/raid1/www/Hosts/bankrupt/TCR_Public/171015.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, October 15, 2017, Vol. 21, No. 287
Headlines
A10 TERM ASSET 2017-1: DBRS Finalizes B Rating on Class F Notes
ANCHORAGE CAPITAL 7: S&P Gives Prelim BB(sf) Rating on E-R Notes
ARBOR REALTY 2017-: DBRS Finalizes BB(low) Rating on Cl. E Notes
BAMLL COMMERCIAL 2015-ASHF: S&P Affirms B- Rating on Class F Certs
BANC OF AMERICA 2007-5: S&P Affirms CCC Rating on Class C Certs
BBCMS TRUST 2015-SRCH: Fitch Affirms 'BB+sf' Rating on Cl. E Notes
BRENTWOOD CLO: Moody's Lowers Rating on Class D Notes to B1
BX TRUST 2017-IMC: S&P Gives Prelim B-(sf) Rating on Class F Certs
BXP TRUST 2017-CC: DBRS Finalizes BB Rating on Class E Certs
CALIFORNIA COUNTY 2006A: Moody's Ups Rating on 2 Tranches to B2
CAN CAPITAL 2014-1: DBRS Lowers Class B Notes Rating to CC(sf)
CAVALRY CLO V: Moody's Hikes Rating on Class E Notes From Ba1
CIFC FUNDING 2013-II: S&P Gives Prelim B- Rating on B-3L-R Notes
CIM TRUST 2017-7: Fitch Assigns 'Bsf' Rating to Cl. B2 Notes
CITIGROUP COMMERCIAL 2013-GC17: Fitch Affirms B Rating on F Certs
CMLS ISSUER 2014-1: DBRS Confirms Bsf Rating on Cl. G Certificates
COMM 2004-LNB2: DBRS Confirms CCC Rating on Class K Certs
COMM MORTGAGE 2007-C9: Moody's Lowers Class XS Debt Rating to C
COMMERCIAL MORTGAGE 1999-C1: Moody's Affirms C on Cl. X Certs
CPS AUTO 2017-D: S&P Assigns Prelim BB-(sf) Rating on Class E Notes
CSFB 2005-C5: Fitch Affirms 'CCCsf' Rating on Class G Certs
CSFB MANUFACTURED 2001-MH29: S&P Cuts Cl. M-2 Certs Rating to Dsf
CWABS TRUST 2006-10: Moody's Hikes Class 3-AV-4 Certs Rating to B3
DBUBS 2017-BRBK: S&P Assigns Prelim. B Rating on Class F Notes
DBUBS MORTGAGE 2011-LC3: Moody's Affirms B2(sf) Rating on F Certs
DENALI CAPITAL X: S&P Gives Prelim B-(sf) Rating on B-3L-R Notes
DEUTSCHE MORTGAGE 1998-C1: Moody's Affirms C Rating on Cl. X Debt
DT AUTO OWNER 2017-3: DBRS Finalizes BB Rating on Class E Notes
EXETER AUTOMOBILE 2016-2: S&P Affirms BB(sf) Rating on Cl. D Notes
FLAGSHIP CREDIT 2017-3: DBRS Finalizes BB Rating on Class E Debt
FREDDIE MAC 2017-2: DBRS Finalizes B(low) Rating on Cl. M-2 Certs
FREDDIE MAC 2017-3: Fitch Assigns 'B-sf' Rating to Cl. M-2 Notes
GALLATIN CLO 2017-1: Moody's Assigns B3 Rating to Class F Notes
GMAC COMMERCIAL 1998-C2: Moody's Affirms C Rating on Cl. X Certs
GOLDMAN SACHS 2012-GCJ9: Fitch Affirms 'Bsf' Rating on Cl. F Certs
JP MORGAN 2006-CIBC15: Moody's Lowers Class A-M Debt Rating to B3
JP MORGAN 2007-CIBC20: S&P Cuts Rating on Class F Certs to D(sf)
JP MORGAN 2014-C18: Fitch Affirms 'Bsf' Rating on Cl. F Certs
JP MORGAN 2017-3: DBRS Finalizes B Rating on Class B-5 Certs
JPMBB COMMERCIAL 2015-C33: Fitch Affirms B- Rating on Cl. F Certs
JPMDB COMMERCIAL 2017-C7: Fitch to Rate Class F-RR Notes 'B-sf'
LB-UBS COMMERCIAL 2003-C1: Fitch Affirms B Rating on Class Q Certs
LEHMAN ABS 2001-B: S&P Lowers Class A-4 Certs Rating to 'CC(sf)'
MERRILL LYNCH 2007-CANADA21: DBRS Confirms B Rating on K Certs
ML-CFC COMMERCIAL 2007-5: Moody's Cuts Rating on 2 Tranches to Caa2
ML-CFC COMMERCIAL 2007-9: Fitch Affirms CC Ratings on 2 Tranches
MORGAN STANLEY 2007-IQ16: DBRS Confirms C Ratings on 3 Tranches
MORGAN STANLEY 2007-IQ16: S&P Cuts Class B Certs Rating to CCC-
MORGAN STANLEY 2013-C8: Fitch Affirms 'Bsf' Rating on Cl. F Certs
MORGAN STANLEY 2014-C17: DBRS Confirms B Rating on Class F Certs
MOUNTAIN VIEW 2013-1: S&P Gives Prelim BB-(sf) Rating on E-R Notes
NEW RESIDENTIAL 2017-6: Moody's Gives (P)B1 Rating to Cl. B-7 Notes
OCP CLO 2014-6: S&P Assigns Prelim B(sf) Rating on Class E Notes
OCTAGON INVESTMENT 24: Moody's Assigns B2 Rating to Cl. E-U Notes
OHA CREDIT XIV: S&P Assigns Prelim. BB- Rating on Class E Notes
PFP 2015-2: DBRS Confirms B Rating on Class G Notes
PRESTIGE AUTO 2017-1: DBRS Finalizes BB Rating on Class E Debt
RITE AID 1999-1: Moody's Confirms B2 Rating on Class A-2 Debt
SEQUOIA MORTGAGE 2017-7: Moody's Rates Class B-4 Notes 'Ba3'
STACR 2017-DNA3: Fitch Assigns B+sf Ratings to 12 Tranches
STACR 2017-HQA3: Moody's Rates Class M-2B Notes (P)Caa1
TOWD POINT 2017-5: Moody's Assigns (P)B1 Rating to Cl. B2 Notes
TROPIC CDO II: Moody's Hikes Class A-3L Notes Rating From Ba1
UBS-BARCLAYS COMMERCIAL 2012-C4: Fitch Affirms B Rating on F Certs
UNISON GROUND 2013-2: Fitch Affirms 'BB-sf' Rating on Cl. B Notes
WELLS FARGO 2016-NXS6: Fitch Affirms 'B-sf' Rating on Class F Certs
WESTCHESTER CLO: Moody's Lowers Rating on Cl. E Notes to Caa1
WESTLAKE AUTOMOBILE 2017-2: DBRS Finalizes BB on Class E Notes
WFRBS COMMERCIAL 2014-C21: DBRS Keeps B Rating on Class F Certs
[*] Fitch: Delinquencies Continue to Fall for US RMBS Servicers
[*] Fitch: New Issuance Offsets USCMBS Delinquencies in September
[*] Moody's Hikes $553MM of Subprime RMBS Issued 2005 & 2006
[*] S&P Takes Various Action on 87 Classes From 10 US RMBS Deals
[*] S&P Takes Various Actions on 13 Classes From 11 US RMBS Deals
*********
A10 TERM ASSET 2017-1: DBRS Finalizes B Rating on Class F Notes
---------------------------------------------------------------
DBRS, Inc. finalized the provisional ratings on these classes of
notes (the Notes) issued by A10 Term Asset Financing 2017-1, LLC
(the Issuer):
-- Class A-1-FL at AAA (sf)
-- Class A-1-FX at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at A (low) (sf)
-- Class C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
All trends are Stable.
The Class E and Class F Notes are non-offered classes and were
retained by the Issuer.
The collateral consists of 30 loans secured by 52 commercial
properties, all originated by A10 Capital, LLC (A10). A total of
eight underlying loans are cross-collateralized and cross-defaulted
into two separate portfolios, or crossed groups. The DBRS analysis
of this transaction incorporates these crossed groups, resulting in
a modified loan count of 28, and loan references within the related
report reflect this total. A10 specializes in mini-perm loans,
which typically have three- to five-year terms with extension
options and are used to finance properties until they are fully
stabilized. The borrowers are often new equity sponsors of fairly
well-positioned assets within their respective markets. A10's
initial advance is a senior debt component typical for the purchase
of a real estate–owned acquisition or discounted payoff.
The pool was analyzed to determine the ratings, which reflect the
long-term probability of loan default within the term and its
liquidity at maturity based on the fully extended loan term.
Because of the floating-rate nature of over half the pool (61.0%),
the index (one-month LIBOR and three-month LIBOR) was assigned at
the lower of a DBRS stressed rate that corresponded to the
remaining fully extended term of the loans and the strike price of
the interest rate cap, to the extent that one is in place, with the
respective contractual loan spread added to determine a stressed
interest rate over the loan term.
For the hybrid loans that contain a fixed- and floating-rate
component, DBRS analyzed the maximum debt service expected
throughout the life of the loan, which occurred in the first 12
months of the loan switching to a floating interest rate. When the
cut-off whole-loan balances, inclusive of future funding, were
measured against the DBRS In-Place Net Cash Flow (NCF) and their
respective in-place constants (fixed-rate loans) or stressed
constants (floating-rate loans), 21 loans, representing 74.2% of
the total loan commitments, had a DBRS Term Debt Service Coverage
Ratio (DSCR) below 1.15 times (x), a threshold indicative of a
higher likelihood of mid-term default.
Additionally, to assess refinance risk, DBRS applied its refinance
constants to the balloon amounts. This resulted in 12 loans,
representing 50.4% of the total commitments, having refinance DSCRs
below 1.00x relative to the DBRS Stabilized NCF. The properties are
often transitioning, with potential upside in the cash flow;
however, DBRS does not give full credit to the stabilization if
there is no future funding or holdback or if other loan structural
features in place were insufficient to support such treatment.
Furthermore, even with the structure provided, DBRS generally does
not assume that the assets will stabilize above current market
levels.
The ratings assigned by DBRS contemplate timely payments of
distributable interest and, in the case of the Notes other than the
Class A Notes, ultimate recovery of Deferred Collateralized Note
Interest Amounts (inclusive of interest payable thereon at the
applicable rate, to the extent permitted by law). Accordingly, DBRS
will assign its Interest in Arrears designation to any class of
Notes (other than the Class A Notes) during any Interest Accrual
Period when such class accrues Deferred Collateralized Note
Interest Amounts.
The ratings assigned to the Notes by DBRS are based exclusively on
the credit provided by the transaction structure and underlying
trust assets. All classes will be subject to ongoing surveillance,
which could result in upgrades or downgrades by DBRS after the date
of issuance.
ANCHORAGE CAPITAL 7: S&P Gives Prelim BB(sf) Rating on E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-R, B-1-R, B-2-R, C-R, D-R, and E-R replacement notes from
Anchorage Capital CLO 7 Ltd., a collateralized loan obligation
(CLO) originally issued in 2015 that is managed by Anchorage
Capital Group LLC.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels.
The preliminary ratings are based on information as of Oct. 5,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Oct. 16, 2017, refinancing date, the proceeds from the
replacement note issuance are expected to redeem the original
notes. S&P said, "At that time, we anticipate withdrawing the
ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, we
may affirm the ratings on the original notes and withdraw our
preliminary ratings on the replacement notes."
The replacement notes are being issued via a proposed amended and
restated indenture, which will outline the terms of the replacement
notes.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the trustee report, to estimate future performance. In line with
our criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. In addition, our analysis considered the
transaction's ability to pay timely interest or ultimate principal,
or both, to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary."
PRELIMINARY RATINGS ASSIGNED
Anchorage Capital CLO 7 Ltd. Replacement
class Rating Amount (mil. $)
A-R AAA (sf) 385.50
B-1-R AA (sf) 69.50
B-2-R AA (sf) 31.75
C-R (deferrable) A (sf) 41.00
D-R (deferrable) BBB (sf) 42.75
E-R (deferrable) BB (sf) 25.25
ARBOR REALTY 2017-: DBRS Finalizes BB(low) Rating on Cl. E Notes
----------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings of the following
classes of Floating-Rate Notes (the Notes) to be issued by Arbor
Realty Commercial Real Estate Notes 2017-FL2, Ltd. (the Issuer):
-- Class A Senior Secured Floating-Rate Notes at AAA (sf)
-- Class A-S Secured Floating-Rate Notes at AAA (sf)
-- Class B Secured Floating-Rate Notes at AA (low) (sf)
-- Class C Secured Floating-Rate Notes at A (low) (sf)
-- Class D Secured Floating-Rate Notes at BBB (low) (sf)
-- Class E Unsecured Floating-Rate Notes at BB (low) (sf)
All trends are Stable. The Class E Notes are non-offered and will
be retained by an affiliate of the Issuer.
The transaction is a managed collateralized loan obligation pool
that totals $365.0 million. The initial collateral consists
entirely of multifamily properties that have some level of
transition or stabilization, which is the premise for seeking
floating-rate short-term debt. The transaction has a replacement
period expected to expire in August 2020. Reinvestment is subject
to Eligibility Criteria, which includes a rating agency condition
(RAC) by DBRS. The initial pool consists of 20 loans totaling
$234.2 million; however, an additional three loans, totaling $59.5
million, are scheduled to close in the near future, increasing the
pool balance to $293.7 million. Most of the loans are secured by
current cash flowing assets in a period of transition, with viable
plans and a viable loan structure to stabilize and improve the
asset value. DBRS analyzed and modeled the existing loan pool in
addition to loans that can be purchased subject to the Eligibility
Criteria in the Post Closing Acquisition Period (PCAP); DBRS
assumes that the loans purchased within the PCAP will migrate to
the least-favorable criteria, as defined in the Eligibility
Criteria. DBRS also anticipates that the pool could become more
concentrated in the future in terms of sponsor concentrations or
additional concentrations (property type, loan size and geography);
as a result, DBRS will have the ability to provide an RAC on loans
that are being added to the pool during the replacement period in
order to evaluate any credit drift caused by loan concentrations.
Following the replacement period, the transaction will have a
sequential-pay structure.
DBRS performed site inspections and met with the on-site property
manager, leasing agent or representative of the borrowing entity
for 11 properties, totaling 68.2% of the initial pool balance. The
floating-rate mortgages were analyzed to determine the probability
of loan default over the term of the loan and its refinance risk at
maturity based on a fully extended loan term. As a result of the
floating-rate nature of the loans, the index DBRS used (one-month
LIBOR) was the lower of a DBRS stressed rate that corresponded to
the remaining fully extended term of the loans or the strike price
of the interest rate cap, with the respective contractual loan
spread added to determine a stressed interest rate over the loan
term. When the cut-off balances were measured against the DBRS
In-Place NCF and their respective stressed constants, there were 22
loans, representing 90.6% of the initial pool balance, with term
debt service coverage ratios (DSCRs) below 1.15 times (x), a
threshold indicative of a higher likelihood of term default.
Additionally, to assess refinance risk, DBRS applied its refinance
constants to the balloon amounts, resulting in 12 loans, or 73.3%
of the initial pool balance, having refinance DSCRs below 1.00x,
relative to the DBRS Stabilized NCF. The properties are often
transitioning with potential upside in the cash flow; however, DBRS
does not give full credit to the stabilization if there are no
holdbacks or if other loan structural features in place were
insufficient to support such treatment. Furthermore, even with the
structure provided, DBRS generally does not assume the assets to
stabilize above market levels.
The Issuer, servicer, mortgage loan seller and advancing agent are
related parties and non-rated entities. Arbor Realty SR, Inc. has a
proven track record with several collateralized loan obligation
platforms that performed well in 2004, 2005 and 2006. In addition
to recently issued transactions in 2012 and 2013, DBRS rated five
transactions, Arbor Realty Collateralized Loan Obligation 2014-1,
Ltd., Arbor Realty Commercial Real Estate Notes 2015-FL1, Ltd.,
Arbor Realty Commercial Real Estate Notes 2015-FL2, Ltd., Arbor
Realty Commercial Real Estate Notes 2016-FL1, Ltd. and Arbor Realty
Commercial Real Estate Notes 2017-FL1, Ltd. DBRS has reviewed Arbor
Multifamily Lending, LLC's servicing platform (and special
servicing) and finds it to be an acceptable servicer. The Class E
Notes and the preferred shares will be retained by ARMS Equity, an
affiliate of the trust asset seller. The non-offered notes and
preferred shares represent 22.5% of the transaction balance.
All initial loans in the transaction are secured by multifamily
properties. Exposure to industrial, retail, office and self-storage
properties in the trust is capped at 25.0% during the reinvestment
period, per the Eligibility Criteria. Nineteen loans, totaling
77.2% of the initial pool balance, represent acquisition financing
with borrowers contributing equity to the transaction. The overall
weighted-average (WA) DBRS Term and Refi DSCRs of 0.81x and 0.93x,
respectively, and corresponding DBRS Debt and Exit Debt Yields of
5.7% and 7.9%, respectively, are considered high-leverage
financing. The DBRS Term and Refinance DSCRs are based on the DBRS
In-Place NCF and debt service calculated using a stressed interest
rate. The WA stressed rate used of 7.15% is 0.83% greater than the
current WA interest rate of 6.32% (based on WA mortgage spread and
an assumed 1.23% one-month LIBOR index). Regarding the significant
refinance risk indicated by the DBRS Refi DSCR of 0.93x, the credit
enhancement levels are reflective of the increased leverage that is
substantially higher than in recent fixed-rate transactions. The
assets are generally well-positioned to stabilize and any realized
cash flow growth would help to offset a rise in interest rates and
also improve the overall debt yield of the loans. DBRS associates
its probability of default (POD) based on the assets' in-place cash
flow, which does not assume that the stabilization plan and cash
flow growth will ever materialize. Only three loans, representing
5.2% of the pool, are secured by properties located in tertiary or
rural markets. Properties located in tertiary and rural markets
were analyzed with significantly higher loss severities than those
located in urban and suburban markets.
BAMLL COMMERCIAL 2015-ASHF: S&P Affirms B- Rating on Class F Certs
------------------------------------------------------------------
S&P Global Ratings raised its ratings on three classes of
commercial mortgage pass-through certificates from BAMLL Commercial
Mortgage Securities Trust 2015-ASHF, a U.S. commercial
mortgage-backed securities (CMBS) transaction. In addition, S&P
affirmed its ratings on four other classes from the same
transaction.
S&P said, "For the upgrades and affirmations on the principal- and
interest-paying certificates, our expectation of credit enhancement
was more or less in line with the affirmed or raised rating
levels.
"We raised our rating on the class X interest-only (IO)
certificates based on our criteria for rating IO securities, in
which the ratings on the IO securities would not be higher than
that of the lowest rated reference class. Class X's notional
balance references classes A and B and the portion balance of the
class C-1 portion.
"This is a single-borrower transaction backed by a floating-rate IO
mortgage loan secured by eight full-service hotel properties
totaling 1,964 guestrooms, 21 food and beverage outlets, and over
75,000 sq. ft. of meeting space in six U.S. states. Our
property-level analysis included a re-evaluation of the portfolio
of hotel properties and considered the upward trending but volatile
servicer-reported occupancy, average daily rate (ADR), and net
operating income for the past six years (from 2012 through the
trailing 12 months ended Aug. 31, 2017). We then derived our
sustainable in-place net cash flow (NCF), which we divided by a
9.28% S&P Global Ratings weighted average capitalizationrate to
determine our expected-case value. This yielded an overall S&P
Global Ratings loan-to-value ratio and debt service coverage (DSC)
of 83.9% and 1.57x (based on the LIBOR cap rate plus a spread),
respectively, for the trust balance.
"According to the Sept. 15, 2017, trustee remittance report, the IO
mortgage loan has a trust and whole loan balance of $285.0 million
and pays an annual floating interest rate of LIBOR plus a 4.016%
spread. The loan currently matures on Jan. 9, 2018, and has two
one-year extension options remaining. The borrowers' equity
interests in the whole loan also secure two mezzanine loans
totaling $91.8 million. In addition, we confirmed that the two
hotels in Florida incurred minor, if any, damages from Hurricane
Irma. The master servicer, Wells Fargo Bank N.A., reported for the
portfolio an overall occupancy, ADR, revenue per available room,
and DSC of 81.39%, $186.72, $154.13, and 3.01x for the trust
balance, respectively, for the 12 months ended June 30, 2017. To
date, the trust has not incurred any principal losses."
RATINGS LIST
BAMLL Commercial Mortgage Securities Trust 2015-ASHF
Commercial mortgage pass-through certificates series 2015-ASHF
Rating
Class Identifier To From
A 05525YAA8 AAA (sf) AAA (sf)
X 05525YAC4 A (sf) A- (sf)
B 05525YAG5 AA (sf) AA- (sf)
C 05525YAJ9 A (sf) A- (sf)
D 05525YAL4 BBB- (sf) BBB- (sf)
E 05525YAN0 BB- (sf) BB- (sf)
F 05525YAQ3 B- (sf) B- (sf)
BANC OF AMERICA 2007-5: S&P Affirms CCC Rating on Class C Certs
---------------------------------------------------------------
S&P Global Ratings raised its ratings on two classes of commercial
mortgage pass-through certificates from Banc of America Commercial
Mortgage Trust 2007-5, a U.S. commercial mortgage-backed securities
(CMBS) transaction. S&P said, "At the same time, we affirmed our
ratings on two other classes from the same transaction. We also
discontinued our rating on class A-1A following its full principal
repayment."
For the upgrades and affirmations, S&P's expectation of credit
enhancement was more or less in line with the raised or affirmed
rating levels.
S&P said, "While available credit enhancement levels suggest
further positive rating movement on classes A-M, and A-J, and
positive rating movement on class B, our analysis also considered
the notes' susceptibility to reduced liquidity support from the
eight specially serviced assets ($165.5 million, 35.7%) and the
magnitude of the nondefeased, performing loans (10 loans; $155.5
million, 33.6%) maturing in 2017.
"We are discontinuing our 'AA (sf)' rating on class A-1A following
the bond's full principal repayment as reflected on the September
2017 trustee remittance report."
TRANSACTION SUMMARY
As of the Sept. 11, 2017, trustee remittance report, the collateral
pool balance was $463.3 million, which is 24.9% of the pool balance
at issuance. The pool currently includes 21 loans and two real
estate-owned (REO) assets (reflecting the Green Oak Village Place A
and B hope notes as one loan), down from 100 loans at issuance.
Eight of these assets ($165.5 million, 35.7%) are with the special
servicer; two ($12.4 million, 2.7%) are defeased; and 12 ($215.1
million, 46.4%) are on the master servicer's watchlist.
S&P said, "We calculated a 1.19x S&P Global Ratings' weighted
average debt service coverage (DSC) and 88.5% S&P Global Ratings'
weighted average loan-to-value (LTV) ratio using a 7.56% S&P Global
Ratings weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the eight specially
serviced assets ($165.5 million, 35.7%), two defeased loans ($12.4
million, 2.7%), three loans ($38.2 million, 8.3%) that the master
servicer informed us have paid off after the September payment
period, and one subordinate B hope note ($31.8 million, 6.9%).
"The top 10 nondefeased assets have an aggregate outstanding pool
trust balance of $383.5 million (82.8%). Adjusting the
servicer-reported numbers, we calculated an S&P Global Ratings'
weighted average DSC and LTV of 1.20x and 89.6%, respectively, for
five of the top 10 nondefeased assets. Four of the remaining assets
are specially serviced, while one has paid off.
"To date, the transaction has experienced $89.1 million in
principal losses, or 4.8% of the original pool trust balance. We
expect losses to reach approximately 8.4% of the original pool
trust balance in the near term, based on losses incurred to date
and additional losses we expect upon the eventual resolution of the
eight specially serviced assets."
CREDIT CONSIDERATIONS
As of the Sept. 11, 2017, trustee remittance report, eight assets
in the pool were with the special servicer, C-III Asset Management
LLC (C-III). Details of the two largest specially serviced assets,
both of which are top 10 nondefeased assets, are as follows:
The 4000 Wisconsin Avenue loan ($53.0 million, 11.4%) is the
third-largest loan in the pool and has a total reported exposure of
$53.3 million. The loan is secured by a 492,192-sq.-ft. office
property located in Washington, D.C. The loan was transferred to
the special servicer on June 19, 2017, for imminent default because
the largest tenant, Fannie Mae (occupying approximately 87% of
gross leasable area (GLA), will vacate the property upon lease
expiration in April 2018. The reported DSC and occupancy as of
March 2017 was 2.19x and 98.4%, respectively. No appraisal
reduction amount (ARA) is in effect against this asset. S&P
currently expects a minimal loss upon this asset's eventual
resolution.
The 500 Virginia Drive REO asset ($28.8 million, 6.2%) has a total
reported exposure of $34.7 million. The asset is a 366,992-sq.-ft.
office property located in Fort Washington, Pa. The loan was
transferred to the special servicer on April 5, 2012, due to
imminent maturity default, and became REO on Sept. 30, 2014. The
special servicer is pursuing leasing efforts at the property. An
ARA of $18.9 million is in effect against this asset. S&P expects a
significant loss upon this asset's eventual resolution.
The six remaining assets with the special servicer each have
individual balances that represent less than 6.0% of the total pool
trust balance. S&P estimated losses for the eight specially
serviced assets, arriving at a weighted-average loss severity of
40.4%.
With respect to the specially serviced assets noted above, a
minimal loss is less than 25%, a moderate loss is 26%-59%, and a
significant loss is 60% or greater.
RATINGS LIST
Banc of America Commercial Mortgage Trust 2007-5
Commercial mortgage pass-through certificates series 2007-5
Rating
Class Identifier To From
A-1A 05952CAF7 NR AA (sf)
A-M 05952CAG5 AA (sf) BB- (sf)
A-J 05952CAH3 BB+ (sf) B- (sf)
B 05952CAL4 B- (sf) B- (sf)
C 05952CAN0 CCC (sf) CCC (sf)
NR--Not rated.
BBCMS TRUST 2015-SRCH: Fitch Affirms 'BB+sf' Rating on Cl. E Notes
------------------------------------------------------------------
Fitch Ratings has affirmed eight classes of BBCMS Trust 2015-SRCH
Mortgage Trust commercial mortgage pass-through certificates.
KEY RATING DRIVERS
The affirmation reflects stable performance of the underlying
collateral since issuance. The loan is secured by the fee simple
interest in three single-tenant office buildings, totaling 943,056
square feet (sf), leased to Google in Sunnyvale, CA.
Stable Performance: Property level performance is stable and the
trailing 12 months (TTM) June 2017 net cash flow (NCF) is in line
with issuance expectations.
Superior Property Quality in Strong Location: The office buildings
are located in Sunnyvale, CA. The three buildings hold a LEED-Gold
designation and are some of the most technologically advanced in
the area.
Single-Tenant Lease Exposure: The three buildings are leased by a
single tenant, Google, Inc. (Google). Google has accepted delivery
of the three buildings, has no outs in its lease, and is expected
to invest approximately $188.6 million ($200 per square foot [psf])
to complete their buildout. Google is one of the world's largest
technology companies with an estimated market capitalization of
$515 billion as of November 2015. It is also one of the largest
landlords and occupiers of space in the Silicon Valley market. The
company has already leased the next three office buildings in the
development (Phase II).
Amortization: The loan is interest-only for the first four years
and eight months and then amortizes on a 30-year schedule,
resulting in seven years of amortization. At maturity, the trust
balloon balance is estimated to be $372.1 million, resulting in an
approximate 13.5% reduction to the initial loan amount.
Reserves: Up-front reserves of approximately $71 million were
funded to address all outstanding landlord obligations, including
tenant improvements, leasing costs and free rent periods. The loan
includes a cash flow sweep to be used to build reserves to $25 psf
during the final two years of the lease term if Google does not
give notice to renew.
RATING SENSITIVITIES
The Outlooks on all classes remain Stable and no rating change is
expected unless there is a material decline in collateral
performance. At issuance, Fitch found that the 'AAAsf' class could
withstand an approximate 51.7% decrease to the estimated in-place
NCF prior to experiencing $1 of loss to the 'AAAsf' rated class.
Fitch performed several stress scenarios in which the Fitch NCF was
stressed. Fitch determined that a 32.5% reduction in Fitch's
implied NCF would cause the notes to break even at a 1.0x debt
service coverage ratio (DSCR), based on the actual debt service.
Fitch also evaluated the sensitivity of the ratings for class A and
found that an 8.1% decline in Fitch's implied NCF would result in a
one-category downgrade, while a 36.8% decline would result in a
downgrade to below investment grade.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating.
Fitch has affirmed the following ratings:
-- $58.0 million class A-1 notes at 'AAAsf'; Outlook Stable;
-- $202.0 million class A-2 notes at 'AAAsf'; Outlook Stable;
-- $260.0 million interest-only class X-A* at 'AAAsf'; Outlook
Stable;
-- $140.0 million interest-only class X-B* notes at 'BBB-sf';
Outlook Stable;
-- $46.0 million class B notes at 'AA-sf'; Outlook Stable;
-- $39.0 million class C notes at 'A-sf'; Outlook Stable;
-- $55.0 million class D notes at 'BBB-sf'; Outlook Stable;
-- $30.0 million class E notes at 'BB+sf'; Outlook Stable.
*Notional amount and interest only.
BRENTWOOD CLO: Moody's Lowers Rating on Class D Notes to B1
-----------------------------------------------------------
Moody's Investors Service has affirmed the ratings on the following
notes issued by Brentwood CLO, Ltd.:
US$51,500,000 Class A-2 Floating Rate Senior Secured Extendable
Notes Due 2022 (current outstanding balance of $7,861,529.76),
Affirmed Aaa (sf); previously on May 16, 2017 Affirmed Aaa (sf)
US$68,600,000 Class B Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2022, Affirmed Aa2 (sf); previously
on May 16, 2017 Upgraded to Aa2 (sf)
US$23,800,000 Class C Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2022, Affirmed Baa3 (sf); previously
on May 16, 2017 Affirmed Baa3 (sf)
Moody's also downgraded the rating on the following notes:
US$21,000,000 Class D Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2022 (current outstanding balance of
$15,985,977.79), Downgraded to B1 (sf); previously on May 16, 2017
Downgraded to Ba3 (sf)
Brentwood CLO, issued in December 2006, is a collateralized loan
obligation (CLO) backed primarily by a portfolio of senior secured
loans, with exposure to CLO securities, illiquid loans and legacy
defaulted assets. The transaction's reinvestment period ended in
February 2014.
RATINGS RATIONALE
The rating affirmations on the Class A-2, Class B, and Class C
notes are primarily a result of deleveraging of the senior notes
and an increase in the transaction's over-collateralization (OC)
ratios since May 2017. The Class A-2 notes have been paid down by
approximately 63.6% or $13.7 million since that time. Based on
Moody's calculation, the OC ratios for the Class A-2, Class B and
Class C notes are currently 1660.03%, 170.68% and 130.16%,
respectively, versus May 2017 levels of 666.65%, 159.62% and
126.30% respectively.
The rating downgrade on the Class D Notes is primarily a result of
portfolio concentration in securities with low credit quality and
securities that mature after the notes do. Moody's notes the
transaction holds $21.6 million of thinly traded or untraded loans,
whose lack of liquidity may pose additional risks, especially for
the Class D notes, relating to the issuer's ultimate ability or
inclination to pursue a liquidation of such assets, especially if
the sales can be transacted only at heavily discounted price
levels. The portfolio also includes $10.1 million of investments in
securities that mature after the notes do. These investments could
expose the notes to additional market risk in the event of
liquidation when the notes mature.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to
uncertainty about credit conditions in the general economy.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and collateral sales by the manager, which could have a significant
impact on the notes' ratings. Note repayments that are faster than
Moody's current expectations will usually have a positive impact on
CLO notes, beginning with those with the highest payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets could result in volatility in the deal's
overcollateralization levels. Further, the timing of recovery
realization and whether the Manager decides to work out or sell
defaulted assets create additional uncertainty. Realization of
recoveries that are either materially higher or lower than assumed
in Moody's analysis would impact the CLO positively or negatively,
respectively.
6) Long-dated and illiquid assets: Repayment of the notes at their
maturity will be highly dependent on the issuer's successful
monetization of illiquid assets and those that mature after the
CLO's legal maturity date (long-dated assets). This risk in turn
may be contingent upon issuer's ability and willingness to sell
these assets. This risk is borne first by investors with the lowest
priority in the capital structure. However, actual long-dated and
illiquid asset exposures and prevailing market prices and
conditions at the time of liquidation will drive the deal's actual
losses, if any.
7) Exposure to credit estimates: The deal contains a large number
of securities whose default probabilities Moody's has assessed
through credit estimates. Moody's normally updates such estimates
at least once annually, but if such updates do not occur, the
transaction could be negatively affected by any default probability
adjustments Moody's assumes in lieu of updated credit estimates.
Additionally, Moody's normally maps certain credit estimates
representing more than 3% of performing assets to equivalent
ratings subject to a two-notch haircut.
8) Lack of portfolio granularity: The performance of the portfolio
depends to a large extent on the credit conditions of a few large
obligors Moody's rates Caa1 or lower, especially if they jump to
default.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF -- 20% ( 2917)
Class A-2: 0
Class B: +1
Class C: +2
Class D: +1
Moody's Adjusted WARF + 20% ( 4375)
Class A-2: 0
Class B: -1
Class C: -1
Class D: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $123.5 million, defaulted par of
$31.3 million, a weighted average default probability of 22.93%
(implying a WARF of 3646), a weighted average recovery rate upon
default of 46.40%, a diversity score of 15 and a weighted average
spread of 3.29% (before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. Moody's generally applies recovery
rates for CLO securities as published in "Moody's Approach to
Rating SF CDOs". In some cases, alternative recovery assumptions
may be considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
the collateral manager's latitude for trading the collateral are
also factors.
BX TRUST 2017-IMC: S&P Gives Prelim B-(sf) Rating on Class F Certs
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to BX Trust
2017-IMC's $955.0 million commercial mortgage pass-through
certificates.
BX Trust 2017-IMC's issuance is a CMBS transaction backed by one
two-year, floating-rate commercial mortgage loan totaling $955
million, with three one-year extension options, secured by the fee
and leasehold interests in 18 showroom properties, 15 of which are
located in High Point, N.C. and three in Las Vegas.
The note issuance is a commercial mortgage-backed securities
transaction backed by one two-year, floating-rate commercial
mortgage loan totaling $955 million, with three one-year extension
options, secured by the fee and leasehold interests in 18 showroom
properties, 15 of which are located in High Point, N.C. and three
in Las Vegas.
The preliminary ratings are based on information as of Oct. 10,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect our view of the collateral's
historical and projected performance, the sponsor's and manager's
experience, the trustee-provided liquidity, the loan's terms, and
the transaction's structure.
PRELIMINARY RATINGS ASSIGNED
BX Trust 2017-IMC
Class Rating(i) Amount ($)
A AAA (sf) 275,592,000
X-CP BBB- (sf) 261,176,000(ii)
X-NCP BBB- (sf) 261,176,000(ii)
B AA- (sf) 95,821,000
C A- (sf) 71,230,000
D BBB- (sf) 94,125,000
E BB- (sf) 148,396,000
F B- (sf) 126,836,000
G NR 95,000,000
HRR NR 48,000,000
(i)The issuer will issue the certificates to qualified
institutional buyers in line with Rule 144A of the Securities Act
of 1933.
(ii)Notional balance. The class X certificates' notional amount
will be reduced by the aggregate amount of principal distributions
and realized losses allocated to the class B, C, and D
certificates.
NR--Not rated.
BXP TRUST 2017-CC: DBRS Finalizes BB Rating on Class E Certs
------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on these classes of
Commercial Mortgage Pass-Through Certificates, Series 2017-CC (the
Certificates) to be issued by BXP Trust 2017-CC:
-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BB (sf)
All trends are Stable.
All classes have been privately placed.
The Class X-A balance is notional.
The collateral for the $550.0 million whole loan is a premier urban
creative office campus comprising six Class A office buildings
totaling 1,176,161 sf and a three-level underground parking garage,
which are collectively referred to as Colorado Center. The
improvements were built in phases, from 1984 to 1991, and are
situated on a 15.0-acre site that spans an entire city block
bounded by Cloverfield Boulevard, 26th Street, Broadway and
Colorado Avenue in the heart of the Media and Entertainment
District of Santa Monica, California. The office campus is located
one block north of the 26th Street/Bergamot Los Angeles County
Metro Rail light rail station that connects downtown Santa Monica
to downtown Los Angeles. Property-wide amenities include a
full-service fitness facility operated by TriFit, LLC, which
contains a fitness area with weights and exercise equipment, an
indoor swimming pool, a yoga and Pilates studio, a spin/cycling
studio, a full-service spa and racquetball and squash courts, in
addition to a food court, dry cleaning services, a children's
playground and daycare and a public park with two tennis courts and
a basketball court. The parking garage can accommodate up to 3,105
vehicles and is equipped with complimentary valet, electric car
charging stations and car washing services.
The subject's original developer, Tishman Speyer, spent
approximately $25.0 million on renovations to the retail area and
outdoor plaza areas, which were completed in 2002. The property was
acquired shortly thereafter through a joint venture between TIAA
Real Estate Account (TIAA) and Equity Office Properties Trust
(EOP). Blackstone Group LP (Blackstone) acquired EOP in Q1 2007,
along with its ownership stake in the property. Blackstone spent
approximately $10.4 million on capital improvements from 2013 to
mid-2016, including seismic retrofitting on all six buildings,
elevator modernization and upgrades to landscaping. In July 2016,
Boston Properties Limited Partnership (BPLP) acquired its 49.8%
ownership interest in the subject from Blackstone and, together
with TIAA (collectively, the sponsor), plans to contribute
approximately $16.9 million toward planned capex improvements that
are slated to begin in Q4 2017. The majority of the improvements
will be focused on the renovation and repositioning of the
ground-floor retail and food court within the 2425-2501 Colorado
Center building. The new improvements will transform the area into
a more modern dining hall concept that is anticipated to be run in
partnership with a world-class culinary operator, which would
prepare and serve fresh meals daily. The new retail space is
expected to have a high-quality design and finishes that will be
more in line with Class A offerings in the surrounding market.
During the planned capex, the sponsor also plans to redesign the
exterior landscape and outdoor common areas.
Historically, the subject has reported relatively strong occupancy
rates, though the average since 2008 is only 83.0%, and the average
over the past four years is even lower at 77.3%. Former tenants
Riot Games, Inc. and Yahoo! vacated the property in 2015, and as a
result, the property's occupancy declined to 49.9% from 85.0%. The
subject was approximately 68.0% occupied when BPLP acquired its
ownership position in July 2016, and more than 337,000 sf of new,
renewal or expansion leases have been executed at the property
since that time. As of the July 2017 rent roll, the subject was
90.9% occupied (excluding four small retail tenants on
month-to-month leases) by a diverse mix of national, regional and
local tenants. The rapid re-leasing of recently vacated space shows
the desirability of the asset and the ability of the Santa Monica
submarket to absorb large blocks of space on the rare occasions
that they become available.
Loan proceeds were used to return $502.6 million of equity to the
sponsor, fund $45.95 million in upfront reserves for outstanding
leasing costs and gap rent and cover closing costs. CBRE, Inc. has
determined the as-is value of the property to be $1,212,500,000
($1,031 psf), based on a 4.00% cap rate. The DBRS concluded value
of $584.6 million ($497 psf) equates to a 51.8% discount to the
appraiser's value and is based on a 7.5% cap rate. The resulting
DBRS loan-to-value (LTV) of 94.1% would typically be indicative of
higher leverage financing, but here it is more a reflection of the
extremely low market cap rates compared with the higher DBRS
stressed cap rate; further, the DBRS Debt Yield of 8.0% is
considered moderate for the market, and the subject's appraised
value of $1,031 psf is well supported by recent property sales in
the area that range from $503 psf to $1,470 psf. Finally, the
cumulative investment-grade-rated proceeds of $283.1 million
reflect an extremely attractive basis of only $241 psf, and the
corresponding DBRS LTV on such proceeds is much lower at 85.8%. The
ten-year loan is interest only throughout the term.
CALIFORNIA COUNTY 2006A: Moody's Ups Rating on 2 Tranches to B2
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 12 tranches
in 6 tobacco settlement revenue securitizations and downgraded the
ratings of 6 tranches in 3 tobacco settlement revenue
securitizations.
The complete rating actions are:
Issuer: California County Tobacco Securitization Agency (Los
Angeles County Securitization Corporation) Series 2006A Convertible
Turbo Bonds
Cl. 2006A-1, Upgraded to Baa2 (sf); previously on Jan 19, 2017
Upgraded to Ba1 (sf)
Cl. 2006A-2, Upgraded to B2 (sf); previously on Jul 6, 2015
Downgraded to B3 (sf)
Cl. 2006A-3, Upgraded to B2 (sf); previously on Jul 6, 2015
Downgraded to B3 (sf)
Issuer: California County Tobacco Securitization Agency (Merced
County Tobacco Funding Corporation) - Tobacco Settlement
Asset-Backed Refunding Bonds
2005A-1, Upgraded to Baa1 (sf); previously on Jan 19, 2017 Upgraded
to Baa2 (sf)
2005A-2, Upgraded to Ba3 (sf); previously on Feb 20, 2014 Confirmed
at B1 (sf)
2005A-3, Upgraded to B1 (sf); previously on Feb 20, 2014 Confirmed
at B2 (sf)
Issuer: New York Counties Tobacco Trust I, Series 2000
Term Bond 1, Upgraded to Aa3 (sf); previously on Feb 20, 2014
Confirmed at A1 (sf)
Issuer: New York Counties Tobacco Trust II, Series 2001
Super Sinker Term Bond 2, Downgraded to Baa2 (sf); previously on
Jul 14, 2017 A1 (sf) Placed Under Review for Possible Downgrade
Super Sinker Term Bond 3, Downgraded to Baa3 (sf); previously on
Jul 14, 2017 A2 (sf) Placed Under Review for Possible Downgrade
Issuer: New York Counties Tobacco Trust III, Series 2003
2003 TTB-3, Downgraded to A3 (sf); previously on Jul 14, 2017 Aa3
(sf) Placed Under Review for Possible Downgrade
Issuer: Rockland Tobacco Asset Securitization Corporation, Series
2001
Super Sinker Term Bond 3, Upgraded to Baa3 (sf); previously on Jan
19, 2017 Downgraded to Ba1 (sf)
Issuer: The California County Tobacco Securitization Agency (
Fresno County Tobacco Funding Corporation), Series 2002
Ser. 2002 Term Bonds 2, Downgraded to A3 (sf); previously on Jul
14, 2017 A2 (sf) Placed Under Review for Possible Downgrade
Ser. 2002 Term Bonds 3, Downgraded to Baa2 (sf); previously on Jul
14, 2017 Baa1 (sf) Placed Under Review for Possible Downgrade
Ser. 2002 Term Bond 4, Downgraded to Baa3 (sf); previously on Jul
14, 2017 Baa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Tobacco Securitization Authority of Northern California
(Sacramento County)
2005A-1-1, Upgraded to Baa3 (sf); previously on Jan 19, 2017
Upgraded to Ba2 (sf)
2005A-2, Upgraded to B2 (sf); previously on Feb 20, 2014 Upgraded
to B3 (sf)
Issuer: Tobacco Settlement Financing Corporation (New Jersey),
Series 2007-1
2007-1A Serial Bond 11, Upgraded to Aaa (sf); previously on Jul 26,
2016 Upgraded to Aa1 (sf)
2007-1A Serial Bond 12, Upgraded to Aa2 (sf); previously on Jul 6,
2015 Upgraded to A1 (sf)
RATINGS RATIONALE
The upgrade actions announced are primarily the result of continued
deleveraging of the transactions, and, to a lesser extent, Moody's
upgrade of Reynolds American Inc.'s senior unsecured rating to Baa2
from Baa3 in August 2017. The 2016 cigarette shipment volume
decrease of approximately 4.0% was in line with Moody's
expectation.
The upgrade action on New York Counties Tobacco Trust I, Series
2000 also reflects an adjustment to the calculation of the
liquidity reserve requirement and corrects an error in prior
analysis in the payment schedule that was affecting future bond
cashflow to the deal.
The downgrade actions on New York Counties Tobacco Trust II, Series
2001 (NY Tobacco Trust II), New York Counties Tobacco Trust III,
Series 2003 (NY Tobacco Trust III), and The California County
Tobacco Securitization Agency (Fresno County Tobacco Funding
Corporation), Series 2002 conclude the review actions announced on
July 14, 2017 and reflect corrections of the errors disclosed in
the press release issued on that date. The downgrade actions on the
bonds from NY Tobacco Trust II and NY Tobacco Trust III also
reflect correction of inaccurate operating expense inputs, and, for
NY Tobacco Trust II, an adjustment to the calculation of the
liquidity reserve requirement, used in prior analysis. The net
impact of correcting all of these errors and making the adjustments
was negative.
METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Tobacco Settlement Revenue Securitizations"
published in January 2017.
For the New York transactions, Moody's base case assumed non-SET
paid Tribal pack sales to be 175 million packs per year, decreasing
annually at the same rate as Moody's assumptions for the yearly
volume decline of cigarette shipments. This upward adjustment of
the base case from 150 million packs per year is based on
information provided by New York State as determined by an
independent investigator. In addition, for the New York
transactions, rating actions included cash flow runs for additional
scenarios to test the resiliency of ratings to stresses to the
projections of future non-SET paid Tribal NPM pack sales.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings if the annual rate of decline in
the volume of domestic cigarette shipments falls below Moody's 4%
base case expectation, if future arbitration proceedings and
subsequent recoveries for settling states become more expeditious
than they currently are, or, in the case of the New York deals, the
number of non-SET paid Tribal NPM packs sold drop significantly
below Moody's expectations.
Down
Moody's could downgrade the ratings if the annual rate of decline
in the volume of domestic cigarette shipments increases above
Moody's 4% base case expectation, if subsequent recoveries from
future arbitration proceedings for settling states take longer than
Moody's assumption of 15-20 years, if an arbitration panel finds
that a settling state was not diligent in enforcing a certain
statute which could lead to a significant decline in cash flow to
that state, or, if, for the New York deals, the number of non-SET
paid Tribal NPM packs sold do not decrease in line with Moody's
expectations.
CAN CAPITAL 2014-1: DBRS Lowers Class B Notes Rating to CC(sf)
--------------------------------------------------------------
DBRS, Inc. removed the Under Review with Negative Implications
status from the Series 2014-1 Notes, Class A (Class A Notes) and
Series 2014-1 Notes, Class B (Class B Notes) of the CAN Capital
Funding LLC Series 2014-1 structured finance asset-backed
securities transaction. The rating of the Class A Notes has been
confirmed at BBB (high) (sf). The rating of the Class B Notes has
been downgraded to CC (sf). For the Class A Notes, credit
enhancement is sufficient to absorb DBRS expected losses at the
current rating level. For the Class B Notes, credit enhancement was
not sufficient to absorb DBRS expected losses at the B (high) (sf)
rating level. DBRS deems the new rating of CC (sf) to reflect DBRS
expectations.
The ratings are based on DBRS's review of the following analytical
considerations:
-- Transaction capital structure, ratings and form and
sufficiency of available credit enhancement.
-- The transaction parties' capabilities with regard to
servicing.
-- The credit quality of the collateral pool and projected
performance.
As of the July 2017 Monthly Servicing Statement, the principal
balance of Class A Notes outstanding was $16,809,471 as reported in
the Monthly Servicing Statement for the above-referenced
transaction. The outstanding principal balance of Class B Notes was
$20,000,000.00 as reported in the Monthly Servicing Statement. The
Ending Eligible Aggregate Unamortized Funded Amount of the
transaction as of the July 2017 Monthly Servicing Statement was
$31,758,041. As such, the Notes currently do not benefit from
credit enhancement in form of overcollateralization. Newly
Non-Performing Assets were reported to be $2,036,774 as of the July
2017 Monthly Servicing Statement. In late June 2017, the company
consummated a transaction with an alternative asset manager,
Varadero Capital, L.P., that allowed the company to repay senior
debt as well as make new loans and merchant cash advances. This may
have an effect on the future performance of the CAN Capital Funding
LLC Series 2014-1 transaction.
CAVALRY CLO V: Moody's Hikes Rating on Class E Notes From Ba1
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Cavalry CLO V, Ltd.:
US$14,000,000 Class D Secured Deferrable Floating Rate Notes Due
2024, Upgraded to Aaa (sf); previously on May 24, 2017 Upgraded to
Aa3 (sf)
US$20,000,000 Class E Secured Deferrable Floating Rate Notes Due
2024, Upgraded to Baa1 (sf); previously on May 24, 2017 Upgraded to
Ba1 (sf)
Moody's also affirmed the ratings on the following notes:
US$35,750,000 Class B Senior Secured Floating Rate Notes Due 2024
(current outstanding balance of $32,567,257), Affirmed Aaa (sf);
previously on May 24, 2017 Affirmed Aaa (sf)
US$18,000,000 Class C Secured Deferrable Floating Rate Notes Due
2024, Affirmed Aaa (sf); previously on May 24, 2017 Upgraded to Aaa
(sf)
Cavalry CLO V, Ltd., issued in December 2014, is a collateralized
loan obligation (CLO) backed primarily by a portfolio of senior
secured loans. The transaction's reinvestment period ended in
January 2016.
RATINGS RATIONALE
These rating actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since May 2017. The Class A
Notes have been paid down completely and the Class B Notes have
been paid down by approximately 8.9% or $3.2 million since that
time. Based on Moody's calculation, the OC ratios for the Class
A/B, Class C, Class D and Class E notes are currently 317.36%,
204.39%, 160.07%, and 122.22%, respectively, versus May 2017 levels
of 189.55%, 154.23%, 134.70%, and 114.07%, respectively.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to
uncertainty about credit conditions in the general economy.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets could result in volatility in the deal's
overcollateralization levels. Further, the timing of recovery
realization and whether the Manager decides to work out or sell
defaulted assets create additional uncertainty. Realization of
recoveries that are either materially higher or lower than assumed
in Moody's analysis would impact the CLO positively or negatively,
respectively.
6) Exposure to assets with low credit quality and weak liquidity:
The historical default rate of assets rated Caa3 with a negative
outlook, Caa2 or Caa3 on review for downgrade or the worst Moody's
speculative grade liquidity (SGL) rating, SGL-4, is higher than the
average. Exposure to such assets subject the notes to additional
risks if these assets default.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF - 20% (2455)
Class B: 0
Class C: 0
Class D: 0
Class E: +2
Moody's Adjusted WARF + 20% (3683)
Class B: 0
Class C: 0
Class D: 0
Class E: -2
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $101.6 million, defaulted par of $6
million, a weighted average default probability of 21.09% (implying
a WARF of 3069), a weighted average recovery rate upon default of
50.06%, a diversity score of 24 and a weighted average spread of
3.40% (before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. In each case, historical and market
performance and the collateral manager's latitude for trading the
collateral are also factors.
CIFC FUNDING 2013-II: S&P Gives Prelim B- Rating on B-3L-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
X-R, A-1L-R, A-2L-R, A-3L-R, B-1L-R, B-2L-R, and B-3L-R replacement
notes from CIFC Funding 2013-II Ltd., a collateralized loan
obligation (CLO) originally issued in 2013 that is managed by CIFC
Asset Management LLC. The replacement notes will be issued via a
proposed supplemental indenture.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels.
The preliminary ratings are based on information as of October 4,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Oct. 18, 2017, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. S&P said, "At that time, we anticipate withdrawing
the ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, we
may affirm the ratings on the original notes and withdraw our
preliminary ratings on the replacement notes."
The replacement notes are being issued via a proposed supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also extend the stated maturity,
reinvestment period, non-call period, and weighted average life
test.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the trustee report, to estimate future performance (see table). In
line with our criteria, our cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults, and recoveries upon default, under various interest rate
and macroeconomic scenarios. In addition, our analysis considered
the transaction's ability to pay timely interest or ultimate
principal, or both, to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary."
PRELIMINARY RATINGS ASSIGNED
CIFC Funding 2013-II Ltd./CIFC Funding 2013-II LLC
Replacement class Rating Amount (mil. $)
X-R AAA (sf) 6.00
A-1L-R AAA (sf) 386.00
A-2L-R AA (sf) 76.00
A-3L-R A (sf) 53.50
B-1L-R BBB- (sf) 34.50
B-2L-R BB- (sf) 25.00
B-3L-R B- (sf) 9.50
Subordinate notes NR 71.50
CIM TRUST 2017-7: Fitch Assigns 'Bsf' Rating to Cl. B2 Notes
------------------------------------------------------------
Fitch Ratings rates CIM Trust 2017-7 as follows:
-- $264,166,000 class A notes 'AAAsf'; Outlook Stable;
-- $264,166,000 class A-IO notional notes 'AAAsf'; Outlook
Stable;
-- $47,657,000 class M1 notes 'AAsf'; Outlook Stable;
-- $47,657,000 class M1-IO notional notes 'AAsf'; Outlook Stable;
-- $23,829,000 class M2 notes 'Asf'; Outlook Stable;
-- $23,829,000 class M2-IO notional notes 'Asf'; Outlook Stable;
-- $13,067,000 class M3 notes 'BBBsf'; Outlook Stable;
-- $13,067,000 class M3-IO notional notes 'BBBsf'; Outlook
Stable;
-- $34,334,000 class B1 notes 'BBsf'; Outlook Stable;
-- $37,409,000 class B2 notes 'Bsf'; Outlook Stable.
The following classes will not be rated by Fitch:
-- $91,984,384 class B3 notes;
-- $512,446,384 notional class A-IO-S notes.
The notes are supported by 3,548 seasoned performing and
re-performing mortgages with a total balance of approximately
$512.5 million (which includes $34.4 million, or 6.7%, of the
aggregate pool balance in non-interest-bearing deferred principal
amounts) as of the cut-off date.
The 'AAAsf' rating on the class A1 notes reflects the 48.45%
subordination provided by the 9.30% class M1, 4.65% class M2, 2.55%
class M3, 6.70% class B1, 7.30% class B2, and 17.95% class B3
notes.
Fitch's ratings on the class notes reflect the credit attributes of
the underlying collateral, the quality of the servicer, Select
Portfolio Servicing, Inc. (SPS, rated RPS1-), and the
representation (rep) and warranty framework, minimal due diligence
findings and the sequential pay structure.
KEY RATING DRIVERS
Distressed Performance History (Negative): The collateral pool
consists primarily of peak-vintage seasoned re-performing loans
(RPLs). Based on Mortgage Bankers Association (MBA) methodology,
6.8% of the loans were 30 days delinquent and 1.1% of the loans
were 60 days delinquent as of the cut-off date. Of these, 59.7%
have either experienced a delinquency in the past 24 months, or had
an incomplete pay string, identified by Fitch as "dirty current."
The remaining 32.4% have been paying for the past 24 months,
identified as "clean current"; 83.2% of the loans have received
modifications.
Solid Alignment of Interest (Positive): The sponsor, or a
majority-owned affiliate, will retain at least a 5% eligible
horizontal interest in the securities to be issued. Fitch considers
the transaction's representation, warranty, and enforcement (RW&E)
mechanism framework to be consistent with Tier 1 quality. The
transaction benefits from life-of-loan representations and
warranties (R&Ws).
New Issuer (Neutral): This is Chimera Investment Corporation's
first rated RPL securitization. Chimera has been involved as an
issuer in 16 non-rated RPL securitizations since 2014 and completed
five prime jumbo securitizations from 2008 to 2012. Fitch conducted
a full review of Chimera's aggregation processes and believes they
meet industry standards that are needed to properly aggregate and
securitize re-performing and non-performing residential mortgage
loans (RPL and NPL, respectively). In addition to the satisfactory
operational assessment, a due diligence review was completed on
100% of the pool.
Sequential-Pay Structure (Positive): The transaction's cash flow is
based on a sequential-pay structure whereby the subordinate classes
do not receive principal until the senior classes are repaid in
full. Losses are allocated in reverse-sequential order.
Furthermore, the provision to re-allocate principal to pay interest
on the 'AAAsf' and 'AAsf' rated notes prior to other principal
distributions is highly supportive of timely interest payments to
those classes in the absence of servicer advancing.
Limited Excess Cash Flow (Negative): The excess cash flow in the
structure is limited due to the inclusion of corresponding
interest-only (IO) notes for all of the non-net-WAC classes (class
A, M1, M2, and M3) which results in nearly all of the interest from
the collateral being used to pay interest to the bonds. This, in
conjunction with principal being diverted to pay interest to the A
and M1 bonds, causes the difference between Fitch's expected losses
and the subordination needed to be higher than in other recently
rated RPL transactions.
Third-Party Due Diligence (Mixed): A third-party due diligence
review was conducted on 100% of the pool and focused on regulatory
compliance, pay history, and a tax and title lien search. The
third-party review (TPR) firms' due diligence review resulted in
7.7% 'C' and 'D' graded loans, meaning the loans had material
violations or lacked documentation to confirm regulatory
compliance. This is below the average of approximately 10.8% seen
in other recently rated RPL transactions and demonstrates
relatively low operational risk.
Deferred Amounts (Negative): Non-interest-bearing principal
forbearance amounts totaling $34.4 million (6.7%) of the unpaid
principal balance are outstanding on 1,877 loans. Fitch included
the deferred amounts when calculating the borrower's LTV and sLTV
despite the lower payment and amounts not being owed during the
term of the loan. The inclusion resulted in higher PDs and LS than
if there were no deferrals. Fitch believes that borrower default
behavior for these loans will resemble that of the higher LTVs, as
exit strategies (i.e. sale or refinancing) will be limited relative
to those borrowers with more equity in the property.
No Servicer P&I Advances (Mixed): The servicer will not be
advancing delinquent monthly payments of P&I, which reduces
liquidity to the trust. However, as P&I advances made on behalf of
loans that become delinquent and eventually liquidate reduce
liquidation proceeds to the trust, the loan-level loss severities
(LS) are less for this transaction than for those where the
servicer is obligated to advance P&I. Structural provisions and
cash flow priorities, together with increased subordination,
provide for timely payments of interest to the 'AAAsf' and 'AAsf'
rated classes.
Hurricane Harvey and Irma Loans (Negative): Inspections were
ordered on properties located in counties designated as major
disaster areas by the Federal Emergency Management Agency (FEMA) as
a result of Hurricane Harvey. Out of the 125 loans in the disaster
areas, only two loans showed minimal damage and therefore remain in
the loan pool. The extent of damage from Hurricane Irma to
properties in the mortgage pool is not yet known. Currently, 16.9%
of the pool is located in disaster areas in AL, FL, GA, and SC.
Within 30 days of the closing date, the servicer will order
inspections on properties located in designated disaster areas.
The remedy provider is obligated to repurchase loans that have
incurred property damage due to water, flood, or hurricane prior to
the transaction's closing that adversely affects the value of the
property. Fitch currently does not expect the effect of the storm
damage to have rating implications due to the repurchase obligation
of the sponsor and due to the limited exposure to affected areas
relative to the credit enhancement (CE) of the rated bonds.
CRITERIA APPLICATION
Fitch's analysis incorporated one criteria variation from "U.S.
RMBS Loan Loss Model Criteria," which is described below.
The variation relates to overriding the default assumption for
original debt-to-income ratio (DTI) in Fitch's Loan Loss model.
Based on a historical data analysis of over 750,000 loans from
Fannie Mae and Fitch's rated RPL transactions, Fitch assumed an
original DTI of 45% for all loans in pool that did not have
original DTI data available (100% of the pool). The historical loan
data supports the DTI assumption of 45%. Prior to conducting the
historical analysis, Fitch had previously assumed 55% for loans
that were missing original DTI values.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the metropolitan statistical area (MSA) and
national levels. The implied rating sensitivities are only an
indication of some of the potential outcomes and do not consider
other risk factors that the transaction may become exposed to or be
considered in the surveillance of the transaction.
Fitch conducted sensitivity analysis determining how the ratings
would react to steeper MVDs at the national level. The analysis
assumes MVDs of 10%, 20%, and 30%, in addition to the
model-projected 37.7% at 'AAAsf'. The analysis indicates there is
some potential rating migration with higher MVDs, compared with the
model projection.
Fitch also conducted sensitivities to determine the stresses to
MVDs that would reduce a rating by one full category, to
non-investment grade, and to 'CCCsf'.
CITIGROUP COMMERCIAL 2013-GC17: Fitch Affirms B Rating on F Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of Citigroup Commercial
Mortgage Trust commercial mortgage pass-through certificates,
series 2013-GC17 (CGCMT 2013-GC17).
KEY RATING DRIVERS
Stable Performance: Overall pool performance remains stable and
generally in line with issuance expectations. As of YE 2016,
aggregate pool-level NOI had improved 4.9% from 2015 for the 56
non-defeased loans reporting full-year 2015 and 2016 financials. As
of the September 2017 distribution date, the pool's aggregate
principal balance had paid down by 4.1% to $831.8 million from $867
million at issuance. There have been no realized losses to date.
Two loans (1.6% of current pool) have been defeased.
Fitch Loans of Concern: Fitch has designated three loans (4.1% of
current pool) as Fitch Loans of Concern (FLOCs), including two of
the top 15 loans (3.6%). The FLOCs include a retail property that
recently lost its grocery anchor tenant (Park Place Shopping
Center; 2.1% of pool) and a hotel loan (SpringHill Suites - Willow
Grove, PA; 1.5%) that transferred to special servicing in April
2017 for delinquent payments and remains over 90 days delinquent.
The other FLOC, which is outside the top 15, is a suburban office
property (0.5%) in Livingston, NJ with recent occupancy declines.
Pool Concentrations: Retail properties represent 49.2% of the
current pool by balance and include eight of the top 15 loans
(31.3%). In addition, upcoming loan maturities account for 23.2% of
the pool in 2018, with the remaining 76.8% scheduled to mature in
2023.
Hurricane Exposure: Eight loans representing 8.1% of the pool are
secured by properties located in Florida that may have been
impacted by Hurricane Irma. Fitch is closely monitoring these loans
and awaiting updates from the master servicer.
Pool Amortization: The pool is scheduled to amortize by 12.4% of
the initial pool balance prior to maturity. Nine loans (15.7%) are
full-term interest-only, and two loans (10.0%) still have a partial
interest-only component during their remaining loan term, compared
with 39.9% of the original pool at issuance.
RATING SENSITIVITIES
Rating Outlooks for all classes remain Stable due to the overall
stable pool performance and expected continued paydown. Future
rating upgrades are possible with improved pool performance and
additional defeasance or paydown from loans maturing in 2018 (23.2%
of pool). Rating downgrades may be possible should overall
performance decline significantly.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings:
-- $10.9 million class A-1 at 'AAAsf'; Outlook Stable;
-- $193 million class A-2 at 'AAAsf'; Outlook Stable;
-- $120 million class A-3 at 'AAAsf'; Outlook Stable;
-- $192.3 million class A-4 at 'AAAsf'; Outlook Stable;
-- $55.5 million class A-AB at 'AAAsf'; Outlook Stable;
-- $641.1 million class X-A* at 'AAAsf'; Outlook Stable;
-- $54.2 million class X-B* at 'AA-sf'; Outlook Stable;
-- $69.4 million class A-S at 'AAAsf'; Outlook Stable;
-- $54.2 million class B at 'AA-sf'; Outlook Stable;
-- $33.6 million class C at 'A-sf'; Outlook Stable;
-- $157.2 million class PEZ at 'A-sf'; Outlook Stable;
-- 17.3 million class X-C* at 'BBsf'; Outlook Stable;
-- $42.3 million class D at 'BBB-sf'; Outlook Stable;
-- $17.3 million class E at 'BBsf'; Outlook Stable;
-- $8.7 million class F at 'Bsf'; Outlook Stable.
*Notional amount and interest-only.
**The class A-S, B and C certificates may be exchanged for class
PEZ certificates, and class PEZ certificates may be exchanged for
the class A-S, B and C certificates.
Fitch does not rate the class G and X-D certificates.
CMLS ISSUER 2014-1: DBRS Confirms Bsf Rating on Cl. G Certificates
------------------------------------------------------------------
DBRS Limited has confirmed the ratings on these classes of
Commercial Mortgage Pass-Through Certificates, Series 2014-1 issued
by CMLS Issuer Corp., Series 2014-1 (the Trust):
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class X at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
The trends on all classes are Stable, excluding Class G, to which
DBRS maintained a Negative trend because of ongoing concerns
surrounding the Clearwater Suites loan (Prospectus ID#, 3.5% of the
current pool balance), which is secured by a hotel property located
in Fort McMurray, Alberta and has been reporting depressed cash
flows since YE2015. The loan is current and is on the servicer's
watchlist for a low DSCR.
At issuance, the collateral consisted of 37 fixed-rate loans
secured by 41 commercial and multifamily properties. As of the July
2017 remittance, 35 of the original 37 loans remained in the pool,
with an outstanding principal balance of approximately $257
million, representing a collateral reduction of approximately 9.4%
since issuance because of scheduled amortization and two loans
repaid at maturity. Overall, performance metrics have remained
stable since issuance, with a weighted-average (WA) debt service
coverage ratio (DSCR) and WA debt yield of 1.43 times (x) and
10.1%, respectively, for the pool as based on the most recent
year-end figures reported for the 35 loans reporting as of the July
2017 remittance. These figures compare with the DBRS Term DSCR and
DBRS Term Debt Yield at issuances of 1.39x and 9.3%, respectively,
for the same 35 loans. There are currently no loans in special
servicing.
As of the July 2017 remittance report, there are six loans,
representing 20.0% of the current pool, on the servicer's
watchlist. The largest watchlisted loan, Burlington Office
Portfolio (Prospectus ID #3, 6.7% of the pool) was watchlisted due
to a low YE2016 DSCR of 1.04x (odd FYE month of May). Cash flows
were down for the period due to an increase in vacancy; however,
the servicer inspected all three properties in June 2017 and found
the overall portfolio occupancy to be 99.4% occupied, suggesting
cash flows should rebound in the near term.
Notes: All figures are in Canadian dollars unless otherwise noted.
COMM 2004-LNB2: DBRS Confirms CCC Rating on Class K Certs
---------------------------------------------------------
DBRS Limited confirmed all classes of Commercial Mortgage
Pass-Through Certificates, Series 2004-LNB2 issued by COMM
2004-LNB2:
-- Class C at AAA (sf)
-- Class D at AAA (sf)
-- Class E at AAA (sf)
-- Class F at AAA (sf)
-- Class G at AAA (sf)
-- Class H at AAA (sf)
-- Class J at AAA (sf)
-- Class K at CCC (sf)
All trends are stable, except for Class K, which carries no trend.
The rating actions reflect the current composition of the remaining
collateral in the transaction. As of the July 2017 remittance
report, the transaction has experienced collateral reduction of
92.2% as a result of successful loan repayment, scheduled
amortization, realized losses from liquidated loans and principal
recoveries from liquidated loans as only five of the original 90
loans remain in the pool.
Three of the remaining loans, representing 94.6% of the current
pool balance, are fully defeased and are scheduled to mature in
December 2018, January 2019 and March 2019, respectively.
Additionally, the Walgreens College Station loan, representing 2.4%
of the pool, is secured by a fully occupied single-tenant retail
property occupied by the Walgreen Company (Walgreens), an
investment-grade-rated tenant, on a triple-net lease with extension
options until May 2078. This loan is fully amortizing and
Walgreens' original lease expires at loan maturity in April 2028.
The remaining loan, Alta Mesa, representing 3.1% of the current
pool balance, is in special servicing because of a maturity default
and became real estate owned in February 2016.
The rating assigned to Class K materially deviates from the higher
ratings implied by the quantitative results. DBRS considers a
material deviation to be a rating differential of three or more
notches between the assigned rating and the rating implied by the
quantitative results that is a substantial component of a rating
methodology. The deviations are warranted, given uncertain
loan-level event risk.
COMM MORTGAGE 2007-C9: Moody's Lowers Class XS Debt Rating to C
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on two classes,
affirmed the ratings on three classes and downgraded the rating on
one class in COMM 2007-C9 Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2007-C9:
Cl. J, Upgraded to Caa1 (sf); previously on Mar 31, 2017 Affirmed
Caa3 (sf)
Cl. K, Upgraded to Caa3 (sf); previously on Mar 31, 2017 Affirmed C
(sf)
Cl. L, Affirmed C (sf); previously on Mar 31, 2017 Affirmed C (sf)
Cl. M, Affirmed C (sf); previously on Mar 31, 2017 Affirmed C (sf)
Cl. N, Affirmed C (sf); previously on Mar 31, 2017 Affirmed C (sf)
Cl. XS, Downgraded to C (sf); previously on Jun 9, 2017 Downgraded
to Caa2 (sf)
RATINGS RATIONALE
The ratings on two P&I classes were upgraded due to an increase in
credit support resulting from loan paydowns and amortization. The
deal has paid down 91% since Moody's last review and 96% since
securitization.
The ratings on three P&I classes were affirmed because the ratings
are consistent with expected recovery of principal and interest
from specially and troubled loans as well as losses from previously
liquidated loans.
The rating on the IO Class (Class XS) was downgraded due to the
decline in the credit quality of its reference classes resulting
from principal paydowns of higher quality referenced classes.
Moody's rating action reflects a base expected loss of 18.5% of the
current pooled balance, compared to 4.8% at Moody's last review.
Moody's base expected loss plus realized losses is now 3.0% of the
original pooled balance, compared to 4.2% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017.
Additionally, the methodology used in rating Cl. XS was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 75% of the pool is in
special servicing and Moody's has identified additional troubled
loans representing 16% of the pool. In this approach, Moody's
determines a probability of default for each specially serviced and
troubled loan that it expects will generate a loss and estimates a
loss given default based on a review of broker's opinions of value
(if available), other information from the special servicer,
available market data and Moody's internal data. The loss given
default for each loan also takes into consideration repayment of
servicer advances to date, estimated future advances and closing
costs. Translating the probability of default and loss given
default into an expected loss estimate, Moody's then applies the
aggregate loss from specially serviced and troubled loans to the
most junior classes and the recovery as a pay down of principal to
the most senior classes.
DEAL PERFORMANCE
As of the September 10, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 96% to $112.4
million from $2.89 billion at securitization. The certificates are
collateralized by ten mortgage loans ranging in size from less than
5% to 18% of the pool.
Two loans, constituting 17% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Fifteen loans have been liquidated from the pool, contributing to
an aggregate realized loss of $66.3 million (for an average loss
severity of 28%). Seven loans, constituting 75% of the pool, are
currently in special servicing. The largest specially serviced loan
is the Grants Pass Shopping Center -- A note Loan ($19.9 million --
18% of the pool), which is secured by a 277,000 SF community
shopping center in Grants Pass, Oregon. The loan originally
transferred to special servicing in 2011 and was modified and
bifurcated into a $20 million A-Note and a $4.9 million B-Note. The
loan was subsequently transferred back to the master servicer,
however, it returned to special servicing in July 2017. A second
loan modification was approved, including a nine month extension.
The loan was current as of the September 2017 distribution date. As
of the June 2017 rent roll, the property was 82% leased to 24
tenants, however, following the departure of JC Penney, physical
occupancy is down to 68%.
The second largest specially serviced loan is the Intercontinental
Center Loan ($18.5 million -- 16.5% of the pool), which is secured
by a 197,000 square foot (SF) office building in Houston, Texas.
The loan transferred to special servicing in May 2017 for maturity
default. As of the March 2017 rent roll, the property was 68%
leased, down from 100% at year-end 2015. Per the servicer, the
property was not adversely affected by Hurricane Harvey.
The third largest specially serviced loan is The Springs Resort
Loan ($16.8 million -- 15% of the pool), which is secured by a
50-room lodge in Pagosa Springs, Colorado. The loan transferred to
special servicing for maturity default in August 2017. The borrower
was unable to refinance the loan and now intends to market the
property for sale.
The fourth specially serviced loan is the Hampton Inn at Bellingham
Airport ($10.7 million -- 9.5% of the pool), which is secured by a
132-room hotel built in 1991 and located in Bellingham, Washington.
The loan transferred to special servicing in April 2016 and became
REO in February 2017. New competition in the area has contributed
to reduced revenues and occupancy at the property.
The remaining three specially serviced loans are secured by a mix
of property types. Moody's estimates an aggregate $15.3 million
loss from the specially serviced loans.
Moody's has also assumed a high default probability for two poorly
performing loans, constituting 16% of the pool, and has estimated
an aggregate loss of $5.4 million (a 30% expected loss on average)
from these troubled loans.
The largest non-specially serviced loan is the Marina Del Rey
Shopping Center Loan ($9.8 million -- 8.7% of the pool), which is
secured by a 24,000 SF retail center in Marina Del Rey, California.
The loan matured in August 2017 and the borrower has requested a
forbearance period. As of June 2017, the property was 87% leased to
11 tenants. Moody's LTV and stressed DSCR are 105% and 1.06X,
respectively, compared to 92% and 1.21X at the last review.
The second non-specially serviced loan is the 1130 Rainier Avenue
South Loan ($9.5 million -- 8.4% of the pool), which is secured by
a 62,000 SF office building in Seattle, Washington. The property
served as the corporate headquarters for an agriculture company
until May 2017 but is now 100% vacant. The loan had an ARD in June
2017 and has a final maturity date in 2037. Moody's has identified
this a troubled loan.
COMMERCIAL MORTGAGE 1999-C1: Moody's Affirms C on Cl. X Certs
-------------------------------------------------------------
Moody's Investors Service has upgraded the rating on one class and
affirmed the rating on one class in Commercial Mortgage Asset Trust
1999-C1, Commercial Mortgage Pass-Through Certificates, series
1999-C1
Cl. F, Upgraded to Caa3 (sf); previously on Jan 13, 2017 Downgraded
to C (sf)
Cl. X, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The rating on Class F was upgraded based primarily due to lower
realized losses than Moody's previously expected.
The rating on the IO class, Class X, was affirmed based on the
credit quality of its referenced classes.
Moody's rating action reflects a base expected loss of 8.8% of the
current pooled balance, compared to 81.7% at Moody's last review.
Moody's base expected loss plus realized losses is now 8.7% of the
original pooled balance, compared to 10.9% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in these ratings were "Moody's Approach to
Rating Large Loan and Single Asset/Single Borrower CMBS" published
in July 2017, and "Moody's Approach to Rating Credit Tenant Lease
and Comparable Lease Financings" published in October 2016.
Additionally, the methodology used in rating Cl. X was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the September 18, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 99% to $19.7 million
from $2.37 billion at securitization. The certificates are
collateralized by 11 mortgage loans ranging in size from less than
1% to 7% of the pool. One loan, constituting 66% of the pool, has
defeased and is secured by US government securities. The pool
contains a Credit Tenant Lease (CTL) component that includes eight
loans, representing 27% of the pool.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 8, as compared to 1 at Moody's last review.
Three loans, constituting 12% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Thirty-two loans have been liquidated from the pool, resulting in
an aggregate realized loss of $205.9 million (for an average loss
severity of 50%). There are not any loans in special servicing.
The two non-defeased and non-CTL loans represent 6.5% of the pool
balance. The largest loan is the Dillen Products Loan ($728,059 --
3.7% of the pool), which is secured by two office properties
totaling 173,800 square feet (SF) located in Middlefield, Ohio. The
sole tenant, Dillen Products, has a lease expiring in August 2018.
The loan has amortized over 86% since securitization. Moody's LTV
and stressed DSCR are 11% and 9.83X, respectively.
The second loan is the Pleasant Valley Marketplace Loan ($554,257
-- 2.8% of the pool), which is secured by a 82,807 SF grocery
anchored retail property, located in Virginia Beach, Virginia. As
of June 2017, the property was over 98% leased, compared to 84% in
September 2016. The loan has amortized over 88% since
securitization. Moody's LTV and stressed DSCR are 13% and 8.26X,
respectively.
The CTL component consists of eight loans, constituting 27% of the
pool, secured by properties leased to two tenants. These two
tenants are R.R. Donnelley & Sons Company ($2.9 million -- 15.0% of
the pool; senior unsecured rating: B2 -- stable outlook) and Dairy
Mart Convenience Stores, Inc. ($2.4 million -- 12.2% of the pool;
not rated).
CPS AUTO 2017-D: S&P Assigns Prelim BB-(sf) Rating on Class E Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to CPS Auto
Receivables Trust 2017-D's $196.30 million asset-backed notes. The
note issuance is an asset-backed securities transaction backed by
subprime auto loan receivables.
The preliminary ratings are based on information as of Oct. 5,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The availability of approximately 57.63%, 49.06%, 40.17%,
31.24%, and 25.18% of credit support for the class A, B, C, D, and
E notes, respectively, based on stressed cash flow scenarios
(including excess spread). These credit support levels provide
coverage of approximately 3.10x, 2.60x, 2.10x, 1.60x, and 1.23x our
18.00-19.00% expected cumulative net loss range for the class A, B,
C, D, and E notes, respectively. Additionally, credit enhancement
including excess spread for classes A, B, C, D, and E covers
breakeven cumulative gross losses of approximately 93%, 79%, 67%,
52%, and 42%, respectively.
-- S&P's expectation that, under a moderate stress scenario of
1.60x our expected net loss level and all else equal, the
preliminary ratings on the class A, B, and C notes would remain
within one rating category while they are outstanding, and the
preliminary rating on the class D notes would not decline by more
than two rating categories within its life.
-- The preliminary rating on the class E notes would remain within
two rating categories during the first year, but the class would
eventually default under the 'BBB' stress scenario after receiving
27%-51% of its principal. These rating migrations are consistent
with S&P's credit stability criteria (see "Methodology: Credit
Stability Criteria," published May 3, 2010).
-- The preliminary rated notes' underlying credit enhancement in
the form of subordination, overcollateralization, a reserve
account, and excess spread for the class A, B, C, D, and E notes.
-- The timely interest and principal payments made to the
preliminary rated notes under our stressed cash flow modeling
scenarios, which S&P believes are appropriate for the assigned
preliminary ratings.
-- The transaction's payment and credit enhancement structure,
which includes a noncurable performance trigger.
PRELIMINARY RATINGS ASSIGNED
CPS Auto Receivables Trust 2017-D
Class Rating Type Interest Amount
rate(i) (mil. $)
A AAA (sf) Senior Fixed 91.40
B AA (sf) Subordinate Fixed 32.50
C A (sf) Subordinate Fixed 27.90
D BBB (sf) Subordinate Fixed 23.80
E BB- (sf) Subordinate Fixed 20.70
(i)The actual coupons of these tranches will be determined on the
pricing date.
CSFB 2005-C5: Fitch Affirms 'CCCsf' Rating on Class G Certs
-----------------------------------------------------------
Fitch Ratings has upgraded one and affirmed 11 classes of Credit
Suisse First Boston Mortgage Securities Corp. series 2005-C5 (CSFB
2005-C5), commercial mortgage pass-through certificates.
KEY RATING DRIVERS
The upgrade reflects increased credit enhancement and continued
paydown since Fitch's last rating action. As of the September 2017
distribution date, the pool's aggregate principal balance has been
reduced by 96.6% to $97.7 million from $2.9 billion at issuance.
Interest shortfalls are currently affecting classes H through S.
Pool Concentration: The pool is highly concentrated with only eight
of the original 282 loans remaining. Two loans (33% of pool) are
secured by co-op properties located in the Riverdale, Bronx and
Flatlands, Brooklyn neighborhoods of New York City. The five
non-defeased loans (66.3%) are secured by properties located in
secondary and tertiary markets. Due to the concentrated nature of
the pool, Fitch performed a sensitivity analysis which grouped the
remaining loans based on loan structural features, collateral
quality and performance, and ranked them by their perceived
likelihood of repayment. The ratings reflect this sensitivity
analysis.
Defeasance & Fully Amortizing Loans: One loan (0.7% of pool) is
defeased and an additional loan (0.3%) is fully amortizing.
Fitch Loans of Concern: Fitch has designated two loans/assets
(51.9% of pool) as Fitch Loans of Concern (FLOCs), including the
largest loan (41.8%) and a specially serviced real-estate owned
(REO) asset (10%).
The largest loan, Gallery at South Dekalb, is secured by a 517,539
square foot (sf) portion of a 715,539 sf regional mall located in
Decatur, GA, approximately seven miles southeast of Atlanta. The
mall is shadow-anchored by a Macy's (198,000 sf), which is not part
of the loan collateral. The largest collateral tenants include
Chapel Beauty (9% of collateral net rentable area [NRA]; lease
expiry in December 2028), Satellite Cinemas (8.1%; December 2026),
and Conway (5.8%; April 2024). Collateral occupancy was 70.7% as of
March 2017, compared to 70% at year-end (YE) 2016 and 63% YE 2015.
Between 2015 and 2016, net operating income (NOI) declined 20.3%;
however, the new 10-year theater lease in 2016 with Satellite
Cinemas is expected to help boost NOI for 2017. Annualized June
2017 NOI implies an 18.5% increase from 2016. The property is
underperforming the submarket occupancy, which as of second quarter
2017 and according to Reis, was 89.9% for the Lithonia/Stone
Mountain submarket of Atlanta. The special servicer has indicated
there has been limited positive leasing momentum. As of the August
2017 rent roll, upcoming lease rollover consists of 9.1% of the
collateral NRA on month-to-month leases, 9.1% rolling in 2018 and
4% in 2019. The loan was previously transferred to special
servicing in April 2015 due to imminent maturity default. The loan
was modified in July 2015, whereby the borrower contributed new
capital of $3.1 million and paid down the loan by $1.325 million in
exchange for a four-year maturity extension to July 2019 and a loan
bifurcation into a $29 million A-note and a $14.4 million B-note.
The loan transferred back to the master servicer in March 2016.
The REO Covington Plaza asset is a 105,574 sf neighborhood retail
shopping center located in Phoenix, AZ. The loan was transferred to
special servicing in July 2015 due to imminent maturity default.
The asset became REO in March 2016. The largest tenant, Basha's
Store (52.4% of net rental area), recently renewed its lease
through March 2032. The special servicer expects REO disposition by
the end of the year.
Loan Maturity: Excluding the REO asset, two loans (41.8% of pool)
mature in 2019 and five loans (48.1%) mature in 2020.
RATING SENSITIVITIES
The Stable Outlooks on classes E and F reflect increased credit
enhancement and expected continued paydown. The balance of class E
is covered by defeased and lowly-leverage co-operative loan
collateral. An upgrade to class F is unlikely until there is an
indication that the largest loan, which had been previously
modified, will be refinanced. Class G and H may be subject to
downgrades should losses exceed expectations.
Fitch has upgraded the following class:
-- $5.4 million class E to 'AAAsf' from 'Asf', Outlook Stable;
Fitch has affirmed the following classes:
-- $29.0 million class F at 'BBsf', Outlook Stable;
-- $36.3 million class G at 'CCCsf', RE 100%;
-- $21.8 million class H at 'CCsf', RE 45%;
-- $6.3 million class J at 'Dsf', RE 0%
-- $0 class K at 'Dsf', RE 0%;
-- $0 class L at 'Dsf', RE 0%;
-- $0 class M at 'Dsf', RE 0%;
-- $0 class N at 'Dsf', RE 0%;
-- $0 class O at 'Dsf', RE 0%;
-- $0 class P at 'Dsf', RE 0%;
-- $0 class Q at 'Dsf', RE 0%.
The class A-1, A-2, A-3, A-AB, A-4, A-1A, A-M, A-J, B, C, D, 375-A,
375-B, and 375-C certificates have paid in full. Fitch does not
rate the class S certificates. Fitch previously withdrew the
ratings on the interest-only class A-X, A-SP and A-Y certificates.
CSFB MANUFACTURED 2001-MH29: S&P Cuts Cl. M-2 Certs Rating to Dsf
-----------------------------------------------------------------
S&P Global Ratings lowered its ratings to 'D (sf)' from 'B+ (sf)'
and 'CCC- (sf)', respectively, on the class M-2 and B-1
certificates from CSFB Manufactured Housing Pass-Through
Certificates Series 2001-MH29, an asset-backed securities
transaction backed by fixed-rate first lien manufactured housing
receivables originated by CIT Group/Sales Financing Inc.
The downgrades reflect that this transaction did not make its full
interest payment on class M-2 and class B-1 on the June 26, 2016,
remittance date and each remittance date since.
CWABS TRUST 2006-10: Moody's Hikes Class 3-AV-4 Certs Rating to B3
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of three
tranches issued by CWABS Asset-Backed Certificates Trust 2006-10.
Complete rating actions are:
Issuer: CWABS Asset-Backed Certificates Trust 2006-10
Cl. 2-AV, Upgraded to A1 (sf); previously on Oct 19, 2016 Upgraded
to Ba1 (sf)
Cl. 3-AV-3, Upgraded to B1 (sf); previously on Oct 19, 2016
Confirmed at Caa2 (sf)
Cl. 3-AV-4, Upgraded to B3 (sf); previously on Oct 19, 2016
Upgraded to Caa3 (sf)
RATINGS RATIONALE
The rating upgrades are primarily due to the total credit
enhancement available to the bonds. Class 2-AV has also benefited
from a large increase in subordination as the tranche has continued
to receive principal payments. The actions reflect the recent
performance of the underlying pools and Moody's updated loss
expectation on these pools.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in January 2017.
Factors that would lead to an upgrade or downgrade of the ratings:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 4.2% in September 2017 from 4.9% in
September 2016. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 year. Deviations from this central
scenario could lead to rating actions in the sector. House prices
are another key driver of US RMBS performance. Moody's expects
house prices to continue to rise in 2017. Lower increases than
Moody's expects or decreases could lead to negative rating actions.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures.
DBUBS 2017-BRBK: S&P Assigns Prelim. B Rating on Class F Notes
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to DBUBS
2017-BRBK Mortgage Trust's $460 million commercial mortgage
pass-through certificates series 2017-BRBK.
The issuance is a commercial mortgage-backed securities transaction
backed by the trust loan is a $460 million portion of a $660
million whole commercial mortgage loan, secured by a first-mortgage
lien on the borrower's fee simple interest in Burbank Media
Portfolio, four office properties totaling 2.1 million sq. ft.
located in the Burbank submarket of Los Angeles.
The preliminary ratings are based on information as of Oct. 11,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect our view of the collateral's
historic and projected performance, the sponsors' and managers'
experience, the trustee-provided liquidity, the loan's terms, and
the transaction's structure.
PRELIMINARY RATINGS ASSIGNED
DBUBS 2017-BRBK Mortgage Trust
Class Rating(i) Amount ($)
A AAA (sf) 147,562,000
X AAA (sf) 147,562,000(ii)
B AA- (sf) 34,305,000
C A- (sf) 52,073,000
D BBB- (sf) 63,875,000
E BB- (sf) 86,789,000
F B (sf) 49,101,000
HRR B- (sf) 26,295,000
(i)The issuer will issue the certificates to qualified
institutional buyers in line with Rule 144A of the Securities Act
of 1933.
(ii)Notional balance. The notional amount of the class X
certificates will equal the balance of the class A certificates.
DBUBS MORTGAGE 2011-LC3: Moody's Affirms B2(sf) Rating on F Certs
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on ten classes
DBUBS 2011-LC3 Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2011-LC3:
Cl. A-3, Affirmed Aaa (sf); previously on Oct 20, 2016 Affirmed Aaa
(sf)
Cl. A-4, Affirmed Aaa (sf); previously on Oct 20, 2016 Affirmed Aaa
(sf)
Cl. A-M, Affirmed Aaa (sf); previously on Oct 20, 2016 Affirmed Aaa
(sf)
Cl. B, Affirmed Aaa (sf); previously on Oct 20, 2016 Upgraded to
Aaa (sf)
Cl. C, Affirmed Aa3 (sf); previously on Oct 20, 2016 Upgraded to
Aa3 (sf)
Cl. D, Affirmed Baa1 (sf); previously on Oct 20, 2016 Upgraded to
Baa1 (sf)
Cl. E, Affirmed Ba1 (sf); previously on Oct 20, 2016 Upgraded to
Ba1 (sf)
Cl. F, Affirmed B2 (sf); previously on Oct 20, 2016 Affirmed B2
(sf)
Cl. X-A, Affirmed Aaa (sf); previously on Oct 20, 2016 Affirmed Aaa
(sf)
Cl. X-B, Affirmed Ba3 (sf); previously on Oct 20, 2016 Affirmed Ba3
(sf)
RATINGS RATIONALE
The ratings on eight P&I classes were affirmed because the
transaction's key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable
ranges.
The ratings on the IO classes, Classes X-A and X-B, were affirmed
based on the credit quality of its referenced classes.
Moody's rating action reflects a base expected loss of 2.1% of the
current pooled balance, compared to 1.5% at Moody's last review.
Moody's base expected loss plus realized losses is now 0.8% of the
original pooled balance, compared to 0.6% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in these ratings were "Approach to Rating US
and Canadian Conduit/Fusion CMBS" published in July 2017, and
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in July 2017.
Additionally, the methodology used in rating Cl. X-A and Cl. X-B
was "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in June 2017.
DEAL PERFORMANCE
As of the September 12, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 62% to $538 million
from $1.40 billion at securitization. The certificates are
collateralized by 24 mortgage loans ranging in size from less than
1% to 20% of the pool, with the top ten loans (excluding
defeasance) constituting 71% of the pool. Three loans, constituting
13% of the pool, have defeased and are secured by US government
securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of nine, compared to 11 at Moody's last review.
Seven loans, constituting 19% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Moody's has assumed a high default probability for one poorly
performing loan constituting 1.5% of the pool.
Moody's received full year 2016 operating results for 100% of the
pool, and full or partial year 2017 operating results for 93% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 93%, compared to 91% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 19% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.3%.
Moody's actual and stressed conduit DSCRs are 1.46X and 1.15X,
respectively, compared to 1.48X and 1.15X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three loans represent 44% of the pool balance. The largest
loan is the Quadrus Office Park Loan ($105.1 million -- 19.5% of
the pool), which is secured by nine Class A office properties
located on Sand Hill Road in Menlo Park, California. As of June
2017 the properties were 90% leased, up from 85% at the prior
review. Moody's LTV and stressed DSCR are 92% and 1.03X,
respectively, compared to 93% and 1.01X at the last review.
The second largest loan is the Dover Mall and Commons Loan ($85.7
million -- 15.9% of the pool), which is secured by a 553,000 square
foot (SF) component of a 886,000 SF single-level enclosed
super-regional mall located in Dover, Delaware. As of June 2017,
the property was 96% leased, compared to 95% at the prior review.
Moody's LTV and stressed DSCR are 105% and 0.98X, respectively,
compared to 104% and 0.96X at the last review.
The third largest loan is the Providence Place Mall ($47.3 million
A note -- 8.8% of the pool), which is secured by a 1.2 million SF
regional mall in downtown Providence, Rhode Island. The property
anchors include Macy's and Nordstrom. This loan has non-pooled
debt, some of which is held as rake bonds in this deal (not rated
by Moody's). Of the rake bonds, one -- the A-2 note -- is
pari-passu with the A note for Providence Place Mall. As of June
2017, the collateral was 88% leased, compared to 92% at the prior
review. Moody's A note LTV and stressed DSCR are 41% and 2.38X,
respectively, compared to 41% and 2.31X at the last review.
DENALI CAPITAL X: S&P Gives Prelim B-(sf) Rating on B-3L-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1L-R, A-2L-R, A-3L-R, B-1L-R, B-2L-R, B-3L-R, and X replacement
notes from Denali Capital CLO X Ltd., a collateralized loan
obligation (CLO) originally issued in March 2013 that is managed by
Crestline Denali Capital L.P. The replacement notes will be issued
via a proposed supplemental indenture.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels.
The preliminary ratings are based on information as of Oct. 6,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Oct. 26, 2017, refinancing date, the proceeds from the
issuance of the replacement notes are expected to redeem the
original notes. S&P said, "At that time, we anticipate withdrawing
the ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, we
may affirm the ratings on the original notes and withdraw our
preliminary ratings on the replacement notes."
The replacement notes are being issued via a proposed supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also:
-- Downsize the rated par amount and target initial par amount to
$320.45 million and $340.00 million, respectively, from $379.25
million and $400.000 million, respectively. This downsize is due to
the transaction currently being in its amortization period and the
issuer having already paid down a portion of the class A-1L notes.
-- Extend the reinvestment period to April 26, 2020, from April
26, 2017.
-- Extend the non-call period to April 26, 2019, from April 26,
2015.
-- Extend the weighted average life test to April 26, 2024, from
Sept. 28, 2021.
-- Extend the legal final maturity date on the rated notes to Oct.
26, 2027, from April 28, 2025.
-- Issue additional class X amortizing senior secured
floating-rate notes, which are expected to be paid down using
excess interest proceeds in equal quarterly installments beginning
in April 2018. In addition, the transaction will issue an
additional class Y note, which will be unrated by S&P Global
Ratings and will be paid subordinated to the rated notes. Finally,
the transaction will issue additional subordinated notes,
increasing the subordinated notes balance to $40.785 million from
$38.100 million.
-- Adopt the use of the non-model version of CDO Monitor. During
the reinvestment period, the non-model version of CDO Monitor may
be used for this transaction to indicate whether changes to the
collateral portfolio are generally consistent with the transaction
parameters we assumed when initially assigning ratings to the
notes. The non-model CDO Monitor approach is built on a foundation
of six portfolio benchmarks intended to provide insight into the
characteristics that inform our view of CLO collateral credit
quality. The benchmarks are meant to enhance transparency for
investors and other CLO market participants by allowing them to
compare metrics across CLO portfolios as well as assess changes
within a given portfolio over time (see "Standard & Poor's
Introduces Non-Model Version Of CDO Monitor," Dec. 8, 2014). The
transaction documents for this CLO are expected to indicate that
the trustee should report the six portfolio benchmarks on a monthly
basis along with the CDO Monitor Test results.
-- Change the required minimum thresholds for the coverage tests.
-- Change the subordinated management fee and the incentive
management fee threshold.
-- Incorporate the recovery rate methodology and updated industry
classifications outlined in S&P's August 2016 CLO criteria update
(see "Global Methodologies And Assumptions For Corporate Cash Flow
And Synthetic CDOs," published Aug. 8, 2016).
REPLACEMENT AND ORIGINAL NOTE ISSUANCES
Replacement Notes
Class Notional Interest
(mil. $) rate (%)
X 3.000 LIBOR + 0.80
A-1L-R 207.500 LIBOR + 1.05
A-2L-R 50.300 LIBOR + 1.60
A-3L-R 22.800 LIBOR + 2.10
B-1L-R 20.850 LIBOR + 3.15
B-2L-R 12.000 LIBOR + 4.75
B-3L-R 4.000 LIBOR + 5.75
Y 1.000 0.1579
Subordinated notes 40.785 N/A
Original Notes
Class Original Notional
notional Aug. 2017 Interest
(mil. $) (mil. $) rate (%)
A-1L 255.50 195.37 LIBOR + 1.15
A-2L 37.75 37.75 LIBOR + 1.75
A-3L 37.00 37.00 LIBOR + 2.90
B-1L 19.50 19.50 LIBOR + 3.50
B-2L 20.00 20.00 LIBOR + 4.75
B-3L 9.50 9.50 LIBOR + 5.75
Subordinated notes 38.10 38.10 N/A
N/A--Not applicable.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the trustee report, to estimate future performance (see table). In
line with our criteria, our cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults, and recoveries upon default, under various interest rate
and macroeconomic scenarios. In addition, our analysis considered
the transaction's ability to pay timely interest or ultimate
principal, or both, to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary."
PRELIMINARY RATINGS ASSIGNED
Denali Capital CLO X Ltd Replacement
class Rating Amount (mil. $)
X AAA (sf) 3.000
A-1L-R AAA (sf) 207.500
A-2L-R AA (sf) 50.300
A-3L-R A (sf) 22.800
B-1L-R BBB- (sf) 20.850
B-2L-R BB- (sf) 12.000
B-3L-R B- (sf) 4.000
Y(i) NR 1.000(i)
Subordinated notes NR 40.785
(i)The issuer will also issue class Y notes on the refinancing
effective date. The class Y noteholders will not be entitled to
receive principal or interest payments, but such holders will be
entitled to receive on each payment date certain amounts in
accordance with the application of funds. The class Y notes will
have a notional balance of $1,000,000 solely for purposes of
allocating such payments among class Y noteholders. All such
payments will be subordinate to payments on the secured notes, but
senior to distributions on the subordinated notes. The class Y
notes will have a minimum denomination of $1.00.
NR--Not rated.
DEUTSCHE MORTGAGE 1998-C1: Moody's Affirms C Rating on Cl. X Debt
-----------------------------------------------------------------
Moody's Investors Service has affirmed the rating on one interest
only (IO) class of Deutsche Mortgage & Asset Receiving Corporation
1998-C1:
Cl. X, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The rating on the IO class was affirmed based on the credit quality
of the referenced classes. The IO class is the only outstanding
Moody's-rated class in this transaction.
Moody's rating action reflects a base expected loss of 1.2% of the
current balance, compared to 3.3% at Moody's last review. Moody's
base expected loss plus realized losses is now 5.2% of the original
pooled balance, compared to 5.1% at the last review. Moody's
provides a current list of base expected losses for conduit and
fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
An IO class may be subject to ratings upgrades if there is an
improvement in the credit quality of its referenced classes,
subject to the limits and provisions of the updated IO
methodology.
An IO class may be subject to ratings downgrades if there is (i) a
decline in the credit quality of the reference classes and/or (ii)
paydowns of higher quality reference classes, subject to the limits
and provisions of the updated IO methodology.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in this rating was "Moody's Approach
to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in July 2017.
Additionally, the methodology used in rating Cl. X was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the September 15, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by over 99% to $10
million from $1.8 billion at securitization. The Certificates are
collateralized by seven mortgage loans ranging in size from less
than 1% to 61% of the pool. One loan, representing 1% of the pool
has defeased and is secured by US Government securities.
One loan, representing less than 1% of the pool, is 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
Moody's ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
Fifty-six loans have been liquidated from the pool, resulting in an
aggregate realized loss of $94 million (43% loss severity on
average). One loan, representing 21% of the pool, is currently in
special servicing. The specially serviced loan is secured by a
retail property located in High Point, North Carolina. The property
was 100% occupied as of June 2017. Moody's analysis incorporates a
small loss for this loan.
Moody's was provided with full year 2016 and full or partial year
2017 operating results for 100% and 50% of the pool, respectively.
Moody's weighted average conduit LTV is 51% compared to 56% at
Moody's prior review. Moody's conduit component excludes defeased
and specially serviced loans. Moody's net cash flow (NCF) reflects
a weighted average haircut of 39% to the most recently available
net operating income (NOI). Moody's value reflects a weighted
average capitalization rate of 9.3%.
Moody's actual and stressed conduit DSCRs are 1.14X and 2.69X,
respectively, compared to 1.10X and 2.34X at prior review. Moody's
actual DSCR is based on Moody's 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 77% of the pool balance. The
largest loan is the Homebase Brea Union Plaza Loan ($6 million --
61% of the pool), which is secured by a retail property in Brea,
California. The property is 100% leased to a single tenant. The
loan benefits from amortization and Moody's LTV and stressed DSCR
are 55% and 1.78X, respectively, compared to 67% and 1.53X at prior
review.
The second largest loan is the K-Mart Des Moines Loan ($1 million
-- 15% of the pool), which is secured by a retail property located
in Des Moines, Iowa. The loan is fully amortizing and has amortized
67% since securitization. Moody's LTV and stressed DSCR are 42% and
2.55X, respectively, compared to 47% and 2.58X at prior review.
The third largest loan is the Forest Hills Care Center Loan
($82,237 -- less than 1% of the pool), which is secured by a
skilled nursing facility in Forest Hills, New York. Due to
amortization, the loan balance has decreased by 96% since
securitization. Moody's LTV and stressed DSCR are now 3% and
>4.00X, respectively.
DT AUTO OWNER 2017-3: DBRS Finalizes BB Rating on Class E Notes
---------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on these classes of
notes issued by DT Auto Owner Trust 2017-3 (DTAOT 2017-3):
-- $193,880,000 Class A at AAA (sf)
-- $57,760,000 Class B at AA (sf)
-- $69,850,000 Class C at A (sf)
-- $67,380,000 Class D at BBB (sf)
-- $53,910,000 Class E at BB (sf)
The ratings are based on DBRS's review of these analytical
considerations:
-- Transaction capital structure, proposed ratings and form and
sufficiency of available credit enhancement.
-- DTAOT 2017-3 provides for Class A, B, C, D and E coverage
multiples slightly below the DBRS range of multiples set forth
in the criteria for this asset class. DBRS believes that this
is warranted, given the magnitude of expected loss and
structural features of the transaction.
-- The transaction parties' capabilities with regard to
originations, underwriting and servicing.
-- The quality and consistency of provided historical static pool
data for DriveTime Automotive Group, Inc. (DriveTime)
originations and performance of the DriveTime auto loan
portfolio.
-- The November 19, 2014, settlement of the Consumer Financial
Protection Bureau inquiry relating to allegedly unfair trade
practices.
-- Review of the legal structure and presence of legal opinions,
which address the true sale of the assets to the Issuer, the
non-consolidation of the special-purpose vehicle with
DriveTime, that the trust has a valid first-priority security
interest in the assets and the consistency with the DBRS
"Legal Criteria for U.S. Structured Finance" methodology.
The DTAOT 2017-3 transaction represents a securitization of a
portfolio of motor vehicle retail installment sales contracts
originated by DriveTime Car Sales Company, LLC (the Originator).
The Originator is a direct, wholly owned subsidiary of DriveTime.
DriveTime is a used vehicle retailer in the United States that
focuses on the sale and financing of vehicles to the subprime
market.
The rating on the Class A Note reflects the 66.25% of initial hard
credit enhancement provided by the subordinated notes in the pool,
the Reserve Account (1.50%) and overcollateralization (19.50%). The
ratings on the Class B, C, D and E Notes reflect 55.75%, 43.05%,
30.80% and 21.00% of initial hard credit enhancement, respectively.
Additional credit support may be provided from excess spread
available in the structure.
EXETER AUTOMOBILE 2016-2: S&P Affirms BB(sf) Rating on Cl. D Notes
------------------------------------------------------------------
S&P Global Ratings raised its ratings on 17 classes from Exeter
Automobile Receivables Trust's (EART's) series 2013-1, 2013-2,
2014-1, 2014-2, 2014-3, 2015-1, 2015-2, 2015-3, 2016-1, and 2016-2
transactions. In addition, S&P affirmed the ratings on 12 classes
from series 2013-1, 2014-2, 2014-3, 2015-2, 2015-3, 2016-1, and
2016-2.
S&P said, "The rating actions reflect collateral performance to
date and our expectations regarding future collateral performance,
as well as each transaction's structure and credit enhancement.
Additionally, we incorporated secondary credit factors, including
credit stability, payment priorities under various scenarios, and
sector- and issuer-specific analyses. Considering all these
factors, we believe the notes' creditworthiness remains consistent
with the raised and affirmed ratings.
"In January 2017, we revised our loss projections for the 2013-1,
2013-2, 2014-1, 2014-2, 2014-3, 2015-1, 2015-2, and 2015-3
transactions. These transactions are currently performing in line
with our revised projections. In September 2017, we revised our
loss expectation on EART series 2016-1 and 2016-2 to the levels
shown below in table 2. While these two transactions appear to be
performing slightly better than the 2015 vintage, they are both
performing worse than our original expectations."
Table 1
Collateral Performance (%)
As of the September 2017 distribution date
Pool Current 60+ day
Series Mo. factor CNL delinq.
2013-1 52 10.74 17.30 22.59
2013-2 48 13.73 16.06 19.27
2014-1 43 19.11 14.37 15.26
2014-2 39 22.60 15.18 15.17
2014-3 35 28.00 15.46 13.93
2015-1 30 33.60 13.16 13.28
2015-2 28 38.60 14.23 13.44
2015-3 23 45.19 13.47 13.06
2016-1 19 53.98 10.18 11.28
2016-2 16 59.72 9.00 11.14
(i)Mo.--Month.
CNL--Cumulative net loss.
Delinq.--Delinquencies.
Table 2
CNL Expectations (%)
As of the September 2017 distribution date
Original
lifetime Current
Series CNL exp. CNL exp.
2013-1 17.00-18.00 17.75-18.25
2013-2 17.00-18.00 16.75-17.25
2014-1 17.00-18.00 16.25-16.75
2014-2 17.25-18.25 18.00-18.50
2014-3 17.25-18.25 19.25-19.75
2015-1 17.50-18.50 19.00-19.50
2015-2 17.50-18.50 21.50-22.50
2015-3 17.50-18.50 22.00-23.00
2016-1 18.50-19.50 20.50-21.50
2016-2 18.75-19.75 20.50-21.50
CNL exp.--Cumulative net loss expectations.
Each transaction contains a sequential principal payment structure
in which the notes are paid principal by seniority. Each also has
credit enhancement in the form of a nonamortizing reserve account,
overcollateralization, subordination for the higher-rated tranches,
and excess spread. With the exception of series 2015-3, each
reviewed transaction's credit enhancement is at its specified
target. In addition, each class' credit support continues to
increase as a percentage of the amortizing collateral balance.
The overcollateralization for all 2014, 2015, and 2016 vintage
transactions can step up to a higher target overcollateralization
level if certain CNL metrics are breached. Overcollateralization
step-up tests occur every three months and are curable on any
following test dates if the CNL rate is below the specified
threshold. The 2015-2 transaction failed its test for the January
2017 collection month and its target overcollateralization
stepped-up as a result. The breach cured in the July 2017
collection month and the overcollateralization target subsequently
stepped back down. As of the August 2017 collection month, only the
series 2015-3 is currently in breach of its cumulative net loss
(CNL) threshold target, and as a result, it currently has a
stepped-up overcollateralization target of 18.00% of the current
pool balance. The series is not currently at the stepped-up target
level, although each class' credit support continues to increase as
a percentage of the amortizing collateral balance (see table 3).
The next test for the series 2015-3 occurs in conjunction with the
September 2017 collection month. This was considered in S&P's
analysis for these transactions.
The raised and affirmed ratings reflect S&P's view that the total
credit support as a percentage of the amortizing pool balance, is
commensurate with each raised or affirmed rating when compared with
its expected remaining losses.
Table 3
Hard Credit Support (%)
As of the September 2017 distribution date
Total hard Current total hard
credit support credit support
Series Class at issuance(i) (% of current)(i)
2013-1 C 13.00 102.11
2013-1 D 5.00 27.62
2013-2 D 6.00 26.56
2014-1 C 18.75 89.20
2014-1 D 6.00 22.47
2014-2 C 16.75 68.42
2014-2 D 6.00 20.85
2014-3 B 26.20 92.39
2014-3 C 14.45 50.42
2014-3 D 6.20 20.96
2015-1 B 27.00 80.20
2015-1 C 15.80 46.87
2015-1 D 6.50 19.20
2015-2 A 39.00 103.42
2015-2 B 25.80 69.23
2015-2 C 15.55 42.67
2015-2 D 6.00 17.93
2015-3 A 39.75 97.39
2015-3 B 26.50 68.07
2015-3 C 16.50 45.93
2015-3 D 5.50 21.59
2016-1 A 44.75 84.75
2016-1 B 30.00 57.42
2016-1 C 21.50 41.68
2016-1 D 9.10 18.71
2016-2 A 44.00 76.55
2016-2 B 29.75 52.69
2016-2 C 22.50 40.55
2016-2 D 9.75 19.20
(i)Calculated as a percentage of the total gross receivable pool
balance, which consists of a reserve account,
overcollateralization, and, if applicable, subordination.
S&P said, "We incorporated a cash flow analysis to assess the loss
coverage level, giving credit to excess spread. Our various cash
flow scenarios included forward-looking assumptions on recoveries,
timing of losses, and voluntary absolute prepayment speeds that we
believe are appropriate given each transaction's performance to
date. Aside from our break-even cash flow analysis, we also
conducted sensitivity analyses for these series to determine the
impact that a moderate ('BBB') stress scenario would have on our
ratings if losses began trending higher than our revised base-case
loss expectation.
"In our view, the results demonstrated that all of the classes have
adequate credit enhancement at the raised or affirmed rating
levels. We will continue to monitor the performance of all of the
outstanding transactions to ensure that the credit enhancement
remains sufficient, in our view, to cover our CNL expectations
under our stress scenarios for each of the rated classes."
RATINGS RAISED
Exeter Automobile Receivables Trust
Rating Rating
Series Class To From
2013-1 D AA (sf) A- (sf)
2013-2 D AA (sf) A- (sf)
2014-1 C AA (sf) AA- (sf)
2014-1 D A (sf) BBB (sf)
2014-2 C AA (sf) AA- (sf)
2014-3 C AA (sf) AA-(sf)
2015-1 B AA (sf) AA- (sf)
2015-1 C AA- (sf) A (sf)
2015-1 D BB+ (sf) BB (sf)
2015-2 B AA (sf) AA- (sf)
2015-2 C AA- (sf) A(sf)
2015-3 B AA (sf) AA- (sf)
2015-3 C AA- (sf) A (sf)
2016-1 B AA- (sf) A (sf)
2016-1 C A+ (sf) BBB+ (sf)
2016-2 B AA- (sf) A (sf)
2016-2 C A (sf) BBB+ (sf)
RATINGS AFFIRMED
Exeter Automobile Receivables Trust
Series Class Rating
2013-1 C AA (sf
2014-2 D BBB (sf)
2014-3 B AA (sf)
2014-3 D BBB (sf)
2015-2 A AA (sf)
2015-2 D BB (sf)
2015-3 A AA (sf)
2015-3 D BB (sf)
2016-1 A AA (sf)
2016-1 D BB (sf)
2016-2 A AA (sf)
2016-2 D BB (sf)
FLAGSHIP CREDIT 2017-3: DBRS Finalizes BB Rating on Class E Debt
----------------------------------------------------------------
DBRS, Inc. finalized provisional ratings on these classes issued by
Flagship Credit Auto Trust 2017-3 (Flagship or the Issuer):
-- $129,410,000 Series 2017-3, Class A at AAA (sf)
-- $32,930,000 Series 2017-3, Class B at AA (sf)
-- $26,570,000 Series 2017-3, Class C at A (sf)
-- $21,380,000 Series 2017-3, Class D at BBB (sf)
-- $12,710,000 Series 2017-3, Class E at BB (sf)
The ratings are based on DBRS's review of the following analytical
considerations:
-- Transaction capital structure, proposed ratings and form and
sufficiency of available credit enhancement.
-- Credit enhancement in the form of overcollateralization (OC),
subordination, amounts held in the reserve fund and excess
spread. Credit enhancement levels are sufficient to support
the DBRS-projected cumulative net loss assumption under
various stress scenarios.
-- The ability of the transaction to withstand stressed cash
flow assumptions and repay investors according to the terms
under which they have invested. For this transaction, the
ratings address the timely payment of interest on a monthly
basis and the payment of principal by the legal final
maturity date.
-- The strength of the combined organization after the merger of
Flagship Credit Acceptance LLC (Flagship or the Company) and
CarFinance Capital LLC; DBRS believes the merger of the two
companies provides synergies that make the combined company
more financially stable and competitive.
-- The capabilities of the Issuer with regard to originations,
underwriting and servicing.
-- DBRS has performed an operational review of Flagship and
considers the entity to be an acceptable originator and
servicer of subprime automobile loan contracts with an
acceptable backup servicer.
-- The Flagship senior management team has considerable
experience and a successful track record within the auto
finance industry.
-- DBRS used a proxy analysis in its development of an expected
loss.
-- A limited amount of performance data was available for
Flagship's current originations mix.
-- A combination of company-provided performance data and
industry comparable data was used to determine an expected
loss.
-- The legal structure and presence of legal opinions that
address the true sale of the assets to the Issuer, the non-
consolidation of the special-purpose vehicle with Flagship,
that the trust has a valid first-priority security interest
in the assets and is consistent with DBRS's "Legal Criteria
for U.S. Structured Finance" methodology.
Flagship is an independent, full-service automotive financing and
servicing company that provides financing to borrowers who do not
typically have access to prime credit lending terms for the
purchase of late-model vehicles and refinancing of existing
automotive financing.
The rating on the Class A notes reflects the 46.00% of initial hard
credit enhancement provided by the subordinated notes in the pool
(40.50%), the Reserve Account (2.00%) and OC (3.50%). The ratings
on the Class B, Class C, Class D and Class E notes reflect 31.75%,
20.25%, 11.00% and 5.50% of initial hard credit enhancement,
respectively. Additional credit support may be provided from excess
spread available in the structure.
FREDDIE MAC 2017-2: DBRS Finalizes B(low) Rating on Cl. M-2 Certs
-----------------------------------------------------------------
DBRS, Inc. has finalized the provisional ratings on the Asset
Backed Securities, Series 2017-2 (the Certificates) issued by
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-2 (the
Trust) as follows:
-- $61.9 million Class M-1 at BB (sf)
-- $111.4 million Class M-2 at B (low) (sf)
The BB (sf) and B (low) (sf) ratings on the Certificates reflect
14.50% and 10.00% of credit enhancement, respectively, provided by
subordinated Certificates in the pool.
Other than the specified classes above, DBRS does not rate any
other classes in this transaction.
This transaction is a securitization of a portfolio of seasoned
re-performing first-lien residential mortgages funded by the
issuance of the Certificates, which are backed by 9,939 loans with
a total principal balance of $2,474,629,247 as at the Cut-Off Date
(June 30, 2017).
The mortgage loans were either purchased by Freddie Mac from
securitized Freddie Mac Participation Certificates or retained by
Freddie Mac in whole-loan form since their acquisition. The loans
are currently held in Freddie Mac's retained portfolio and will be
deposited into the Trust on the Closing Date.
The portfolio contains 100% modified loans. Each mortgage loan was
modified under either the government-sponsored enterprise (GSE)
Home Affordable Modification Program (HAMP) or GSE non-HAMP
modification programs. Within the pool, 8,972 mortgages have
forborne principal amounts as a result of modification, which
equates to 19.7% of the total unpaid principal balance as at the
Cut-Off Date. For 92.9% of the modified loans, the modifications
happened more than two years ago. The loans are approximately 125
months seasoned, and all are current as at Cut-Off Date.
Furthermore, 86.4% of the mortgage loans have been zero times 30
days delinquent for at least the past 24 months under the Mortgage
Bankers Association delinquency methods. Because of the seasoning
of the collateral, none of the loans are subject to the Consumer
Financial Protection Bureau's Qualified Mortgage rules.
The mortgage loans will be serviced by Nationstar Mortgage LLC.
There will not be any advancing of delinquent principal or interest
on any mortgages by the servicer; however, the servicer is
obligated to advance to third parties any amounts necessary for the
preservation of mortgaged properties or real estate–owned
properties acquired by the Trust through foreclosure or a loss
mitigation process.
Freddie Mac will serve as the Sponsor, Seller and Trustee of the
transaction, as well as Guarantor of the senior certificates.
Wilmington Trust, National Association (Wilmington Trust) will
serve as Trust Agent. Wells Fargo Bank, N.A. (rated AA (high) with
a Negative trend by DBRS) will serve as the Custodian for the
Trust. U.S. Bank National Association (rated AA (high) with a
Stable trend by DBRS) will serve as the Securities Administrator
for the Trust and will act as Paying Agent, Registrar, Transfer
Agent and Authenticating Agent.
Freddie Mac will make certain representations and warranties (R&Ws)
with respect to the mortgage loans. It will be the only party from
which the Trust may seek indemnification (or, in certain cases, a
repurchase) as a result of a breach of R&Ws. If a breach review
trigger occurs, the Trust Agent, Wilmington Trust, will be
responsible for the enforcement of the R&Ws. The warranty period
will only be effective through August 10, 2020 (approximately three
years from the Closing Date), for substantially all R&Ws other than
the real estate mortgage investment conduit R&Ws.
The mortgage loans will be divided into two loan groups. The Group
M loans (38.6% of the pool) were subject to fixed-rate
modifications, and the Group H loans (61.4% of the pool) were
subject to step-rate modifications. Principal and interest (P&I) on
the Group M and Group H senior certificates (the Guaranteed
Certificates) will be guaranteed by Freddie Mac. The Guaranteed
Certificates will be backed by collateral from each group. The
remaining Certificates, including the subordinate, interest-only,
mortgage insurance and residual Certificates, will be
cross-collateralized between the two groups. This is generally
known as a Y-Structure.
The transaction employs a pro rata pay cash flow structure with a
sequential-pay feature among the subordinate certificates. Certain
principal proceeds can be used to cover interest shortfalls on the
rated Class M-1 and Class M-2 Certificates. Senior classes benefit
from guaranteed P&I payments by the Guarantor, Freddie Mac;
however, such guaranteed amounts, if paid, will be reimbursed to
Freddie Mac from the interest and principal collections prior to
any allocation to the subordinate Certificates. The senior
principal distribution amounts vary subject to the satisfaction of
a series of step-down tests. Realized losses are allocated reverse
sequentially.
The ratings reflect transactional strengths that include underlying
assets that have generally performed well through the crisis (86.4%
of the pool has remained consistently current in the past 24
months), good credit quality relative to other re-performing pools
reviewed by DBRS and a strong servicer. Additionally, a third-party
due diligence review, albeit on less than 100% of the portfolio,
was performed on a sample that generally meets or exceeds DBRS's
criteria. The due diligence results and findings on the sampled
loans were satisfactory.
Although improved from Freddie Mac Seasoned Credit Risk Transfer
Trust, Series 2016-1 (SCRT 2016-1) and substantially similar to
Freddie Mac Seasoned Credit Risk Transfer Trust, Series 2017-1, the
transaction employs a relatively weak R&W framework that includes a
36-month sunset (as opposed to 12 months in SCRT 2016-1) without an
R&W reserve account, substantial knowledge qualifiers (with
clawback) and fewer mortgage loan representations relative to DBRS
criteria for seasoned pools. DBRS increased loss expectations from
the model results to capture the weaknesses in the R&W framework.
Other mitigating factors include (1) significant loan seasoning and
very clean performance history in the past two years, (2) stringent
and automatic breach review triggers, (3) Freddie Mac as the R&W
provider and (4) a satisfactory third-party due diligence review.
The lack of P&I advances on delinquent mortgages may increase the
possibility of periodic interest shortfalls to the Noteholders;
however, principal proceeds can be used to pay interest to the
rated Certificates and subordination levels are greater than
expected losses, which may provide for interest payments to the
rated Certificates.
FREDDIE MAC 2017-3: Fitch Assigns 'B-sf' Rating to Cl. M-2 Notes
----------------------------------------------------------------
Fitch rates Freddie Mac's risk-transfer transaction, Seasoned
Credit Risk Transfer Series 2017-3 (SCRT 2017-3) as follows:
-- $42,672,000 class M-1 notes 'BBsf'; Outlook Stable;
-- $76,808,000 class M-2 notes 'B-sf'; Outlook Stable.
The following classes will not be rated by Fitch:
-- $521,247,000 class HT notes;
-- $390,935,000 class HA exchangeable notes;
-- $130,312,000 class HB exchangeable notes;
-- $65,156,000 class HV exchangeable notes;
-- $65,156,000 class HZ exchangeable notes;
-- $895,439,000 class MT notes;
-- $671,579,000 class MA exchangeable notes;
-- $223,860,000 class MB exchangeable notes;
-- $111,930,000 class MV exchangeable notes;
-- $111,930,000 class MZ exchangeable notes;
-- $1,416,686,000 class A-IO notional notes;
-- $170,685,495 class B notes;
-- $290,165,495 class B-IO notional notes.
The 'BBsf' rating for the M-1 notes reflects the 14.50%
subordination provided by the 4.50% class M-2 notes, and the 10.00%
class B notes. The 'B-sf' rating for the M-2 notes reflects the
10.00% subordination provided by the class B notes.
SCRT 2017-3 represents Freddie Mac's fourth seasoned risk transfer
transaction issued as part of the Federal Housing Finance Agency's
Conservatorship Strategic Plan for 2013-2017 for each of the
government-sponsored enterprises (GSEs) to demonstrate the
viability of multiple types of risk-transfer transactions involving
single-family mortgages. SCRT 2017-3 consists of two collateral
groups backed by 7,176 seasoned performing and re-performing
mortgages with a total balance of approximately $1.707 billion,
which includes $375.4 million, or 22%, of the aggregate pool
balance in non-interest-bearing deferred principal amounts, as of
the cut-off date. The two collateral groups are distinguished
between loans that have additional interest rate increases
outstanding due to the terms of the modification and those that are
expected to remain fixed for the remainder of the term.
Distributions of principal and interest (P&I) and loss allocations
to the rated notes are based on a senior subordinate, sequential
structure.
KEY RATING DRIVERS
Distressed Performance History (Negative): The collateral pool
consists primarily of peak-vintage re-performing loans (RPLs), all
of which have been modified. Roughly, 92% of the pool has been
paying on time for the past 24 months per the Mortgage Bankers
Association methodology (MBA), and none of the loans have
experienced a delinquency within the past 12 months. The pool has a
weighted average sustainable loan-to-value ratio (WA sLTV) of
104.6% and the WA model FICO is 688.
Deferred Amounts (Negative): Non-interest-bearing principal
forbearance amounts totaling $375.4 million (22%) are outstanding
on 6,566 loans. Fitch included the deferred amounts in the LTV and
sLTV despite the lower payment and amounts not being owed during
the term of the loan. The inclusion resulted in higher probability
of default (PD) and loss severity (LS) assumptions than if there
were no deferrals. Fitch believes that borrower default behavior
for these loans will resemble that of the higher LTVs, as exit
strategies (that is, sale or refinancing) will be limited relative
to those borrowers with more equity in the property.
Interest Payment Risk (Negative): In Fitch's timing scenarios both
the M-1 and M-2 class incur temporary shortfalls in their
respective rating categories but are ultimately repaid prior to
maturity of the transaction. The difference between Fitch's
expected loss and the credit enhancement (CE) on the rated classes
is due to the repayment of interest deferrals. Interest to the
rated classes is subordinated to the senior notes as well as
repayments made to Freddie Mac for prior payments on the senior
classes. Timely payments of interest are also a potential risk as
principal collections on the underlying can only be used to repay
interest shortfalls on the rated classes after the balance has been
paid off.
Third-Party Due Diligence (Neutral): A third-party due diligence
review was conducted on a sample basis of approximately 10% of the
pool as it relates to regulatory compliance and pay history and a
tax and title lien search for 100% of the loans in the pool. The
third-party review (TPR) firms' due diligence review resulted in
4.6% of the sample loans remaining in the final pool graded 'D' (0%
'C' graded loans), meaning the loans had material violations or
lacked documentation to confirm regulatory compliance. This is well
below the average of approximately 11% seen in other recently rated
RPL transactions and demonstrates relatively low operational risk.
New Issuer (Neutral): This is Freddie Mac's fourth rated RPL
securitization and the first one that Fitch has been asked to rate.
Fitch has conducted multiple reviews of Freddie Mac and is
confident that it has have the necessary policies, procedures and
third party oversight in place to properly aggregate and securitize
reperforming mortgage loans (RPL). In addition to the satisfactory
operational assessments, the sample due diligence that was
conducted points to sound operational controls.
Representation Framework (Negative): Fitch considers the
representation, warranty, and enforcement (RW&E) mechanism
construct for this transaction as weaker than other Fitch rated RPL
deals. The weakness is due to the exclusion of a number of reps
that Fitch views as consistent with a full framework as well as the
limited diligence that may have otherwise acted as a mitigant.
Additionally, Freddie Mac as rep provider will only be obligated to
repurchase a loan due to breaches prior to Oct. 9, 2020. However,
Fitch believes that the defect risk is lower relative to other RPL
transactions because the loans were subject to Freddie Mac's loan
level review process in place at the time the loan became
delinquent. Therefore, Fitch treated the construct as Tier 3 and
increased its 'BBsf' PD expectations by 104 bps to account for a
the weaknesses in the reps.
Sequential-Pay Structure (Positive): The transaction's cash flow is
similar to what is seen in Freddie Mac's STACR transactions. Once
the initial CE of the senior notes has reached the target and if
all performance triggers are passing principal is allocated pro
rata among the seniors and subordinate classes with the most senior
subordinate bond receiving the full subordinate share. This
structure is a positive to the rated notes as it results in a
faster paydown and allows them to receive principal earlier than
under a traditional sequential structure. To the extent any of the
performance triggers are failing, however, principal is distributed
sequentially.
No Servicer P&I Advances (Mixed): The servicer will not be
advancing delinquent monthly payments of P&I, which reduces
liquidity to the trust. However, as P&I advances made on behalf of
loans that become delinquent and eventually liquidate reduce
liquidation proceeds to the trust, the loan-level LS are less for
this transaction than for those where the servicer is obligated to
advance P&I. Structural provisions and cash flow priorities,
together with increased subordination, provide for ultimate
payments of interest to the rated classes.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the MSA and national levels. The implied
rating sensitivities are only an indication of some of the
potential outcomes and do not consider other risk factors that the
transaction may become exposed to or be considered in the
surveillance of the transaction.
This defined stress sensitivity analysis demonstrates how the
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the
model projected 19.2% at the 'BBsf' level, and 11.3% at the 'Bsf'
level. The analysis indicates that there is some potential rating
migration with higher MVDs, compared with the model projection.
Fitch also conducted defined rating sensitivities, which determine
the stresses to MVDs that would reduce a rating by one full
category, to non-investment grade, and to 'CCCsf'. For example,
additional MVDs of 7%, and 16% would potentially move the 'BBsf'
rated class down one rating category, and to 'CCCsf', respectively.
GALLATIN CLO 2017-1: Moody's Assigns B3 Rating to Class F Notes
---------------------------------------------------------------
Moody's Investors Service has assigned ratings to six classes of
notes issued by Gallatin CLO VIII 2017-1, Ltd.
Moody's rating action is:
US$396,000,000 Class A Senior Secured Floating Rate Notes due 2027
(the "Class A Notes"), Assigned Aaa (sf)
US$63,000,000 Class B Senior Secured Floating Rate Notes due 2027
(the "Class B Notes"), Assigned Aa2 (sf)
US$32,000,000 Class C Deferrable Mezzanine Floating Rate Notes due
2027 (the "Class C Notes"), Assigned A2 (sf)
US$34,000,000 Class D Deferrable Mezzanine Floating Rate Notes due
2027 (the "Class D Notes"), Assigned Baa3 (sf)
US$27,000,000 Class E Deferrable Mezzanine Floating Rate Notes due
2027 (the "Class E Notes"), Assigned Ba3 (sf)
US$9,000,000 Class F Deferrable Mezzanine Floating Rate Notes due
2027 (the "Class F Notes"), Assigned B3 (sf)
The Class A Notes, the Class B Notes, the Class C Notes, the Class
D Notes, the Class E Notes and the Class F Notes are referred to
herein, collectively, as the "Rated Notes."
RATINGS RATIONALE
Moody's ratings of the Rated Notes address the expected losses
posed to noteholders. The ratings reflect the risks due to defaults
on the underlying portfolio of assets, the transaction's legal
structure, and the characteristics of the underlying assets.
Gallatin VIII is a managed cash flow CLO. The issued notes will be
collateralized primarily by broadly syndicated first lien senior
secured corporate loans. At least 90.0% of the portfolio must
consist of senior secured loans, and up to 10.0% of the portfolio
may consist of second lien loans or unsecured loans. The portfolio
is approximately 85% ramped as of the closing date.
Gallatin Loan Management, LLC (the "Manager") will direct the
selection, acquisition and disposition of the assets on behalf of
the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's less than two year
reinvestment period. Thereafter, the Manager may reinvest
unscheduled principal payments and proceeds from sales of credit
risk assets, subject to certain restrictions.
In addition to the Rated Notes, the Issuer issued subordinated
notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in August 2017.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $600,000,000
Diversity Score: 57
Weighted Average Rating Factor (WARF): 2944
Weighted Average Spread (WAS): 3.65%
Weighted Average Coupon (WAC): 6.50%
Weighted Average Recovery Rate (WARR): 48.0%
Weighted Average Life (WAL): 6.8 years.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
Together with the set of modeling assumptions above, Moody's
conducted an additional sensitivity analysis, which was a component
in determining the ratings assigned to the Rated Notes. This
sensitivity analysis includes increased default probability
relative to the base case.
Below is a summary of the impact of an increase in default
probability (expressed in terms of WARF level) on the Rated Notes
(shown in terms of the number of notch difference versus the
current model output, whereby a negative difference corresponds to
higher expected losses), assuming that all other factors are held
equal:
Percentage Change in WARF -- increase of 15% (from 2944 to 3386)
Rating Impact in Rating Notches
Class A Notes: 0
Class B Notes: -2
Class C Notes: -2
Class D Notes: -1
Class E Notes: 0
Class F Notes: 0
Percentage Change in WARF -- increase of 30% (from 2944 to 3827)
Rating Impact in Rating Notches
Class A Notes: -1
Class B Notes: -3
Class C Notes: -3
Class D Notes: -2
Class E Notes: -1
Class F Notes: -1
GMAC COMMERCIAL 1998-C2: Moody's Affirms C Rating on Cl. X Certs
----------------------------------------------------------------
Moody's Investors Service has affirmed the rating on one interest
only (IO) class of GMAC Commercial Mortgage Securities Inc.,
Mortgage Pass-Through Certificates, Series 1998-C2:
Cl. X, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The rating on the IO class was affirmed based on the credit quality
of its referenced classes . The IO class is the only outstanding
Moody's-rated class in this transaction.
Moody's rating action reflects a base expected loss of 11% of the
current balance, compared to 6% at Moody's last review. Moody's
base expected loss plus realized losses is now 2.6% of the original
pooled balance, essentially unchanged from the last review. Moody's
provides a current list of base expected losses for conduit and
fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
An IO class may be subject to ratings upgrades if there is an
improvement in the credit quality of its referenced classes,
subject to the limits and provisions of the updated IO
methodology.
An IO class may be subject to ratings downgrades if there is (i) a
decline in the credit quality of the reference classes and/or (ii)
paydowns of higher quality reference classes, subject to the limits
and provisions of the updated IO methodology.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in this rating were "Moody's Approach to
Rating Large Loan and Single Asset/Single Borrower CMBS" published
in July 2017, and "Moody's Approach to Rating Credit Tenant Lease
and Comparable Lease Financings", published in October 2016.
Additionally, the methodology used in rating Cl. X was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
DEAL PERFORMANCE
As of the September 15, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $46 million
from $2.5 billion at securitization. The Certificates are
collateralized by 32 mortgage loans ranging in size from less than
1% to 33% of the pool, with the top ten loans representing 64% of
the pool. Ten loans, representing 32% of the pool have defeased and
are secured by US Government securities. The pool contains a Credit
Tenant Lease (CTL) component that includes eight loans, totaling 8%
of the pool, secured by properties leased to six tenants
Seven loans, representing 37% 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
Moody's ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
Forty-seven loans have been liquidated from the pool, contributing
to an aggregate realized loss of $60 million (34% loss severity on
average). Two loans, representing 9% of the pool, are currently in
special servicing. The specially serviced loans are secured by a
mix of property types. Moody's estimates an aggregate $3 million
loss for the specially serviced loans (80% expected loss on
average). Additionally, Moody's has assumed a high default
probability for one poorly performing loans representing 4% of the
pool.
Moody's was provided with full year 2016 and full or partial year
2017 operating results for 95% and 58% of the pool, respectively.
Moody's weighted average conduit LTV is 46% compared to 60% at
Moody's prior review. Moody's conduit component excludes loans with
credit assessments, defeased and CTL loans and specially serviced
and troubled loans. Moody's net cash flow (NCF) reflects a weighted
average haircut of 9.0% to the most recently available net
operating income (NOI). Moody's value reflects a weighted average
capitalization rate of 10.2%.
Moody's actual and stressed conduit DSCRs are 1.96X and 2.87X,
respectively, compared to 1.12X and 2.74X at prior review. Moody's
actual DSCR is based on Moody's 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 42% of the pool balance. The
largest loan is the D'Amato Portfolio Loan ($15 million -- 33% of
the pool), which is secured by a collection of industrial and
retail properties located in Connecticut and Rhode Island. The
properties were 94% leased as of March 2017. Moody's LTV and
stressed DSCR are 51% and 2.17X, respectively, compared to 55% and
2.00X at prior review.
The second largest loan is the Columbus Georgia Apartments Loan ($3
million -- 5% of the pool), which represents four cross
collateralized loans secured by multifamily properties in Columbus,
Georgia. The loan is fully amortizing and the loan balance has
decreased by 59% since origination. Moody's LTV and stressed DSCR
are 30% and 3.57X, respectively, compared to 36% and 3.02X at prior
review
The third largest loan is the South Mountain Shopping Center Loan
($2 million -- 4% of the pool), which is secured by a grocery
anchored retail center in Allentown, Pennsylvania. The loan is
fully amortizing and the loan balance has decreased by 58% since
origination. Moody's LTV and stressed DSCR are 39% and 2.71X,
respectively, compared to 36% and 2.95X at prior review.
The CTL component consists of eight loans, totaling 8% of the pool,
secured by properties leased to six tenants. The largest exposure
is CVS Health ($2.7 million -- 6% of the pool; Moody's senior
unsecured rating: Baa1 -- stable outlook). The bottom-dollar
weighted average rating factor (WARF) for this pool is 1,314
compared to 1,843 at last review when CTL component included
additional loans which have since defeased . WARF is a measure of
the overall quality of a pool of diverse credits. The bottom-dollar
WARF is a measure of the default probability within the pool.
GOLDMAN SACHS 2012-GCJ9: Fitch Affirms 'Bsf' Rating on Cl. F Certs
------------------------------------------------------------------
Fitch Ratings has affirmed 10 classes of Goldman Sachs Commercial
Mortgage Capital, L.P., GS Mortgage Securities Trust series
2012-GCJ9 commercial mortgage pass-through certificates.
KEY RATING DRIVERS
Increase in Credit Enhancement: The pool has paid down 19.7%,
including the payoff or disposition of seven loans. Of the
remaining loans, 62 were amortizing as of September 2017 (66.8% of
the pool balance) with two additional loans (13.6%) scheduled to
start amortizing before YE17. There are nine defeased loans
(4.9%).
Underperforming Loans: The reported YE16 net operating income (NOI)
for eight of the top 15 loans (44.2% of the pool) is below the
underwritten NOI. This includes Gansevoort Park Avenue (5.6%) and
Miami Center (4.8%), which are down 42% and 24.1%, respectively.
There are 11 loans on the master servicer's watchlist (24.2%), and
10 loans are identified as Fitch loans of concern (20.9%).
Hurricane Exposure: There are six loans (7.5%) secured by
properties located in FEMA disaster counties in Florida and
Georgia. The largest property affected is Miami Center (4.8%), a
786,836-square foot office building located along Biscayne Bay in
downtown Miami; however, the building is operational. Additionally,
there are two limited-service hotels in Florence, SC (1.1%) that
are currently operating. Damage reports are still being gathered to
determine the severity of impact from the storms.
Pool Concentrations: The pool is concentrated by loan balance, with
the top 10 loans making up 58.4% of the current pool balance, and
the top 15 67.6%. Of the pool, 50.9% of the properties by allocated
balance are located in primary markets that include New York City
(24.8%), Los Angeles, CA (18.5%), Miami, FL (4.8%) and Chicago, IL
(3.5%).
RATING SENSITIVITIES
The Outlooks on all classes are Stable given the recent pool-level
performance and paydown. All the remaining non-specially serviced
loans (98.1%) have scheduled maturities in 2022. Rating downgrades
are possible in the event the loan-level underperformance continues
or there are additional loans transferred to special servicing.
Rating upgrades are possible with additional paydown or defeasance;
however, upgrades may be limited due to loan concentration and
long-dated scheduled maturities.
Fitch has affirmed the following ratings:
-- $1.3 million class A-2 at 'AAAsf'; Outlook Stable;
-- $607.4 million class A-3 at 'AAAsf'; Outlook Stable;
-- $90 million class A-AB at 'AAAsf'; Outlook Stable;
-- Interest-only class X-A at 'AAAsf'; Outlook Stable;
-- $111.1 million class A-S at 'AAAsf'; Outlook Stable;
-- $90.3 million class B at 'AA-sf'; Outlook revised to Stable
from Positive;
-- $57.3 million class C at 'A-sf'; Outlook revised to Stable
from Positive;
-- $57.3 million class D at 'BBB-sf'; Outlook Stable;
-- $27.8 million class E at 'BBsf'; Outlook Stable;
-- $22.6 million class F at 'Bsf'; Outlook Stable.
Class A-1 is paid in full. Fitch does not rate the interest-only
class X-B or the $49 million class G.
JP MORGAN 2006-CIBC15: Moody's Lowers Class A-M Debt Rating to B3
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on two classes
and downgraded the ratings on one class in J.P. Morgan Chase
Commercial Mortgage Securities Corp. Series 2006-CIBC15
Cl. A-M, Downgraded to B3 (sf); previously on Oct 13, 2016 Affirmed
B1 (sf)
Cl. A-J, Affirmed C (sf); previously on Oct 13, 2016 Affirmed C
(sf)
Cl. X-1, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The rating of Class A-M was downgraded due to higher anticipated
losses on specially serviced and troubled loans.
The rating of Class A-J was affirmed because the rating is
consistent with Moody's expected loss plus realized losses. Class
AJ has already experienced a 31% realized loss as result of
previously liquidated loans.
The rating on the IO class, Class X-1, was affirmed because of the
credit quality of the referenced classes
Moody's rating action reflects a base expected loss of 51.3% of the
current pooled balance, compared to 32.9% at Moody's last review.
Moody's base expected loss plus realized losses is now 20.5% of the
original pooled balance, compared to 18.3% at the last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in these ratings were "Approach to Rating US
and Canadian Conduit/Fusion CMBS" published in July 2017 and
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in July 2017.
Additionally, the methodology used in rating Cl. X-1 was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 48.6% of the pool is in
special servicing and Moody's has identified additional troubled
loans representing 23.7% of the pool. In this approach, Moody's
determines a probability of default for each specially serviced and
troubled loan that it expects will generate a loss and estimates a
loss given default based on a review of broker's opinions of value
(if available), other information from the special servicer,
available market data and Moody's internal data. The loss given
default for each loan also takes into consideration repayment of
servicer advances to date, estimated future advances and closing
costs. Translating the probability of default and loss given
default into an expected loss estimate, Moody's then applies the
aggregate loss from specially serviced and troubled loans to the
most junior class and the recovery as a pay down of principal to
the most senior class.
DEAL PERFORMANCE
As of the September 12, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 88% to $245.2
million from $2.1 billion at securitization. The certificates are
collateralized by 18 mortgage loans ranging in size from less than
1% to 23.7% of the pool, with the top ten loans (excluding
defeasance) constituting 72.3% of the pool. One loan, constituting
12% of the pool, has defeased and are secured by US government
securities.
Moody's uses a variation of Herf to measure the diversity of loan
sizes, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of nine, compared to 11 at Moody's last review.
One loan, constituting 0.4% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Thirty-six loans have been liquidated from the pool at a loss,
contributing to an aggregate realized loss of $311.1 million (for
an average loss severity of 31%). Eleven loans, constituting 48.6%
of the pool, are currently in special servicing. The largest
specially serviced loan is the Marriott -- Jackson Loan ($23.8
million -- 9.8% of the pool), which is secured by a 303-key
full-service Marriott hotel located in Jackson, Mississippi. The
loan was transferred to the special servicer in June 2016 for
maturity default. Hotel amenities include meeting space and ball
rooms, full-service restaurant, fitness center, and outdoor pool. A
high-rise 586-space parking garage is attached to the subject.
The second largest specially serviced loan is the FGP Portfolio I
-- A Note Loan ($16.0 million -- 6.6% of the pool), which was
initially secured by a portfolio of 12 industrial properties, of
which nine have been released. The portfolio was initially
transferred to the special servicer in July 2009 due to imminent
default as a result of tenant departures. The loan was modified in
July 2011. The loan was transferred back to the special servicer in
June 2016 for maturity default due to the borrower being unable to
pay the outstanding loan amount. The portfolio was 73% leased as of
December 2016. Moody's analysis incorporated a Lit/Dark approach to
account for the tenant concentration at the remaining properties.
The third largest specially serviced loan is the Rockwell
Automation Loan ($15.3 million -- 6.3% of the pool), which is
secured by a 130,000 SF industrial property located in Shirley, New
York, approximately 70 miles east of New York City on Long Island.
The loan was transferred to the special servicer in November 2013
due to imminent default stemming from the departure of the
property's sole tenant, Rockwell Automation. The property is
currently fully vacant.
The remaining eight specially serviced loans are secured by a mix
of property types. Moody's has also assumed a high default
probability for one poorly performing loan, constituting 23.7% of
the pool. Moody's estimates an aggregate $116.4 million loss for
the specially serviced and troubled loans (67% expected loss on
average).
As of the September 12, 2017 remittance statement cumulative
interest shortfalls were $22.2 million. Moody's anticipates
interest shortfalls will continue because of the exposure to
specially serviced loans and/or modified loans. Interest shortfalls
are caused by special servicing fees, including workout and
liquidation fees, appraisal entitlement reductions (ASERs), loan
modifications and extraordinary trust expenses.
Moody's received full year 2016 operating results for 100% of the
pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 67.2%, compared to 84.5% at Moody's
last review. Moody's conduit component excludes loans with
structured credit assessments, defeased and CTL loans, and
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 22% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.5%.
Moody's actual and stressed conduit DSCRs are 1.18X and 1.59X,
respectively, compared to 1.13X and 1.31X at the last review.
Moody's actual DSCR is based on Moody's NCF and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and a
9.25% stress rate the agency applied to the loan balance.
The top three performing non-specially serviced loans represent
34.8% of the pool balance. The largest loan is the Scottsdale Plaza
Resort Loan ($57.2 million -- 23.7% of the pool), which is secured
by the borrower's fee simple interest in a 404-key full-service
hotel situated on a 37 acre parcel in Scottsdale, Arizona. The
property was developed in 1974 with 224 keys and then expanded by
an additional 180 keys in 1985. Amenities at the property include
30,000 SF of meeting space, five outdoor swimming pools, two
restaurants, two lounges, five tennis courts, and full-service
business center, a spa/salon, and a fitness room. The loan was
modified in April 2016 and returned to the master servicer as a
corrected mortgage loan. The terms of the modification included,
among other items, a $4.0 million equity contribution to a
renovation reserve, a two-year maturity extension to June 2018 and
an interest-rate reduction along with the conversion of the loan to
interest-only. Moody's has identified this as a troubled loan.
The second largest performing loan is the Harbor Freight Tools USA,
Inc. Loan ($17.2 million -- 7.1% of the pool), which is secured by
a 1.0 million SF industrial property located in Dillon, South
Carolina, approximately 65 miles northwest of Myrtle Beach. The
property is 100% leased to Harbor Freight Tools through June 2034.
Moody's analysis incorporated a Lit/Dark approach to account for
the single-tenant exposure. Moody's LTV and stressed DSCR are 83%
and 1.31X, respectively, compared to 99% and 1.09X at the last
review.
The third largest loan is the 70 Jewett City Road Loan ($9.8
million -- 4.1% of the pool), which is secured by a 638,000 SF
industrial property located in Norwich, Connecticut. The property
is 100% leased to Bob's Discount Furniture which runs through
August 2027. Moody's analysis incorporated a Lit/Dark approach to
account for the single-tenant exposure. The loan is fully
amortizing and has paid down 39% since securitization. Moody's LTV
and stressed DSCR are 49% and 2.01X, respectively, compared to 48%
and 2.04X at the last review.
JP MORGAN 2007-CIBC20: S&P Cuts Rating on Class F Certs to D(sf)
----------------------------------------------------------------
S&P Global Ratings raised its ratings on three classes of
commercial mortgage pass-through certificates from JPMorgan Chase
Commercial Mortgage Securities Trust 2007-CIBC20, a U.S. commercial
mortgage-backed securities (CMBS) transaction. In addition, S&P
lowered its rating on one class and affirmed its ratings on two
other classes from the same transaction.
For the affirmations and upgrades, S&P's expectation of credit
enhancement was generally in line with the affirmed or raised
rating levels.
The upgrades also reflect the trust balance's significant reduction
as well as expected payoffs for near-term maturating loans.
According to the master servicer, the Millennium Garage loan ($18.0
million, 10.4%), has paid off following the September 2017 payment
period.
The downgrade on class F reflects ongoing interest shortfalls that
S&P expects to remain outstanding for the foreseeable future.
According to the Sept. 12, 2017, trustee remittance report, the
current monthly interest shortfalls totaled $497,099 and resulted
primarily from workout fees totaling $281,534, interest reduction
from a modified loan totaling $136,535, and appraisal subordinate
entitlement reduction amounts totaling $73,422.
S&P said, "The current interest shortfalls affected classes
subordinate to and including class D. Excluding the nonrecurring
interest shortfalls, we expect the outstanding interest shortfalls
on classes D and E to be recovered in the near term. In the event
that the shortfalls remain outstanding for a longer period, we may
take additional rating actions in accordance with our temporary
interest shortfall methodology.
"While available credit enhancement levels suggest further positive
rating movements on classes B and C and positive rating movement on
classes D and E, our analysis also considered the susceptibility to
reduced liquidity support from the five specially serviced assets
($49.4 million, 28.5%), the history of interest shortfalls, and the
timing of repayment."
TRANSACTION SUMMARY
As of the Sept. 12, 2017, trustee remittance report, the collateral
pool balance was $173.1 million, which is 6.8% of the pool balance
at issuance. The pool currently includes 12 loans (reflecting the
Clark Tower A note and B note as a single loan) and one real
estate-owned (REO) asset, down from 143 fixed-rate loans at
issuance. Five of these assets are with the special servicer, and
five loans ($41.8 million, 24.1%) are on the master servicer's
watchlist. Of the five loans on the master servicer's watchlist,
the master servicer indicated that one loan has repaid in full
following the September 2017 payment period, while two other loans,
Valet Airport ($9.0 million, 5.2%) and Deer Trace MHC ($7.4
million, 4.3%), have reported nonperforming matured balloon payment
statuses. As a result, S&P categorized these two loans as credit
impaired because we believe that they are at heightened risk of
default and loss.
S&P calculated a 1.16x S&P Global Ratings' weighted average debt
service coverage (DSC) and 93.1% S&P Global Ratings' weighted
average loan-to-value (LTV) ratio using an 8.35% S&P Global
Ratings' weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the five specially
serviced assets, the aforementioned loan that paid off, the two
credit-impaired loans, and the subordinate Clark Tower - B note
($17.0 million, 9.8%).
The top 10 assets have an aggregate outstanding pool trust balance
of $163.2 million (94.3%). Adjusting the servicer-reported numbers,
S&P calculated an S&P Global Ratings' weighted average DSC and LTV
of 1.20x and 99.1%, respectively, for two of the top 10 assets. The
remaining assets are either specially serviced, have paid off, or
are credit impaired. Details on the two largest
specially serviced assets are discussed below.
To date, the transaction has experienced $189.4 million in
principal losses, or 7.4% of the original pool trust balance. S&P
said, "We expect losses to reach approximately 9.3% of the original
pool trust balance in the near term, based on losses incurred to
date and additional losses we expect upon the eventual resolution
of the five specially serviced assets, the two loans that we have
credit impaired, and the subordinate B note."
CREDIT CONSIDERATIONS
As of the Sept. 12, 2017, trustee remittance report, five assets in
the pool were with the special servicer, C-III Asset Management
(C-III). Details of thetwo largest specially serviced assets are as
follows:
Holiday Inn-Harrisburg West loan ($12.8 million, 7.4%) is the
fourth-largest loan in the pool and has a total reported exposure
of $14.9 million. The loan is secured by a 238-room lodging
property located in Mechanicsburg, Pa. The loan, which has a
reported foreclosure in progress payment status, was transferred to
the special servicer on July 19, 2016, due to imminent default,
because the borrower indicated it could no longer support cash flow
shortfalls. A $7.3 million appraisal reduction amount (ARA) is in
effect against this loan. S&P expects a significant loss (60% or
greater) upon this loan's eventual resolution.
The Gannttown REO asset ($12.6 million, 7.3%), the fifth-largest
asset in the pool, has a total reported exposure of $16.8 million.
The asset is a 107,587-sq.-ft. retail building in Turnersville,
N.J. The loan was transferred to the special servicer on Sept. 5,
2013, due to imminent payment default. The property became REO on
Jan. 26, 2016. C-III reported that the asset is being marketed for
sale. A $6.8 million ARA is in effect against this asset. S&P
expects a significant loss upon this asset's eventual resolution.
The three remaining assets with the special servicer each have
individual balances that represent less than 6.0% of the total pool
trust balance. S&P estimated losses for the five specially serviced
assets, arriving at a weighted average loss severity of 52.4%.
In addition, S&P assigned losses for the two credit impaired loans
as well as the subordinate Clark Tower - B note. Including these
loans with the specially serviced assets, S&P arrived at a weighted
average loss severity of 58.0%.
RATINGS LIST
JPMorgan Chase Commercial Mortgage Securities Trust 2007-CIBC20
Commercial mortgage pass-through certificates series 2007-CIBC20
Rating
Class Identifier To From
A-J 46631QAJ1 AAA (sf) BB- (sf)
B 46631QAM4 A (sf) B (sf)
C 46631QAP7 BB+ (sf) B- (sf)
D 46631QAR3 B- (sf) B- (sf)
E 46631QAT9 B- (sf) B- (sf)
F 46631QAV4 D (sf) CCC (sf)
JP MORGAN 2014-C18: Fitch Affirms 'Bsf' Rating on Cl. F Certs
-------------------------------------------------------------
Fitch Ratings has affirmed 15 classes J.P. Morgan Chase Commercial
Mortgage Securities Trust (JPMBB) commercial mortgage pass-through
certificates series 2014-C18.
KEY RATING DRIVERS
The affirmations are the result of stable performance since
issuance. As of the September 2017 distribution date, the pool's
aggregate principal balance has been reduced by 4.2% to $917.4
million from $957.6 million at issuance. Per the servicer
reporting, one loan (0.5% of the pool) is defeased. There are two
loans on the master servicer's watchlist (1.5%) due to lease
rollover risk. Both watchlist loans have remained current and Fitch
has not designated any loans as Fitch Loans of Concern.
Stable Performance: All loans in the pool continue to perform, as
of the September 2017 distribution, with property level performance
generally in line with issuance expectations and no material
changes to pool metrics.
Pool Concentration: The pool is more concentrated by loan size and
sponsor than average transactions from 2013. Also, the 10 largest
loans represent 59.3% of the total pool balance, which is higher
than the average 2013 top 10 concentration of 54.5%.
High Retail Concentration: The pool has an above-average
concentration of retail properties at 51.2%. Eight of the top 15
largest assets are retail properties. The average retail
concentration in 2013 was 33.2%.
Hurricane Exposure: Two loans, accounting for 13.1% of the pool,
were located in counties impacted by Hurricane Irma. The largest
property affected is Miami International Mall (10.9%), a
1.09-million-sf super-regional mall located 12 miles northwest of
downtown Miami; however, the property is operational. Only one
loan, accounting for 1.8% of the pool, was impacted by Hurricane
Harvey. Fitch is closely monitoring these loans and awaiting
updates from the master servicer.
RATING SENSITIVITIES
Rating Outlook for all classes remains Stable due to stable
collateral performance. Fitch does not foresee positive or negative
ratings migration until a material economic or asset-level event
changes the transaction's portfolio-level metrics.
Fitch has affirmed the following classes:
-- $12 million class A-1 at 'AAAsf'; Outlook Stable;
-- $85.2 million class A-2 at 'AAAsf'; Outlook Stable;
-- $23.5 million class A-3 at 'AAAsf'; Outlook Stable;
-- $87.5 million class A-4A1 at 'AAAsf'; Outlook Stable;
-- $87.5 million class A-4A2 at 'AAAsf'; Outlook Stable;
-- $267 million class A-5 at 'AAAsf'; Outlook Stable;
-- $67.4 million class A-SB at 'AAAsf'; Outlook Stable;
-- $55.1 million class A-S at 'AAAsf'; Outlook Stable;
-- $685.2 million* class X-A at 'AAAsf'; Outlook Stable
-- $69.4 million class B at 'AA-sf'; Outlook Stable;
-- $37.1 million class C at 'A-sf'; Outlook Stable;
-- $69.4 million class EC at 'A-sf'; Outlook Stable;
-- $56.3 million class D at 'BBB-sf'; Outlook Stable;
-- $19.2 million class E at 'BBsf'; Outlook Stable;
-- $12 million class F at 'Bsf'; Outlook Stable.
*Notional and interest-only.
Class A-S, B and C certificates may be exchanged for a related
amount of class EC certificates, and class EC certificates may be
exchanged for class A-S, B and C certificates.
Fitch does not rate the class NR and X-C certificates. Fitch
previously withdrew the rating on the interest-only class X-B
certificates.
JP MORGAN 2017-3: DBRS Finalizes B Rating on Class B-5 Certs
------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the Mortgage
Pass-Through Certificates, Series 2017-3 (the Certificates) issued
by J.P. Morgan Mortgage Trust 2017-3 as follows:
-- $862.4 million Class 1-A-1 at AAA (sf)
-- $862.4 million Class 1-A-2 at AAA (sf)
-- $807.3 million Class 1-A-3 at AAA (sf)
-- $807.3 million Class 1-A-4 at AAA (sf)
-- $605.5 million Class 1-A-5 at AAA (sf)
-- $605.5 million Class 1-A-6 at AAA (sf)
-- $201.8 million Class 1-A-7 at AAA (sf)
-- $201.8 million Class 1-A-8 at AAA (sf)
-- $158.0 million Class 1-A-9 at AAA (sf)
-- $158.0 million Class 1-A-10 at AAA (sf)
-- $43.8 million Class 1-A-11 at AAA (sf)
-- $43.8 million Class 1-A-12 at AAA (sf)
-- $55.0 million Class 1-A-13 at AAA (sf)
-- $55.0 million Class 1-A-14 at AAA (sf)
-- $862.4 million Class 1-AX-1 at AAA (sf)
-- $862.4 million Class 1-AX-2 at AAA (sf)
-- $807.3 million Class 1-AX-3 at AAA (sf)
-- $605.5 million Class 1-AX-4 at AAA (sf)
-- $201.8 million Class 1-AX-5 at AAA (sf)
-- $158.0 million Class 1-AX-6 at AAA (sf)
-- $43.8 million Class 1-AX-7 at AAA (sf)
-- $55.0 million Class 1-AX-8 at AAA (sf)
-- $93.7 million Class 2-A-1 at AAA (sf)
-- $87.7 million Class 2-A-2 at AAA (sf)
-- $6.0 million Class 2-A-3 at AAA (sf)
-- $93.7 million Class 2-A-4 at AAA (sf)
-- $87.7 million Class 2-A-5 at AAA (sf)
-- $6.0 million Class 2-A-6 at AAA (sf)
-- $93.7 million Class 2-AX-1 at AAA (sf)
-- $87.7 million Class 2-AX-2 at AAA (sf)
-- $6.0 million Class 2-AX-3 at AAA (sf)
-- $14.2 million Class B-1 at AA (sf)
-- $16.3 million Class B-2 at A (sf)
-- $11.7 million Class B-3 at BBB (sf)
-- $8.6 million Class B-4 at BB (sf)
-- $5.6 million Class B-5 at B (sf)
Classes 1-AX-1, 1-AX-2, 1-AX-3, 1-AX-4, 1-AX-5, 1-AX-6, 1-AX-7,
1-AX-8, 2-AX-1, 2-AX-2 and 2-AX-3 are interest-only certificates.
The class balances represent notional amounts.
Classes 1-A-1, 1-A-2, 1-A-3, 1-A-4, 1-A-5, 1-A-7, 1-A-8, 1-A-9,
1-A-11, 1-A-13, 1-AX-2, 1-AX-3, 1-AX-5, 2-A-1, 2-A-4, 2-A-5, 2-A-6
and 2-AX-1 are exchangeable certificates. These classes can be
exchanged for a combination of depositable certificates, as
specified in the offering documents.
Classes 1-A-6, 1-A-10, 1-A-12 and 2-A-2 are super-senior
certificates. These classes benefit from additional protection from
senior support certificates (Classes 1-A-14 and 2-A-3) with respect
to loss allocation.
The AAA (sf) ratings on the Certificates reflect the 6.00% of
credit enhancement provided by subordinated certificates in the
pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings
reflect 4.60%, 3.00%, 1.85%, 1.00% and 0.45% of credit enhancement,
respectively.
Other than the specified classes above, DBRS does not rate any
other classes in this transaction.
The Certificates are backed by 1,483 loans with a total principal
balance of $1,017,102,512 as at the Cut-Off Date (August 1, 2017).
The loans are divided into two groups: Pool 1 and Pool 2. Pool 1
(90.2% of the aggregate pool) consists of fully amortizing
fixed-rate mortgages (FRMs) with original terms to maturity of 20
years to 30 years, while Pool 2 (9.8% of the aggregate pool)
consists of fully amortizing FRMs with original terms to maturity
of 15 years.
The originators for the aggregate mortgage pool are JPMorgan Chase
Bank, N.A. (JPMCB; rated AA with a Stable trend by DBRS; 22.9%);
EverBank (13.4%); Social Finance (9.1%); United Shore Financial
Services (9.0%); Quicken Loans Inc. (8.7%); and various other
originators, each comprising less than 5.0% of the mortgage loans.
Approximately 1.5% of the loans sold to the mortgage loan seller
were acquired by MAXEX, LLC, which purchased loans from the related
originators or an unaffiliated third party that directly or
indirectly purchased such loans from the related originators.
The loans will be serviced or sub-serviced by New Penn Financial,
LLC doing business as Shellpoint Mortgage Servicing (52.9%); JPMCB
(22.9%); EverBank (13.4%); and various other servicers, each
comprising less than 5.0% of the mortgage loans.
Wells Fargo Bank, N.A. (rated AA (high) with a Negative trend by
DBRS) will act as the Master Servicer, Securities Administrator and
Custodian. U.S. Bank Trust National Association will serve as
Delaware Trustee. Pentalpha Surveillance, LLC will serve as the
Representations and Warranties (R&W) Reviewer.
The transaction employs a senior-subordinate shifting-interest cash
flow structure that is enhanced from a pre-crisis structure. Pool 1
and Pool 2 senior certificates will be backed by collateral from
each pool, respectively. The subordinate certificates will be
cross-collateralized between the two pools. This is generally known
as a Y-structure.
The ratings reflect transactional strengths that include
high-quality underlying assets, well-qualified borrowers and a
satisfactory third-party due diligence review.
This transaction employs an R&W framework that contains certain
weaknesses, such as materiality factors, some unrated R&W
providers, knowledge qualifiers and sunset provisions that allow
for certain R&Ws to expire within three to six years after the
Closing Date. The framework is perceived by DBRS to be limiting
compared with traditional lifetime R&W standards in certain
DBRS-rated securitizations. To capture the perceived weaknesses in
the R&W framework, DBRS reduced the originator scores in this pool.
A lower originator score results in increased default and loss
assumptions and provides additional cushions for the rated
securities.
JPMBB COMMERCIAL 2015-C33: Fitch Affirms B- Rating on Cl. F Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 16 classes of JPMBB Commercial Mortgage
Securities Trust commercial mortgage pass-through certificates,
series 2015-C33.
KEY RATING DRIVERS
Stable Performance: Overall pool performance remains stable and
generally in line with expectations at issuance, with minimal
paydown or changes to credit enhancement. As of the September 2017
distribution date, the pool's aggregate principal balance paid down
by 1.2% to $753 million from $761.8 million at issuance.
Loans of Concern: Fitch has designated three loans (4.4% of current
pool) as Fitch Loans of Concern (FLOCs), including one of the top
15 loans, Plaza Paseo Del Norte (2.3%), due to the loss of a major
tenant. The other FLOCs outside of the top 15 were flagged for
occupancy and/or debt service coverage ratio declines.
Pool and Loan Concentrations: The largest loan, 32 Avenue of the
Americas, represents 16.6% of the current pool balance. However,
the largest 10 loans account for 49% of the total pool, which is in
line with the 2015 average concentration of 49.3%. Loans secured by
multifamily properties represent 36.2% of the pool.
Hurricane Exposure: Exposure to Hurricane Harvey includes two
multifamily properties, including The Villas at Sienna Plantation
(2.6% of pool) located in Missouri City, TX that sustained damage
of which the extent remains unknown at this time, and the Mira
Bella and San Martin property (1.5%) located in Houston, TX that
sustained minor damage, according to the latest servicer updates.
Per the servicer reporting, both of the Texas properties are
located in Flood Zone X and have wind/hail storm insurance
coverage. According to servicer updates, the Town Center II
property (2%) located in Orlando, FL sustained minor damage from
Hurricane Irma, and the six properties located in Jacksonville,
Orlando, Fort Lauderdale, Seminole and Dania Beach, FL, comprising
7.2% of the pool, sustained no damage.
Amortization: The pool is scheduled to amortize by 9% of the
initial pool balance prior to maturity. 16 loans (42.1% of current
pool) are full-term interest-only and nine loans (18.3%) are
partial interest-only and have yet to begin amortizing.
RATING SENSITIVITIES
Rating Outlooks for all classes remain Stable due to the overall
stable performance of the pool since issuance. Fitch does not
foresee positive or negative ratings migration until a material
economic or asset level event changes the transaction's overall
portfolio-level metrics.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings:
-- $20 million class A-1 at 'AAAsf'; Outlook Stable;
-- $44.1 million class A-2 at 'AAAsf'; Outlook Stable;
-- $135 million class A-3 at 'AAAsf'; Outlook Stable;
-- $287 million class A-4 at 'AAAsf'; Outlook Stable;
-- $38.5 million class A-SB at 'AAAsf'; Outlook Stable;
-- $40.9 million class A-S at 'AAAsf'; Outlook Stable;
-- $565.4 million class X-A* at 'AAAsf'; Outlook Stable;
-- $35.2 million class B at 'AA-sf'; Outlook Stable;
-- $35.2 million class X-B* at 'AA-sf'; Outlook Stable;
-- $41.9 million class C at 'A-sf'; Outlook Stable;
-- $23.8 million class D-1** at 'BBBsf'; Outlook Stable;
-- $20 million class D-2** at 'BBB-sf'; Outlook Stable;
-- $43.8 million class D** at 'BBB-sf'; Outlook Stable;
-- $43.8 million class X-D* at 'BBB-sf'; Outlook Stable;
-- $20 million class E at 'BB-sf'; Outlook Stable;
-- $8.6 million class F at 'B-sf'; Outlook Stable.
*Notional amount and interest-only.
**Class D-1 and D-2 certificates may be exchanged for class D
certificates, and class D certificates may be exchanged for class
D-1 and D-2 certificates.
Fitch does not rate the class G or class NR certificates. Fitch had
previously withdrawn the ratings on the interest-only class X-C
certificates.
JPMDB COMMERCIAL 2017-C7: Fitch to Rate Class F-RR Notes 'B-sf'
---------------------------------------------------------------
Fitch Ratings has issued a presale report on JPMDB Commercial
Mortgage Securities Trust 2017-C7 commercial mortgage pass-through
certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
-- $27,657,000 class A-1 'AAAsf'; Outlook Stable;
-- $54,016,000 class A-2 'AAAsf'; Outlook Stable;
-- $60,700,000 class A-3 'AAAsf'; Outlook Stable;
-- $275,000,000 class A-4 'AAAsf'; Outlook Stable;
-- $287,683,000 class A-5 'AAAsf'; Outlook Stable;
-- $47,404,000 class A-SB 'AAAsf'; Outlook Stable;
-- $857,267,000b class X-A 'AAAsf'; Outlook Stable;
-- $100,776,000b class X-B 'A-sf'; Outlook Stable;
-- $104,807,000 class A-S 'AAAsf'; Outlook Stable;
-- $55,091,000 class B 'AA-sf'; Outlook Stable;
-- $45,685,000 class C 'A-sf'; Outlook Stable;
-- $47,029,000ab class X-D 'BBB-sf'; Outlook Stable;
-- $47,029,000a class D 'BBB-sf'; Outlook Stable;
-- $21,499,000ac class E-RR 'BB-sf'; Outlook Stable;
-- $12,093,000ac class F-RR 'B-sf'; Outlook Stable.
The following classes are not expected to be rated:
-- $36,279,296ac class G-RR
-- $30,390,000d class VRR
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
(c) Horizontal credit risk retention interest.
(d) Vertical credit risk retention interest.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 41 loans secured by 201
commercial properties having an aggregate principal balance of
$1,105,333,296 as of the cut-off date. The loans were contributed
to the trust by JPMorgan Chase Bank, National Association and
German American Capital Corporation.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 67.2% of the properties
by balance, cash flow analysis of 91.5%, and asset summary reviews
on 100% of the pool.
KEY RATING DRIVERS
Fitch Leverage in Line with Recent Transactions: The transaction
has comparable leverage to other recent Fitch-rated multiborrower
transactions. The pool's Fitch DSCR and LTV is 1.29x and 100.9%,
respectively, relative to the YTD 2017 averages of 1.27x and
100.8%, respectively. Excluding the investment-grade credit opinion
loans, the pool has a Fitch DSCR and LTV of 1.28x and 106.4%,
respectively, also comparable to the YTD 2017 normalized averages
of 1.21x and 106.5%.
Investment-Grade Credit Opinion Loans: Three loans representing
13.3% of the pool have investment-grade credit opinions, which is
above the YTD 2017 average of 12.0% and 2016 average of 8.4%.
Moffett Place Building 4 (6.3% of the pool) and 245 Park Avenue
(2.9% of the pool) both have investment-grade credit opinions of
'BBB-sf*'. General Motors Building has an investment-grade credit
opinion of 'AAAsf*'. Combined, the three loans have a weighted
average (WA) Fitch DSCR and LTV of 1.37x and 65.0%, respectively.
Above-Average Hotel Concentration: Loans secured by hotels make up
18.9% of the pool, which is above the YTD 2017 average of 15.9%.
Hotels have the highest probability of default in Fitch's
multiborrower model. The pool's largest property type is office at
33.0%, followed by industrial at 18.2%. Office and industrial
properties have an average probability of default in Fitch's
multiborrower model.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 12.3% below
the most recent year's net operating income (NOI) for properties
for which a full-year NOI was provided, excluding properties that
were stabilizing during this period. Unanticipated further declines
in property-level NCF could result in higher defaults and loss
severities on defaulted loans and in potential rating actions on
the certificates.
Fitch evaluated the sensitivity of the ratings assigned to the
JPMDB 2017-C7 certificates and found that the transaction displays
average sensitivities to further declines in NCF. In a scenario in
which NCF declined a further 20% from Fitch's NCF, a downgrade of
the junior 'AAAsf' certificates to 'Asf' could result. In a more
severe scenario, in which NCF declined a further 30% from Fitch's
NCF, a downgrade of the junior 'AAAsf' certificates to 'BBBsf'
could result.
LB-UBS COMMERCIAL 2003-C1: Fitch Affirms B Rating on Class Q Certs
------------------------------------------------------------------
Fitch Ratings has affirmed five classes of LB-UBS Commercial
Mortgage Trust commercial mortgage pass-through certificates series
2003-C1.
KEY RATING DRIVERS
Sufficient Credit Enhancement: The affirmations reflect the
sufficient credit enhancement (CE) of the classes, against the pool
concentration and adverse selection of the remaining pool. CE is
expected to increase from continued amortization and loan
repayment. As of the September 2017 distribution date, the
transaction has paid down 98% since issuance, to $27 million from
$1.4 billion. Interest shortfalls are currently affecting classes Q
through T, and realized losses to date are $17 million (1.24% of
the original pool balance).
Concentrated Pool: The pool is highly concentrated with only five
loans remaining. Due to the concentrated nature of the pool, Fitch
performed a sensitivity analysis which grouped the remaining loans
based on loan structural features, collateral quality and
performance which ranked them by their perceived likelihood of
repayment. The ratings reflect this sensitivity analysis.
Property Type and Geographic Concentration: Retail properties
account for 100% of the remaining pool balance, with the two
largest loans (87.4% of the pool balance) secured by properties
located in Texas.
ARD Loans: The two largest loans (87.4% of the pool) are on the
servicers watchlist due to their upcoming anticipated repayment
dates (ARD) in December 2017. Per servicer reporting, the borrowers
for both loans are aware of the pending ARD and are currently
looking into refinancing options. Both loans have remained current
since issuance.
The largest loan is secured by a 139,181 square foot (sf) community
shopping center located in Dallas, TX. The property is anchored by
Albertsons (42% of the net rentable area [NRA]), with its lease
scheduled to expire in March 2019. As of June 2017, the property
was 90% occupied with a year to date (YTD) June 2017 net operating
income (NOI) debt service coverage ratio (DSCR) of 1.52x.
The second largest loan is secured by a 100,283 sf retail center
located in Fort Worth, TX. Occupancy has improved to 87% as of June
2017, after a significant decline in 2016 when Staples (previously
24% NRA) had vacated the property. The majority of the vacated
Staples space has been leased to The Tile Shop (16.3% NRA) starting
July 2017. Per servicer OSAR, NOI DSCR reported at 1.36x for YTD
June 2017, compared to 1.49x at year end December 2016.
Single-Tenant Risk: The three remaining loans (12.6% of the pool)
are secured by single tenant retail properties located in Compton,
CA, Hackettstown, NJ and Franklin, NH. All are fully amortizing
loans (loans mature August 2021) with collateral 100% leased to the
Rite Aid Corporation (B/Rating Watch Negative) through August 2021.
Rite Aid had vacated the Hackettstown, NJ property (3.9%) in April
2014 and the space is currently subleased to the Salvation Army.
RATING SENSITIVITIES
The Rating Outlooks on all classes remain Stable. Further upgrades
are unlikely until there is an indication that the two largest
loans in the pool will be refinanced. Downgrades are not likely as
the loans benefit from amortization.
Fitch has affirmed the following ratings:
-- $2.9 million class M at 'AAAsf'; Outlook Stable;
-- $6.9 million class N at 'BBBsf'; Outlook Stable;
-- $10.3 million class P at 'BBsf'; Outlook Stable;
-- $5.1 million class Q at 'Bsf'; Outlook Stable;
-- $1.8 million class S at 'Dsf'; RE 0%.
The class A-1, A-2, A-3, A-4, A-1B, B, C, D, E, F, G, H, J, K, L,
and XCP certificates have all paid in full. Fitch does not rate the
class T certificates. Fitch previously withdrew the rating on the
interest-only class XCL certificates.
LEHMAN ABS 2001-B: S&P Lowers Class A-4 Certs Rating to 'CC(sf)'
----------------------------------------------------------------
S&P Global Ratings lowered its rating on the class A-4 certificates
from Lehman ABS Manufactured Housing Contract Trust 2001-B to 'CC
(sf)' from 'BB (sf)'. The securitization is backed by fixed-rate
manufactured housing loans originated by CIT Group/Sales Financing
Inc. and currently serviced by Ditech Financial LLC.
Lehman ABS Manufactured Housing Contract Trust 2001-B is a
securitization backed by fixed-rate manufactured housing loans
originated by CIT Group/Sales Financing Inc. and currently serviced
by Ditech Financial LLC.
S&P said, "The downgrade of the class A-4 certificates reflects our
view that the trust is highly unlikely to pay principal in full by
the certificate's stated final distribution date of Sept. 15, 2018.
Our criteria define the 'CC (sf)' issue credit rating as an
obligation that is highly vulnerable to nonpayment. We rate an
issue 'CC (sf)' when we expect default to be a virtual certainty,
regardless of the time to default.
"The pro rata principal reduction to the class A-4 certificates has
averaged approximately $300,000 per month over the last 12 months
and has been decreasing on a year-over-year basis. Given class
A-4's $4.7 million principal balance as of the September 2017
distribution date, the average monthly paydown will most likely not
be sufficient to reduce the principal balance to zero by the stated
final distribution date. As a result, we lowered the rating to 'CC
(sf)'."
MERRILL LYNCH 2007-CANADA21: DBRS Confirms B Rating on K Certs
--------------------------------------------------------------
DBRS Limited has upgraded the rating on the following class of
Commercial Mortgage Pass-Through Certificates, Series 2007-Canada
21 issued by Merrill Lynch Financial Assets Inc., Series
2007-Canada 21:
-- Class D to A (high) (sf) from BBB (sf)
Additionally, DBRS has confirmed the following classes:
-- Class XC at A (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (sf)
-- Class H at BB (low) (sf)
-- Class J at B (high) (sf)
-- Class K at B (sf)
-- Class L at B (low) (sf)
All trends are Stable, excluding Classes K and L, for which DBRS
has maintained Negative trends because of concerns surrounding the
performance of the largest loan remaining in the pool. Concerns
include poor financial performance and the loan being secured by a
property in a market with limited liquidity.
The rating upgrade reflects the increased credit support to the
bonds as a result of significant principal repayment to the
securitized debt since issuance. The transaction originally
consisted of 41 loans. There are two loans remaining in the trust
with an aggregate principal balance of $24.7 million, reflecting a
collateral reduction of 93.6% because of scheduled loan
amortization and repayment since issuance. Both loans have either
partial or full recourse to their respective sponsors.
Based on YE2016 figures, the transaction reported a
weighted-average (WA) debt service coverage ratio (DSCR) of 0.88
times (x) and a WA debt yield of 7.2%. The poor overall performance
is attributable to the largest loan, 550-11th Avenue Office
Building (Prospectus ID#3; representing 66.2% of the current pool
balance), which was the only loan on the servicer's watchlist as at
the July 2017 remittance. The loan is secured by a
97,325-square-foot Class B office building located in Calgary in
the city's Beltline District. The loan has been on the watchlist
since 2012 because of decreased occupancy, which was 43.2% as at
March 2017. The YE2016 DSCR was 0.58x compared with the YE2015 DSCR
of 0.88x.
The ratings assigned to Classes D, E, F, G and H materially deviate
from the higher ratings implied by the quantitative results. DBRS
considers a material deviation to be a rating differential of three
or more notches between the assigned rating and the rating implied
by the quantitative results that is a substantial component of a
rating methodology. The deviations are warranted given the
uncertain loan-level event risk.
The rating assigned to Class XC materially deviates from the lower
ratings implied by the quantitative results. Consideration was
given to the actual loan, the transaction and sector performance,
where a rating based on the lowest-rated notional class may not
reflect the observed risk.
Notes: All figures are in Canadian dollars unless otherwise noted.
ML-CFC COMMERCIAL 2007-5: Moody's Cuts Rating on 2 Tranches to Caa2
-------------------------------------------------------------------
Moody's Investors Service has affirmed the rating on one class and
downgraded the ratings on two classes of ML-CFC Commercial Mortgage
Trust 2007-5, Commercial Mortgage Pass-Through Certificates,
2007-5:
Cl. AJ, Downgraded to Caa2 (sf); previously on Dec 1, 2016 Affirmed
Caa1 (sf)
Cl. AJ-FL, Downgraded to Caa2 (sf); previously on Dec 1, 2016
Affirmed Caa1 (sf)
Cl. X, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C
(sf)
RATINGS RATIONALE
The ratings on Classes AJ and AJ-FL were downgraded due to an
increase in anticipated losses from specially serviced loans.
Specially serviced loans currently represent 94% of the deal
compared to 22% at last review.
The rating on IO Class, Class X, was affirmed based on the credit
quality of its referenced classes.
Moody's rating action reflects a base expected loss of 34.3% of the
current balance, compared to 16.2% at Moody's last review. Moody's
base expected loss plus realized losses is now 14.8% of the
original pooled balance, compared to 11.1% at Moody's last review.
Moody's provides a current list of base expected losses for conduit
and fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. Performance that falls outside the given range can
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a
significant amount of loan paydowns or amortization, an increase in
the pool's share of defeasance or an improvement in pool
performance.
Factors that could lead to a downgrade of the ratings include a
decline in the performance of the pool, loan concentration, an
increase in realized and expected losses from specially serviced
and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017.
Additionally, the methodology used in rating Class X was "Moody's
Approach to Rating Structured Finance Interest-Only (IO)
Securities" published in June 2017.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 94% of the pool is in
special servicing. In this approach, Moody's determines a
probability of default for each specially serviced and troubled
loan that it expects will generate a loss and estimates a loss
given default based on a review of broker's opinions of value (if
available), other information from the special servicer, available
market data and Moody's internal data. The loss given default for
each loan also takes into consideration repayment of servicer
advances to date, estimated future advances and closing costs.
Translating the probability of default and loss given default into
an expected loss estimate, Moody's then applies the aggregate loss
from specially serviced loans to the most junior classes and the
recovery as a pay down of principal to the most senior classes.
DEAL PERFORMANCE
As of the September 14, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 96% to $158 million
from $4.42 billion at securitization. The certificates are
collateralized by 16 mortgage loans ranging in size from less than
1% to 18% of the pool.
Two loans, constituting 3.9% of the pool, are on the master
servicer's watchlist. The watchlist includes loans that meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, the agency reviews the
watchlist to assess which loans have material issues that could
affect performance.
Seventy loans have been liquidated from the pool, resulting in an
aggregate realized loss of $600 million (for an average loss
severity of 60%). Eleven loans, constituting 94% of the pool, are
currently in special servicing. The largest specially serviced loan
is the Woodhill Circle Plaza Loan ($29.1 million -- 18.4% of the
pool), which is secured by a 342,000 SF (63 unit) retail property
located in Lexington, Kentucky. There were 14 vacant units ranging
in size from 1,600 to 36,000 SF as of July 2017. Property occupancy
dropped in October 2016, when Cinemark vacated. The loan
transferred to special servicing in October 2015 due to imminent
monetary default, matured in March 2017 and foreclosure was
completed in September 2017.
The second largest specially serviced loan is the Renaissance
Victorville Shopping Center II Loan ($21.2 million -- 13.4% of the
pool), which is secured by a 117,000 SF retail property located in
Victorville, California approximately 40 miles north of San
Bernardino. The property is anchored by Food 4 Less, 24-Hour
Fitness, and Rite Aid and was 100% leased as of August 2017. The
loan transferred to special servicing in May 2017 due to balloon
payment/maturity default.
The third largest specially serviced loan is the Pahrump Valley
Junction Loan ($20.8 million -- 13.2% of the pool), which is
secured by a 117,000 SF retail property located in Pahrump, NV
approximately 60 miles west of Las Vegas, Nevada. The property was
98% leased as of July 2017, and is anchored by an Albertson's. The
loan transferred to special servicing in January 2017 due to
imminent balloon payment/maturity default (the loan was scheduled
to mature in February 2017).
The remaining specially serviced loans are secured by a mix of
office and retail properties. Moody's estimates an aggregate $54
million loss for the specially serviced loans (36% expected loss on
average).
There are only five non-specially serviced loans, representing 6%
of the pool. The largest performing loan is the Coca-Cola
Distribution Center Loan ($5.6 million -- 3.6% of the pool), which
is secured by a 75,000 SF single-story industrial warehouse
property located in Sarasota, Florida. This property is 100%
occupied by the Coca-Cola Company on a long term triple-net lease.
The loan has amortized 2.5% since securitization and Moody's LTV
and stressed DSCR are 111% and 0.88X, respectively.
ML-CFC COMMERCIAL 2007-9: Fitch Affirms CC Ratings on 2 Tranches
----------------------------------------------------------------
Fitch Ratings has upgraded one and affirmed 14 classes of ML-CFC
Commercial Mortgage Trust, commercial mortgage pass-through
certificates, series 2007-9 (MLCFC 2007-9).
KEY RATING DRIVERS
Increased Credit Enhancement (CE): The upgrade to class AM reflects
increased CE from loan payoffs and better recoveries than expected
on loan dispositions since Fitch's last rating action. As of the
September 2017 distribution date, the pool's aggregate principal
balance has been reduced by 90.4% to $271 million from $2.81
billion at issuance. Interest shortfalls are currently affecting
classes B through F and classes J through T.
Pool Concentration: The pool is concentrated with 28 of the
original 271 loans remaining. Due to the concentrated nature of the
pool, Fitch performed a sensitivity analysis which grouped the
remaining loans based on loan structural features, collateral
quality and performance which ranked them by their perceived
likelihood of repayment. The ratings reflect this sensitivity
analysis.
Fitch Loans of Concern; High Concentration in Special Servicing:
Fitch has designated 19 loans/assets (75.3% of current pool) as
Fitch Loans of Concern (FLOCs), which includes 11 loans/assets
(49%) in special servicing. Of those in special servicing, three
assets (4.8%) are real-estate owned, six loans (37.5%) are
non-performing matured balloons, one loan (1.4%) is 30 days
delinquent and one loan (5.4%) remains current. Risks associated
with the non-specially serviced FLOCs include low debt service
coverage ratio, single-tenant properties, declining occupancy,
tenancy concerns, near-term lease rollover and secondary market
locations, coupled against the significant amount of upcoming loan
maturities.
Fitch expects significant losses on the largest loan, Northwood
Centre (17% of pool), which is a two-story, 493,746-square foot
office building located in Tallahassee, FL. The loan was
transferred to special servicing in March 2016 because the State of
Florida Legislature voted to prohibit any further lease payments on
the property due to mold issues. The State of Florida, which has
occupied nearly 80% of the NRA at the property since 1989, had
delivered notices of violations on a few of their leases at the
property. Subsequently, the borrower failed to make the April 2016
loan payment and the loan went into default.
With the exception of the Department of Economic Opportunity, all
other State agencies at the property have vacated. Current physical
occupancy has dropped below 20%. Litigation between the borrower
and the State of Florida remains ongoing regarding breach of lease.
The lender's legal counsel is in the process of intervening in the
existing case, while a receiver continues to manage the property.
The special servicer indicated a Stage II environmental report is
currently underway to further understand the detail of the
problem.
Loan Maturities: Of the non-specially serviced loans/assets, 28.2%
of the remaining pool matures in 2017, 9.4% in 2018, 10.3% in 2019
and 3.1% in 2022.
RATING SENSITIVITIES
The Stable Outlook on class AM reflects the class's high credit
enhancement and the high likelihood of near-term repayment. The
remaining distressed classes may be subject to further downgrades
as additional losses are realized.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has upgraded the following class:
-- $38.6 million class AM to 'AAAsf' from 'Asf'; Outlook Stable.
In addition, Fitch has affirmed the following classes:
-- $168 million class AJ at 'CCsf'; RE 70%;
-- $14.7 million class AJ-A at 'CCsf'; RE 70%;
-- $31.6 million class B at 'Csf'; RE 0%;
-- $17.9 million class C at 'Dsf'; RE 0%;
-- $0 class D at 'Dsf'; RE 0%;
-- $0 class E at 'Dsf'; RE 0%;
-- $0 class F at 'Dsf'; RE 0%;
-- $0 class G at 'Dsf'; RE 0%;
-- $0 class H at 'Dsf'; RE 0%;
-- $0 class J at 'Dsf'; RE 0%;
-- $0 class K at 'Dsf'; RE 0%;
-- $0 class L at 'Dsf'; RE 0%;
-- $0 class M at 'Dsf'; RE 0%;
-- $0 class N at 'Dsf'; RE 0%.
The class A-1, A-2, A-3, A-SB, A-4, A-1A and AM-A certificates have
paid in full. Fitch does not rate the class P, Q, S and T
certificates. Fitch previously withdrew the ratings on the
interest-only class XP and XC certificates.
MORGAN STANLEY 2007-IQ16: DBRS Confirms C Ratings on 3 Tranches
---------------------------------------------------------------
DBRS Limited has confirmed the ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2007-IQ16
issued by Morgan Stanley Capital I Trust, Series 2007-IQ16 (the
Trust):
-- Class A-4 at AAA (sf)
-- Class A-1A at AAA (sf)
-- Class A-M at AA (sf)
-- Class A-MFL at AA (sf)
-- Class A-MA at AA (sf)
-- Class A-J at CCC (sf)
-- Class A-JFL at CCC (sf)
-- Class A-JA at CCC (sf)
-- Class B at C (sf)
-- Class C at C (sf)
-- Class D at C (sf)
Classes A-4, A-1A, A-M, A-MFL and A-MA have Stable trends. Trends
are not assigned for classes rated CCC (sf) and below.
The rating confirmations reflect the overall performance of the
remaining loans in the transaction. Since issuance, the pool has
experienced collateral reduction of 75.7% as a result of scheduled
amortization, successful loan repayment, principal recovered from
liquidated loans and realized losses from liquidated loans. There
are 85 loans remaining out of the original 234 loans in the pool at
issuance. Since issuance, 41 loans have been liquidated from the
Trust, resulting in realized losses of $209.4 million. Based on
80.8% of the pool that reported YE2016 figures, the transaction
reported a weighted-average (WA) debt service coverage ratio (DSCR)
of 1.22 times (x) and a WA debt yield of 9.0%. Of the remaining 85
loans, 72 (representing 90.8% of the current pool balance) are
scheduled to mature by the end of 2017. Based on the analyzed cash
flow figures for this review, the WA DBRS Refinance DSCR for
non-specially serviced loans maturing in 2017 is 1.21x, with a WA
DBRS Exit Debt Yield of 9.6%.
As of the July 2017 remittance, there were 13 loans in special
servicing, representing 12.0% of the current pool balance, and 58
loans on the servicer's watchlist, representing 75.8% of the
current pool balance. Seven of the loans in special servicing were
transferred within the last year, with only three of the loans
individually representing over 1.0% of the current pool balance.
The majority of the loans on the servicer's watchlist were flagged
because of upcoming maturities or have been on the watchlist for
several years for performance issues that have been sustained over
that time.
At issuance, DBRS shadow-rated three loans, together representing
0.1% of the current pool balance, as investment grade. These loans
include Ferrell-Duncan Clinic, 283 6th Ave. Corporation and 51
Seventh Housing Corp. DBRS has confirmed that the performance of
these loans remains consistent with investment-grade loan
characteristics.
The ratings assigned to Classes A-J, A-JFL, A-JA, B, C and D notes
materially deviate from the higher ratings implied by the
quantitative results. DBRS considers a material deviation to be a
rating differential of three or more notches between the assigned
rating and the rating implied by the quantitative results that is a
substantial component of a rating methodology. The deviations are
warranted, given the uncertain loan-level event risk.
MORGAN STANLEY 2007-IQ16: S&P Cuts Class B Certs Rating to CCC-
---------------------------------------------------------------
S&P Global Ratings lowered its ratings on six classes of commercial
mortgage pass-through certificates from Morgan Stanley Capital I
Trust 2007-IQ16, a U.S. commercial mortgage-backed securities
(CMBS) transaction. In addition, S&P affirmed its ratings on three
other classes from the same transaction.
S&P said, "For the affirmations, our expectation of credit
enhancement was in line with the affirmed rating levels.
"The downgrades reflect credit support erosion that we anticipate
occuring uponthe eventual resolution of the 20 assets ($215.0
million, 55.2%) with the special servicer (discussed below), as
well as reduced liquidity support available to these classes
because of ongoing interest shortfalls.
"While available credit enhancement levels suggest positive rating
movements on classes A-M, A-MA, and A-MFL, our analysis also
considered the bonds' susceptibility to reduced liquidity support
from the specially serviced assets and the credit quality of the
remaining collateral."
TRANSACTION SUMMARY
As of the Sept. 14, 2017, trustee remittance report, the collateral
pool balance was $389.8 million, which is 15.0% of the pool balance
at issuance and includes 37 loans and six real estate-owned (REO)
assets, down from 234 loans at issuance. Sixteen of these assets
($183.3 million, 47.1%) were with the special servicer LNR Partners
LLC (LNR), one ($6.1 million, 1.6%) was
defeased, and 22 ($156.2 million, 40.1%) were on the master
servicer's watchlist. The master servicer informed S&P that,
subsequent to the September 2017 trustee remittance report, eight
loans ($19.7 million, 5.1%) that were on the master servicer's
watchlist were repaid in full, and four additional assets ($31.7
million, 8.1%) were transferred to the special servicer.
S&P said, "We calculated a 1.01x S&P Global Ratings weighted
average debt service coverage (DSC) and 108.0% S&P Global Ratings
weighted average loan-to-value (LTV) ratio using a 7.75% S&P Global
Ratings weighted average capitalization rate. The DSC, LTV, and
capitalization rate calculations exclude the speciallyserviced
assets, the defeased loan, and the eight watchlist loans that
repaid in full.
"The top 10 nondefeased assets have an aggregate outstanding pool
trust balance of $280.1 million (71.9%). Adjusting the
servicer-reported numbers, we calculated an S&P Global Ratings
weighted average DSC and LTV of 0.99x and 112.9%, respectively, for
four of the top 10 nondefeased assets. The remainingassets are
specially serviced, the three largest of which are discussed
below.
"To date, the transaction has experienced $218.8 million in
principal losses, or 8.4% of the original pool trust balance. We
expect losses to reach approximately 11.9% of the original pool
trust balance in the near term, based on losses incurred to date
and additional losses we expect upon the eventual resolution of the
specially serviced assets."
CREDIT CONSIDERATIONS
Details of the three largest specially serviced assets, all of
which are top 10 nondefeased loans, are as follows:
The Bangor Mall loan ($80.0 million, 20.5%) is the largest
nondefeased loan in the pool and has a reported total exposure of
$80.0 million. The loan is secured by 536,299 sq. ft. of collateral
space in a 655,124-sq.-ft. regional mall in Bangor, Maine. The loan
was transferred to the special servicer on Aug. 28, 2017, for
imminent maturity default. The reported DSC and occupancy as of
March 31, 2017, were 1.31x and 87.7%, respectively. Based on
currently available information, S&P expects a moderate loss upon
this loan's eventual resolution.
The Century XXI loan ($25.3 million, 6.5%) is the third-largest
loan in the pool and has a total reported exposure of $25.3
million. Per LNR, the loan was transferred to the special servicer
on Aug. 25, 2017. for nonmonetary default. The loan is secured by a
167,843-sq.-ft. office building in Germantown, Md. The reported DSC
and occupancy as of June 30, 2017, were 1.08x and 71.8%,
respectively. We expect a moderate loss upon this loan's eventual
resolution.
The Art Institute Student Housing loan ($23.4 million, 6.0%) has a
total reported exposure of $23.8 million. The loan is secured by a
140-unit student housing complex in Pittsburgh, Pa. The loan was
transferred to LNR on April 11, 2017, for imminent default.
According to servicer comments, the sole tenant at the property,
The Art Institute of Pittsburgh, vacated the property upon lease
expiration on June 30, 2017. S&P expects a significant loss upon
this loan's eventual resolution.
The remaining assets with the special servicer each have balances
that represent 5.0% or less of the total pool trust balance. S&P
estimated losses for the specially serviced assets, arriving at a
weighted-average loss severity of 41.8%.
With respect to the specially serviced assets noted above, a
minimal loss is less than 25%, a moderate loss is 26%-59%, and a
significant loss is 60% or greater.
RATINGS LIST
Morgan Stanley Capital I Trust 2007-IQ16
Commercial mortgage pass through certificates series 2007-IQ16
Rating
Class Identifier To From
A-M 61756UAF8 A (sf) A (sf)
A-MFL 61756UBE0 A (sf) A (sf)
A-MA 61756UAG6 A (sf) A (sf)
A-J 61756UAH4 B- (sf) B (sf)
A-JFX 61756UBG5 B- (sf) B (sf)
A-JA 61756UAJ0 B- (sf) B (sf)
B 61756UAN1 CCC- (sf) B- (sf)
C 61756UAP6 CCC- (sf) B- (sf)
D 61756UAQ4 CCC- (sf) CCC (sf)
MORGAN STANLEY 2013-C8: Fitch Affirms 'Bsf' Rating on Cl. F Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 13 classes of Morgan Stanley Capital I,
commercial mortgage pass-through certificates, series 2013-C8.
KEY RATING DRIVERS
Collateral Reduction: The pool has paid down 19% since issuance due
to prepayments and amortization, resulting in increasing credit
enhancement to the bonds. This has offset some asset-level
performance declines and the increase in Fitch's base case loss
projection.
Low Leverage: The Fitch stressed LTV for the pool is 78.6%, and the
weighted-average stressed debt yield is 12.7%. The low leverage
points also mitigate the observed loan-loan issues.
Fitch Loans of Concern: Fitch is monitoring two loans in the Top 15
that together represent 4.3% of the pool. One of the assets is an
office property located within Houston's Energy Corridor, and the
other is a regional mall situated in a tertiary market.
RATING SENSITIVITIES
The Rating Outlook for class F has been revised to Negative from
Stable given concerns with two loans in Top 15. Fitch's analysis
includes an additional sensitivity stress related to these
concerns, and downgrades to the non-investment grade classes would
be possible should these loans default. The Rating Outlook for all
other classes remains Stable. Although Fitch's base case loss has
increased since issuance, the pool has experienced 19% collateral
reduction since issuance and credit enhancement has improved. The
pool's low leverage also mitigates loan level concerns. Upgrades
are possible should the pool continue to deleverage and performance
to Loans of Concern improves.
Fitch has affirmed the following ratings:
-- $5.5 million class A-2 at 'AAAsf'; Outlook Stable;
-- $99 million class ASB at 'AAAsf'; Outlook Stable;
-- $140 million class A-3 at 'AAAsf'; Outlook Stable;
-- $336 million class A-4 at 'AAAsf'; Outlook Stable;
-- $108.1 million class A-S at 'AAAsf'; Outlook Stable;
-- $688.6 million* class X-A at 'AAAsf'; Outlook Stable;
-- $68.3 million class B at 'AA-sf'; Outlook Stable;
-- $68.3 million* class X-B at 'AA-sf'; Outlook Stable;
-- $42.7 million class C at 'A-sf'; Outlook Stable;
-- $0 class PST at 'A-sf'; Outlook Stable;
-- $48.4 million class D at 'BBB-sf'; Outlook Stable;
-- $19.9 million class E at 'BBsf'; Outlook Stable;
-- $12.8 million class F at 'Bsf'; Outlook revised to Negative
from Stable.
*Notional amount and interest-only.
The class A-1 certificate has been fully repaid. The class A-S, B
and C certificates may be exchanged for a related amount of the
class PST certificate, and vice versa. Fitch does not rate the
class G and H certificates.
MORGAN STANLEY 2014-C17: DBRS Confirms B Rating on Class F Certs
----------------------------------------------------------------
DBRS Limited confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2014-C17 issued by Morgan Stanley
Bank of America Merrill Lynch Trust 2014-C17 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class PST at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class X-C at B (high) (sf)
-- Class F at B (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction. The collateral for this transaction consists of 67
fixed-rate loans secured by 72 commercial properties. As of the
July 2017 remittance, there has been a collateral reduction of 1.9%
as a result of scheduled loan amortization. Loans representing
93.0% of the current pool balance reported YE2016 cash flow
figures. The portfolio reported a weighted-average (WA) debt
service coverage ratio (DSCR) and WA debt yield of 1.70 times (x)
and 10.0%, respectively, compared with the DBRS WA DSCR and WA debt
yield of 1.60x and 9.3%, respectively, at issuance. The largest 15
loans in the pool reported a WA DSCR and debt yield of 1.67x and
9.6%, respectively, reflective of a WA net cash flow growth of
11.6% over the DBRS issuance figures.
As of the July 2017 remittance, there were five loans, representing
4.3% of the current pool balance, on the servicer's watchlist.
Three loans are being monitored for upcoming major tenant lease
expirations. Two loans are being monitored for
non-performance-related issues limited to deferred maintenance or
lack of financial reporting. There is one loan, representing 1.9%
of the pool balance, in special servicing.
At issuance, DBRS shadow-rated the Courtyard King Kamehameha's Kona
Beach Hotel Lease Fee (Prospectus ID#6, 3.6% of the pool balance)
as investment grade. DBRS has today confirmed that the performance
of this loan remains consistent with investment-grade
characteristics.
MOUNTAIN VIEW 2013-1: S&P Gives Prelim BB-(sf) Rating on E-R Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
X-R, A-R, B-R, C-1-R, C-2-R, D-R, and E-R replacement notes from
Mountain View CLO 2013-1 Ltd., a collateralized loan obligation
(CLO) originally issued in May 2013 that is managed by Seix
Investment Advisors LLC. The replacement notes will be issued via a
proposed supplemental indenture.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels.
The preliminary ratings are based on information as of Oct. 10,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Oct. 12, 2017, refinancing date, the proceeds from the
replacement note issuance are expected to redeem the original
notes. At that time, S&P anticipates withdrawing the ratings on the
original notes and assigning ratings to the replacement notes.
However, if the refinancing doesn't occur, S&P may affirm the
ratings on the original notes and withdraw our preliminary ratings
on the replacement notes.
The replacement notes are being issued via a proposed supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also:
-- Issue the replacement class A-R, C-1-R, C-2-R, D-R, and E-R
notes (as well as the class C-2-R coupon) at a higher spread than
the original notes.
-- Replace the original class B-1 and B-2 notes with class B-R
notes, which will have a floating spread only.
-- Extend the stated maturity 6.5 years, the reinvestment period
5.5 years, and the non-call period 4.5 years.
-- Amend the overcollateralization ratio thresholds, minimum
weighted average spread covenant, and minimum weighted average
recovery rate covenant.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the trustee report, to estimate future performance. In line with
our criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults, and
recoveries upon default, under various interest rate and
macroeconomic scenarios. In addition, our analysis considered the
transaction's ability to pay timely interest or ultimate principal,
or both, to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary."
PRELIMINARY RATINGS ASSIGNED
Mountain View CLO 2013-1 Ltd./Mountain View CLO 2013-1 Corp.
Replacement class Rating Amount (mil. $)
X-R AAA (sf) 5.150
A-R AAA (sf) 253.000
B-R AA (sf) 51.000
C-1-R A (sf) 19.470
C-2-R A (sf) 10.530
D-R BBB- (sf) 20.000
E-R BB- (sf) 18.000
Subordinated notes NR 47.370
NR--Not rated.
NEW RESIDENTIAL 2017-6: Moody's Gives (P)B1 Rating to Cl. B-7 Notes
-------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to 28
classes of notes issued by New Residential Mortgage Loan Trust
2017-6. The NRMLT 2017-6 transaction is a securitization of $592.8
million of first lien, seasoned performing and re-performing
mortgage loans with weighted average seasoning of 162 months, a
weighted average updated LTV ratio of 61.3% and a weighted average
updated FICO score of 679. Based on the OTS methodology, 79.5% of
the loans by scheduled balance have been current every month in the
past 24 months. Additionally, 38.5% of the loans in the pool have
been previously modified. Nationstar Mortgage LLC (Nationstar
Mortgage), Ocwen Loan Servicing, LLC (Ocwen), and PNC Mortgage will
act as primary servicers and Nationstar Mortgage will act as master
servicer, successor servicer and special servicer.
The complete rating action is:
Issuer: New Residential Mortgage Loan Trust 2017-6
Class A-1, Assigned (P)Aaa (sf)
Class A-1A, Assigned (P)Aaa (sf)
Class A-1B, Assigned (P)Aaa (sf)
Class A-1C, Assigned (P)Aaa (sf)
Class A, Assigned (P)Aaa (sf)
Class A-2, Assigned (P)Aa1 (sf)
Class B-1, Assigned (P)Aa2 (sf)
Class B-1A, Assigned (P)Aa2 (sf)
Class B-1B, Assigned (P)Aa2 (sf)
Class B-1C, Assigned (P)Aa2 (sf)
Class B-2, Assigned (P)A2 (sf)
Class B-2A, Assigned (P)A2 (sf)
Class B-2B, Assigned (P)A2 (sf)
Class B-2C, Assigned (P)A2 (sf)
Class B-3, Assigned (P)Baa2 (sf)
Class B-3A, Assigned (P)Baa2 (sf)
Class B-3B, Assigned (P)Baa2 (sf)
Class B-3C, Assigned (P)Baa2 (sf)
Class B-4, Assigned (P)Ba2 (sf)
Class B-4A, Assigned (P)Ba2 (sf)
Class B-4B, Assigned (P)Ba2 (sf)
Class B-4C, Assigned (P)Ba2 (sf)
Class B-5, Assigned (P)B2 (sf)
Class B-5A, Assigned (P)B2 (sf)
Class B-5B, Assigned (P)B2 (sf)
Class B-5C, Assigned (P)B2 (sf)
Class B-5D, Assigned (P)B2 (sf)
Class B-7, Assigned (P)B1 (sf)
RATINGS RATIONALE
Moody's losses on the collateral pool equal 4.65% in an expected
scenario and reach 22.70% at a stress level consistent with the Aaa
ratings on the senior classes. Moody's based Moody's expected
losses for the pool on Moody's estimates of (1) the default rate on
the remaining balance of the loans and (2) the principal recovery
rate on the defaulted balances. The final expected losses for the
pool reflect the third party review (TPR) findings and Moody's
assessment of the representations and warranties (R&Ws) framework
for this transaction.
To estimate the losses on the pool, Moody's used an approach
similar to Moody's surveillance approach. Under this approach,
Moody's apply expected annual delinquency rates, conditional
prepayment rates (CPRs), loss severity rates and other variables to
estimate future losses on the pool. Moody's assumptions on these
variables are based on the observed rate of delinquency on seasoned
modified and non-modified loans, the collateral attributes of the
pool including the percentage of loans that were delinquent in the
past 24 months, and the observed performance of recent New
Residential Mortgage Loan Trust issuances rated by Moody's. The
pool has a significant percentage of adjustable rate mortgages
(ARMs) and, in Moody's analysis, Moody's incorporated the effect of
rising interest rates on the probability of default for ARMs. For
this pool, Moody's used default burnout and voluntary CPR
assumptions similar to those detailed in Moody's "US RMBS
Surveillance Methodology" for Alt-A loans originated before 2005.
Moody's then aggregated the delinquencies and converted them to
losses by applying pool-specific lifetime default frequency and
loss severity assumptions. Moody's also applied a small upward
adjustment to Moody's loss estimates due to Hurricane Harvey and
Hurricane Irma.
Collateral Description
NRMLT 2017-6 is a securitization of seasoned performing and
re-performing residential mortgage loans which the seller, NRZ
Sponsor VI LLC, has previously purchased in connection with the
termination of various securitization trusts. The transaction is
comprised of 5,096 loans of which 20.0% by principal balance are
ARMs. For the loans in the pool, 61.5% by balance have never been
modified and have been performing while 38.5% of the loans were
previously modified but are now current and cash flowing. In the
transaction, 2.6% of the properties are in zip codes that were
designated by the Federal Emergency Management Agency (FEMA) as
impacted by Harvey and 2.7% of the properties are in zip codes that
were designated by FEMA as impacted by Hurricane Irma. The seller
provides a representation that, to its knowledge, none of the
mortgaged properties in the pool are materially adversely impacted
by hurricane damage.
Property values were updated using home data index (HDI) values or
broker price opinions (BPOs). HDIs were obtained for 5,069 out of
the 5,096 properties contained within the securitization. In
addition, updated BPOs were obtained from a third party BPO
provider for 1,084 properties.
Third-Party Review ("TPR") and Representations & Warranties
("R&W")
A third party due diligence provider, AMC, conducted a compliance
review on a sample of 1,893 mortgage loans for the securitization
pool. The regulatory compliance review consisted of a review of
compliance with the federal Truth in Lending Act (TILA) as
implemented by Regulation Z, the federal Real Estate Settlement
Procedures Act (RESPA) as implemented by Regulation X, the
disclosure requirements and prohibitions of Section 50(a)(6),
Article XVI of the Texas Constitution, federal, state and local
anti-predatory regulations, federal and state specific late charge
and prepayment penalty regulations, and document review. The TPR
identified 1,665 loans with compliance exceptions, 373 of which
were considered to have rating agency grade C or D level
exceptions. These C or D level exceptions broadly fell into five
categories: missing final HUD-1 settlement statements/HUD errors,
Texas (TX50(a)(6)) cash-out loan violations, North Carolina CHL
Tangible Net Benefit violations, other state compliance exceptions,
and missing documents or missing information. Moody's applied a
small adjustment to Moody's loss severities to account for the C or
D level missing final HUD-1 settlement statement and HUD errors.
For these types of issues, borrowers can raise legal claims in
defense against foreclosure as a set off or recoupment and win
damages that can reduce the amount of the foreclosure proceeds.
Such damages can include up to $4,000 in statutory damages,
borrowers' legal fees and other actual damages. Moody's also
applied small adjustments to loss severities for TX50(a)(6)
violations, North Carolina CHL Tangible Net Benefit exceptions, and
other state law compliance exceptions. Moody's did not apply an
adjustment for missing documents or missing information identified
by the diligence provider in part because Moody's separately
received and assessed a title report and a custodial report for the
mortgage loans in the pool.
The third party due diligence provider also conducted reviews of
data integrity, pay history, and title/lien on selected samples to
confirm that certain information in the mortgage loan files matched
the information supplied by the servicers and that the loans in the
sample were in first lien position. The pay history and data
integrity analysis largely confirmed the accuracy of information
provided in the data tape. The TPR also confirmed the first lien
position for 979 out of 1,034 loans subject to the title/lien
review. For the 55 remaining loans, proof of first lien position
could only be confirmed using the final title policy as of loan
origination.
The seller, NRZ Sponsor VI LLC, is providing a representation and
warranty for missing mortgage files. To the extent that the
indenture trustee, master servicer, related servicer or depositor
has actual knowledge of a defective or missing mortgage loan
document or a breach of a representation or warranty regarding the
completeness of the mortgage file or the accuracy of the mortgage
loan documents, and such missing document, defect or breach is
preventing or materially delaying the (a) realization against the
related mortgaged property through foreclosure or similar loss
mitigation activity or (b) processing of any title claim under the
related title insurance policy, the party with such actual
knowledge will give written notice of such breach, defect or
missing document, as applicable, to the related seller, indenture
trustee, depositor, master servicer and related servicer. Upon
notification of a missing or defective mortgage loan file, the
related seller will have 120 days from the date it receives such
notification to deliver the missing document or otherwise cure the
defect or breach. If it is unable to do so, the related seller will
be obligated to replace or repurchase the mortgage loan.
Despite this provision, Moody's increased Moody's loss severities
to account for loans with note instrument issues. This adjustment
was based on both the results of the TPR review and because the R&W
provider is an unrated entity and weak from a credit perspective.
In Moody's analysis Moody's assumed that a small percentage of the
projected defaults (calculated based upon the TPR results) will
have missing document breaches that will not be remedied and result
in higher than expected loss severities.
Trustee, Custodian, Paying Agent, Servicers, Master Servicer,
Successor Servicer and Special Servicer
The transaction indenture trustee is Wilmington Trust, National
Association. The custodian functions will be performed by Wells
Fargo Bank, N.A., The Bank of New York Mellon Trust Company, N.A.,
and U.S. Bank National Association. The paying agent and cash
management functions will be performed by Citibank, N.A. In
addition, Nationstar Mortgage, as master servicer, is responsible
for servicer oversight, termination of servicers, and the
appointment of successor servicers. Having Nationstar Mortgage as a
master servicer mitigates servicing-related risk due to the
performance oversight that it will provide. Nationstar Mortgage is
the named successor servicer for the transaction and will also
serve as the special servicer. As the special servicer, it will be
responsible for servicing mortgage loans that become 60 or more
days delinquent.
Nationstar Mortgage (55.7%), Ocwen (37.4%) and PNC Mortgage (3.4%)
will act as the primary servicers for the collateral pool. In
addition, 2.7% of the collateral pool will transfer to Nationstar
Mortgage or Ocwen by December 1, 2017 and 0.8% of the collateral
pool will be serviced by Nationstar Mortgage, in its capacity as
master servicer, with assistance from certain subservicers. On
April 20, 2017, the Consumer Financial Protection Bureau's (CFPB)
announced that it had filed suit against Ocwen and a consortium of
state mortgage regulators filed cease and desist orders against
Ocwen due to alleged violations of state and federal laws. These
regulatory actions could adversely impact Ocwen's servicing
operations and could result in monetary penalties, judgments, and
reputational damage. These potential adverse consequences would in
turn increase the probability of an Ocwen bankruptcy. In NRMLT
2017-6, these risks are mitigated by Nationstar Mortgage's roles as
master servicer, special servicer, and designated successor
servicer.
Transaction Structure
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to increasingly receive principal
prepayments after an initial lock-out period of five years,
provided two performance tests are met. To pass the first test, the
delinquent and recently modified loan balance cannot exceed 50% of
the subordinate bonds outstanding. To pass the second test,
cumulative losses cannot exceed certain thresholds that gradually
increase over time.
Because a shifting interest structure allows subordinated bonds to
pay down over time as the loan pool shrinks, senior bonds are
exposed to tail risk, i.e., risk of back-ended losses when fewer
loans remain in the pool. The transaction provides for a
subordination floor that helps to reduce this tail risk.
Specifically, the subordination floor prevents subordinate bonds
from receiving any principal if the amount of subordinate bonds
outstanding falls below 5.85% of the closing principal balance.
There is also a provision that prevents subordinate bonds from
receiving principal if the credit enhancement for the Class A-1
Note falls below its percentage at closing, 24.5%. These provisions
mitigate tail risk by protecting the senior bonds from eroding
credit enhancement over time.
Other Considerations
When analyzing the transaction, Moody's reviewed the transaction's
exposure to large potential indemnification payments owed to
transaction parties due to potential lawsuits. In particular,
Moody's assessed the risk that the indenture trustee would be
subject to lawsuits from investors for a failure to adequately
enforce the R&Ws against the seller. Moody's believe that NRMLT
2017-6 is adequately protected against such risk primarily because
all of the loans in this transaction are more than 10 years
seasoned and the weighted average seasoning is approximately 14
years. Although some loans in the pool were previously delinquent
and modified, the loans all have a substantial history of payment
performance. This includes payment performance during the recent
recession. As such, if loans in the pool were materially defective,
such issues would likely have been discovered prior to the
securitization. Furthermore, third party due diligence was
conducted on a significant random sample of the loans for issues
such as data integrity, compliance, and title. As such, Moody's did
not apply adjustments in this transaction to account for
indemnification payment risk.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market. Other reasons
for better-than-expected performance include changes to servicing
practices that enhance collections or refinancing opportunities
that result in prepayments.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
OCP CLO 2014-6: S&P Assigns Prelim B(sf) Rating on Class E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to the class
A-1-R, A-2-R, B-R, C-R, D-R, and E-R replacement notes and the new
class X notes from OCP CLO 2014-6 Ltd., a collateralized loan
obligation (CLO) originally issued in June 2014 that is managed by
Onex Credit Partners LLC. The replacement notes will be issued via
a proposed supplemental indenture.
The preliminary ratings reflect S&P's opinion that the credit
support available is commensurate with the associated rating
levels.
Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
On the Oct. 17, 2017 refinancing date, the proceeds from the
issuance of the replacement notes, plus the proceeds from
additional preference shares, are expected to redeem the original
notes. S&P said, "At that time, we anticipate withdrawing the
ratings on the original notes and assigning ratings to the
replacement notes. However, if the refinancing doesn't occur, we
may affirm the ratings on the original notes and withdraw our
preliminary ratings on the replacement notes."
The replacement notes are being issued via a proposed supplemental
indenture, which, in addition to outlining the terms of the
replacement notes, will also:
-- Downsize the rated par amount and target initial par amount to
$909.50 million and $960.00 million, respectively, from $909.75
million and $970.00 million, respectively.
-- Extend the reinvestment period to Oct. 17, 2022, from July 17,
2018.
-- Extend the non-call period to Oct. 17, 2019, from July 17,
2016.
-- Extend the weighted average life test to Oct. 17, 2026, from
June 26, 2022.
-- Extend the legal final maturity date on the rated notes to Oct.
17, 2030, from July 17, 2026.
-- Issue additional class X senior secured floating-rate notes,
which are expected to be paid down using interest proceeds in equal
quarterly installments on the first eight payment dates. In
addition, the transaction will issue an additional $23.40 million
in preference shares, increasing the combined preference shares and
subordinated notes balance to $115.40 million from $92.00 million
-- Adopt the use of the non-model version of CDO Monitor. During
the reinvestment period, the non-model version of CDO Monitor may
be used for this transaction to indicate whether changes to the
collateral portfolio are generally consistent with the transaction
parameters S&P assumed when initially assigning ratings to the
notes.
-- Change the required minimum thresholds for the coverage tests.
-- Make the transaction E.U. and U.S. risk retention compliant.
-- Incorporate the recovery rate methodology and updated industry
classifications outlined in our August 2016 CLO criteria update
(see "Global Methodologies And Assumptions For Corporate Cash Flow
And Synthetic CDOs," published Aug. 8, 2016).
REPLACEMENT AND ORIGINAL NOTE ISSUANCES
Replacement Notes
Class Amount Interest
(mil. $) rate (%)
X 9.50 LIBOR + 0.70
A-1-R 595.20 LIBOR + 1.26
A-2-R 124.80 LIBOR + 1.72
B-R 67.20 LIBOR + 2.15
C-R 55.20 LIBOR + 3.20
D-R 40.80 LIBOR + 6.52
E-R 16.80 LIBOR + 8.06
Preference shares 108.40 N/A
Subordinated notes 7.00 N/A
Original Notes
Class Rating Amount Interest
(mil. $) rate (%)
A-1A AAA (sf) 365.50 LIBOR + 1.45
A-1B AAA (sf) 193.00 LIBOR + 1.45
A-1L AAA (sf) 50.00 LIBOR + 1.35
A-2A AA (sf) 63.75 LIBOR + 2.05
A-2B AA (sf) 48.50 4.16
B (deferrable) A (sf) 68.50 LIBOR + 3.10
C (deferrable) BBB (sf) 52.75 LIBOR + 3.65
D (deferrable) BB (sf) 47.00 LIBOR + 4.95
E (deferrable) B (sf) 20.75 LIBOR + 5.60
Preference shares NR 85.00 N/A
Subordinated notes NR 7.00 N/A
N/A--Not applicable.
NR--Not rated.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction as reflected in
the trustee report, to estimate future performance (see table). In
line with our criteria, our cash flow scenarios applied
forward-looking assumptions on the expected timing and pattern of
defaults, and recoveries upon default, under various interest rate
and macroeconomic scenarios. In addition, our analysis considered
the transaction's ability to pay timely interest or ultimate
principal, or both, to each of the rated tranches.
"We will continue to review whether, in our view, the ratings
assigned to the notes remain consistent with the credit enhancement
available to support them, and we will take further rating actions
as we deem necessary."
PRELIMINARY RATINGS ASSIGNED
OCP CLO 2014-6 Ltd.
Replacement class Rating Amount (mil. $)
X AAA (sf) 9.50
A-1-R AAA (sf) 595.20
A-2-R AA (sf) 124.80
B-R A (sf) 67.20
C-R BBB- (sf) 55.20
D-R BB- (sf) 40.80
E-R B- (sf) 16.80
Preference shares NR 108.40
Subordinated notes NR 7.00
NR--Not rated.
OCTAGON INVESTMENT 24: Moody's Assigns B2 Rating to Cl. E-U Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned the following ratings to the
following notes (the "Refinancing Notes") issued by Octagon
Investment Partners 24, Ltd.:
US$548,958,333 Class A-1-R Senior Secured Floating Rate Notes Due
2027 (the "Class A-1-R Notes"), Assigned Aaa (sf)
US$73,459,211 Class A-2A-R Senior Secured Floating Rate Notes Due
2027 (the "Class A-2A-R Notes"), Assigned Aa2 (sf)
US$21,315,789 Class A-2B-R Senior Secured Floating Rate Notes Due
2027 (the "Class A-2B-R Notes"), Assigned Aa2 (sf)
Moody's has also assigned the following ratings to the following
notes (the "Additional Offered Notes") issued by Octagon Investment
Partners 24, Ltd. (the "Issuer"):
US$6,650,000 Class B-U Secured Deferrable Floating Rate Notes Due
2027 (the "Class B-U Notes"), Assigned A2 (sf)
US$5,183,333 Class C-U Secured Deferrable Floating Rate Notes Due
2027 (the "Class C-U Notes"), Assigned Baa3 (sf)
US$4,416,667 Class D-U Secured Deferrable Floating Rate Notes Due
2027 (the "Class D-U Notes"), Assigned Ba2 (sf)
US$1,000,000 Class E-U Secured Deferrable Floating Rate Notes Due
2027 (the "Class E-U Notes"), Assigned B2 (sf)
Octagon Investments Partners 24, Ltd., issued in May, 2015, is a
managed cash flow collateralized loan obligation (CLO). The issued
notes are collateralized primarily by a portfolio of senior
secured, broadly syndicated corporate loans.
Octagon Credit investors, LLC (the "Manager") manages the CLO. It
directs the selection, acquisition, and disposition of collateral
on behalf of the Issuer.
RATINGS RATIONALE
Moody's ratings on the Refinancing Notes and Additional Offered
Notes address the expected loss posed to noteholders. The ratings
reflect the risks due to defaults on the underlying portfolio of
assets, the transaction's legal structure, and the characteristics
of the underlying assets.
The Issuer has issued the Refinancing Notes and Additional Offered
Notes on October 10, 2017 (the "Refinancing Date") in connection
with the refinancing of certain classes of notes (the "Refinanced
Original Notes") previously issued on the Original Closing Date. On
the Refinancing Date, the Issuer used the proceeds from the
issuance of the Refinancing Notes to redeem in full the Refinanced
Original Notes.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of each class of the Issuer's notes is subject to
uncertainty relating to certain factors and circumstances, and this
uncertainty could lead Moody's to change its ratings:
1) Macroeconomic uncertainty: CLO performance is subject to
uncertainty about credit conditions in the general economy.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the Manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by the Manager or other transaction parties owing to embedded
ambiguities.
3) Collateral credit risk: Investing in collateral of better credit
quality, or better than Moody's expected credit performance of the
assets collateralizing the transaction can lead to positive CLO
performance. Conversely, a negative shift in the credit quality or
performance of the collateral can have adverse consequences for CLO
performance.
4) Deleveraging: During the amortization period, the pace of
deleveraging from unscheduled principal proceeds is an important
source of uncertainty. Deleveraging of the CLO could accelerate
owing to high prepayment levels in the loan market and/or
collateral sales by the Manager, which could have a significant
impact on the ratings. Note repayments that are faster than Moody's
current expectations will usually have a positive impact on CLO
notes, beginning with those notes having the highest payment
priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets could result in volatility in the deal's
overcollateralization levels. Further, the timing of recovery
realization and whether the Manager decides to work out or sell
defaulted assets create additional uncertainty. Realization of
recoveries that are either materially higher or lower than assumed
in Moody's analysis would impact the CLO positively or negatively,
respectively.
6) Weighted average life: The notes' ratings can be sensitive to
the weighted average life assumption of the portfolio, which could
lengthen owing to any decision by the Manager to reinvest into new
issue loans or loans with longer maturities, or participate in
amend-to-extend offerings. Life extension can increase the default
risk horizon and assumed cumulative default probability of CLO
collateral.
7) Weighted Average Spread (WAS): CLO performance can be sensitive
to WAS, which is a key factor driving the amount of excess spread
available as credit enhancement when a deal fails its
over-collateralization or interest coverage tests. A decrease in
excess spread, including as a result of losing the net interest
benefit of LIBOR floors, or because market conditions make it
difficult for the deal to source assets of appropriate credit
quality in order to maintain its WAS target, would reduce the
effective credit enhancement available for the notes.
Together with the set of modeling assumptions described below,
Moody's conducted additional sensitivity analyses, which were
considered in determining the ratings assigned to the rated notes.
In particular, in addition to the base case analysis, Moody's
conducted sensitivity analyses to test the impact of a number of
default probabilities on the rated notes relative to the base case
modeling results. Below is a summary of the impact of different
default probabilities, expressed in terms of WARF level, on the
rated notes (shown in terms of the number of notches difference
versus the base case model output, where a positive difference
corresponds to a lower expected loss):
Moody's Assumed WARF - 20% (2138)
Class A-1-R: 0
Class A-2A-R: +1
Class A-2B-R: +1
Class B-U: +4
Class C-U: +3
Class D-U: +1
Class E-U: +2
Moody's Assumed WARF + 20% (3206)
Class A-1-R: 0
Class A-2A-R: -2
Class A-2B-R: -2
Class B-U: -2
Class C-U: -1
Class D-U: -1
Class E-U: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score, weighted average
recovery rate, and weighted average spread, are based on its
published methodology and could differ from the trustee's reported
numbers. For modeling purposes, Moody's used the following
base-case assumptions
Performing par and principal proceeds balance: $845,133,519
Defaulted par: $4,801,551
Diversity Score: 65
Weighted Average Rating Factor (WARF): 2672 (corresponding to a
weighted average default probability of 22.19%)
Weighted Average Spread (WAS): 3.45%
Weighted Average Recovery Rate (WARR): 46.5%
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. In each case, historical and market
performance and the collateral manager's latitude for trading the
collateral are also factors.
OHA CREDIT XIV: S&P Assigns Prelim. BB- Rating on Class E Notes
---------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to OHA Credit
Partners XIV Ltd./OHA Credit Partners XIV LLC's $379.725 million
floating-rate notes.
The note issuance is a collateralized loan obligation transaction
backed by a revolving pool consisting primarily of broadly
syndicated speculative-grade senior secured term loans that are
governed by collateral quality tests.
The preliminary ratings are based on information as of Oct. 11,
2017. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The diversified collateral pool, which consists primarily of
broadly syndicated speculative-grade senior secured term loans that
are governed by collateral quality tests.
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization.
-- The collateral manager's experienced team, which can affect the
performance of the rated notes through collateral selection,
ongoing portfolio management, and trading.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
OHA Credit Partners XIV Ltd./OHA Credit Partners XIV LLC
Class Rating Amount
(mil. $)
X AAA (sf) 3.500
A-1 AAA (sf) 253.700
A-2 NR 19.875
B AA (sf) 53.750
C (deferrable) A (sf) 26.350
D (deferrable) BBB- (sf) 26.075
E (deferrable) BB- (sf) 15.850
Subordinated notes NR 39.650
NR--Not rated.
PFP 2015-2: DBRS Confirms B Rating on Class G Notes
---------------------------------------------------
DBRS Limited has confirmed the Floating Rate Notes (the Notes)
issued by PFP 2015-2, Ltd.:
-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
All trends are Stable. Classes F and G are non-offered classes.
The rating confirmations reflect the stable overall performance of
the pool and the increased credit support to the bonds as a result
of successful loan repayment. At issuance, the collateral consisted
of 29 floating-rate mortgage loans secured by 31 transitional
commercial, multifamily and hospitality properties with a trust
balance of $624.1 million. According to the July 2017 remittance,
there has been collateral reduction of 25.7% since issuance, as 11
loans have left the trust, contributing to a principal paydown of
$160.6 million. In the last 12 months, ten loans have repaid from
the trust. Fifteen of the remaining loans in the pool are pari
passu companion participations with future funding components that
are to be used for property renovations and future leasing costs to
aid in property stabilization.
According to the most recent reporting, a portion of the collateral
assets in the subject pool have reached stabilization; however,
others continue to perform below their respective stabilization
plans. As of the July 2017 remittance, there are no loans in
special servicing and 11 loans on the servicer's watchlist,
representing 64.9% of the fully funded pool balance. Three of the
loans, representing 21.0% of the fully funded pool balance, are
flagged for upcoming loan maturity, with the servicer noting that
two of the borrowers are expected to exercise extension options.
The remaining loans on the watchlist have been flagged for
performance-related reasons, as the borrowers continue to work
toward achieving their respective stabilization plans.
The Outlets at the Border loan (Prospectus ID#3, representing 10.8%
of the pool balance) is secured by a 135,135-square foot (sf)
outlet mall in San Ysidro, California, strategically located near
the world's busiest international border crossing between the
United States and Mexico. The loan was added to the servicer's
watchlist because of poor performance, as the Q1 2017 annualized
debt service coverage ratio (DSCR) was reported at 0.60 times (x).
The loan is structured with a $5.0 million future funding
component, of which $3.4 million is allocated as a future earn-out,
with the remaining allocated for future leasing costs. As of June
2017, the $1.6 million in future funding for leasing costs has been
advanced. The deadline for the borrower to achieve the earn-out
passed in August 2016, and as the property did not achieve the
performance metrics necessary, the earn-out will not be funded.
At issuance, it was noted that the U.S. side of the border was
undergoing a $741 million project to create a new northbound
pedestrian crossing, which was expected to significantly increase
foot traffic to the subject from Mexican shoppers and aid in
property stabilization. The northbound portion of the new border
crossing opened in July 2016, and the southbound entrance opened in
the latter part of 2016. As of March 2017, the Mexico-U.S. border
crossing station adjacent to the property was fully operational,
according to the servicer.
The subject's occupancy rate of 84.1% as of March 2017 has improved
over the June 2016 occupancy rate of 81.7% and issuance occupancy
rate of 80.6%. The largest three tenants collectively represent
38.5% of the net rentable area (NRA) with leases that are scheduled
to expire between October 2024 and August 2025. The largest tenant,
H&M, represents 19.3% of the NRA with a lease expiring in October
2024. H&M's lease commenced in October 2014, and the tenant is
paying a contractual rent of 7.0% of gross sales. As of June 2017,
the servicer noted that two new leases collectively representing
1.7% of the NRA had been signed at the subject, which are scheduled
to expire in March 2018 and February 2022, respectively. The
property reported a Q1 2017 DSCR of 0.60x; however, income from
percentage rents paid by tenants, including H&M, was excluded.
Despite the fully operational pedestrian bridge, performance
remains below stabilization levels. The leasing reserve had an
ending balance of $1.4 million as of July 2017, which should
facilitate further leasing activity at the property.
The Mark Apartments loan (Prospectus ID#6, representing 4.9% of the
pool balance) is secured by a 227-unit multifamily complex in
Alexandria, Virginia. Originally completed in 1965, the property
was operated as an extended-stay hotel until 2013 when a project to
convert the subject to an apartment building began. At issuance,
the property was 46.1% occupied, as tenants were being rolled off
in order to complete unit renovations. The loan was originally
structured with a $9.5 million future funding component, of which
$8.9 million was reserved to facilitate the sponsor's plans to
complete the full renovation of the property. As of March 2017, the
renovations were near completion with only eight units remaining,
and with the future funding component advanced in full to the
borrower as of June 2016. The occupancy rate has increased to 70.0%
from 46.1% at issuance because of strong leasing momentum as a
result of renovated units coming online. According to the March
2017 rent roll, the average rental rate at the property was $1,659
per unit, which is an increase of 40.4% over the average rate at
issuance. In addition, in-place rental rates at the subject have
surpassed the sponsor's expectations at issuance, which were
anticipated to increase to $1,626 per unit. The subject's target
rental rates are above the current average asking rent for
comparable properties in the submarket of $1,536 per unit,
according to CoStar. The Q1 2017 reported annualized DSCR is
negative at -0.22x, which is attributed to the fluctuating
occupancy levels and subsequent decline in rental revenue as a
result of the ongoing renovations. DBRS anticipates that property
performance will improve given the increased rental rates and as
the vacant units are leased up.
The ratings assigned to Class B and Class C Notes materially
deviate from the higher ratings implied by the quantitative
results. DBRS considers a material deviation to be a rating
differential of three or more notches between the assigned rating
and the rating implied by the quantitative results that is a
substantial component of a rating methodology. The deviations are
warranted given the undemonstrated sustainability of loan
performance trends.
PRESTIGE AUTO 2017-1: DBRS Finalizes BB Rating on Class E Debt
--------------------------------------------------------------
DBRS, Inc. finalized the provisional ratings of these classes
issued by Prestige Auto Receivables Trust 2017-1:
-- $45,700,000 Series 2017-1, Class A-1 rated R-1 (high) (sf)
-- $117,000,000 Series 2017-1, Class A-2 rated AAA (sf)
-- $50,260,000 Series 2017-1, Class A-3 rated AAA (sf)
-- $35,850,000 Series 2017-1, Class B rated AA (sf)
-- $44,100,000 Series 2017-1, Class C rated A (sf)
-- $31,020,000 Series 2017-1, Class D rated BBB (sf)
-- $11,293,000 Series 2017-1, Class E rated BB (sf)
The ratings are based on DBRS's review of the following analytical
considerations:
-- Transaction capital structure, proposed ratings and form
and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of overcollateralization,
subordination, amounts held in the reserve fund and excess
spread. Credit enhancement levels are sufficient to support
the DBRS projected expected cumulative net loss assumption
under various stress scenarios.
-- The ability of the transaction to withstand stressed cash
flow assumptions and repay investors according to the terms
under which they have invested. For this transaction, the
ratings address the payment of timely interest on a monthly
basis and the payment of principal by the legal final
maturity date.
-- The transaction parties' capabilities with regard to
originations, underwriting and servicing.
-- DBRS has performed an operational review of Prestige
Financial Services, Inc. (Prestige) and considers the entity
to be an acceptable originator and servicer of subprime
automobile loan receivables with an acceptable backup
servicer.
-- The Prestige management team has extensive experience. They
have been lending to the subprime auto sector since 1994 and
have considerable experience lending to Chapter 7 and 13
obligors.
-- The credit quality of the collateral and performance of
Prestige's auto loan portfolio.
-- The legal structure and presence of legal opinions that
address the true sale of the assets to the Issuer, the
non-consolidation of the special-purpose vehicle with CPS,
that the trust has a valid first-priority security interest
in the assets and consistency with DBRS's "Legal Criteria for
U.S. Structured Finance" methodology.
This is the 16th transaction Prestige has issued in the
asset-backed securities (ABS) term market. All of the term ABS
transactions issued between 2001 and 2007 were wrapped by a
monoline insurer while all of the term ABS transactions issued
since 2009 were senior-subordinate transactions. All of the
transactions, except for the PART 2014-1, 2015-1, 2016-1 and 2016-2
term securitizations, which remain outstanding, have paid off in
full without experiencing an Event of Default.
Initial Class A credit enhancement of 41.60% includes a reserve
account (1.00% of the initial aggregate principal balance, funded
at inception and non-declining), overcollateralization (OC) of
6.50% of the initial pool balance and subordination of 34.10%.
Initial Class B credit enhancement of 31.60% includes the 1.00%
reserve account, OC of 6.50% and subordination of 24.10%. Initial
Class C credit enhancement of 19.30% includes the 1.00% reserve
account, OC of 6.50% and subordination of 11.80%. Initial Class D
credit enhancement of 10.65% includes the 1.00% reserve account, OC
of 6.50% and subordination of 3.15%. Initial Class E credit
enhancement of 7.50% is from the reserve account of 1.00% and OC of
6.50%.
RITE AID 1999-1: Moody's Confirms B2 Rating on Class A-2 Debt
-------------------------------------------------------------
Moody's Investors Service has confirmed the rating of Rite Aid
Pass-Through Trust, Series 1999-1
Cl. A-2, Confirmed at B2; previously on Jul 6, 2017 B2 Placed Under
Review Direction Uncertain
RATINGS RATIONALE
The rating for this CTL lease transaction Class A-2 was confirmed
primarily due to the rating of Rite Aid Corporation (Moody's senior
unsecured debt rating of B3/Caa1; stable outlook), and the support
provided by a residual value insurance policy issued by a rated
entity, with additional consideration given to the value of the
real estate collateral relative to the outstanding loan balance,
The transaction balance has decreased approximately 51% and has a
current balance of $98 per square foot (PSF) compared to $199 PSF
at securitization.
This concludes a review which was initiated on October 30, 2015 due
to Rite Aid Corporation senior unsecured rating being placed on
review. On October 5, 2017 Rite Aid Corporation senior unsecured
rating was confirmed at B3/Caa1 with stable outlook.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
The ratings of Credit Tenant Lease (CTL) deals are primarily based
on the senior unsecured debt rating (or the corporate family
rating) of the tenants leasing the real estate collateral
supporting the bonds. Other factors that are also considered are
Moody's dark value of the collateral (value based on the property
being vacant or dark), which is used to determine a recovery rate
upon a loan's default and the rating of the residual insurance
provider, if applicable. Factors that may cause an upgrade of the
ratings include an upgrade in the rating of the corporate tenant or
significant loan paydowns or amortization which results in a lower
loan to dark value ratio. Factors that may cause a downgrade of the
ratings include a downgrade in the rating of the corporate tenant
or the residual insurance provider.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in this rating was "Moody's Approach
to Rating Credit Tenant Lease and Comparable Lease Financings"
published in October 2016.
No model was used in this review.
DEAL PERFORMANCE
As of the October 3, 2017 distribution date, the transaction's
aggregate Certificate balance has decreased by approximately 51% to
$82.9 million from $167.6 million at securitization
The Class A-1 certificate with the original balance of $75 million
has already paid off, The remaining Class A-2 balance has decreased
by 10% to $82.9 million from $92.6 million at securitization and
will have a balloon payment of $54 million that is protected by
residual insurance.
This credit-tenant lease (CTL) transaction is supported by a
mortgage on a portfolio of 53 drug stores with a total of 841,411
square feet located in 14 states and the District of Columbia. Each
property is subject to a fully bondable, triple net lease
guaranteed by Rite Aid Corporation, which provides pharmacy
services as well as over-the-counter medication and household
items.
Residual insurance is provided by Hartford Fire Insurance Company
(Moody's insurance financial strength rating of A1) of The Hartford
Financial Services Group, Inc. (Moody's senior unsecured debt
rating of Baa2; stable outlook). Hartford Fire Insurance Company is
now evaluated on a consolidated basis as part of the Hartford P&C
Insurance Group.
SEQUOIA MORTGAGE 2017-7: Moody's Rates Class B-4 Notes 'Ba3'
------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
classes of residential mortgage-backed securities (RMBS) issued by
Sequoia Mortgage Trust (SEMT) 2017-7. The certificates are backed
by one pool of prime quality, first-lien mortgage loans, including
1 super conforming mortgage loans. The assets of the trust consist
of 489 fully amortizing, fixed rate mortgage loans, substantially
all of which have an original term to maturity of 30 years. The
borrowers in the pool have high FICO scores, significant equity in
their properties and liquid cash reserves.
The complete rating actions are:
Issuer: Sequoia Mortgage Trust 2017-7
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-6, Definitive Rating Assigned Aaa (sf)
Cl. A-7, Definitive Rating Assigned Aaa (sf)
Cl. A-8, Definitive Rating Assigned Aaa (sf)
Cl. A-9, Definitive Rating Assigned Aaa (sf)
Cl. A-10, Definitive Rating Assigned Aaa (sf)
Cl. A-11, Definitive Rating Assigned Aaa (sf)
Cl. A-12, Definitive Rating Assigned Aaa (sf)
Cl. A-13, Definitive Rating Assigned Aaa (sf)
Cl. A-14, Definitive Rating Assigned Aaa (sf)
Cl. A-15, Definitive Rating Assigned Aaa (sf)
Cl. A-16, Definitive Rating Assigned Aaa (sf)
Cl. A-17, Definitive Rating Assigned Aaa (sf)
Cl. A-18, Definitive Rating Assigned Aaa (sf)
Cl. A-19, Definitive Rating Assigned Aa1 (sf)
Cl. A-20, Definitive Rating Assigned Aa1 (sf)
Cl. A-21, Definitive Rating Assigned Aa1 (sf)
Cl. A-22, Definitive Rating Assigned Aaa (sf)
Cl. A-23, Definitive Rating Assigned Aaa (sf)
Cl. A-24, Definitive Rating Assigned Aaa (sf)
Cl. B-1, Definitive Rating Assigned Aa3 (sf)
Cl. B-2, Definitive Rating Assigned A3 (sf)
Cl. B-3, Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Definitive Rating Assigned Ba3 (sf)
RATINGS RATIONALE
Summary Credit Analysis
Moody's expected cumulative net loss on the aggregate pool is 0.30%
in a base scenario and reaches 3.55% at a stress level consistent
with the Aaa ratings. Moody's loss estimates are based on a
loan-by-loan assessment of the securitized collateral pool using
Moody's Individual Loan Level Analysis (MILAN) model. Loan-level
adjustments to the model included: adjustments to borrower
probability of default for higher and lower borrower DTIs,
borrowers with multiple mortgaged properties, self-employed
borrowers, origination channels and at a pool level, for the
default risk of HOA properties in super lien states. The adjustment
to Moody's Aaa stress loss above the model output also includes
adjustments related to aggregator and originators assessments. The
model combines loan-level characteristics with economic drivers to
determine the probability of default for each loan, and hence for
the portfolio as a whole. Severity is also calculated on a
loan-level basis. The pool loss level is then adjusted for
borrower, zip code, and MSA level concentrations.
Collateral Description
The SEMT 2017-7 transaction is a securitization of 489 first lien
residential mortgage loans, with an aggregate unpaid principal
balance of $ 350,401,847. There are 135 originators in this pool,
including First Republic Bank (12.25%). None of the originators
other than First Republic Bank contributed 10% or more of the
principal balance of the loans in the pool. The loan-level third
party due diligence review (TPR) encompassed credit underwriting,
property value and regulatory compliance. In addition, Redwood has
agreed to backstop the rep and warranty repurchase obligation of
all originators other than First Republic Bank.
The loans were all aggregated by Redwood Residential Acquisition
Corporation (Redwood), which Moody's has assessed as an Above
Average aggregator of prime jumbo residential mortgages. As of
August 2017 remittance report, there have been no losses on
Redwood-aggregated transactions that Moody's have rated to date,
and delinquencies to date have also been very low.
Borrowers of the mortgage loans backing this transaction have
strong credit profile demonstrated by strong credit scores, high
down payment percentages and significant liquid reserves. Similar
to SEMT transactions Moody's rated recently, SEMT 2017-7 has a
weighted average FICO at 772 and a percentage of loan purpose for
home purchase at 69.9%, better than SEMT transactions issued
earlier this year, where weighted average original FICOs were
slightly below 770 and purchase money percentages were ranging from
40% to 60%.
Approximately 17.95% of the mortgage loans by balance are secured
by mortgaged properties located in areas that the Federal Emergency
Management Agency has designated for federal assistance during the
prior 12 months. The seller has engaged a third party to inspect
all of these properties and no material visible damage was detected
from these inspections. The related seller of the mortgage loans
will make a representation that the property has not been damaged
to the extent that it would affect the value of the property.
Structural considerations
Similar to recent rated Sequoia transactions, in this transaction,
Redwood is adding a feature prohibiting the servicer, or securities
administrator, from advancing principal and interest to loans that
are 120 days or more delinquent. These loans on which principal and
interest advances are not made are called the Stop Advance Mortgage
Loans ("SAML"). The balance of the SAML will be removed from the
principal and interest distribution amounts calculations. Moody's
view the SAML concept as something that strengthens the integrity
of senior and subordination relationships in the structure. Yet, in
certain scenarios the SAML concept, as implemented in this
transaction, can lead to a reduction in interest payment to certain
tranches even when more subordinated tranches are outstanding. The
senior/subordination relationship between tranches is strengthened
as the removal of SAML in the calculation of the senior percentage
amount, directs more principal to the senior bonds and less to the
subordinate bonds. Further, this feature limits the amount of
servicer advances that could increase the loss severity on the
liquidated loans and preserves the subordination amount for the
most senior bonds. On the other hand, this feature can cause a
reduction in the interest distribution amount paid to the bonds;
and if that were to happen such a reduction in interest payment is
unlikely to be recovered. The final ratings on the bonds, which are
expected loss ratings, take into consideration Moody's expected
losses on the collateral and the potential reduction in interest
distributions to the bonds. Furthermore, the likelihood that in
particular the subordinate tranches could potentially permanently
lose some interest as a result of this feature was considered.
Moody's believe there is a low likelihood that the rated securities
of SEMT 2017-7 will incur any losses from extraordinary expenses or
indemnification payments owing to potential future lawsuits against
key deal parties. First, the loans are prime quality and were
originated under a regulatory environment that requires tighter
controls for originations than pre-crisis, which reduces the
likelihood that the loans have defects that could form the basis of
a lawsuit. Second, Redwood, who initially retains the subordinate
classes and provides a back-stop to the representations and
warranties of all the originators except for FRB, has a strong
alignment of interest with investors, and is incentivized to
actively manage the pool to optimize performance. Third, historical
performance of loans aggregated by Redwood has been very strong to
date. Fourth, the transaction has reasonably well defined processes
in place to identify loans with defects on an ongoing basis. In
this transaction, an independent breach reviewer must review loans
for breaches of representations and warranties when a loan becomes
120 days delinquent, which reduces the likelihood that parties will
be sued for inaction.
Tail Risk & Subordination Floor
The transaction cash flows follow a shifting interest structure
that allows subordinated bonds to receive principal payments under
certain defined scenarios. Because a shifting interest structure
allows subordinated bonds to pay down over time as the loan pool
shrinks, senior bonds are exposed to increased performance
volatility, known as tail risk. The transaction provides for a
subordination floor of 1.40% of the closing pool balance, which
mitigates tail risk by protecting the senior bonds from eroding
credit enhancement over time.
Third-party Review and Reps & Warranties
One TPR firm conducted a due diligence review of 100% of the
mortgage loans in the pool. For 442 loans, the TPR firm conducted a
review for credit, property valuation, compliance and data
integrity ("full review") and limited review for 47 First Republic
loans. For the 47 loans, Redwood Trust elected to conduct a limited
review, which did not include a TPR firm check for TRID
compliance.
For the full review loans, the third party review found that the
majority of reviewed loans were compliant with Redwood's
underwriting guidelines and had no valuation or regulatory defects.
Most of the loans that were not compliant with Redwood's
underwriting guidelines had strong compensating factors.
Additionally, the third party review didn't identify material
compliance-related exceptions relating to the TILA-RESPA Integrated
Disclosure (TRID) rule for the full review loans.
No TRID compliance reviews were performed by the TPR firm on the
limited review loans. Therefore, there is a possibility that some
of these loans could have unresolved TRID issues. We, however
reviewed the initial compliance findings of loans from the same
originator where a full review was conducted and there were no
material compliance findings. As a result, Moody's did not increase
Moody's Aaa loss for the limited review loans.
After a review of the TPR appraisal findings, Moody's found the
exceptions to be minor in nature and did not pose a material
increase in the risk of loan loss. Moody's note that there are 4
escrow holdback loans, including 3 loans where escrow holdbacks
amounts are more than 10%. In the event the escrow funds greater
than 10% have not been disbursed within six months of the Closing
Date, the Seller shall repurchase the affected Escrow Holdback
Mortgage Loan, on or before the date that is six months after the
Closing Date at the applicable Repurchase Price. Given that the
small number of such loans and that the seller has the obligation
to repurchase, Moody's did not make an adjustment for these loans.
The originators and the seller have provided unambiguous
representations and warranties (R&Ws) including an unqualified
fraud R&W. There is provision for binding arbitration in the event
of dispute between investors and the R&W provider concerning R&W
breaches.
Trustee & Master Servicer
The transaction trustee is Wilmington Trust, National Association.
The paying agent and cash management functions will be performed by
Citibank, N.A. and the custodian functions will be performed by
Wells Fargo Bank, N.A., rather than the trustee. In addition,
CitiMortgage Inc., as Master Servicer, is responsible for servicer
oversight, and termination of servicers and for the appointment of
successor servicers. In addition, CitiMortgage is committed to act
as successor if no other successor servicer can be found.
Factors that would lead to an upgrade or downgrade of the ratings:
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US Prime RMBS" published in February 2015.
In addition, Moody's publishes a weekly summary of structured
finance credit ratings and methodologies, available to all
registered users of Moody's website, www.moodys.com/SFQuickCheck
Significant weight was put on judgment taking into account the
results of the modeling tools as well as the aggregate impact of
the third-party review and the quality of the servicers and
originators.
STACR 2017-DNA3: Fitch Assigns B+sf Ratings to 12 Tranches
----------------------------------------------------------
Fitch Ratings has assigned ratings to Freddie Mac's risk-transfer
transaction, Structured Agency Credit Risk Debt Notes Series
2017-DNA3 (STACR 2017-DNA3) as follows:
-- $400,000,000 class M-1 notes 'BBB-sf'; Outlook Stable;
-- $300,000,000 class M-2A notes 'BBsf'; Outlook Stable;
-- $300,000,000 class M-2B notes 'B+sf'; Outlook Stable;
-- $600,000,000 class M-2 exchangeable notes 'B+sf'; Outlook
Stable;
-- $600,000,000 class M-2R exchangeable notes 'B+sf'; Outlook
Stable;
-- $600,000,000 class M-2S exchangeable notes 'B+sf'; Outlook
Stable;
-- $600,000,000 class M-2T exchangeable notes 'B+sf'; Outlook
Stable;
-- $600,000,000 class M-2U exchangeable notes 'B+sf'; Outlook
Stable;
-- $600,000,000 class M-2I notional exchangeable notes 'B+sf';
Outlook Stable;
-- $300,000,000 class M-2AR exchangeable notes 'BBsf'; Outlook
Stable;
-- $300,000,000 class M-2AS exchangeable notes 'BBsf'; Outlook
Stable;
-- $300,000,000 class M-2AT exchangeable notes 'BBsf'; Outlook
Stable;
-- $300,000,000 class M-2AU exchangeable notes 'BBsf'; Outlook
Stable;
-- $300,000,000 class M-2AI notional exchangeable notes 'BBsf';
Outlook Stable;
-- $300,000,000 class M-2BR exchangeable notes 'B+sf'; Outlook
Stable;
-- $300,000,000 class M-2BS exchangeable notes 'B+sf'; Outlook
Stable;
-- $300,000,000 class M-2BT exchangeable notes 'B+sf'; Outlook
Stable;
-- $300,000,000 class M-2BU exchangeable notes 'B+sf'; Outlook
Stable;
-- $300,000,000 class M-2BI notional exchangeable notes 'B+sf';
Outlook Stable.
The following classes will not be rated by Fitch:
-- $200,000,000 class B-1 notes;
-- $54,186,025,511 class A-H reference tranche;
-- $161,513,218 class M-1H reference tranche;
-- $121,134,913 class M-2AH reference tranche;
-- $121,134,913 class M-2BH reference tranche;
-- $80,756,609 class B-1H reference tranche;
-- $280,756,609 class B-2H reference tranche.
The 'BBB-sf' rating for the M-1 notes reflects the 2.50%
subordination provided by the 0.75% class M-2A notes, the 0.75%
class M-2B notes, the 0.50% class B-1 notes and their corresponding
reference tranches, as well as the 0.50% class B-2H reference
tranche. The 'BBsf' rating for the M-2A notes reflects the 1.75%
subordination provided by the 0.75% class M-2B notes, the 0.50%
class B-1 notes and their corresponding reference tranches, as well
as the 0.50% class B-2H reference tranche. The 'B+sf' rating for
the M-2B notes reflects the 1.00% subordination provided by the
0.50% class B-1 notes and the 0.50% class B-2H reference tranche.
The notes are general unsecured obligations of Freddie Mac
(AAA/Stable) subject to the credit and principal payment risk of a
pool of certain residential mortgage loans held in various Freddie
Mac-guaranteed MBS.
STACR 2017-DNA3 represents Freddie Mac's 18th risk transfer
transaction applying actual loan loss severity (LS) issued as part
of the Federal Housing Finance Agency's Conservatorship Strategic
Plan for 2013 - 2017 for each of the government-sponsored
enterprises (GSEs) to demonstrate the viability of multiple types
of risk-transfer transactions involving single-family mortgages.
The objective of the transaction is to transfer credit risk from
Freddie Mac to private investors with respect to a $56.2 billion
pool of mortgage loans currently held guaranteed by Freddie Mac
where principal repayment of the notes is subject to the
performance of a reference pool of mortgage loans. As loans
liquidate or other credit events occur, the outstanding principal
balance of the debt notes will be reduced by the actual loan's LS
percentage related to those credit events, which includes
borrower's delinquent interest.
While the transaction structure simulates the behavior and credit
risk of traditional RMBS senior-subordinate securities, Freddie Mac
will be responsible for making monthly payments of interest and
principal to investors. Because of the counterparty dependence on
Freddie Mac, Fitch's expected rating on the M-1, M-2A and M-2B
notes will be based on the lower of: the quality of the mortgage
loan reference pool and credit enhancement (CE) available through
subordination, and Freddie Mac's Issuer Default Rating. The M-1,
M-2A, M-2B, and B-1 notes will be issued as LIBOR-based floaters.
In the event that the one-month LIBOR rate falls below zero and
becomes negative, the coupons of the interest-only modifications
and combinations (MAC) notes may be subject to a downward
adjustment, so that the aggregate interest payable within the
related MAC combination does not exceed the interest payable to the
notes for which such classes were exchanged. The notes will carry a
12.5-year legal final maturity.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The reference pool consists
of loans with original loan-to-value ratios (LTVs) of over 60% and
less than or equal to 80% with a weighted average (WA) original
combined LTV of 75.7%. The WA debt-to-income (DTI) ratio of 35.3%
and credit score of 749 reflect the strong credit profile of
post-crisis mortgage originations.
Additional Rating Drivers
12.5-Year Hard Maturity (Positive): The M-1, M-2A and M-2B notes
benefit from a 12.5-year legal final maturity. Thus, any credit
events on the reference pool that occur beyond year 12.5 are borne
by Freddie Mac and do not affect the transaction. In addition,
credit events that occur prior to maturity with losses realized
from liquidations or loan modifications that occur after the final
maturity date will not be passed through to noteholders.
Solid Lender Review and Acquisition Processes (Positive): Fitch
found that Freddie Mac has a well-established and disciplined
process in place for the purchase of loans and views its
lender-approval and oversight processes for minimizing counterparty
risk and ensuring sound loan quality acquisitions as positive. Loan
quality control (QC) review processes are thorough and indicate a
tight control environment that limits origination risk. Fitch has
determined Freddie Mac to be an above-average aggregator for its
2013 and later product. Fitch accounted for the lower risk by
applying a lower default estimate for the reference pool.
Advantageous Payment Priority (Positive): The M-1 class strongly
benefits from the sequential pay structure and stable CE provided
by the more junior M-2A, M-2B and B-1 classes, which are locked out
from receiving any principal until classes with a more senior
payment priority are paid in full. However, available CE for the
junior classes as a percentage of the outstanding reference pool
increases in tandem with the paydown of the M-1 class. Given the
size of the M-1 class relative to the combined total of all the
junior classes, together with the sequential pay structure, the
class M-1 will de-lever and CE as a percentage will build faster
than in a pro rata payment structure.
Solid Alignment of Interests (Positive): While the transaction is
designed to transfer credit risk to private investors, Fitch
believes the transaction benefits from a solid alignment of
interests. Freddie Mac will retain credit risk in the transaction
by holding the senior reference tranche A-H, which has 3.50% of
loss protection, as well as a minimum of 5% of the M-1, M-2A, M-2B
and B-1 tranches and a minimum of 75% of the first-loss B-2H
tranche. Initially, Freddie Mac will retain an approximately 28.8%
vertical slice/interest in the M-1, M-2A and M-2B tranches.
Receivership Risk Considered (Neutral): Under the Federal Housing
Finance Regulatory Reform Act, the Federal Housing Finance Agency
(FHFA) must place Freddie Mac into receivership if it determines
that the government-sponsored enterprise's (GSE) assets are less
than its obligations for longer than 60 days following the deadline
of its SEC filing. As receiver, FHFA could repudiate any contract
entered into by Freddie Mac if it is determined that such action
would promote an orderly administration of Freddie Mac's affairs.
Fitch believes that the U.S. government will continue to support
Freddie Mac, as reflected in its current rating of the GSE.
However, if, at some point, Fitch views the support as being
reduced and receivership likely, the rating of Freddie Mac could be
downgraded and ratings on the M-1, M-2A and M-2B notes, along with
their corresponding MAC notes, could be affected.
Hurricane Harvey and Irma Loans Removed (Positive): Freddie Mac
removed all the loans from the reference pool with properties
located in the 82 counties that were designated as major disaster
areas by the Federal Emergency Management Agency (FEMA) and areas
in which FEMA has authorized individual homeowner assistance as a
result of Hurricane Harvey and Hurricane Irma, as of Sept. 13,
2017. Freddie Mac will continue to remove loans from the reference
pool if the properties are located in any new counties that are
declared by FEMA in which FEMA has authorized individual homeowner
assistance a result of Hurricane Harvey and Hurricane Irma after
Sept. 13, 2017 through and including Nov. 2, 2017.
Home Possible Loans (Neutral): Approximately 0.8% of the reference
pool was originated under Freddie Mac's Home Possible or Home
Possible Advantage program, which targets low- to moderate-income
homebuyers or buyers in high-cost or underrepresented communities.
The Home Possible program provides flexibility for a borrower's
LTV, income, down payment and mortgage insurance coverage
requirements. Among the eligibility guidelines is that the borrower
must be located in an underserved area, or the borrower's income
cannot exceed 100% of the area's median income or a higher
percentage in some designated high-cost areas. In certain
circumstances, Home Possible borrowers must participate in a
homeownership education program to qualify and have early
delinquency counselling made available to them in the event they
have trouble making payments.
Fitch does not believe the Home Possible loans add meaningful
credit risk to this transaction due to the relatively low
percentage of the loans in the pool and the full documentation of
income, employment and assets. If the Home Possible loans were
assumed to have a 25% higher default probability than loans with
the same credit attributes that were not originated under Home
Possible, the adjustment to the total pool projected loss would not
be large enough to change the CE for the rated classes.
RATING SENSITIVITIES
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at both the MSA and national levels. The implied
rating sensitivities are only an indication of some of the
potential outcomes and do not consider other risk factors that the
transaction may become exposed to or be considered in the
surveillance of the transaction.
This defined stress sensitivity analysis demonstrates how the
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10%, 20% and 30%, in addition to the model
projected 24% at the 'BBBsf' level, and 14.5% at the 'Bsf' level.
The analysis indicates that there is some potential rating
migration with higher MVDs, compared with the model projection.
Fitch also conducted defined rating sensitivities which determine
the stresses to MVDs that would reduce a rating by one full
category, to non-investment grade, and to 'CCCsf'. For example,
additional MVDs of 12%, 12% and 36% would potentially move the
'BBBsf' rated class down one rating category, to non-investment
grade, to 'CCCsf', respectively.
STACR 2017-HQA3: Moody's Rates Class M-2B Notes (P)Caa1
-------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
nineteen classes of notes on STACR 2017-HQA3, a securitization
designed to provide credit protection to the Federal Home Loan
Mortgage Corporation (Freddie Mac) against the performance of
approximately $21.6 billion reference pool of mortgages. All of the
Notes in the transaction are direct, unsecured obligations of
Freddie Mac and as such investors are exposed to the credit risk of
Freddie Mac (currently Aaa Stable).
The complete rating action is:
Issuer: Structured Agency Credit Risk (STACR) Debt Notes, Series
2017-HQA3
$120.0 million of Class M-1 notes, Assigned (P)Baa3 (sf)
$202.5 million of Class M-2A notes, Assigned (P)Ba3 (sf)
$202.5 million of Class M-2B notes, Assigned (P)Caa1 (sf)
The Class M-2A and Class M-2B noteholders can exchange their notes
for:
$405.0 million of Class M-2 exchangeable notes, assigned (P)B2
(sf)
The Class M-2 noteholders can exchange their notes for the
following notes:
$405.0million of Class M-2R exchangeable notes, Assigned (P)B2
(sf)
$405.0 million of Class M-2S exchangeable notes, Assigned (P)B2
(sf)
$405.0 million of Class M-2T exchangeable notes, Assigned (P)B2
(sf)
$405.0 million of Class M-2U exchangeable notes, Assigned (P)B2
(sf)
$405.0 million of Class M-2I exchangeable notes, Assigned (P)B2
(sf)
The Class M-2A noteholders can exchange their notes for the
following notes:
$202.5 million of Class M-2AR exchangeable notes, Assigned (P)Ba3
(sf)
$202.5 million of Class M-2AS exchangeable notes, Assigned (P)Ba3
(sf)
$202.5 million of Class M-2AT exchangeable notes, Assigned (P)Ba3
(sf)
$202.5 million of Class M-2AU exchangeable notes, Assigned (P)Ba3
(sf)
$202.5 million of Class M-2AI exchangeable notes, Assigned (P)Ba3
(sf)
The Class M-2B noteholders can exchange their notes for the
following notes:
$202.5 million of Class M-2BR exchangeable notes, Assigned (P)Caa1
(sf)
$202.5 million of Class M-2BS exchangeable notes, Assigned (P)Caa1
(sf)
$202.5 million of Class M-2BT exchangeable notes, Assigned (P)Caa1
(sf)
$202.5 million of Class M-2BU exchangeable notes, Assigned (P)Caa1
(sf)
$202.5 million of Class M-2BI exchangeable notes, Assigned (P)Caa1
(sf)
STACR 2017-HQA3 is the ninth transaction in the HQA series issued
by Freddie Mac. Similar to STACR 2017-HQA1, STACR 2017-HQA3's note
write-downs are determined by actual realized losses and
modification losses on the loans in the reference pool, and are not
tied to a pre-set tiered severity schedule. In addition, the
interest amount paid to the notes can be reduced by the amount of
modification loss incurred on the mortgage loans. STACR 2017-HQA3
is also the nineteenth transaction in the STACR series (including
STACR-DNA) to have a legal final maturity of 12.5 years, as
compared to 10 years in STACR-DN and STACR-HQ securitizations.
Unlike typical RMBS transactions, STACR 2017-HQA3 note holders are
not entitled to receive any cash from the mortgage loans in the
reference pool. Instead, the timing and amount of principal and
interest that Freddie Mac is obligated to pay on the notes are
linked to the performance of the mortgage loans in the reference
pool. Each of the mortgages in the reference pool had a
loan-to-value (LTV) ratio at origination that was greater than 80%
and equal to or less than 97%.
Moody's rating on the transaction is based on both quantitative and
qualitative analyses. This included a quantitative evaluation of
the credit quality of the reference pool and the impact of the
structural mechanisms on credit enhancement, as well as qualitative
assessments regarding the operational strength of Freddie Mac to
oversee its sellers and servicers.
Moody's base-case expected loss on for the reference pool is 1.40%
and is expected to reach 13.00% at a stress level consistent with a
Aaa rating.
Moody's didn't adjust the loss levels for hurricane exposure
because Freddie Mac has excluded from the reference pool of all
mortgage loans that were located in one of the 98 counties that the
Federal Emergency Management Agency (FEMA) designated as major
disaster areas and in which FEMA has authorized individual
assistance to assist homeowners as a result of Hurricane Harvey or
Hurricane Irma as of September 19, 2017 and will remove loans from
the pool if the related mortgaged property is located within a
county declared by FEMA at any time from and after September 20,
2017 and through and including November 2, 2017, to be a major
disaster area and in which FEMA has authorized individual
assistance to homeowners in such a county as a result of Hurricane
Harvey or Hurricane Irma.
Below is a summary description of the transaction and Moody's
rating rationale. More details on this transaction can be found in
Moody's presale report.
The Notes
The M-1 notes are adjustable rate P&I notes with an interest rate
that adjusts relative to LIBOR.
The M-2A and M-2B notes are adjustable rate P&I notes with an
interest rate that adjusts relative to LIBOR. The holders of the
M-2A and M-2B notes can exchange those notes for the M-2
exchangeable notes. M-2 notes can also be exchanged for M-2R, M-2S,
M-2T, M-2U and M-2I exchangeable notes. The M-2I exchangeable notes
are fixed rate interest only notes that have a notional balance
that equals the M-2 note balance. The M-2R, M-2S, M-2T and M-2U
notes are adjustable rate P&I notes that have a balance that equals
the M-2 note balance and an interest rate that adjusts relative to
LIBOR.
The M-2A notes are adjustable rate P&I notes with an interest rate
that adjusts relative to LIBOR. The holders of the M-2A notes can
exchange those notes for M-2AR, M-2AS, M-2AT, M-2AU and M-2AI
exchangeable notes. The M-2AI exchangeable notes are fixed rate
interest only notes that have a notional balance that equals the
M-2A note balance. The M-2AR, M-2AS, M-2AT and M-2AU notes are
adjustable rate P&I notes that have a balance that equals the M-2A
note balance and an interest rate that adjusts relative to LIBOR.
The M-2B notes are adjustable rate P&I notes with an interest rate
that adjusts relative to LIBOR. The holders of the M-2B notes can
exchange those notes for M-2BR, M-2BS, M-2BT, M-2BU and M-2BI
exchangeable notes. The M-2BI exchangeable notes are fixed rate
interest only notes that have a notional balance that equals the
M-2B note balance. The M-2BR, M-2BS, M-2BT and M-2BU notes are
adjustable rate P&I notes that have a balance that equals the M-2B
note balance and an interest rate that adjusts relative to LIBOR.
The B-1 note is adjustable rate P&I note with an interest rate that
adjusts relative to LIBOR.
Freddie Mac will only make principal payments on the notes based on
the scheduled and unscheduled principal payments that are actually
collected on the reference pool mortgages. Losses on the notes
occur as a result of credit events and modifications, and are
determined by actual realized and modification losses on loans in
the reference pool, and not tied to a pre-set loss severity
schedule. Freddie Mac is obligated to retire the notes in April
2030 if balances remain outstanding.
Credit events in STACR 2017-HQA3 occur when a short sale is
settled, when a seriously delinquent mortgage note is sold prior to
foreclosure, when the mortgaged property that secured the related
mortgage note is sold to a third party at a foreclosure sale, when
an REO disposition occurs, or when the related mortgage note is
charged-off. This differs from STACR-DN and STACR-HQ
securitizations, where credit events occur as early as when a
reference obligation is 180 or more days delinquent.
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
As part of its analysis, Moody's considered historic Freddie Mac
performance and severity data, the eligibility criteria of loans in
the reference pool, and the high credit quality of the underlying
collateral. The reference pool consists of loans that Freddie Mac
acquired between December 1, 2016 and March 31, 2017, and have no
previous 30-day delinquencies since purchase. The loans in the
reference pool are to strong borrowers, as the weighted average
credit score of 747 indicates. The weighted average CLTV of 91.8%
is far higher than that of recent private label prime jumbo deals,
which typically have CLTVs in the high 60's range, but is similar
to the weighted average CLTV of other STACR-HQA and STACR-HQ
transactions. 99.8% of loans in the pool were covered by mortgage
insurance at origination with 81.3% covered by borrower provided
mortgage insurance (BPMI) and 18.5% covered by lender provided
mortgage insurance (LPMI). Freddie Mac will backstop the mortgage
insurance in this transaction.
Structural considerations
Moody's took structural features such as the principal payment
waterfall of the notes, a 12.5-year bullet maturity, performance
triggers, as well as the allocation of realized losses and
modification losses into consideration in Moody's cash flow
analysis. The final structure for the transaction reflects
consistent credit enhancement levels available to the notes per the
term sheet provided for the provisional ratings.
For modification losses, Moody's has taken into consideration the
level of rate modifications based on the projected defaults, the
weighted average coupon of the reference pool (4.06%), and compared
that with the available credit enhancement on the notes, the coupon
and the accrued interest amount of the most junior bonds. Class
B-2H reference tranche represents 0.50% of the pool. The final
coupons on the notes will have an impact on the amount of interest
available to absorb modification losses from the reference pool.
The ratings are linked to Freddie Mac's rating. As an unsecured
general obligation of Freddie Mac, the rating on the notes will be
capped by the rating of Freddie Mac, which Moody's currently rates
Aaa (stable).
The transaction is not exposed to losses from extraordinary
expenses or indemnification costs of the key transaction parties.
This is because any indemnification expenses incurred by the global
agent/exchange administrator are obligations of Freddie Mac only
and will not reduce the STACR notes. There is no trustee or trust
accounts in the transaction because the notes are direct, unsecured
obligation of Freddie Mac.
Collateral Analysis
The reference pool consists of 88,375 loans that meet specific
eligibility criteria, which limits the pool to first lien, fixed
rate, fully amortizing loans with 220-359 month terms and original
LTV ratios that range between 80% and equal to or less than 97% on
one to four unit properties. The credit positive aspects of the
pool include borrower, loan and geographic diversification, and a
high weighted average FICO of 747. There are no interest-only (IO)
loans in the reference pool and all of the loans are underwritten
to full documentation standards.
Methodology
The principal methodology used in these ratings was "Moody's
Approach to Rating US Prime RMBS," published in February 2015.
Additionally, the methodology used in rating Cl. M-2AI, Cl. M-2BI,
and Cl. M-2I was "Moody's Approach to Rating Structured Finance
Interest-Only (IO) Securities" published in June 2017.
Moody's made loan-level adjustments to loss severities to account
for the presence of mortgage insurance backed by Freddie Mac. For
loans with LPMI, Moody's reduced loss severities by the mortgage
insurance coverage percentage. For loans with BPMI, Moody's reduced
loss severities by only a fraction of the mortgage insurance
coverage percentage because BPMI can be cancelled in certain
situations such as when the LTV ratio (based on the original sales
price or appraisal value) falls below 80%. To determine the
appropriate coverage haircut for each loan with BPMI, Moody's
estimated the percentage of each loan's life that mortgage
insurance would likely be in effect. Given that Freddie Mac (Aaa
stable) is backing the mortgage insurance in this transaction,
Moody's did not adjust the mortgage insurance benefit to account
for the risk of a mortgage insurer bankruptcy.
In addition, Moody's publishes a weekly summary of structured
finance credit ratings and methodologies, available to all
registered users of Moody's website, www.moodys.com/SFQuickCheck.
Reps and Warranties
Freddie Mac is not providing loan level reps and warranties (RWs)
for this transaction because the notes are a direct obligation of
Freddie Mac. Freddie Mac commands robust RWs from its
seller/servicers pertaining to all facets of the loan, including
but not limited to compliance with laws, compliance with all
underwriting guidelines, enforceability, good property condition
and appraisal procedures. To the extent that Freddie Mac discovers
a confirmed underwriting defect or a major servicing defect in the
reference pool, prior months' credit events will be reversed.
Moody's expected credit event rate takes into consideration
historic repurchase rates.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings up. Losses could decline from Moody's original
expectations as a result of a lower number of obligor defaults or
appreciation in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligor defaults or deterioration
in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly on
the US macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud. As an unsecured general obligation of Freddie Mac, the
ratings on the notes depend on the rating of Freddie Mac, which
Moody's currently rates Aaa.
TOWD POINT 2017-5: Moody's Assigns (P)B1 Rating to Cl. B2 Notes
---------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to eight
classes of notes issued by Towd Point Mortgage Trust 2017-5.
The notes are backed by one pool of seasoned residential mortgage
loans. None of the loans in the collateral pool have been
previously modified for loss mitigation purposes. As of the
statistical calculation date of August 31, 2017, the collateral
pool is comprised of 3,992 first and second lien, adjustable rate
and fixed rate mortgage loans, and has a non-zero updated weighted
average FICO score of 736 and a weighted average current LTV of
65.3%. Select Portfolio Servicing, Inc. (SPS) is the servicer for
the loans in the pool. FirstKey Mortgage, LLC (FirstKey) will be
the asset manager for the transaction.
The complete rating actions are:
Issuer: Towd Point Mortgage Trust 2017-5
Cl. A1, Assigned (P)Aaa (sf)
Cl. A2, Assigned (P)Aa2 (sf)
Cl. A3, Assigned (P)Aa1 (sf)
Cl. A4, Assigned (P)A1 (sf)
Cl. M1, Assigned (P)A2 (sf)
Cl. M2, Assigned (P)Baa2 (sf)
Cl. B1, Assigned (P)Ba2 (sf)
Cl. B2, Assigned (P)B1 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expected loss on TPMT 2017-5's collateral pool is 2.3% in
Moody's base case scenario. Moody's loss estimates take into
account the historical performance of the loans that have similar
collateral characteristics as the loans in the pool, and also
incorporate an expectation of a continued strong credit environment
for RMBS, supported by improving home prices over the next two to
three years.
Moody's credit opinion is the result of Moody's analysis of a wide
array of quantitative and qualitative factors, a review of the
third-party review of the pool, servicing framework and the
representations and warranties framework.
The methodologies used in these ratings were "Moody's Approach to
Rating Securitisations Backed by Non-Performing and Re-Performing
Loans" published in August 2016 and "US RMBS Surveillance
Methodology" published in January 2017.
Collateral Description
Towd Point Mortgage Trust 2017-5 (TPMT 2017-5) is a securitization
of seasoned residential mortgage loans. This transaction represents
the fifth TPMT transaction in 2017 and the 16th issue from the Towd
Point Mortgage Trust ("TPMT") shelf since its inception in January
2015. The loans underlying this transaction exhibit collateral
characteristics similar to that of seasoned Alt-A mortgages.
TPMT 2017-5 represents the first TPMT securitization that consists
entirely of mortgage loans that have never been modified for loss
mitigation purposes. As a consequence, none of the mortgage loans
have deferred amounts. As of the statistical calculation date,
August 31, 2017, all of the mortgage loans have been contractually
current under both the Office of Thrift Supervision (OTS) method
and Mortgage Bankers Association (MBA) method. As of the
statistical calculation date, approximately 90.2% of the loans have
been current under both the OTS method and MBA method for at least
24 months. On average, the mortgage loans have been seasoned for 12
years and show some delinquencies in the payment history that have
self-cured. Moody's analysis for CDR is based on the payment
history of loans with similar loan characteristics as the loans in
TPMT 2017-5 and that show delinquencies that have self-cured and
that have never been modified for loss mitigation purposes.
As of the statistical calculation date, the majority of the
mortgage loans (99.1%) have an adjustable rate. Of these mortgage
loans, approximately 79.9% have mortgage rates that adjust in
accordance with an index based on one-year, six-month or one-month
LIBOR. The interest rate on the Class A1, Class A2, Class M1, Class
M2, Class B1, Class B2, Class B3, Class B4 and Class B5 (assuming
no exchanges for exchangeable notes have occurred) adjusts monthly
based on one-month LIBOR. To the extent that the index on the
related adjustable mortgage loans declines more rapidly than
one-month LIBOR, a net WAC shortfall may be created. Excess
cashflow, if any, will be available for the payment of any net WAC
shortfalls to the notes as well as any unpaid reimbursement amount.
In the event that LIBOR is no longer available as an index, the
mortgage notes and the transaction documents provide the servicer
and indenture trustee (with direction from the depositor) for
determining an index for the mortgage loans indexed to LIBOR and
the notes, respectively.
As of the statistical calculation date, approximately 14.2% and
2.0% of the properties backing the mortgage loans are located in
Florida and Texas, respectively. To the extent that a borrower in
the FEMA zone areas affected by Hurricane Irma or Hurricane Harvey
is granted any payment relief (including forbearance) by SPS as a
result of property damage from either hurricane within 90 days of
the closing date, FirstKey will repurchase the related mortgage
loan at the repurchase price on the next succeeding payment date.
In addition, if within 90 days of the closing date, any such
borrower under the related mortgage loan becomes one (1) month
delinquent under the OTS method and SPS is unable to contact such
borrower, SPS will order an external inspection of the related
mortgaged property within approximately 45 days of the related
monthly payment due date that is delinquent on such mortgage loan.
If SPS determines that such inspection shows material property
damage to such mortgaged property resulting from Hurricane Harvey
or Hurricane Irma, SPS will grant the related borrower payment
relief (e.g., forbearance) and FirstKey will repurchase the related
mortgage loan at the repurchase price on the next succeeding
payment date.
Between the statistical calculation date and the cut-off date of
September 30, 2017, 200 loans were removed from the pool, with 69
such mortgage loans removed because of payment in full, 27 of such
mortgage loans removed because of hurricane damage or payment
relief (e.g., forbearance) entered into due to hurricane damage to
the related mortgage property and 104 of such mortgage loans
removed due to a failure to meet the sponsor's eligibility
requirements. As a result, as of the cut-off date, the number of
mortgage loans is 3,792, the WA non-zero FICO is 736, the WA LTV is
64.3%, the percentage of loans current for at least the prior 24
months is 90.2% and the percentage of mortgage loans delinquent
more than 29 days (based on the MBA method) increased from 0.00% to
1.2%. The percentage of adjustable rate mortgage loans is 99.2%.
The total unpaid principal balance is $735,866,012.
Moody's estimated losses on the pool by applying Moody's
assumptions on expected future delinquencies, default rates, loss
severities and prepayments as observed on similar seasoned
collateral. Moody's projected future annual delinquencies for eight
years by applying an initial annual default rate assumption
adjusted for future years through delinquency burnout factors. The
delinquency burnout factors reflect Moody's future expectations of
the economy and the U.S. housing market. Based on the loan
characteristics of the pool and the demonstrated pay histories,
Moody's applied an initial expected annual delinquency rate of 4.0%
for the pool for year one. Moody's then calculated future
delinquencies using default burnout and voluntary conditional
prepayment rate (CPR) assumptions. Moody's aggregated the
delinquencies and converted them to losses by applying pool
specific lifetime default frequency and loss severity assumptions.
In applying Moody's loss severity assumptions, Moody's accounted
for the lack of principal and interest advancing in this
transaction.
Transaction Structure
TPMT 2017-5 has a sequential priority of payments structure, in
which a given class of notes can only receive principal payments
when all the classes of notes above it have been paid off.
Similarly, losses will be applied in the reverse order of priority.
The interest rate for the notes other than Class A3 and Class A4
will equal the least of (a) one-month LIBOR plus the applicable
margin per annum (subject to a floor of zero) (b) the applicable
adjusted net WAC rate and (c) the applicable available funds cap
for each accrual period. The coupon for the exchangeable notes,
Class A3 and Class A4 is equal to the weighted average of the note
rates of the related exchange notes for such accrual period. There
are no performance triggers in this transaction. Additionally, the
servicer will not advance any principal or interest on any of the
loans.
As discussed in the collateral section above, monthly excess
cashflow, if any, will be available for the payment of any net WAC
shortfalls and reimbursement of any unreimbursed writedwon amounts
to the notes.
As sponsor, FirstKey (or through a majority-owned affiliate) will
retain an eligible vertical interest representing at least 5%
economic interest in the credit risk of the mortgage loans.
Moody's believe there is a very low likelihood that the rated notes
in TPMT 2017-5 will incur any loss from extraordinary expenses or
indemnification payments owing to potential future lawsuits against
key deal parties. First, majority of the loans are seasoned with
demonstrated payment history, reducing the likelihood of a lawsuit
on the basis that the loans have underwriting defects. Second,
historical performance of loans aggregated by the sponsor to date
has been within expectation, with minimal losses on previously
issued TPMT transactions. Third, the transaction has reasonably
well defined processes in place to identify loans with defects on
an ongoing basis. In this transaction, an independent breach
reviewer must review loans for breaches of representations and
warranties when a realized loss is incurred on a loan, which
reduces the likelihood that parties will be sued for inaction.
Moody's coded TPMT 2017-5's cashflows using SFW®, a cashflow tool
developed by Moody's Analytics. To assess the final rating on the
notes, Moody's ran 96 different loss and prepayment scenarios
through SFW. The scenarios encompass six loss levels, four loss
timing curves, and four prepayment curves. The structure allows for
timely payment of interest and ultimate payment of principal with
respect to the notes by the legal final maturity.
Third Party Review
In contrast to other TPMT transactions, where mortgage loans were
acquired from multiple sources, approximately 87% of the mortgage
loans were acquired by FirstKey Mortgage, LLC (FirstKey) from a
single seller and serviced by a single servicer. As such, the due
diligence review for this transaction for compliance, data capture
and payment history was based on a sample rather than on a 100%
review as in prior TPMT transactions. However, a 100% third party
due diligence was conducted for tax delinquencies and lien
position.
Four independent third party review (TPR) firms -- JCIII &
Associates, Inc. (subsequently acquired by American Mortgage
Consultants), Clayton Services, LLC, AMC Diligence, LLC, and
Westcor Land Title Insurance Company -- conducted due diligence for
the transaction. Due diligence was performed on 20.7% of the loans
in TPMT 2017-5's collateral pool for compliance and data capture,
23.5% for pay string history, and 100% for title and tax review.
The TPR firms reviewed compliance, data integrity and key documents
to verify that loans were originated in accordance with federal,
state and local anti-predatory laws. The TPR firms conducted audits
of designated data fields to ensure the accuracy of the collateral
tape.
Based on Moody's analysis of the third-party review reports,
Moody's determined that a portion of the loans had legal or
compliance exceptions that could cause future losses to the trust.
Moody's incorporated an additional hit to the loss severities for
these loans to account for this risk. FirstKey Mortgage, LLC,
retained Westcor and AMC to review the title and tax reports for
the loans in the pool, and will oversee Westcor and monitor the
loan sellers in the completion of the assignment of mortgage
chains.
Representations & Warranties
Moody's ratings reflect TPMT 2017-5's weak representations and
warranties (R&Ws) framework. The representation provider, FirstKey
Mortgage, LLC is unrated by Moody's. Moreover, FirstKey's
obligations will be in effect for only thirteen months (until the
payment date in November 2018). The R&Ws themselves are weak
because they contain many knowledge qualifiers and the regulatory
compliance R&W does not cover monetary damages that arise from TILA
violations whose right of rescission has expired. The transaction
provides a breach reserve account to cover for any breaches of R&Ws
after the sunset. The initial breach reserve account target amount
is $3,316,913.
Transaction Parties
The transaction benefits from a strong servicing arrangement.
Select Portfolio Servicing, Inc. (SPS) will service 100% of TPMT
2017-5's collateral pool. Moody's assess SPS higher compared to its
peers. Furthermore, FirstKey, the asset manager, will oversee the
servicer, which strengthens the overall servicing framework in the
transaction. Wells Fargo Bank N.A. and U.S. Bank National
Association are the Custodians of the transaction. The Delaware
Trustee for TPMT 2017-5 is Wilmington Trust, National Association.
TPMT 2017-5's Indenture Trustee is U.S. Bank National Association.
Factors that would lead to an upgrade or downgrade of the ratings:
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's original expectations
as a result of a higher number of obligors defaulting or
deterioration in the value of the mortgaged property securing an
obligor's promise of payment. Transaction performance also depends
greatly on the US macro economy and housing market. Other reasons
for worse-than-expected performance include poor servicing, error
on the part of transaction parties, inadequate transaction
governance and fraud.
TROPIC CDO II: Moody's Hikes Class A-3L Notes Rating From Ba1
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the following
notes issued by Tropic CDO II Ltd.:
US$145,000,000 Class A-1L Floating Rate Notes Due April 2034
(current balance $57,858,131), Upgraded to Aa1 (sf); previously on
September 23, 2015 Affirmed A1 (sf)
US$50,000,000 Class A-2L Floating Rate Notes Due April 2034,
Upgraded to Aa3 (sf); previously on September 23, 2015 Upgraded to
Baa1 (sf)
US$35,000,000 Class A-3L Floating Rate Notes Due April 2034,
Upgraded to Baa1 (sf); previously on September 23, 2015 Upgraded to
Ba1 (sf)
Tropic CDO II Ltd., issued in October 2003, is a collateralized
debt obligation backed mainly by a portfolio of bank trust
preferred securities (TruPS), with a small exposure to REIT TruPS.
RATINGS RATIONALE
The rating actions are primarily a result of the deleveraging of
the Class A-1L notes, an increase in the transaction's
over-collateralization ratios (OC) , and the improvement in the
credit quality of the underlying portfolio since October 2016.
The Class A-1L notes have paid down by approximately 3.5% or $2.1
million since October 2016, using principal proceeds from the
redemption of the underlying assets, recoveries from defaulted
assets, and the diversion of excess interest proceeds. Based on
Moody's calculations, the OC ratios for the Class A-1L, A-2L, A-3L,
A-4L, and B-1L notes have improved to 313.8%, 168.3%, 127.1%,
86.1%, and 80.4%, respectively, from October 2016 levels of 302.8%,
165.1%, 125.3%, 85.3%, and 79.3%, respectively. The Class A-1L
notes will continue to benefit from the diversion of excess
interest and the use of proceeds from redemptions of any assets in
the collateral pool.
The deal has also benefited from improvement in the credit quality
of the underlying portfolio. According to Moody's calculations, the
weighted average rating factor (WARF) improved to 1213 from 1268 in
October 2016.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating TruPS CDOs," published in October 2016.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings, as described below:
1) Macroeconomic uncertainty: TruPS CDOs performance could be
negatively affected by uncertainty about credit conditions in the
general economy. Moody's has a stable outlook on the US banking
sector
2) Portfolio credit risk: Credit performance of the assets
collateralizing the transaction that is better than Moody's current
expectations could have a positive impact on the transaction's
performance. Conversely, asset credit performance weaker than
Moody's current expectations could have adverse consequences on the
transaction's performance.
3) Deleveraging: One source of uncertainty in this transaction is
whether deleveraging from unscheduled principal proceeds and excess
interest proceeds will continue and at what pace. Note repayments
that are faster than Moody's current expectations could have a
positive impact on the notes' ratings, beginning with the notes
with the highest payment priority.
4) Exposure to non-publicly rated assets: The deal contains a large
number of securities whose default probability Moody's assesses
through credit scores derived using RiskCalc™ or credit
estimates. Because these are not public ratings, they are subject
to additional uncertainties.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Assuming a two-notch upgrade to assets with below-investment grade
ratings or rating estimates (WARF of 766)
Class A-1L: 0
Class A-2L: +2
Class A-3L: +2
Class A-4L: +1
Class A-4: +1
Class B-1L: 0
Assuming a two-notch downgrade to assets with below-investment
grade ratings or rating estimates (WARF of 1440)
Class A-1L: 0
Class A-2L: 0
Class A-3L: -1
Class A-4L: 0
Class A-4: 0
Class B-1L: 0
Loss and Cash Flow Analysis:
Moody's applied a Monte Carlo simulation framework in Moody's
CDROM(TM) to model the loss distribution for TruPS CDOs. The
simulated defaults and recoveries for each of the Monte Carlo
scenarios defined the reference pool's loss distribution. Moody's
then used the loss distribution as an input in its CDOEdge(TM) cash
flow model. CDROM(TM) is available on www.moodys.com under Products
and Solutions -- Analytical models, upon receipt of a signed free
license agreement.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, and weighted average recovery rate,
are based on its methodology and could differ from the trustee's
reported numbers. In its base case, Moody's analyzed the underlying
collateral pool has having a performing par and of $181.6 million,
defaulted/deferring par of $75 million, a weighted average default
probability of 12.36% (implying a WARF of 1213), and a weighted
average recovery rate upon default of 10%.
In addition to the quantitative factors Moody's explicitly models,
qualitative factors are part of rating committee considerations.
Moody's considers the structural protections in the transaction,
the risk of an event of default, recent deal performance under
current market conditions, the legal environment and specific
documentation features. All information available to rating
committees, including macroeconomic forecasts, inputs from other
Moody's analytical groups, market factors, and judgments regarding
the nature and severity of credit stress on the transactions, can
influence the final rating decision.
The portfolio of this CDO contains TruPS issued by small to medium
sized U.S. community banks, and REIT companies that Moody's does
not rate publicly. To evaluate the credit quality of bank TruPS
that do not have public ratings, Moody's uses RiskCalc™, an
econometric model developed by Moody's Analytics, to derive credit
scores. Moody's evaluation of the credit risk of most of the bank
obligors in the pool relies on the latest FDIC financial data. For
REIT TruPS that do not have public ratings, Moody's REIT group
assesses their credit quality using the REIT firms' annual
financials.
UBS-BARCLAYS COMMERCIAL 2012-C4: Fitch Affirms B Rating on F Certs
------------------------------------------------------------------
Fitch Ratings has affirmed 11 classes of UBS-Barclays Commercial
Mortgage Trust 2012-C4 commercial mortgage pass-through
certificates, series 2012-C4. Fitch has also revised the Outlook on
two classes to Negative.
KEY RATING DRIVERS
Stable Performance: The affirmations are based on stable
performance of the majority of the underlying collateral pool. As
of the September 2017 remittance report, the pool has been paid
down by 10.3% to $1.31 billion from $1.46 billion at issuance.
Fitch modeled losses of $47 million (3.6%) on the remaining pool.
Losses based on the original pool balance are 3.2%. The pool has
experienced no realized losses to date, and excluding the REO
property, no loans are delinquent. Twelve loans (5.1% of current
pool) have been defeased.
Loans of Concern/Specially Serviced Loans: Four loans (5.9%) are
Fitch Loans of Concern, including one (0.5%) performing specially
serviced loan, and one (0.4%) REO. Worthington on the Beltway
(0.5%) transferred to special servicing in December 2016 after a
fire in 2013 damaged 40 units in Building 1 and insurance issues
prevented the borrower from completing repairs. The special
servicer has ordered a property condition report and is gathering
information to determine the best course of action in relation to
the insurance claims. Hickory Commons (0.4%) transferred to special
servicing in January 2017 for imminent default when Burlington Coat
Factory (46% NRA) indicated it would vacate when its lease expired
in February 2017. The property went REO on July 31, 2017. The
special servicer is working to lease up vacant space and market the
property for sale, but stated in May 2017 that there was little
interest from tenants.
Regional Mall Exposure: Two of the top five loans in the pool,
Visalia Mall and Newgate Mall (10.1%), are regional malls with
full-term interest only loans that mature in May or June 2020,
respectively. Visalia Mall has exposure to Macy's and JCPenney, and
Newgate Mall, which is a Fitch Loan of Concern has exposure to
Sears and declining sales trends. All three of these anchors have
experienced store closures in recent months. Further declines in
sales or the loss of an anchor at Newgate Mall could result in
downgrades.
Single Tenant Exposure: Two of the 10 largest assets, representing
14.4% of the pool, are occupied by a single tenant or have exposure
in excess of 80% of the NRA to a single tenant.
Hurricane Exposure: Ten loans (15%) are located in counties
impacted by Hurricane Harvey. The majority of these properties had
minimal or no damage; however, one property (0.46%) located in
Kingwood, TX, was reported to have major damage. Only one borrower
has not yet been in contact with the servicer about a property
(0.52%), located in Humble, TX, which may have been impacted by
Hurricane Harvey. Just two loans, accounting for 1.9% of the pool,
are located in counties affected by Hurricane Irma; Fitch is
closely monitoring these loans and awaiting updates from the master
servicer.
Sports Authority Vacancies: Two top 10 properties had exposure to
Sports Authority, Newgate Mall and Clifton Commons (8.6%). Both
properties have since re-tenanted the spaces. Downeast Home opened
in 3Q 2016 in the Newgate Mall Sports Authority space and
Burlington Coat Factory opened in 1Q 2017 in the Sports Authority
space at Clifton Commons.
RATING SENSITIVITIES
The Rating Outlooks on classes A-2, A-3, A-4, A-5, A-AB, A-S, B, C,
D, X-A, and X-B are Stable due to overall stable pool performance.
The rating outlook on classes E and F has been revised to Negative
due to regional mall exposure, specifically Newgate Mall, which is
in a tertiary market and has experienced declining sales. Fitch
does not foresee positive ratings migration until significant
principal paydown, continued defeasance, or further improved
collateral performance occurs. Negative rating actions are possible
if performance of specially serviced, or Fitch Loans of Concern
deteriorates.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation
to this rating action.
Fitch has affirmed the following ratings and revised Outlooks as
indicated:
-- $7 million class A-2 at 'AAAsf'; Outlook Stable;
-- $132 million class A-3 at 'AAAsf'; Outlook Stable;
-- $150 million class A-4 at 'AAAsf'; Outlook Stable;
-- $476 million class A-5 at 'AAAsf'; Outlook Stable;
-- $104 million class A-AB 'AAAsf'; Outlook Stable;
-- $145.6 million class A-S at 'AAAsf'; Outlook Stable;
-- $1.015 billion* class X-A at 'AAAsf'; Outlook Stable;
-- $134.7 million* class X-B at 'A-sf'; Outlook Stable;
-- $69.2 million class B at 'AA-sf'; Outlook Stable;
-- $65.5 million class C at 'A-sf'; Outlook Stable;
-- $61.9 million class D at 'BBB-sf'; Outlook Stable;
-- $25.5 million class E at 'BBsf'; Outlook to Negative from
Stable;
-- $18.2 million class F at 'Bsf'; Outlook to Negative from
Stable.
*Notional amount and interest-only.
Class A-1 has been paid in full. Fitch does not rate the $51
million class G.
UNISON GROUND 2013-2: Fitch Affirms 'BB-sf' Rating on Cl. B Notes
-----------------------------------------------------------------
Fitch Ratings has affirmed Unison Ground Lease Funding, LLC secured
cellular site revenue notes, series 2013-1 and 2013-2:
-- $98,000,000 class 2013-1 A at 'Asf'; Outlook Stable;
-- $31,000,000 class 2013-1 B at 'BB-sf'; Outlook Stable;
-- $13,600,000 class 2013-2 A at 'Asf'; Outlook Stable;
-- $4,400,000 class 2013-2 B at 'BB-sf'; Outlook Stable.
The affirmations are the result of the stable performance of the
collateral since issuance with no significant changes to the
collateral composition. The Stable Outlooks reflect the limited
prospect for upgrades given the provision to issue additional
notes.
As of the September 2017 distribution date, the aggregate principal
balance of the notes was unchanged at $147 million. These notes do
not amortize during the loan term.
As part of its review, Fitch analyzed the financial and site
information provided by the Midland Loan Services.
KEY RATING DRIVERS
Long-Term Easements: The ownership interests in the sites consist
of 94.3% perpetual or long-term (30+ years) easements, 4.7% limited
term easements (less than 30 years), and 1% fee.
Stable Cash Flow: As of July 2017, the Fitch stressed debt service
coverage ratio (DSCR) was 1.33x, which compares with 1.23x at
issuance. The debt multiple relative to Fitch's net cash flow (NCF)
was 7.91x, which equates to a debt yield of 12.6%.
Leases to Strong Tower Tenants: Cash flow is derived from 1,222
separate leases across 1,025 sites in markets throughout the United
States and Puerto Rico. Investment-grade tenants account for
approximately 58.8% of run-rate revenue. Telephony towers account
for 95.6% of run-rate revenue.
Additional Notes: The transaction allows for the issuance of
additional notes. Such additional notes may rank senior to, pari
passu with, or subordinate to the 2013 notes. Additional notes may
be issued without the benefit of additional collateral, provided
the post-issuance DSCR is not less than 2.0x. The possibility of
upgrades may be limited due to this provision.
Risk of Technological Obsolescence: The notes have a rated final
payment date in 2042, and the long-term tenor of the notes
increases the risk that an alternative technology rendering
obsolete the current transmission of wireless signals through
cellular sites will be developed. Currently, WSPs depend on towers
to transmit their signals and continue to invest in this
technology.
RATING SENSITIVITIES
The Outlooks on all classes are expected to remain Stable.
Downgrades are unlikely due to continued cash flow growth from
annual rent escalations and automatic renewal clauses resulting in
higher debt service coverage ratios since issuance. The ratings
have been capped at 'A' and upgrades are unlikely due to the
structure of the security interest in the collateral, specialized
nature of the collateral, and the potential for changes in
technology to affect long-term demand for wireless tower space.
WELLS FARGO 2016-NXS6: Fitch Affirms 'B-sf' Rating on Class F Certs
-------------------------------------------------------------------
Fitch Ratings has affirmed Wells Fargo Commercial Mortgage Trust
pass-through certificates, series 2016-NXS6.
KEY RATING DRIVERS
The affirmations are based on the stable performance of the
underlying collateral. There have been no material changes to the
pool since issuance, therefore the original rating analysis was
considered in affirming the transaction.
Stable Performance: The overall pool performance remains stable
from issuance. There are no delinquent or specially serviced loans.
As of the September 2017 distribution date, the pool's aggregate
balance has been reduced by 0.6% to $752.9 million, from $757.1
million at issuance. No loans are on the servicer's watchlist, and
none are considered Fitch Loans of Concern.
Retail Concentration: Loans backed by retail properties represent
26.9% of the pool, including five (15.8%) in the top 15. One of the
retail loans (2.6%) is backed by a regional mall with exposure to
JC Penney and Macy's; both stores remain open.
Interest only loans: Ten loans (50.3% of the pool) are interest
only, which is higher than average of 23.3% for 2016 and 30.6% YTD
2016 Fitch rated multiborrower deals. Overall, the pool is
scheduled to pay down 9%, which is less than the averages of 11.7%
for 2015 and 10.4% YTD for 2016 for other Fitch rated multiborrower
transactions.
Highly Concentrated Pool: The top 10 loans in the transaction
represent 57.9% of the pool which is above the average for 2015 and
2016 Fitch rated deals at 49.3% and 55.3%; respectively.
Hurricane Exposure: Four loans (6.5%) are located in Florida
including the fifth largest loan (4.6%), The Falls, which is
located in Miami, Florida. The Falls was reported on the servicer's
significant insurance event report; however, an update on whether
damage occurred was not provided. One loan (2.3%) is located in the
Houston area and was reported on the servicer's significant
insurance event report and they have contacted the borrower and are
awaiting a response. Fitch is closely monitoring these loans and
awaiting updates from the master servicer on whether the properties
have been impacted by Hurricane Harvey or Hurricane Irma.
RATING SENSITIVITIES
The Rating Outlooks on all classes remain Stable. Fitch does not
foresee positive or negative ratings migration until a material
economic or asset-level event changes the transaction's overall
portfolio-level metrics.
Fitch has affirmed the following ratings:
-- $22.8 million class A-1 at 'AAAsf'; Outlook Stable;
-- $115.8 million class A-2 at 'AAAsf'; Outlook Stable;
-- $150.0 million class A-3 at 'AAAsf'; Outlook Stable;
-- $206.0 million class A-4 at 'AAAsf'; Outlook Stable;
-- $31.1 million class A-SB at 'AAAsf'; Outlook Stable;
-- $48.3 million class A-S at 'AAAsf'; Outlook Stable;
-- $525.7a million class X-A at 'AAAsf'; Outlook Stable;
-- $120.2a million class X-B at'AA-sf'; Outlook Stable;
-- $36.0 million class B at 'AA-sf'; Outlook Stable;
-- $36.0 million class C at 'A-sf'; Outlook Stable;
-- $43.5ab million class at X-D 'BBB-sf'; Outlook Stable;
-- $20.8ab million class at X-E 'BB-sf'; Outlook Stable;
-- $43.5b million class D at 'BBB-sf'; Outlook Stable;
-- $20.8b million class E at 'BB-sf'; Outlook Stable.
-- $8.5b million class F at 'B-sf'; Outlook Stable.
(a) Notional amount and interest-only.
(b) Privately placed and pursuant to Rule 144A.
Fitch does not rate the class X-FG, X-H, G, or the class H
certificates.
WESTCHESTER CLO: Moody's Lowers Rating on Cl. E Notes to Caa1
-------------------------------------------------------------
Moody's Investors Service has upgraded the rating on the following
notes issued by Westchester CLO, Ltd.:
US$53,500,000 Class C Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2022, Upgraded to Aa2 (sf);
previously on April 21, 2017 Upgraded to A1 (sf)
Moody's also downgraded the rating on the following notes:
US$37,500,000 Class E Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2022 (current outstanding balance of
$25,526,408), Downgraded to Caa1 (sf); previously on April 21, 2017
Affirmed B1 (sf)
In addition, Moody's also affirmed the ratings on the following
notes:
US$142,500,000 Class A-1-B Floating Rate Senior Secured
Extendable Notes Due 2022 (current outstanding balance of
$10,078,927), Affirmed Aaa (sf); previously on April 21, 2017
Affirmed Aaa (sf)
US$80,000,000 Class B Floating Rate Senior Secured Extendable
Notes Due 2022, Affirmed Aaa (sf); previously on April 21, 2017
Upgraded to Aaa (sf)
US$36,000,000 Class D Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2022, Affirmed Ba2 (sf); previously
on April 21, 2017 Affirmed Ba2 (sf)
Westchester CLO, Ltd., issued in May 2007, is a collateralized loan
obligation (CLO) backed primarily by a portfolio of senior secured
loans, with exposure to CLO securities, illiquid loans and legacy
defaulted assets. The transaction's reinvestment period ended in
August 2014.
RATINGS RATIONALE
The rating upgrade on the Class C notes and rating affirmations on
the Class A-1-B, Class B and Class D notes are primarily a result
of deleveraging of the notes and an increase in the transaction's
over-collateralization (OC) ratios since April 2017. The Class
A-1-A notes have been paid off in full and the Class A-1-B notes
have been paid down by approximately 92.9% or $132.4 million since
that time. In addition, the Class E notes have been paid down by
approximately 5.9% or $1.6 million due to the failure of the Class
E OC Test on the May 2017 payment date. Based on the trustee's
August 2017 report, the OC ratios for the Class A/B, Class C, Class
D, and Class E notes are reported at 233.80%, 146.68%, 117.28%, and
102.68%, respectively, versus April 2017 levels of 149.43%,
122.67%, 109.47%, and 101.26%, respectively.
The rating downgrade on the Class E notes is a result of the
deterioration of the credit quality of the portfolio and the market
risk stemming from exposure to securities that mature after the
notes do. Based on Moody's calculation, the weighted average rating
factor (WARF) is currently 3251 compared to 2701 in April 2017. The
portfolio also includes $10.2 million of investments in securities
that mature after the notes do. These investments could expose the
notes to market risk in the event of liquidation when the notes
mature. Furthermore, the deal holds a material par amount of thinly
traded or untraded loans, whose lack of liquidity may pose
additional risks, especially for the Class D and the Class E notes,
relating to the issuer's ultimate ability to pursue a liquidation
of such assets, especially if the sales can be transacted only at
heavily discounted price levels.
The rating actions on the Class D and Class E notes also reflect a
correction to Moody's modeling. In previous rating actions, the use
of principal proceeds to pay the most junior debt tranche in the
event of a failure of the junior overcollateralization test was
modeled incorrectly. This error has been corrected, and rating
actions reflect this change.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
August 2017.
Factors that Would Lead to an Upgrade or Downgrade of the Ratings:
This transaction is subject to a number of factors and
circumstances that could lead to either an upgrade or downgrade of
the ratings:
1) Macroeconomic uncertainty: CLO performance is subject to
uncertainty about credit conditions in the general economy.
2) Collateral Manager: Performance can also be affected positively
or negatively by a) the manager's investment strategy and behavior
and b) differences in the legal interpretation of CLO documentation
by different transactional parties owing to embedded ambiguities.
3) Collateral credit risk: A shift towards collateral of better
credit quality, or better credit performance of assets
collateralizing the transaction than Moody's current expectations,
can lead to positive CLO performance. Conversely, a negative shift
in credit quality or performance of the collateral can have adverse
consequences for CLO performance.
4) Deleveraging: An important source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging of the CLO
could accelerate owing to high prepayment levels in the loan market
and/or collateral sales by the manager, which could have a
significant impact on the notes' ratings. Note repayments that are
faster than Moody's current expectations will usually have a
positive impact on CLO notes, beginning with those with the highest
payment priority.
5) Recovery of defaulted assets: Fluctuations in the market value
of defaulted assets could result in volatility in the deal's
overcollateralization levels. Further, the timing of recovery
realization and whether the Manager decides to work out or sell
defaulted assets create additional uncertainty. Realization of
recoveries that are either materially higher or lower than assumed
in Moody's analysis would impact the CLO positively or negatively,
respectively.
6) Long-dated and illiquid assets: Repayment of the notes at their
maturity will be highly dependent on the issuer's successful
monetization of illiquid assets and those that mature after the
CLO's legal maturity date (long-dated assets). This risk in turn
may be contingent upon issuer's ability and willingness to sell
these assets. This risk is borne first by investors with the lowest
priority in the capital structure. However, actual long-dated and
illiquid asset exposures and prevailing market prices and
conditions at the time of liquidation will drive the deal's actual
losses, if any.
7) Exposure to credit estimates: The deal contains a large number
of securities whose default probabilities Moody's has assessed
through credit estimates. Moody's normally updates such estimates
at least once annually, but if such updates do not occur, the
transaction could be negatively affected by any default probability
adjustments Moody's assumes in lieu of updated credit estimates.
Additionally, Moody's normally maps certain credit estimates
representing more than 3% of performing assets to equivalent
ratings subject to a two-notch haircut.
8) Lack of portfolio granularity: The performance of the portfolio
depends to a large extent on the credit conditions of a few large
obligors Moody's rates Caa1 or lower, especially if they jump to
default.
In addition to the base case analysis, Moody's also conducted
sensitivity analyses to test the impact of a number of default
probabilities on the rated notes relative to the base case modeling
results, which may be different from the current public ratings of
the notes. Below is a summary of the impact of different default
probabilities (expressed in terms of WARF) on all of the rated
notes (by the difference in the number of notches versus the
current model output, for which a positive difference corresponds
to lower expected loss):
Moody's Adjusted WARF - 20% (2601)
Class A-1-B: 0
Class B: 0
Class C: +1
Class D: +1
Class E: +2
Moody's Adjusted WARF + 20% (3901)
Class A-1-B: 0
Class B: 0
Class C: -2
Class D: -1
Class E: -1
Loss and Cash Flow Analysis:
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in "Moody's Global
Approach to Rating Collateralized Loan Obligations."
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and the weighted
average recovery rate, are based on its published methodology and
could differ from the trustee's reported numbers. In its base case,
Moody's analyzed the collateral pool as having a performing par and
principal proceeds balance of $204.7 million, defaulted par of
$55.4 million, a weighted average default probability of 21.43%
(implying a WARF of 3251), a weighted average recovery rate upon
default of 48.29%, a diversity score of 19 and a weighted average
spread of 3.22% (before accounting for LIBOR floors).
Moody's incorporates the default and recovery properties of the
collateral pool in cash flow model analysis where they are subject
to stresses as a function of the target rating on each CLO
liability reviewed. Moody's derives the default probability from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate for future defaults is based primarily on the seniority of the
assets in the collateral pool. Moody's generally applies recovery
rates for CLO securities as published in "Moody's Approach to
Rating SF CDOs". In some cases, alternative recovery assumptions
may be considered based on the specifics of the analysis of the CLO
transaction. In each case, historical and market performance and
the collateral manager's latitude for trading the collateral are
also factors.
WESTLAKE AUTOMOBILE 2017-2: DBRS Finalizes BB on Class E Notes
--------------------------------------------------------------
DBRS, Inc. has finalized its provisional ratings on these classes
of notes issued by Westlake Automobile Receivables Trust 2017-2
(the Issuer):
-- $214,000,000 Class A-1 at R-1 (high) (sf)
-- $249,220,000 Class A-2-A at AAA (sf)
-- $40,000,000 Class A-2-B at AAA (sf)
-- $74,840,000 Class B at AA (sf)
-- $98,900,000 Class C at A (sf)
-- $81,720,000 Class D at BBB (sf)
-- $41,320,000 Class E at BB (sf)
The ratings are based on DBRS's review of these analytical
considerations:
-- Transaction capital structure, proposed ratings and form and
sufficiency of available credit enhancement.
-- The ability of the transaction to withstand stressed cash
flow assumptions and repay investors according to the terms
under which they have invested. For this transaction, the
rating addresses the timely payment of interest on a monthly
basis and principal by the legal final maturity date for each
class.
-- The credit quality of the collateral and performance of the
auto loan portfolio by origination channels.
-- The capabilities of Westlake Services, LLC (Westlake) with
regards to originations, underwriting and servicing.
-- The quality and consistency of provided historical static
pool data for Westlake originations and performance of the
Westlake auto loan portfolio.
-- Wells Fargo Bank, N.A. (rated AA (high) with a Negative
trend/R-1 (high) with a Stable trend by DBRS) has served as
a backup servicer for Westlake since 2003, when a conduit
facility was put in place.
-- The legal structure and presence of legal opinions that
address the true sale of the assets to the Issuer, the non-
consolidation of the special-purpose vehicle with Westlake,
that the trust has a valid first-priority security interest
in the assets and the consistency with the DBRS "Legal
Criteria for U.S. Structured Finance" methodology.
The collateral securing the notes consists entirely of a pool of
retail automobile contracts secured by predominantly used vehicles
that typically have high mileage. The loans are primarily made to
obligors who are categorized as subprime, largely because of their
credit history and credit scores.
The ratings on the Class A Notes reflect the 42.50% of initial hard
credit enhancement provided by the subordinated notes in the pool,
the Reserve Account (1.00%) and overcollateralization (7.00%). The
ratings on the Class B, Class C, Class D and Class E Notes reflect
33.80%, 22.30%, 12.80% and 8.00% of initial hard credit
enhancement, respectively. Additional credit support may be
provided from excess spread available in the structure.
WFRBS COMMERCIAL 2014-C21: DBRS Keeps B Rating on Class F Certs
---------------------------------------------------------------
DBRS Limited confirmed the ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2014-C21 issued by WFRBS
Commercial Mortgage Trust 2014-C21 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-SBFL at AAA (sf)
-- Class A-SBFX at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class PEX at A (low) (sf)
-- Class X-B at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (high) (sf)
-- Class E at BB (sf)
-- Class X-D at B (high) (sf)
-- Class F at B (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction since issuance. The collateral consists of 122
fixed-rate loans secured by 146 commercial and multifamily
properties. As of the July 2017 remittance, there has been a
collateral reduction of 2.5% as a result of scheduled loan
amortization, with all loans remaining in the pool and a current
trust balance of $1,387.3 million. Loans representing 83.5% of the
current pool balance reported YE2016 cash flow figures. The
portfolio reported a weighted-average (WA) debt service coverage
ratio (DSCR) and WA debt yield of 1.80 times (x) and 10.5%,
respectively, compared with the DBRS WA DSCR and WA debt yield of
1.66x and 9.6%, respectively, at issuance. The largest 15 loans in
the pool reported a WA DSCR and debt yield of 1.73x and 9.5%,
respectively, reflective of a WA net cash flow growth of 6.8% over
the DBRS issuance figures.
As of the July 2017 remittance, there were 24 loans, representing
21.9% of the current pool balance, on the servicer's watchlist. The
watchlist is concentrated in the top 15, with five loans
representing 16.2% of the watchlist. Three of these loans in the
top 15 are performing and being monitored for
non-performance-related issues. Two loans, representing 1.7% of the
pool balance, are currently in special servicing. The larger of
those two loans, Prospectus ID #19, Best Western Premier Hotel Napa
(1.3% of the pool) is in special servicing because the borrower
terminated the franchise agreement with Best Western and has been
operating the hotel as an independent hotel without servicer
consent.
The ratings assigned to Class C and the exchangeable Class PEX
materially deviate from the higher ratings implied by the
quantitative results. DBRS considers a material deviation to be a
rating differential of three or more notches between the assigned
rating and the rating implied by the quantitative results that is a
substantial component of a rating methodology. The deviations are
warranted because the sustainability of loan performance trends was
not demonstrated.
[*] Fitch: Delinquencies Continue to Fall for US RMBS Servicers
---------------------------------------------------------------
Subprime delinquencies are still declining for most companies
servicing underperforming U.S. mortgage loans, though two of the
biggest names in the space continue to add subprime loans to their
portfolios according to Fitch Ratings in the latest update to the
U.S. RMBS Servicer Handbook.
Non-bank servicers in particular saw significant declines for
subprime delinquencies to 22.8% from 25.1% from last quarter and
27.3% year over year. Bank servicers followed suit albeit at a more
modest rate for subprime delinquencies (to 8.5% from 8.6% from last
quarter and unchanged from one year earlier). Subprime
delinquencies for both non-banks and banks have improved to roughly
half the levels observed four years ago at the end of 2013.
Fitch's latest servicer handbook includes portfolio information on
newest entrant Flagstar Bank, FSB. The third-largest savings bank
and a top-five mortgage originator in the U.S., Flagstar's
servicing portfolio had the second lowest 60+ delinquency rate
among Fitch's nine rated bank servicers (behind only First Republic
Bank). Flagstar (RPS2-/Stable Outlook) services over 400,000
residential mortgage loans with an unpaid principal balance (UPB)
of approximately $87 billion.
Also notable in Fitch's latest RMBS servicer handbook:
-- Select Portfolio Servicing (SPS) grew its total portfolio by
14.4% from the prior quarter to approximately 574,000 loans as
its subprime RMBS portfolio grew to approximately 433,000
loans;
-- Ocwen, the largest subprime RMBS servicer with approximately
617,000 loans, saw its total portfolio decline by 3.8% to
1.276 million loans;
-- Nationstar grew its portfolio by 7% to 2.798 million loans and
remains the largest non-bank servicer. Its subprime portfolio
is smaller than both Ocwen's and SPS's at approximately
146,000 loans.
Fitch's U.S. RMBS Servicer Handbook includes a description of all
Fitch-rated servicers, their current servicer ratings and key
rating drivers, portfolio size and key attributes, important
trends, links to the full RMBS servicer reports, and Fitch analyst
contact information. The portfolio data incorporates the latest
quarterly updates from the servicers. Fitch updates the Handbook on
a quarterly basis. These updates include rating changes, any
changes to key rating drivers, and portfolio size and attribute
data.
[*] Fitch: New Issuance Offsets USCMBS Delinquencies in September
-----------------------------------------------------------------
Strong new issuance volume led to a decline in the U.S. CMBS
delinquency rate last month, according to the latest index results
from Fitch Ratings.
Loan delinquencies declined six basis points (bps) to 3.53% in
September from 3.59% a month earlier. Resolutions of $639 million
and new delinquencies of $600 million last month were both well
below their year-to-date monthly averages. Meanwhile, Fitch-rated
new issuance volume of $7.3 billion from eight transactions in
August significantly exceeded last month's portfolio runoff of $2.9
billion. Fitch expects new issuance volume will continue to outpace
portfolio runoff as an additional $8 billion of new issuance from
seven transactions will be added to next month's figures, compared
to less than $7 billion of outstanding loan maturities within the
Fitch-rated universe through the end of 2017.
The largest new delinquency last month was the $93 million
Charleston Town Center loan (BSCMS 2007-TOP28), which defaulted at
its September 2017 maturity. The largest resolution last month was
the $124 million Metropolitan Square loan (WBCMT 2005-C21), which
is secured by a 987,300 sf office property located in downtown St.
Louis, MO.
Current and previous delinquency rates by property type are as
follows:
-- Retail*: 6.10% (from 6.17% in August);
-- Office: 5.84% (from 6.06%);
-- Industrial: 4.24% (from 3.93%);
-- Mixed Use: 3.32% (from 3.38%);
-- Hotel: 2.85% (from 2.87%);
-- Multifamily: 0.68% (from 0.69%);
-- Other: 0.87% (from 0.80%).
[*] Moody's Hikes $553MM of Subprime RMBS Issued 2005 & 2006
------------------------------------------------------------
Moody's Investors Service, on Oct. 10, 2017, upgraded the ratings
of 22 tranches from 7 transactions issued by various issuers.
Complete rating actions are:
Issuer: CWABS Asset-Backed Certificates Trust 2006-26
Cl. 2-A-3, Upgraded to Ba2 (sf); previously on Oct 17, 2016
Upgraded to B3 (sf)
Cl. 2-A-4, Upgraded to B1 (sf); previously on Oct 17, 2016 Upgraded
to Caa1 (sf)
Issuer: Merrill Lynch Mortgage Investors Trust 2006-FF1
Cl. B-1, Upgraded to Baa1 (sf); previously on Apr 27, 2017 Upgraded
to Ba1 (sf)
Cl. B-2, Upgraded to Baa3 (sf); previously on Apr 27, 2017 Upgraded
to Ba2 (sf)
Cl. M-2, Upgraded to Aaa (sf); previously on Apr 27, 2017 Upgraded
to Aa1 (sf)
Cl. M-3, Upgraded to Aaa (sf); previously on Apr 27, 2017 Upgraded
to Aa3 (sf)
Cl. M-4, Upgraded to Aa2 (sf); previously on Apr 27, 2017 Upgraded
to A1 (sf)
Cl. M-5, Upgraded to A1 (sf); previously on Apr 27, 2017 Upgraded
to A3 (sf)
Cl. M-6, Upgraded to A2 (sf); previously on Apr 27, 2017 Upgraded
to Baa2 (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE1
Cl. M-2, Upgraded to Ba1 (sf); previously on Jan 25, 2017 Upgraded
to Ba3 (sf)
Cl. M-3, Upgraded to B1 (sf); previously on Jan 25, 2017 Upgraded
to B3 (sf)
Cl. M-4, Upgraded to Caa1 (sf); previously on Jan 25, 2017 Upgraded
to Caa3 (sf)
Cl. M-5, Upgraded to Caa3 (sf); previously on Jul 15, 2010
Downgraded to C (sf)
Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE5
Cl. M-2, Upgraded to Ba1 (sf); previously on Sep 17, 2014 Upgraded
to B1 (sf)
Cl. M-3, Upgraded to B3 (sf); previously on May 3, 2016 Upgraded to
Caa2 (sf)
Issuer: Morgan Stanley Home Equity Loan Trust 2005-3
Cl. M-3, Upgraded to Ba1 (sf); previously on Nov 4, 2015 Upgraded
to B1 (sf)
Cl. M-4, Upgraded to B2 (sf); previously on May 5, 2017 Upgraded to
Ca (sf)
Issuer: Morgan Stanley Home Equity Loan Trust 2006-1
Cl. A-2c, Upgraded to Aaa (sf); previously on Apr 10, 2017 Upgraded
to Aa2 (sf)
Cl. M-1, Upgraded to Ba1 (sf); previously on Jun 25, 2015 Upgraded
to B1 (sf)
Issuer: RASC Series 2005-KS8 Trust
Cl. M-3, Upgraded to Aaa (sf); previously on Mar 28, 2017 Upgraded
to Aa2 (sf)
Cl. M-4, Upgraded to Aa3 (sf); previously on Mar 28, 2017 Upgraded
to A2 (sf)
Cl. M-6, Upgraded to B1 (sf); previously on Mar 28, 2017 Upgraded
to Caa1 (sf)
RATINGS RATIONALE
The rating upgrades are primarily due to the total credit
enhancement available to the bonds. The actions reflect the recent
performance of the underlying pools and Moody's updated loss
expectation on these pools.
The rating actions on CWABS Asset-Backed Certificates Trust 2006-26
Class 2-A-4, Merrill Lynch Mortgage Investors Trust 2006-FF1 Class
B-1, Morgan Stanley ABS Capital I Inc. Trust 2005-HE1 Class M-5,
Morgan Stanley ABS Capital I Inc. Trust 2005-HE5 Class M-3, Morgan
Stanley Home Equity Loan Trust 2005-3 Class M-4 and RASC Series
2005-KS8 Trust Class M-6 also partially reflect a correction to the
cash-flow models previously used by Moody's in rating these
transactions.
In prior rating actions, the cash flow model for CWABS Asset-Backed
Certificates Trust 2006-26 allocated losses to collateral group 2
that were too high, thereby underestimating the excess interest
available to be paid as principal to group 2 bonds. The cash flow
models for Merrill Lynch Mortgage Investors Trust 2006-FF1, Morgan
Stanley ABS Capital I Inc. Trust 2005-HE1, Morgan Stanley ABS
Capital I Inc. Trust 2005-HE5 and Morgan Stanley Home Equity Loan
Trust 2005-3 did not reimburse projected losses after the tranches
reached a zero balance, thus overestimating the projected losses on
some tranches. The cash flow model for RASC Series 2005-KS8
projected interest payments for Class M-6 that were too low,
thereby overestimating the funds available from excess spread to be
paid as principal. These errors have now been corrected, and rating
actions reflect these changes.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in January 2017.
Factors that would lead to an upgrade or downgrade of the ratings:
Ratings in the US RMBS sector remain exposed to the high level of
macroeconomic uncertainty, and in particular the unemployment rate.
The unemployment rate fell to 4.2% in September 2017 from 4.9% in
September 2016. Moody's forecasts an unemployment central range of
4.5% to 5.5% for the 2017 year. Deviations from this central
scenario could lead to rating actions in the sector. House prices
are another key driver of US RMBS performance. Moody's expects
house prices to continue to rise in 2017. Lower increases than
Moody's expects or decreases could lead to negative rating actions.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures.
[*] S&P Takes Various Action on 87 Classes From 10 US RMBS Deals
----------------------------------------------------------------
S&P Global Ratings completed its review of 87 classes from 10 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 1999 and 2007. All of these transactions are backed by
Alternative-A (Alt-A) collateral. The review yielded 18 upgrades,
five downgrades, 59 affirmations, and five discontinuances.
Analytical Considerations
S&P incorporates various considerations into its decisions to
raise, lower, or affirm ratings when reviewing the indicative
ratings suggested by our projected cash flows. These considerations
are based on transaction-specific performance or structural
characteristics (or both) and their potential effects on certain
classes. Some of these considerations include:
-- Collateral performance/delinquency trends;
-- Historical interest shortfalls;
-- Expected short duration;
-- Priority of principal payments; and
-- Available subordination and/or overcollateralization.
Rating Actions
Please see the ratings list for the rationales for classes with
rating transitions. The affirmations of ratings reflect S&P's
opinion that its projected credit support and collateral
performance on these classes has remained relatively consistent
with S&P prior projections.
S&P said, "We raised our ratings on four senior classes by six
notches due to expected short duration. These four classes are
backed by 15-year amortization collateral, which is expected to pay
down within the next 24 months, reducing the timeframe in which
these classes are exposed to potential losses. The respective
collateral groups have strong performance with low delinquencies
and a large proportion of non-delinquent loans, with sufficient
balances to pay down these four classes. In addition, these classes
benefit from subordination of junior classes that are
cross-collateralized with long amortization collateral."
The raised ratings on classes 1-A-1 and 1-A-2 from MASTR
Alternative Loan Trust 2004-6 reflect an expected payoff within the
next one-to-two months, based on the average scheduled principal
payments, greatly limiting their exposure to potential losses.
During the September 2017 distribution period, each class received
a large prepayment allocation, which greatly reduced their
principal balances by 98.9% from the previous month.
A list of affected ratings can be viewed at:
http://bit.ly/2y6uN4P
[*] S&P Takes Various Actions on 13 Classes From 11 US RMBS Deals
-----------------------------------------------------------------
S&P Global Ratings completed its review of 13 classes from 11 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2003 and 2007. All of these transactions are backed by
mixed collateral. S&P lowered 10 ratings, removed two from
CreditWatch with negative implications, and placed one on
CreditWatch with negative implications.
S&P said, "The CreditWatch placement reflects interest shortfalls
on the affected class as reported by the trustee report in the
recent remittance period, which could negatively affect our rating
on this class. After verifying this interest shortfall, we will
adjust the rating as we consider appropriate per our criteria."
APPLICATION OF INTEREST SHORTFALL CRITERIA
S&P said, "In reviewing some of these ratings, we applied our
interest shortfall criteria as stated in "Structured Finance
Temporary Interest Shortfall Methodology," Dec. 15, 2015, which
impose a maximum rating threshold on classes that have incurred
interest shortfalls resulting from credit or liquidity erosion. In
applying the criteria, we looked to see if the applicable class
received additional compensation beyond the imputed interest due as
direct economic compensation for the delay in interest payment. In
instances where the class did not receive additional compensation
for outstanding interest shortfalls, we used the maximum length of
time until full interest is reimbursed as part of our analysis to
assign the rating on the class.
"We removed our 'B- (sf)' rating on class A from Bear Stearns Asset
Backed Securities I Trust 2005-AC1 and 'CCC (sf)' rating on class
I-A from Bear Stearns Asset Backed Securities I Trust 2005-AC2 from
CreditWatch negative after we received information to assess the
impact of missed interest payments on these classes."
The list of affected ratings can be viewed at:
http://bit.ly/2wNCaN6
*********
Monday's edition of the TCR delivers a list of indicative prices
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obtained by TCR editors from a variety of outside sources during
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