeling the transaction. The Rating Outlooks for classes C through D are Stable, reflecting the paydown of the senior notes. The 'CCC' and below ratings for classes E through G are based on a deterministic analysis that considers Fitch's base case loss expectation for the pool and the current percentage of defaulted assets and Fitch Loans of Concern factoring in anticipated recoveries relative to each class' credit enhancement. In March 2012, GSREA, LLC was renamed Talmage, LLC, and in that regard (1) Guggenheim Structured Real Estate Funding 2006-3, Ltd. was renamed Talmage Structured Real Estate Funding 2006-3, Ltd., and (2) Guggenheim Structured Real Estate Funding 2006-3, LLC was renamed Talmage Structured Real Estate Funding 2006-3, LLC. In connection with these name changes, there was no change to the CDO's assets, liabilities or to the personnel of the Collateral Manager. Fitch has upgraded, affirmed, and assigned Outlooks on the following classes as indicated: -- $42,053,000 class C upgraded to 'Asf' from 'BBsf; Outlook Stable; -- $24,029,000 class D affirmed at 'Bsf'; Outlook Stable; -- $28,827,789 class E affirmed at 'CCCsf'; RE80%; -- $22,054,477 class F affirmed at 'CCsf'; RE0%; -- $22,126,278 class G affirmed at 'CCsf'; RE0%. Class S, A-1, A-2 and B have paid in full. TALMAGE 2006-4: Fitch Affirms Junk Rating on Six Note Classes ----------------------------------------------------------------- Fitch Ratings has affirmed all classes of Talmage Structured Real Estate Funding 2006-4 Ltd./LLC (Talmage 2006-4) reflecting Fitch's base case loss expectation of 50% for the remaining assets. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. Since Fitch's last review, the class A-1 notes have amortized by an additional $43.8 million due to the repayment in full of two loans, the partial paydown and/or amortization of several other loans, and through interest diversion. Talmage 2006-4 is concentrated with 12 obligors of commercial real estate (CRE) debt of which approximately 81.9% is subordinate debt or subordinate tranches of structured finance transactions. Fitch expects significant losses upon default for the subordinate positions since they are generally highly leveraged. Positions from three obligors (33.2%) are currently defaulted and one loan (3.8%) is considered a Fitch Loan of Concern. Fitch expects significant losses on the defaulted assets. Talmage 2006-4 is a CRE collateralized debt obligation (CDO) managed by Talmage, LLC with approximately $263 million of collateral. The transaction had a five-year reinvestment period that ended in February 2012. As of the June 2012 trustee report and per Fitch categorizations, the CDO was substantially invested as follows: CRE subordinate B- notes/mezzanine loans (51.5%), A-notes/whole loans (17.7%), CMBS and CRE CDOs (30.8%). In general, Fitch treats non-senior, single-borrower CMBS as CRE B-notes. The average Fitch derived rating for the remaining collateral that carries a public rating is 'CCC'. All overcollateralization (OC) tests are failing, as of the June 2012 trustee report. As a result, all interest proceeds remaining after the payment of the class B interest are being redirected to redeem class A-1. Under Fitch's updated methodology, approximately 72.1% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 7.8% from the most recent available cash flows (generally from year-end 2011 or trailing twelve months ended April 2012). Fitch modeled recoveries to average 30.6%. The largest component of Fitch's base case loss expectation is the expected loss assigned to the CRE CDO collateral. The second largest component of Fitch's base case loss expectation is the expected loss on three B-notes (12.6%) secured by a portfolio of three hotel/gaming properties that have experienced significant declines in performance. Fitch modeled a term default in its base case scenario with a full loss on the subordinate positions. The third largest component of Fitch's base case loss expectation is an A-note (13.9%) secured by an undeveloped land parcel in Orlando, FL. Fitch modeled a term default in its base case scenario with a substantial modeled loss. This transaction was analyzed according to the 'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions', which applies stresses to property cash flows and 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. The credit enhancement to class A-1 through B was then compared to the modeled expected losses, and in consideration of the high concentration of the pool, the credit enhancement was determined to be consistent with the ratings assigned below. Based on prior modeling results, no material impact was anticipated from cash flow modeling the transaction. The Stable Rating Outlooks for classes A-1, and A-2 are reflect the paydown of the senior notes. Class B maintains a Negative Rating Outlook reflecting Fitch's expectation of further potential negative credit migration of the underlying collateral. The 'CCC' and below ratings for classes C through H are based on a deterministic analysis that considers Fitch's base case loss expectation for the pool and the current percentage of defaulted assets and Fitch Loans of Concern factoring in anticipated recoveries relative to each class' credit enhancement. In March 2012, GSREA, LLC was renamed Talmage, LLC, and in that regard (1) Guggenheim Structured Real Estate Funding 2006-4, Ltd. was renamed Talmage Structured Real Estate Funding 2006-4, Ltd., and (2) Guggenheim Structured Real Estate Funding 2006-4, LLC was renamed Talmage Structured Real Estate Funding 2006-4, LLC. In connection with these name changes, there was no change to the CDO's assets, liabilities or to the personnel of the Collateral Manager. Fitch has affirmed the ratings on the following classes as indicated: -- $47.3 million class A-1 at 'BBsf'; Outlook Stable; -- $34.8 million class A-2 at 'Bsf'; Outlook Stable; -- $42 million class B at 'Bsf'; Outlook Negative; -- $26.3 million class C at 'CCCsf'; 'RE30%'; -- $14.1 million class D at 'CCCsf'; 'RE0%; -- $13.6 million class E at 'CCCsf'; 'RE0%'; -- $13.7 million class F at 'CCsf'; 'RE0%'; -- $15.1 million class G at 'Csf'; 'RE0%'; -- $10.9 million class H at 'Csf'; 'RE0%'. Class S has paid in full. TAURUS CMBS 2007-1: Moody's Cuts Rating on Cl. A2 Notes to 'Ba2' ---------------------------------------------------------------- Moody's Investors Service has downgraded the Class A1 and the Class A2 CMBS Notes issued by Taurus CMBS (Pan-Europe) 2007-1 Limited (amounts reflect initial outstandings): EUR407.6M Class A1 Notes due 2020, Downgraded to Baa2 (sf); previously on Aug 4, 2011 Downgraded to Aa3 (sf) EUR21.3M Class A2 Notes due 2020, Downgraded to Ba2 (sf); previously on Oct 26, 2009 Downgraded to A3 (sf) Moody's does not rate the Class B, Class C, Class D, Class E, Class F, Class X1 and the Class X2 Notes. Ratings Rationale The downgrade reflects Moody's increased loss expectation for the pool since its last review. This is primarily due to an increase in the refinancing risk for all loans in the pool, resulting from (i) significantly lower values for non-prime properties, which are not expected to recover over the short term, (ii) the dormant refinancing market, especially for highly leveraged loans, and (iii) the uncertainty with respect to the path and timing for a recovery of the lending market. The severity expectation also increased due to a hightened Moody's weighted average (WA) securitised loan-to-value (LTV) ratio of approximately 100%. Due to the modified pro-rata allocation of principal repayment proceeds from the above average loans over the past year, the credit enhancement has not increased sufficiently to off-set the increased loss expectation for the remaining pool. Based on the comparatively weak sequential pay trigger the allocation will not switch to sequential pay in the near future. The key parameters in Moody's analysis are the default probability of the securitised loans (both during the term and at maturity) as well as Moody's value assessment for the properties securing these loans. Moody's derives from those parameters a loss expectation for the securitised pool. In general, Moody's analysis reflects a forward-looking view of the likely range of commercial real estate collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters such as property value or loan refinancing probability for instance, 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 . There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortisation and loan re- prepayments or a decline in subordination due to realised losses. Primary sources of assumption uncertainty are the current stressed macro-economic environment and continued weakness in the occupational and lending markets. Moody's anticipates (i) delayed recovery in the lending market persisting through 2013, while remaining subject to strict underwriting criteria and heavily dependent on the underlying property quality, (ii) strong differentiation between prime and secondary properties, with further value declines expected for non-prime properties, and (iii) occupational markets will remain under pressure in the short term and will only slowly recover in the medium term in line with anticipated economic recovery. Overall, Moody's central global macroeconomic scenario is for a material slowdown in growth in 2012 for most of the world's largest economies fueled by fiscal consolidation efforts, household and banking sector deleveraging and persistently high unemployment levels. Moody's expects a mild recession in the Euro area. As the Euro area crisis continues, the rating of the structured finance notes remain exposed to the uncertainties of credit conditions in the general economy. The deteriorating creditworthiness of euro area sovereigns as well as the weakening credit profile of the global banking sector could negatively impact the ratings of the notes. Furthermore, as discussed in Moody's special report "Rating Euro Area Governments Through Extraordinary Times -- An Updated Summary," published in October 2011, Moody's is considering reintroducing individual country ceilings for some or all euro area members, which could affect further the maximum structured finance rating achievable in those countries. Moody's Portfolio Analysis Taurus CMBS (Pan-Europe) 2007-1 Limited closed in August 2007 and represents the securitisation of initially 13 mortgage loans originated by Merrill Lynch International Bank Limited and Merrill Lynch Capital Corporation. The loans were secured by first-ranking legal mortgages over 57 commercial properties. Currently 7 loans remain in the pool and the loans are secured by first-ranking legal mortgages over 44 commercial properties. Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Large multi-borrower transactions typically have a Herf of less than 10 with an average of around 5. This pool has a Herf of 3.47, which is lower than the 8.2 score at Moody's prior review. Moody's estimates the transaction's weighted average WA securitised LTV ratio at approximately 100% compared to the current U/W LTV of 87.5%. Since closing, approximately 50% of the initial pool repaid with principal allocated on a modified pro-rata basis. As a result, the Class A1 and the Class A2 Notes subordination levels have increased, from 25.9% to 29.1% for the Class A1 Notes and from 22.0% to 24.8% for the Class A2 Notes. The Class A2 Notes are structurally subordinated to the Class A1 Notes. Moody's views the transaction's weak sequential pay trigger as credit negative, and the likely continued predominantly non-sequential application of loan principal (at least over the short to medium term) is unlikely to materially improve subordination levels for the Class A1 and the Class A2 Notes. Fishman JEC is the largest loan representing 48.3% of the pool. The loan is secured by a mixture of 18 French office and industrial properties. Moody's securitised loan LTV is around 100% compared to the current U/W LTV of 82.93%. Moody's expects a high probability of default at loan maturity in July 2014. Hutley is the second largest loan representing 14.7% of the pool. The loan is secured by a mixture of 11 German office and retail properties. Moody's securitised loan LTV is around 100% compared to the current U/W LTV of 89.2%. Moody's expects a high probability of default at loan maturity in July 2014. Swan is the third largest loan representing 12.5% of the pool. The loan is secured by 10 Swiss warehouse/office properties. Moody's securitised loan LTV is around 80% compared to the current U/W LTV of 64.58%. Moody's expects a medium probability of default at loan maturity in April 2013. Moody's expects a significant amount of losses on the securitised portfolio, stemming mainly from the refinancing profile of the securitised portfolio and its elevated LTV of around 100%. Given the default risk profile and the anticipated work-out strategy for potentially defaulting loans, the expected losses are likely to crystallise only towards the mid to end of the transaction term. The principal methodology used in this rating was Moody's Approach to Real Estate Analysis for CMBS in EMEA: Portfolio Analysis (MoRE Portfolio) published in April 2006. Other factors used in this rating are described in European CMBS: 2012 Central Scenarios published in February 2012. The updated assessment is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's prior assessment is summarised in a press release dated October 26, 2009. The last Performance Overview for this transaction was published on June 26, 2012. In rating this transaction, Moody's used both MoRE Portfolio and MoRE Cash Flow to model the cash-flows and determine the loss for each tranche. MoRE Portfolio evaluates a loss distribution by simulating the defaults and recoveries of the underlying portfolio of loans using a Monte Carlo simulation. This portfolio loss distribution, in conjunction with the loss timing calculated in MoRE Portfolio is then used in MoRE Cash Flow, where for each loss scenario on the assets, the corresponding loss for each class of notes is calculated taking into account the structural features of the notes. As such, Moody's analysis encompasses the assessment of stressed scenarios. 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. TCW'S GLOBAL: Fitch Affirms Junk Ratings on Two Note Classes ------------------------------------------------------------ Fitch Ratings has taken the following actions on the notes issued by TCW's Global Project Fund II (GPF II): -- $330 million revolving senior notes affirmed at 'AAAsf'; Outlook Stable; -- $70 million class A-1 floating-rate notes affirmed at 'AAAsf'; Outlook Stable; -- $64 million class A-2-A floating-rate notes affirmed at 'Asf'; Outlook Negative; -- $6 million class A-2-B fixed-rate notes affirmed at 'Asf'; Outlook Negative; -- $61 million class B-1 floating-rate notes downgraded to 'BB-sf' from 'BBsf'; Outlook Negative; -- $14 million class B-2 fixed-rate notes downgraded to 'BB-sf' from 'BBsf'; Outlook Negative; -- $33 million class C floating-rate notes affirmed at 'CCCsf'; -- $17 million class D floating-rate affirmed at 'CCsf'. The one-notch downgrade to the rating assigned to the class B notes reflects the decrease in available credit enhancement as a result of worse than expected asset performance in addition to an increasingly concentrated portfolio. The sequential-pay principal waterfall attempts to alleviate concentration ramp-down risks. However, credit enhancement for the class B notes has slightly decreased, although not enough to breach class B coverage triggers that would allocate excess interest collections to principal amortization on the more senior notes. Affirmations to the ratings assigned to the revolving senior notes and A-1 notes reflect the continuous increase in credit enhancement which supports high asset default rates, consistent with the 'AAAsf' rating. The class C and class D notes remain very sensitive to the market value of asset balances due beyond the transaction's final maturity on June 2016. As of April 2012, the revolving senior notes had amortized to the amount of USD52.4 million from the initial USD330 million. The outstanding balance of the performing portfolio was USD306 million. GPF II is a CLO of project finance loans, the majority of which are senior secured obligations. As of April 2012 there were 14 performing assets in the portfolio. Approximately 30% of the fund's assets are domiciled in the United States while the remaining 70% stem from emerging market countries. The majority of investments are in the energy, oil and gas, and infrastructure project finance sectors. WAMU 2003-C1: Fitch Upgrades Rating on Seven Certificate Classes ---------------------------------------------------------------- Fitch Ratings has upgraded the ratings on seven classes of Washington Mutual Asset Securities Corporation (WAMU) commercial mortgage pass-through certificates, series 2003-C1. The upgrades are due to the pool's stable performance, increased credit enhancement from scheduled principal paydown, and low future expected losses following Fitch's prospective review of potential stresses to the transaction. As of the June 2012 distribution date, the pool's certificate balance has been reduced 92% (including 0.07% in realized losses) to $45.84 million from $571.87 million at issuance. There are 33 of the original 213 loans remaining in the transaction. The pool's concentration includes 38.76% of the pool balance located in California, and multifamily representing 70.74%. There are no defeased loans. There are no specially serviced loans as of the June 2012 remittance report. Fitch expects minimal losses to the remaining pool balance. Any incurred losses are expected to be absorbed by the non-rated class P. Fitch has identified five Loans of Concern (FLOCs) (33.23% of the pool balance). The largest loan of concern is Center Pointe Plaza, the largest loan in the pool (26.99%). The loan is secured by a 252,393 square foot (sf) retail center in Christiana, DE. The March 2012 rent roll reports occupancy at 96%, with debt service coverage ratio (DSCR) at 1.50x as of year-end December 2011. The loan has been identified as a FLOC due to the potential upcoming lease rollover of the property's anchor tenants. Home Depot (43.5% of the net rentable area [NRA]), Babies R' Us (16.6% NRA), and TJ Maxx (11.8%) current leases expire in January 2013. Fitch upgrades the following classes: -- $2.9 million class H to 'AAAsf' from 'AA+sf; Outlook Stable; -- $5.7 million class J to 'AAAsf' from 'Asf'; Outlook Stable; -- $4.3 million class K to 'Asf' from 'BBB+sf'; Outlook Stable; -- $1.4 million class L to 'BBBsf' from 'BBB-sf'; Outlook Stable; -- $2.9 million class M to 'BBB-sf' from 'BB+sf'; Outlook Stable; -- $2.9 million class N to 'BBsf' from 'B+sf'; Outlook Stable; -- $1.4 million class O to 'Bsf' from 'B-sf'; Outlook Stable. Fitch also affirms the following classes: -- $6.2 million class D at 'AAAsf'; Outlook Stable; -- $2.9 million class E at 'AAAsf'; Outlook Stable; -- $4.3 million class F at 'AAAsf'; Outlook Stable; -- $5.7 million class G at 'AAAsf'; Outlook Stable; Class P is not rated by Fitch, and has been reduced to $5.3 million from $5.7 million at issuance due to realized losses. Fitch also does not rate the rake classes HM and HS. Classes A, B, and C have paid in full. Fitch had previously withdrawn the rating on the interest-only class X-1. WHITEHORSE III: S&P Affirms Class B-2L Rating at 'CCC+(sf)' ----------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on three classes of notes from WhiteHorse III Ltd., a collateralized loan obligation (CLO) transaction backed by corporate loans and managed by WhiteHorse Capital Partners L.P. "We also removed the ratings from CreditWatch with positive implications, where we had placed them on Apr. 18, 2012. We affirmed our ratings on two other classes from the transaction and removed one of them from CreditWatch with positive implications," S&P said. This transaction entered its amortization period in May 2012. "The upgrades reflect the improvement in the credit quality of the transaction's portfolio since our April 2010 rating actions. According to the May 2012 trustee report, the amount of defaulted assets within the asset portfolio decreased to $2.96 from the $31.45 million reported in the January 2010 trustee report, which we used for our April 2010 actions. Over the same time period, the amount of 'CCC' rated assets decreased to $18.32 million from $30.15 million. Due to these and other factors, the overcollateralization (O/C) ratios increased for all the classes of notes," S&P said. The affirmations reflect credit support commensurate with the current rating levels. Standard & Poor's will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. Rating And Creditwatch Actions WhiteHorse III Ltd. Rating Class To From A-1L AA+ (sf) AA (sf)/Watch Pos A-2L A+ (sf) A+ (sf)/Watch Pos A-3L BBB+ (sf) BBB- (sf)/Watch Pos B-1L BB- (sf) B+ (sf)/Watch Pos Rating Affirmed WhiteHorse III Ltd. Class Rating B-2L CCC+ (sf) * Moody's Says Leverage on US CMBS Conduit Loans Up in 3Q 2012 -------------------------------------------------------------- Leverage on conduit loans to be securitized in the third quarter will likely be higher than it was in the second quarter, leading to more credit enhancement being necessary to achieve similar ratings, says Moody's Investors Service in its latest quarterly review of US commercial mortgage-backed securities. Specifically, based on the transactions in its deal pipeline, Moody's Loan to Value ratio is positioned to increase to 102.1% in the third quarter from 97.8% in the second quarter, says Moody's in the report "US CMBS Q2 2012 Review: Conduit MLTV and Credit Enhancement to Increase in Q3." Moody's credit enhancement level for tranches rated Baa3 look to be approximately 7.3% in the third quarter, up from 5.8% when CMBS deals started again after the credit crisis. "The relatively favorable position of the credit cycle mitigates some of the risk from the increasing leverage in conduit loans," says Tad Philipp, Moody's Director of Commercial Real Estate Research. "The current position bares similarities in several of its metrics to the market conditions that prevailed in the early 1990's, which was 5 to 7 years past the prior peak and saw loan origination vintages that were high performing." Moody's notes that its loan to value ratio is much higher than the loan to value ratio used in underwriting the loans. In fact Moody's expects the gap between them to widen to 37.7% in the third quarter. The gap reflects the fact that underwriting valuations use increasingly low capitalization rates as US ten- year treasury rates remain low, while the Moody's valuations use capitalization rates that are stabilized, to capture the risk that interest rates may be much higher when a loan must be refinanced. During second-quarter 2012 Moody's rated seven conduit transactions, to bring the total for deals rated since the resumption of CMBS after the credit crisis to 30. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies in "Structured Finance Quick Check". * Moody's Reviews Ratings on 2000-2006 Second Lien RMBS Tranches ---------------------------------------------------------------- Moody's Investors Service has placed on review ratings on one tranche for upgrade and 16 tranches for downgrade from 11 residential mortgage-backed securities (RMBS) from 2000-06 backed by second-lien loans and home equity lines of credit. Moody's rates a total of 1257 tranches from 435 second- lien RMBS transactions from 1995-2007. Ratings Rationale The actions reflect the recent performance of second-lien transactions and Moody's updated loss expectations on these pools. The rating actions include placing on review ratings on one bond for upgrade and 16 bonds for downgrade. The upgrade review is due primarily to higher credit enhancement levels. The downgrade reviews are primarily due to deteriorating collateral performance. Although individual transaction performance varies, the overall performance on second-lien RMBS remains weak. Moody's is placing on review for downgrade ratings of second-lien RMBS with underlying pool performance weaker than Moody's previous expectations or with credit enhancement lower than Moody's prior projections. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "Second Lien RMBS Loss Projection Methodology: April 2010" published in April 2010. For the two tranches included in this action that financial guarantors insure, noted below, the principal methodology Moody's uses in determining the rating is the same methodology for rating securities that do not have a financial guaranty. The credit quality of RMBS that a financial guarantor insures reflects the higher of the credit quality of the guarantor or the RMBS without the benefit of the guaranty; however, for both of these tranches, the financial strength of the guarantor is lower than what the rating of the security would be absent the guaranty. To determine which ratings to place on review, Moody's derived a rating assessment based on updated pool losses relative to the total credit enhancement available from subordination, as well as excess spread and external enhancement such as pool insurance policies, reserve accounts, and guarantees. Moody's placed on review ratings that differed significantly from the rating assessments. Over the coming weeks, Moody's will perform individual, detailed, transaction-specific analysis and conclude the review on these tranches. When assigning the final ratings to bonds, in addition to the approach described above, Moody's will consider the volatility of the projected losses and timeline of the expected defaults. The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.0% in May 2011 to 8.2% in May 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions. Complete rating actions are as follows: Issuer: Citigroup HELOC Trust 2006-NCB1 Cl. 2A-2, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Jan 6, 2011 Confirmed at Baa3 (sf) Issuer: DLJ ABS Trust Series 2000-6 Cl. M-2, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Nov 30, 2010 Downgraded to Baa3 (sf) Cl. B-1, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Nov 30, 2010 Downgraded to Ba2 (sf) Issuer: First Franklin Mortgage Loan Trust 2003-FFA Cl. II-M-2, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Oct 20, 2010 Downgraded to Ba1 (sf) Issuer: GMACM Home Equity Loan Trust 2000-HE4, GMACM Home Equity Loan-Backed Term Notes, Series 2000-HE4 Cl. A-1, B3 (sf) Placed Under Review for Possible Downgrade; previously on Feb 18, 2009 Downgraded to B3 (sf) Financial Guarantor: MBIA Insurance Corporation (B3 placed on review for possible downgrade on Dec 19, 2011) Issuer: GMACM Home Equity Loan Trust 2001-HE3 Cl. A-2, B3 (sf) Placed Under Review for Possible Downgrade; previously on May 21, 2010 Downgraded to B3 (sf) Underlying Rating: B3 (sf) Placed Under Review for Possible Downgrade; previously on May 21, 2010 Downgraded to B3 (sf) Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn Mar 25, 2009) Issuer: GMACM Home Equity Loan Trust 2004-HE2 Cl. A-4, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on May 21, 2010 Downgraded to Baa2 (sf) Issuer: HLTV Mortgage Loan Trust 2004-1 Notes, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb 11, 2011 Confirmed at Baa3 (sf) Issuer: HomeBanc Mortgage Trust 2005-2 Cl. M-3, B2 (sf) Placed Under Review for Possible Downgrade; previously on Jun 3, 2010 Downgraded to B2 (sf) Issuer: Irwin Home Equity Loan Trust 2005-1 Cl. B-3, C (sf) Placed Under Review for Possible Upgrade; previously on Jun 30, 2010 Downgraded to C (sf) Issuer: Irwin Whole Loan Home Equity Trust 2003-A Cl. M-1, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Jul 22, 2011 Downgraded to Baa1 (sf) Issuer: Irwin Whole Loan Home Equity Trust 2005-A Cl. M-1, A3 (sf) Placed Under Review for Possible Downgrade; previously on Jun 30, 2010 Downgraded to A3 (sf) Cl. M-2, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Jun 30, 2010 Downgraded to Baa1 (sf) Cl. M-3, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on Jun 30, 2010 Downgraded to Baa2 (sf) Cl. M-4, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Jun 30, 2010 Downgraded to Baa3 (sf) Cl. M-5, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Jun 30, 2010 Downgraded to Ba1 (sf) Cl. M-6, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on Jun 30, 2010 Downgraded to Ba3 (sf) A list of the review actions associated with this announcement appears at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF290551 * S&P Cuts Ratings on 4 Classes on JPMorgan/GMAC CMBS to 'Dsf' -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on four classes of commercial mortgage pass-through certificates from two U.S. commercial mortgage-backed securities (CMBS) transactions to 'D (sf)' because it expect the accumulated interest shortfalls to remain outstanding for the foreseeable future. The four downgraded classes have had accumulated interest shortfalls outstanding between four and 11 months. The recurring interest shortfalls for the respective certificates are primarily due to one or more of the following factors: Appraisal subordinate entitlement reduction (ASER) amounts in effect for specially serviced assets; The lack of servicer advancing for assets where the servicer has made nonrecoverable advance declarations; and Special servicing fees. Standard & Poor's analysis primarily considered the ASER amounts based on appraisal reduction amounts (ARAs) calculated using recent Member of the Appraisal Institute (MAI) appraisals. "We also considered servicer nonrecoverable advance declarations and special servicing fees that are likely, in our view, to cause recurring interest shortfalls," S&P said. The servicer implements ARAs and resulting ASER amounts in accordance with each respective transaction's terms. Typically, these terms call for the automatic implementation of an ARA equal to 25% of the stated principal balance of a loan when a loan is 60 days past due and an appraisal or other valuation is not available within a specified timeframe. "We primarily considered ASER amounts based on ARAs calculated from MAI appraisals when deciding which classes from the affected transactions to downgrade to 'D (sf)'. This is because ARAs based on a principal balance haircut is highly subject to change, or even reversal, once the special servicer obtains the MAI appraisals," S&P said. Servicer nonrecoverable advance declarations can prompt shortfalls due to a lack of debt service advancing, the recovery of previously made advances deemed nonrecoverable, or the failure to advance trust expenses when nonrecoverable declarations have been determined. Trust expenses may include, but are not limited to, property operating expenses, property taxes, insurance payments, and legal expenses. "We detail the four downgraded classes from the two U.S. CMBS transactions below," S&P said. JPMorgan Chase Commercial Mortgage Securities Corp. Series 2001- C1 "We lowered our ratings to 'D (sf)' on the class J and K certificates from JPMorgan Chase Commercial Mortgage Securities Corp.'s series 2001-C1 due to accumulated interest shortfalls outstanding for four and 11 months, respectively," S&P said. These interest shortfalls were primarily due to ASER amounts ($34,821) related to six ($24.0 million, 41.9%) of the 10 ($38.0 million, 66.3%) assets that are currently with the special servicer, CWCapital Asset Management LLC (CWCapital), recovery of prior servicer's advances ($36,706), interest not advanced due to servicer's nonrecoverable determination ($20,650), and special servicing fees ($8,420). As of the June 12, 2012, trustee remittance report, ARAs totaling $7.4 million were in effect for six specially serviced assets. The reported monthly interest shortfalls, net of a one-time ASER recovery of $9,503, totaled $91,826. Interest shortfalls have affected all of the classes subordinate to and including class J. GMAC Commercial Mortgage Securities Inc. Series 2003-C1 "We lowered our ratings to 'D (sf)' on the class N-1 and N-2 certificates from GMAC Commercial Mortgage Securities Inc.'s series 2003-C1 due to accumulated interest shortfalls outstanding for eight and 10 months, respectively," S&P said. These interest shortfalls were primarily due to interest not advanced due to servicer's nonrecoverable determination ($14,018) for one (Countryside Village Apartments asset, $2.2 million) of the three assets ($38.0 million, 5.5%) with the special servicer, CWCapital, and special servicing fees ($8,196). As of the June 11, 2012, trustee remittance report, the reported monthly interest shortfalls totaled $22,836 and affected all of the classes subordinate to and including class N-1. Ratings Lowered JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2001-C1 Reported Rating Credit interest shortfalls Class To From enhcmt(%) Current Accumulated J D (sf) CCC- (sf) 18.44 42,308 93,769 K D (sf) CCC- (sf) 7.19 30,221 206,314 GMAC Commercial Mortgage Securities Inc. Commercial mortgage pass-through certificates series 2003-C1 Reported Rating Credit interest shortfalls Class To From enhcmt(%) Current Accumulated N-1 D (sf) CCC+ (sf) 1.30 26,929 160,481 N-2 D (sf) CCC (sf) 1.10 5,917 56,612 * S&P Lowers 13 Ratings on Three BofA U.S. CMBS Transactions ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 13 classes of commercial mortgage pass-through certificates from three U.S. commercial mortgage-backed securities (CMBS) transactions due to interest shortfall. "We lowered our ratings on six of these classes to 'D (sf)' because we expect the accumulated interest shortfalls to remain outstanding in the foreseeable future," S&P said. These six classes had accumulated interest shortfalls outstanding between seven and nine months. The recurring interest shortfalls for the respective certificates are primarily due to one or more of the following factors: Appraisal subordinate entitlement reduction (ASER) amounts in effect for specially serviced assets; The lack of servicer advancing for assets where the servicer has made nonrecoverable advance declarations; Special servicing fees; and Interest rate reductions or deferrals resulting from loan modifications. Standard & Poor's analysis primarily considered the ASER amounts based on appraisal reduction amounts (ARAs), calculated using recent Member of the Appraisal Institute (MAI) appraisals. "We also considered servicer nonrecoverable advance declarations, special servicing fees, and interest rate reductions and deferrals resulting from loan modifications that are likely to cause recurring interest shortfalls," S&P said. The servicer implements ARAs and resulting ASER amounts in accordance with each respective transaction's terms. Typically, these terms call for the automatic implementation of an ARA equal to 25% of the stated principal balance of a loan when it is 60 days past due and an appraisal, or other valuation, is not available within a specified timeframe. "We primarily considered ASER amounts based on ARAs calculated from MAI appraisals when deciding which classes from the affected transactions to downgrade to 'D (sf)'. This is because ARAs based on a principal balance haircut are highly subject to change, or even reversal, once the special servicer obtains the MAI appraisals," S&P said. Servicer nonrecoverable advance declarations can prompt shortfalls due to a lack of debt service advancing, the recovery of previously made advances deemed nonrecoverable, or the failure to advance trust expenses when nonrecoverable declarations have been determined. Trust expenses may include, but are not limited to, property operating expenses, property taxes, insurance payments, and legal expenses. "We detail the 13 downgraded classes from the three U.S. CMBS transactions below," S&P said. Banc of America Commercial Mortgage Inc. 2002-PB2 "We lowered our ratings on the class C, D, E, and F certificates from Banc of America Commercial Mortgage Inc. 2002-PB2. We lowered our ratings on the class F certificates to 'D (sf)' due to accumulated interest shortfalls outstanding for seven months," S&P said. The shortfalls were primarily due to ASER amounts of $265,490 related to four ($66.2 million, 32.9%) of the eight assets ($165.9 million, 82.4%) that are currently with the special servicer, LNR Partners Inc. (LNR), interest not advanced of $586,033 associated with a non-recoverable declaration related to four specially serviced assets and special servicing fees $35,752. In addition, a one-time recovery totaling $562,400 was refunded to the trust, primarily for three of the eight specially serviced assets. "We downgraded classes C, D, and E due to reduced liquidity support available to these classes. As of the June 11, 2012, trustee remittance report, the master servicer, Bank of America N.A. (BofA), reported ARAs totaling $94.0 million in effect for seven specially serviced assets," S&P said. "The total reported monthly ASER amount on these assets was $265,490. The reported monthly interest shortfalls totaled $323,603 and have affected all of the classes subordinate to and including class F. Excluding the aforementioned one-time recovery totaling $562,401, we estimate interest shortfall to be $888,095, indicating all classes subordinate to and including class C, could experience interest shortfalls," S&P said. Banc of America Commercial Mortgage Inc. 2004-1 "We lowered our ratings on the class G, H, J, K, and L certificates from Banc of America Commercial Mortgage Inc. 2004-1. We lowered our ratings on classes H, J, K, and L to 'D (sf)' to reflect accumulated interest shortfalls outstanding for between seven and nine months. The shortfalls were primarily due to ASER amounts of $128,602 related to two ($31.0 million, 3.4%) of the four assets ($78.5 million, 8.5%) that are currently with the special servicer, and an additional ASER of $33,322 related to the Tracy Pavillion loan, which appears in the June 11, 2012, remittance report but was returned to the master servicer on April 16, 2012, with workout fees of $1,366 and special servicing fees of $16,935. As of the June 11, 2012, trustee remittance report, Wells Fargo reported ARAs totaling $27.7 million in effect for three assets, including the Tracy Pavillion loan and a total reported monthly ASER amount of $161,924. Without the Tracy Pavillion loan, the reported ARAs total $23.7 million and the total reported monthly ASER amount is $128,602. Accumulated interest shortfalls have affected all of the classes subordinate to and including class H," S&P said. Banc of America Commercial Mortgage Inc. 2004-4 "We lowered our ratings on the class E, F, G, and H certificates from Banc of America Commercial Mortgage Inc. 2004-4. We lowered our ratings on class H to 'D (sf)' to reflect accumulated interest shortfalls outstanding for seven months. The shortfalls were primarily due to ASER amounts of $93,078 related to six ($51.8 million, 8.8%) of the eight assets ($93.0 million, 15.7%) that are currently with the special servicer, interest not advanced of $102,104 associated with a nonrecoverable declaration, and special servicing fees of $20,838," S&P said. As of the June 11, 2012, trustee remittance report, U.S. Bank reported ARAs totaling $30.95 million in effect for six assets and a total reported monthly ASER amount of $93,078. Accumulated interest shortfalls have affected all of the classes subordinate to and including class H. Ratings Lowered Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2002-PB2 Credit Reported Rating enhancement interest shortfalls ($) Class To From (%) Current Accumulated C B+ (sf) BB+ (sf) 78.60 0 0 D CCC+ (sf) B+ (sf) 71.63 0 0 E CCC- (sf) CCC+ (sf) 61.86 0 0 F D (sf) CCC- (sf) 56.28 (293,421) 54,590 Banc of America Commercial Mortgage Inc. Commercial Mortgage pass-through certificates series 2004-1 Credit Reported Rating enhancement interest shortfalls ($) Class To From (%) Current Accumulated G CCC (sf) B- (sf) 5.59 0 0 H D (sf) CCC- (sf) 3.43 48,266 132,503 J D (sf) CCC- (sf) 2.71 28,053 212,846 K D (sf) CCC- (sf) 1.99 28,053 252,480 L D (sf) CCC- (sf) 1.09 35,067 315,600 Banc of America Commercial Mortgage Inc. Commercial Mortgage pass-through certificates series 2004-4 Credit Reported Rating enhancement interest shortfalls ($) Class To From (%) Current Accumulated E BBB- (sf) A- (sf) 14.60 0 0 F B (sf) BBB (sf) 11.87 0 0 G CCC- (sf) B+ (sf) 9.95 0 0 H D (sf) CCC (sf) 7.21 51.002 229,261 * S&P Cuts Ratings On 8 Classes From 5 CMBS Transactions to 'D' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on eight classes of commercial mortgage pass-through certificates from five U.S. commercial mortgage-backed securities (CMBS) transactions to 'D (sf)' because it expect the accumulated interest shortfalls to remain outstanding for the foreseeable future. The eight downgraded classes have had accumulated interest shortfalls outstanding between one and 11 months. The recurring interest shortfalls for the respective certificates are primarily due to one or more of the following factors: Appraisal subordinate entitlement reduction (ASER) amounts in effect for specially serviced assets; The lack of servicer advancing for assets where the servicer has made nonrecoverable advance declarations; Special servicing fees; and Interest rate reductions or deferrals resulting from loan modifications. "Standard & Poor's analysis primarily considered the ASER amounts based on appraisal reduction amounts (ARAs) calculated using recent Member of the Appraisal Institute (MAI) appraisals. We also considered servicer nonrecoverable advance declarations and special servicing fees that are likely, in our view, to cause recurring interest shortfalls," S&P said. The servicer implements ARAs and resulting ASER amounts in accordance with each respective transaction's terms. Typically, these terms call for the automatic implementation of an ARA equal to 25% of the stated principal balance of a loan when a loan is 60 days past due and an appraisal or other valuation is not available within a specified timeframe. "We primarily considered ASER amounts based on ARAs calculated from MAI appraisals when deciding which classes from the affected transactions to downgrade to 'D (sf)'. This is because ARAs based on a principal balance haircut is highly subject to change, or even reversal, once the special servicer obtains the MAI appraisals. Servicer nonrecoverable advance declarations can prompt shortfalls due to a lack of debt service advancing, the recovery of previously made advances deemed nonrecoverable, or the failure to advance trust expenses when nonrecoverable declarations have been determined. Trust expenses may include, but are not limited to, property operating expenses, property taxes, insurance payments, and legal expenses, "S&P said. "We detail the eight downgraded classes from the five U.S. CMBS transactions, "S&P said. Salomon Bros. Commercial mortgage trust 2001-C2 "We lowered our ratings to 'D (sf)' on the class K and L certificates from Salomon Bros. Commercial Mortgage Trust 2001-C2 due to accumulated interest shortfalls outstanding for seven and eight months, respectively. These interest shortfalls were primarily due to ASER amounts related to six ($19.5 million, 37.1%) of the nine ($41.8 million, 79.7%) assets that are currently with the special servicer, CWCapital Asset Management LLC (CWCapital), and special servicing fees ($9,024)," S&P said. As of the June 13, 2012, trustee remittance report, ARAs totaling $6.3 million were in effect for six specially serviced assets and the reported ASER amount for these six assets, excluding a $51,689 ASER recovery, was $40,672. Due to the aforementioned ASER recovery, the trust experienced a net interest recovery of $1,966 for this period. The reported accumulated interest shortfalls outstanding total $2.8 million and have affected all of the classes subordinate to and including class K. Salomon Bros. Commercial Mortgage Trust 2002-Key2 "We lowered our rating on the class S certificates from Salomon Bros. Commercial Mortgage Trust 2002-KEY2 to 'D (sf)' to reflect accumulated interest shortfalls outstanding for 11 months. The interest shortfalls were primarily due to ASER amounts ($35,818) related to one ($8.1 million, 28.%) of the three ($13.6 million, 48.6%) loans that are currently with the special servicer, C-III Asset Management LLC (C-III), interest rate reduction from loan modification ($4,756), and special servicing fees ($2,927). As of the June 18, 2012, trustee remittance report, an ARA of $5.3 million was in effect for one of the specially serviced loans. The reported monthly interest shortfalls totaled $43,501 and have affected allof the classes subordinate to and including class S," S&P said. TIAA Seasoned Commercial Mortgage Trust 2007-C4 "We lowered our rating on the class P certificates from TIAA Seasoned Commercial Mortgage Trust 2007-C4 to 'D (sf)' to reflect accumulated interest shortfalls outstanding for nine months. The interest shortfalls were primarily due to ASER amounts ($49,339) related to three ($38.5 million, 3.1%) of the eight ($87.1 million, 7.1%) assets that are currently with the special servicer, C-III, interest rate reduction from loan modification ($18,695), and special servicing fees ($16,209). As of the June 15, 2012, trustee remittance report, ARAs totaling $10.7 million were in effect for three of the specially serviced assets. The reported monthly interest shortfalls totaled $89,580 and have affected all of the classes subordinate to and including class P," S&P said. Wachovia Bank Commercial Mortgage Trust Series 2005-C17 "We lowered our rating on the class K certificates from Wachovia Bank Commercial Mortgage Trust's series 2005-C17 to 'D (sf)' to reflect accumulated interest shortfalls outstanding for six months. The interest shortfalls were primarily due to ASER amounts related to five ($76.2 million, 3.7%) of the 22 ($151.6 million, 7.4%) assets that are currently with the special servicer, CWCapital, workout fees ($394,076), and special servicing fees ($32,366). The reported workout fees for June 2012 include a nonrecurring amount of $$387,881 associated with the Falchi Building asset that liquidated this period. As of the June 15, 2012, trustee remittance report, ARAs totaling $39.6 million were in effect for five specially serviced assets and the reported ASER amount, excluding ASER recoveries totaling $294,734, was $178,358. The reported net monthly interest shortfalls totaled $335,408 and have affected all of the classes subordinate to and including class H," S&P said. WAMU Commercial Mortgage Securities Trust 2007-Sl3 "We lowered our ratings on the class K, L, and M certificates from WaMu Commercial Mortgage Securities Trust 2007-SL3 to 'D (sf)' to reflect accumulated interest shortfalls outstanding between one and nine months. The interest shortfalls on these classes were primarily due to ASER amounts related to 11 ($11.3 million, 1.3%) of the 34 ($53.7 million, 5.9%) assets that are currently with the special servicer, KeyBank Real Estate Capital, workout fees ($245,490), interest not advanced for assets that the master servicer has deemed nonrecoverable ($33,712), and special servicing fees ($11,219). The workout fees include nonrecurring amounts totaling $246,046 associated with three assets that liquidated this period. As of the June 25, 2012, trustee remittance report, ARAs totaling $4.2 million were in effect for 11 specially serviced assets and the reported ASER amount, excluding an ASER recovery of $38,670, was $17,452. The reported net monthly interest shortfalls totaled $255,632 and have affected all of the classes subordinate to and including class H," S&P said. Ratings Lowered Salomon Bros. Commercial Mortgage Trust 2001-C2 Commercial mortgage pass-through certificates Reported Rating Credit interest shortfalls Class To From enhcmt(%) Current Accumulated K D (sf) CCC+ (sf) 23.76 (66,052) 97,604 L D (sf) CCC- (sf) 11.41 33,306 249,386 Salomon Bros. Commercial Mortgage Trust 2002-KEY2 Commercial mortgage pass-through certificates Reported Rating Credit interest shortfalls Class To From enhcmt(%) Current Accumulated S D (sf) CCC+ (sf) 16.71 19,597 106,965 TIAA Seasoned Commercial Mortgage Trust 2007-C4 Commercial mortgage pass-through certificates Reported Rating Credit interest shortfalls Class To From enhcmt(%) Current Accumulated P D (sf) CCC- (sf) 1.40 7,811 32,613 Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2005-C17 Reported Rating Credit interest shortfalls Class To From enhcmt(%) Current Accumulated K D (sf) CCC- (sf) 2.82 42,452 110,855 WaMu Commercial Mortgage Securities Trust 2007-SL3 Commercial mortgage pass-through certificates Reported Rating Credit interest shortfalls Class To From enhcmt(%) Current Accumulated K D (sf) CCC- (sf) 1.44 42,164 42,164 L D (sf) CCC- (sf) 0.74 33,734 139,536 M D (sf) CCC- (sf) 0.38 16,865 149,538 * S&P Cuts Three Ratings on Two U.S. RMBS Re-REMIC Transactions --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on three classes from two residential mortgage-backed securities (RMBS) resecuritized real estate mortgage investment conduit (re-REMIC) transactions. "Concurrently, we affirmed our ratings on 94 classes from the two transactions with lowered ratings and four other transactions," S&P said. "In addition, we withdrew our ratings on class XII-A3 from BCAP LLC 2009-RR13 Trust because it has been paid in full and on class 4-R from CSMC Series 2009-3R due to its de minimis outstanding balance," S&P said. "The six transactions in this review were issued in 2008 to 2010," S&P said. Three transactions in this review (BCAP LLC 2009-RR13 Trust, JMAC Master Resecuritization Trust I Series 2009-A and Picard Funding 2 Ltd.) pay interest sequentially, two (J.P. Morgan Resecuritization Trust Series 2010-6 and Lehman Mortgage Trust 2008-5) pay interest on a pro rata basis, and one (CSMC Series 2009-3R) contains both sequential and pro rata paying structures. All transactions within this review contain subordinate classes that provide credit support to more senior classes, with the exception of JMAC Master Resecuritization Trust I Series 2009-A. In this transaction, each structure contains only one class and therefore cannot rely on subordinate tranches for credit support. Instead, overcollateralization of each structure provides support to the re-REMIC classes. "We intend our ratings on the re-REMIC classes to address the timely payment of interest and ultimate payment of principal. We reviewed the interest and principal amounts due on the underlying securities, which are then passed through to the applicable re- REMIC classes. We applied our loss projections and assumptions, to the underlying collateral to identify the principal and interest amounts that could be passed through from the underlying securities under our rating scenario stresses. We stressed our loss projections at various rating categories to assess whether the re-REMIC classes could withstand the stressed losses associated with their ratings while receiving timely payment of interest and principal consistent with our criteria," S&P said. "We based our downgrades on our assessment of projected interest shortfalls and/or projected principal losses from the underlying securities that would impair the re-REMIC classes at the applicable rating stresses. The affirmations reflect our assessment that the re-REMIC classes will likely receive timely interest and the ultimate payment of principal under the applicable stressed assumptions for the current ratings," S&P said. Rating Actions BCAP LLC 2009-RR13 Trust Series 2009-RR13 Rating Class CUSIP To From XII-A3 05532JFU3 NR AAA (sf) VI-A5 05532JER1 BBB (sf) A (sf) VI-A7 05532JET7 BB (sf) BBB (sf) CSMC Series 2009-3R Series 2009-3R Rating Class CUSIP To From 4-R 22943YVE6 NR AAA (sf) 4-A-2 22943YCK3 B- (sf) B+ (sf) NR-Not rated. Ratings Affirmed BCAP LLC 2009-RR13 Trust Series 2009-RR13 Class CUSIP Rating I-A1 05532JAA2 AAA (sf) I-A3 05532JAC8 AA (sf) I-A5 05532JDT8 A (sf) I-A7 05532JDV3 BBB (sf) II-A1 05532JAE4 AAA (sf) II-A3 05532JAG9 AA (sf) II-A5 05532JEA8 A (sf) II-A7 05532JEC4 BBB (sf) III-A1 05532JAJ3 AAA (sf) III-A3 05532JAL8 AA (sf) III-A5 05532JEH3 A (sf) IV-A1 05532JAN4 AAA (sf) IV-A3 05532JAQ7 AA (sf) IV-A5 05532JEM2 A (sf) V-A1 05532KEP2 AAA (sf) VI-A1 05532JAW4 AAA (sf) VI-A3 05532JAY0 AA (sf) VII-A1 05532JBA1 AAA (sf) VII-A3 05532JBC7 A (sf) VIII-A1 05532JBE3 AAA (sf) VIII-A3 05532JBG8 AA (sf) VIII-A5 05532JFF6 A (sf) IX-A1 05532JBJ2 AAA (sf) IX-A3 05532JBL7 AA (sf) IX-A5 05532JFG4 A (sf) X-A1 05532JBN3 AAA (sf) X-A3 05532JBQ6 A (sf) XI-A1 05532KET4 AAA (sf) XIII-A3 05532JCC6 AA (sf) XIII-A5 05532JFW9 BBB (sf) XIV-A1 05532JCE2 AAA (sf) XIV-A3 05532JCG7 A (sf) XXI-A1 05532KAV3 AAA (sf) CSMC Series 2009-3R Series 2009-3R Class CUSIP Rating 4-A-1 22943YCJ6 AAA (sf) 26-A-1 22943YTV1 AAA (sf) 26-A-2 22943YTW9 B- (sf) 30-A-1 22943YUR8 AAA (sf) 30-A-3 22943YUT4 AAA (sf) 30-A-4 22943YUU1 AAA (sf) 30-A-5 22943YUV9 AAA (sf) 30-A-6 22943YUW7 B (sf) 30-A-8 22943YUY3 AAA (sf) J.P. Morgan Resecuritization Trust Series 2010-6 Class CUSIP Rating 1-A-1 46635AAA1 AAA (sf) 1-A-2 46635AAB9 AA (sf) 1-A-3 46635AAC7 A (sf) 1-A-4 46635AAD5 B (sf) 1-A-5 46635AAE3 AA (sf) 1-A-6 46635AAF0 A (sf) 1-A-7 46635AAG8 B (sf) 1-A-8 46635AAH6 B (sf) 2-A-1 46635AAJ2 AAA (sf) 2-A-2 46635AAK9 AA (sf) 2-A-3 46635AAL7 A (sf) 2-A-5 46635AAN3 AA (sf) 2-A-6 46635AAP8 A (sf) 2-A-14 46635AAX1 AAA (sf) 2-A-15 46635AAY9 AA (sf) 2-A-16 46635AAZ6 A (sf) 2-A-18 46635ABB8 AA (sf) 2-A-19 46635ABC6 A (sf) 3-A-1 46635ABJ1 AAA (sf) 3-A-2 46635ABK8 AA (sf) 3-A-3 46635ABL6 A (sf) 3-A-4 46635ABM4 BB (sf) 3-A-5 46635ABN2 AA (sf) 3-A-6 46635ABP7 A (sf) 3-A-7 46635ABQ5 BB (sf) 3-A-8 46635ABR3 BB (sf) JMAC Master Resecuritization Trust I Series 2009-A Class CUSIP Rating 37-A 46633LBN0 AAA (sf) 38-A 46633LBP5 A (sf) 39-A 46633LBQ3 BBB (sf) 40-A 46633LBR1 AAA (sf) 41-A 46633LBS9 AAA (sf) 42-A 46633LBT7 AA (sf) 47-A 46633LBY6 AA (sf) 48-A 46633LBZ3 AAA (sf) Lehman Mortgage Trust 2008-5 Class CUSIP Rating A1 52524SAA4 B (sf) A2 52524SAB2 CCC (sf) A3 52524SAC0 CC (sf) A4 52524SAD8 CCC (sf) A5 52524SAJ5 CC (sf) Picard Funding 2 Ltd. Series 2 Class CUSIP Rating A 71952WAA6 AAA (sf) B 71952WAB4 AA (sf) C 71952WAC2 AA- (sf) D 71952WAD0 A+ (sf) E 71952WAE8 A (sf) F 71952WAF5 A- (sf) G 71952WAG3 BBB+ (sf) H 71952WAH1 BBB (sf) I 71952WAJ7 BBB- (sf) J 71952WAK4 BB+ (sf) K 71952WAL2 BB (sf) L 71952WAM0 BB- (sf) M 71952WAN8 B (sf) ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers" public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed Chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. The Sunday TCR delivers securitization rating news from the week then-ending. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors" Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Denise Marie Varquez, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2012. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. 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