/raid1/www/Hosts/bankrupt/TCR_Public/200315.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, March 15, 2020, Vol. 24, No. 74
Headlines
ALM XIX: S&P Assigns BB- (sf) Rating to Class D-R2 Notes
ANCHORAGE CAPITAL 7: S&P Rates Class E-R2 Notes 'BB- (sf)'
APIDOS CLO XXII: Moody's Assigns B3 Rating on $10MM Cl. E-R Notes
BANK 2020-BNK26: Fitch Assigns B-sf Rating on $11.4MM Cl. G Certs
BANK OF AMERICA 2016-UBS10: Fitch Affirms Bsf Rating on 2 Tranches
BELLEMEADE RE 2020-1: Moody's Gives (P)B3 Rating on 3 Tranches
BENCHMARK 2018-B3: Fitch Affirms B-sf Rating on Class H-RR Certs
BHMS 2018-ATLS: DBRS Confirms BB Rating on Class E Certs
CONNECTICUT AVENUE 2020-SBT1: Fitch Assigns B Rating on 13 Tranches
CT CDO IV: Fitch Affirms Csf Ratings on 9 Tranches
CUTWATER LTD 2014-I: Moody's Lowers $7.3MM Cl. E Notes to Caa3
DENBURY RESOURCES: Moody's Lowers CFR to Caa2, Outlook Neg.
ELEVATION CLO 2020-11: S&P Assigns Prelim 'BB-' Rating to E Notes
FLAGSTAR MORTGAGE 2020-2: Fitch to Rate Class B-5 Certs 'B(EXP)'
FREDDIE MAC 2020-1: DBRS Gives Prov. B(low) Rating on Cl. M Certs
FREDDIE MAC 2020-1: Fitch Assigns B-sf Rating on Class M Debt
GALTON FUNDING 2020-H1: DBRS Finalizes B Rating on Class B2 Certs
GSAMP TRUST 2004-NC1: Moody's Lowers Rating on Class M-1 Debt to B1
JP MORGAN 2008-C2: Moody's Affirms C Rating on 2 Tranches
JP MORGAN 2019-2: Moody's Hikes Class B-5 Debt Rating to B1(sf)
JPMBB COMMERCIAL 2014-C22: Moody's Affirms Ba1 Rating on UHP Debt
KKR INDUSTRIAL 2020-AIP: Moody's Rates Class E Certs '(P)B3'
MFA TRUST 2020-NQM1: DBRS Gives Prov. B Rating on Class B-2 Certs
MMCAPS FUNDING XVIII: Fitch Affirms Csf Rating on Class D Debt
MORGAN STANLEY 2005-HQ7: Moody's Lowers Class F Certs to Ca
MORGAN STANLEY 2007-TOP25: DBRS Confirms C Rating on Class C Certs
MORGAN STANLEY 2007-TOP25: Moody's Lowers Cl. A-J Debt to B1
MORGAN STANLEY 2013-C10: Fitch Affirms B Rating on Class H Debt
NEW RESIDENTIAL 2020-2: DBRS Gives Prov. B Rating on 10 Classes
OZLM LTD XV: Moody's Assigns Ba3 Rating on $22MM Class D-R Notes
RALI TRUST 2006-QH1: Moody's Hikes Cl. A-1 Debt Rating to Caa1
SBALR COMMERCIAL 2020-RR1: DBRS Finalizes B(low) Rating on F Certs
WELLS FARGO 2015-C30: Fitch Affirms B-sf Rating on Class F Certs
WOODMONT 2017-3: S&P Assigns 'BB (sf)' Rating to Class E-R Notes
YORK CLO-4: S&P Assigns BB- (sf) Rating to Class E-R Notes
[*] DBRS Takes Rating Action on 579 Classes From 33 U.S. RMBS Deals
[*] Moody's Takes Action on $173MM of ARM/RMBS Issued 2004-2005
*********
ALM XIX: S&P Assigns BB- (sf) Rating to Class D-R2 Notes
--------------------------------------------------------
S&P Global Ratings assigned ratings to the class A-1a-R2, A-2a-R2,
A-2b-R2, B-R2, C-R2, and D-R2 replacement notes from ALM XIX Ltd.,
a collateralized loan obligation (CLO) originally issued in 2016
and later reset in March 2019, managed by Apollo Credit Management
(CLO) LLC. S&P does not rate the replacement class A-1b-R2 notes.
The replacement notes were issued via a supplemental indenture.
"The ratings reflect our opinion that the credit support available
is commensurate with the associated rating levels," S&P said.
On the March 9, 2020, refinancing date, proceeds from the issuance
of the replacement notes redeemed the original notes. As such, S&P
withdrew its ratings on the original notes.
The replacement notes were issued via a supplemental and conformed
indenture. Based on the indenture and the information provided to
S&P Global Ratings in connection with S&P's review, the replacement
notes were issued at a lower spread than the original notes, and
the class balances and the subordination levels have changed in the
post-refinanced structure. Additionally, there are new class
A-2b-R2 notes introduced in the structure, which are deferrable and
senior to the B-R2 notes, but junior to the class A-2a-R2 notes.
These notes sit below the most senior overcollateralization (O/C)
test in the payment priority. Although it is quite uncommon to have
an 'AA (sf)' category-rated CLO tranche with this type of feature,
S&P feels that this risk is mitigated by the fact that its cash
flow model reflects that the class A-2b-R2 notes are fully
deferrable.
Table 1
Replacement Notes
Class Amount (mil. $) Interest rate (%)
A-1a-R2 303.00 LIBOR + 1.00
A-1b-R2 23.50 LIBOR + 1.35
A-2a-R2 24.00 LIBOR + 1.45
A-2b-R2 10.00 LIBOR + 1.55
B-R2 33.00 LIBOR + 2.00
C-R2 23.50 LIBOR + 3.00
D-R2 21.00 LIBOR + 6.80
Table 2
Original Notes
Class Amount (mil. $) Interest rate (%)
A-1a-R 298.50 LIBOR + 1.35
A-1b-R 25.00 LIBOR + 1.55
A-2-R 21.50 LIBOR + 1.75
B-R 48.50 LIBOR + 2.60
C-R 23.50 LIBOR + 3.60
D-R 21.00 LIBOR + 6.85
The supplemental indenture, in addition to outlining the terms of
the replacement notes, also:
-- Modifies the reference rate to allow for amendments from LIBOR
to an alternative designated reference rate;
-- Updates O/C ratio test levels;
-- Updates the Standard & Poor's CDO Monitor language to conform
to the current methodology;
-- Updates the S&P Global Ratings recovery rate tables and the
industry and country classifications to conform to the latest
criteria released; and
-- Reestablishes the non-call period to end in March 2021.
On a standalone basis, the results of the cash flow analysis
indicated a thin cushion on the class D-R2 notes; however, S&P was
comfortable assigning a 'BB- (sf)' rating to these notes after
considering the relatively stable O/C ratios that currently have
significant cushion over their minimum requirements, the stable
credit quality of the portfolio, and that the transaction will soon
enter its amortization phase. Based on the latter, S&P expects the
credit support available to all rated classes to increase as
principal is collected and paydowns to the senior notes occur.
"Our review of this transaction included a cash flow analysis,
based on the portfolio and transaction as reflected in the
aforementioned 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 and/or ultimate
principal to each of the rated tranches. In our view, the results
of the cash flow analysis, and other qualitative factors as
applicable, demonstrated that all of the rated outstanding classes
have adequate credit enhancement available at the rating levels
assigned," S&P said.
"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," the rating agency said.
RATINGS ASSIGNED
ALM XIX Ltd./ALM XIX LLC (Refinancing)
Replacement class Rating Amount (mil. $)
A-1a-R2 AAA (sf) 303.00
A-1b-R2 NR 23.50
A-2a-R2 AA+ (sf) 24.00
A-2b-R2 AA (sf) 10.00
B-R2 A (sf) 33.00
C-R2 BBB- (sf) 23.50
D-R2 BB- (sf) 21.00
Subordinated notes NR 36.35
NR--Not rated.
RATINGS WITHDRAWN
ALM XIX Ltd./ALM XIX LLC
Rating
Class To From
A-1a-R NR AAA (sf)
A-2-R NR AA (sf)
B-R NR A (sf)
C-R NR BBB- (sf)
D-R NR BB- (sf)
NR--Not rated.
ANCHORAGE CAPITAL 7: S&P Rates Class E-R2 Notes 'BB- (sf)'
----------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R2, B-R2,
C-R2, D1-R2, D2-R2, and E-R2 replacement notes from Anchorage
Capital CLO 7 Ltd., a CLO originally issued in 2015 that is managed
by Anchorage Capital Group LLC. S&P withdrew its ratings on the
original class A-R, B-1-R, B-2-R, C-R, D-R, and E-R notes following
payment in full on the March 6, 2020, refinancing date.
On the March 6, 2020, refinancing date, the proceeds from the
issuance of the replacement notes 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 its
preliminary ratings on the replacement notes.
"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," S&P said.
"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," the rating agency said.
RATINGS ASSIGNED
Anchorage Capital CLO 7 Ltd.
Replacement class Rating Amount (mil. $)
A-R2 AAA (sf) 372.00
B-R2 AA (sf) 78.00
C-R2 (deferrable) A (sf) 42.00
D1-R2 (deferrable) BBB- (sf) 25.50
D2-R2 (deferrable) BBB- (sf) 10.50
E-R2 (deferrable) BB- (sf) 24.00
Subordinated notes NR 74.50
RATINGS WITHDRAWN
Rating
Class To From
A-R NR AAA (sf)
B-1-R NR AA (sf)
B-2-R NR AA (sf)
C-R (deferrable) NR A (sf)
D-R (deferrable) NR BBB (sf)
E-R (deferrable) NR BB (sf)
NR--Not rated.
APIDOS CLO XXII: Moody's Assigns B3 Rating on $10MM Cl. E-R Notes
-----------------------------------------------------------------
Moody's Investors Service assigned ratings to six classes of CLO
refinancing notes issued by Apidos CLO XXII.
Moody's rating action is as follows:
US$325,000,000 Class A-1R Senior Secured Floating Rate Notes due
2031 (the "Class A-1R Notes"), Assigned Aaa (sf)
US$55,000,000 Class A-2R Senior Secured Floating Rate Notes due
2031 (the "Class A-2R Notes"), Assigned Aa2 (sf)
US$29,500,000 Class B-R Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class B-R Notes"), Assigned A2 (sf)
US$29,000,000 Class C-R Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class C-R Notes"), Assigned Baa3 (sf)
US$21,500,000 Class D-R Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class D-R Notes"), Assigned Ba3 (sf)
US$10,000,000 Class E-R Mezzanine Secured Deferrable Floating Rate
Notes due 2031 (the "Class E-R Notes"), Assigned B3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on its methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation.
The issued notes are collateralized primarily by a portfolio of
broadly syndicated senior secured corporate loans. At least 90% of
the portfolio must consist of first lien senior secured loans,
cash, and eligible investments, and up to 10% of the portfolio may
consist of second lien loans and unsecured loans.
CVC Credit Partners, LLC will continue to 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 extended three-year reinvestment
period. Thereafter, subject to certain restrictions, the Manager
may reinvest unscheduled principal payments and proceeds from sales
of credit risk assets.
The Issuer has issued the Refinancing Notes and additional
subordinated notes on March 12, 2020 (the "Refinancing Date") in
connection with the refinancing of all classes of the secured notes
originally issued on October 14, 2015. On the Refinancing Date, the
Issuer used proceeds from the issuance of the Refinancing Notes and
additional subordinated notes to redeem in full the Refinanced
Original Notes. On the Original Closing Date, the issuer also
issued one class of subordinated notes that remains outstanding.
In addition to the issuance of the Refinancing Notes and additional
subordinated notes, a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: extension of the reinvestment period; extensions of the
stated maturity and non-call period; changes to certain collateral
quality tests; and changes to the overcollateralization test
levels.
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 March 2019.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, 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: $498,515,047
Defaulted par: $3,099,435
Diversity Score: 80
Weighted Average Rating Factor (WARF): 2900
Weighted Average Spread (WAS): 3.20%
Weighted Average Coupon (WAC): 7.5%
Weighted Average Recovery Rate (WARR): 47.00%
Weighted Average Life (WAL): 7 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
March 2019.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing 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 Refinancing Notes.
BANK 2020-BNK26: Fitch Assigns B-sf Rating on $11.4MM Cl. G Certs
-----------------------------------------------------------------
Fitch Ratings assigned the following final ratings and Rating
Outlooks to BANK 2020-BNK26 commercial mortgage pass-through
certificates, series 2020-BNK26:
-- $27,400,000 class A-1 'AAAsf'; Outlook Stable;
-- $95,000,000 class A-2 'AAAsf'; Outlook Stable;
-- $38,600,000 class A-SB 'AAAsf'; Outlook Stable;
-- $250,000,000d class A-3 'AAAsf'; Outlook Stable;
-- $0d class A-3-1 'AAAsf'; Outlook Stable;
-- $0d class A-3-2 'AAAsf'; Outlook Stable;
-- $0d class A-3-X1 'AAAsf'; Outlook Stable;
-- $0d class A-3-X2 'AAAsf'; Outlook Stable;
-- $387,064,000d class A-4 'AAAsf'; Outlook Stable;
-- $0d class A-4-1 'AAAsf'; Outlook Stable;
-- $0d class A-4-2 'AAAsf'; Outlook Stable;
-- $0d class A-4-X1 'AAAsf'; Outlook Stable;
-- $0d class A-4-X2 'AAAsf'; Outlook Stable;
-- $798,064,000a class X-A 'AAAsf'; Outlook Stable;
-- $226,593,000a class X-B 'A-sf'; Outlook Stable;
-- $131,111,000d class A-S 'AAAsf'; Outlook Stable;
-- $0d class A-S-1 'AAAsf'; Outlook Stable;
-- $0d class A-S-2 'AAAsf'; Outlook Stable;
-- $0d class A-S-X1 'AAAsf'; Outlook Stable;
-- $0d class A-S-X2 'AAAsf'; Outlook Stable;
-- $49,879,000 class B 'AA-sf'; Outlook Stable;
-- $45,603,000 class C 'A-sf'; Outlook Stable;
-- $48,454,000ab class X-D 'BBB-sf'; Outlook Stable;
-- $19,952,000ab class X-F 'BB-sf'; Outlook Stable;
-- $11,401,000ab class X-G 'B-sf'; Outlook Stable;
-- $27,078,000b class D 'BBBsf'; Outlook Stable;
-- $21,376,000b class E 'BBB-sf'; Outlook Stable;
-- $19,952,000b class F 'BB-sf'; Outlook Stable;
-- $11,401,000b class G 'B-sf'; Outlook Stable.
The following classes are not rated by Fitch:
-- $35,628,248a class X-H;
-- $35,628,248 class H;
-- $60,004,855c RR Interest.
(a) Notional amount and interest-only.
(b) Privately placed and pursuant to Rule 144A.
(c) Non-offered Vertical credit-risk retention interest.
(d) The Class A 3, Class A-4, Class A-S, Class A-3-1, Class A-3-2,
Class A-3-X1, Class A-3-X2, Class A-4-1, Class A-4-2, Class A-4-X1,
Class A-4-X2, Class A-S-1, Class A-S-2, Class A-S-X1 and Class
A-S-X2 certificates the exchangeable certificates. Each class of
exchangeable certificates may be exchanged for the corresponding
classes of exchangeable certificates, and vice versa. The dollar
denomination of each of the received classes of certificates must
be equal to the dollar denomination of each of the surrendered
classes of certificates. The Class A-3 may be surrendered (or
received) for the received (or surrendered) Classes A-3-1 and
A-3-X. The Class A-3 may be surrendered (or received) for the
received (or surrendered) Class A-3-2 and Class A-3-X2. The Class
A-4 may be surrendered (or received) for the received (or
surrendered) Class A-4-1 and Class A-4-X1. The Class A-4 may be
surrendered (or received) for the received (or surrendered) Class
A-4-2 and Class A-4-X2. The Class A-S may be surrendered (or
received) for the received (or surrendered) Class A-S-1 and Class
A-S-X1. The Class A-S may be surrendered (or received) for the
received (or surrendered) Class A-S-2 and Class A-S-X2. The ratings
of the exchangeable classes would reference the ratings on the
associated referenced or original classes.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 75 loans secured by 101
commercial properties having an aggregate principal balance of
$1,200,097,104 as of the cut-off date. The loans were contributed
to the trust by Morgan Stanley Mortgage Capital Holdings LLC, Bank
of America, National Association, Wells Fargo Bank, National
Association and National Cooperative Bank, N.A.
KEY RATING DRIVERS
Lower Fitch Leverage than Recent Transactions. The pool's Fitch
debt service ratio (DSCR) of 1.48x is better than the 2019 and YTD
2020 averages of 1.26x and 1.36x, respectively, for other
Fitch-rated multiborrower transactions. The pool's loan-to-value
(LTV) of 95.5% is below the 2019 and YTD 2020 averages of 103.0%
and 97.1%, respectively. Excluding the co-op and credit assessed
collateral, the pool has a Fitch DSCR and LTV of 1.34x and 109.2%.
Diversified Pool: The pool's loan concentration index (LCI) of 306
is well below the 2019 and YTD 2020 averages of 379 and 371,
respectively. The pool's 10 largest loans represent 46.9% of the
pool balance, which is below the 2019 and YTD 2020 averages of
51.0% and 50.7%, respectively.
Investment-Grade Credit Opinion and Co-op Loans: Five loans
representing 23.1% of the pool are credit assessed. This is
significantly above the 2019 average of 14.2% and below the YTD
2020 average of 29.9%. Bravern Office Commons (6.3% of the pool)
received a credit opinion of 'AA-sf' on a stand-alone basis. 560
Mission Street (5.8%) received a credit opinion of 'AA-sf' on a
stand-alone basis. 55 Hudson Yards (4.7%) received a credit opinion
of 'BBB-sf' on a stand-alone basis. 1633 Broadway (3.3%) received a
credit opinion of 'BBB-sf' on a stand-alone basis. Bellagio Hotel
and Casino (2.9%) received a credit opinion of 'BBB-sf' on a
stand-alone basis. 55 Hudson Yards (4.7%) received a credit opinion
of 'BBB-sf' on a stand-alone basis. 1633 Broadway (3.3%) received a
credit opinion of 'BBB-sf' on a stand-alone basis. Bellagio Hotel
and Casino (2.9%) received a credit opinion of 'BBB-sf' on a
stand-alone basis.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 12.1% below
the most recent year's 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 BANK
2020-BNK26 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 'AA-sf' 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 'A-sf' could
result.
BANK OF AMERICA 2016-UBS10: Fitch Affirms Bsf Rating on 2 Tranches
------------------------------------------------------------------
Fitch Ratings affirmed 16 classes of Bank of America Merrill Lynch
Commercial Mortgage Trust 2016-UBS10 Commercial Mortgage
Pass-Through Certificates.
RATING ACTIONS
BACM 2016-UBS10
Class A-1 06054MAA1; LT AAAsf Affirmed; previously at AAAsf
Class A-2 06054MAB9; LT AAAsf Affirmed; previously at AAAsf
Class A-3 06054MAD5; LT AAAsf Affirmed; previously at AAAsf
Class A-4 06054MAE3; LT AAAsf Affirmed; previously at AAAsf
Class A-S 06054MAH6; LT AAAsf Affirmed; previously at AAAsf
Class A-SB 06054MAC7; LT AAAsf Affirmed; previously at AAAsf
Class B 06054MAJ2; LT AA-sf Affirmed; previously at AA-sf
Class C 06054MAK9; LT A-sf Affirmed; previously at A-sf
Class D 06054MAW3; LT BBB-sf Affirmed; previously at BBB-sf
Class E 06054MAY9; LT BBsf Affirmed; previously at BBsf
Class F 06054MBA0; LT Bsf Affirmed; previously at Bsf
Class X-A 06054MAF0; LT AAAsf Affirmed; previously at AAAsf
Class X-B 06054MAG8; LT AA-sf Affirmed; previously at AA-sf
Class X-D 06054MAL7; LT BBB-sf Affirmed; previously at BBB-sf
Class X-E 06054MAN3; LT BBsf Affirmed; previously at BBsf
Class X-F 06054MAQ6; LT Bsf Affirmed; previously at Bsf
KEY RATING DRIVERS
Stable Loss Expectations: The affirmations reflect the generally
stable performance of the pool. There have been no material changes
to the pool since issuance, therefore, the original analysis was
considered in affirming the transaction. Five loans representing
4.45% of the pool are on the servicer's watchlist and two assets
(1.68% of the deal) are in special servicing; however, only one of
the loans is delinquent.
The largest loan in special servicing is The Shoppes at Taylor Mill
(0.86% of the pool). The loan transferred to the special servicer
in May 2019 due to imminent monetary default. The loan is secured
by a 69,326 sf grocery anchored retail center located in Taylor
Mill, KY. As of September 2019, the subject was 96% occupied and
the DSCR was 1.41x. While the property's performance has been
historically stable, the loan has been delinquent 11 times in the
last 12 months and the loan is currently 60 days past due.
The second loan in special servicing is the Comfort Inn - Cross
Lanes, WV (0.82% of the pool). The loan is secured by a 136-key,
full-service hotel located in Cross Lanes, West Virginia. In
October of 2017, the loan transferred to special servicing after
the property's performance began to deteriorate. While performance
remains below expectations, it has improved as of September of 2019
with a debt service coverage ratio (DSCR) of 1.16x, compared with
1.10x at YE 2018 and 0.28x at YE 2017.
Minimal Change in Credit Enhancement: As of the February 2020
remittance report, the pool's aggregate balance had been reduced by
2.69% to $852.7 million from $876.3 million at issuance. No loans
have paid off since issuance. Three loans representing 2.85% of the
pool's balance have defeased. Excluding the defeased loans, eight
loans (17.6% of the pool) are interest only, 16 loans (49%) are
partial interest only, and the remaining 25 loans (33.5%) are
amortizing balloon loans with terms of five to ten years. The pool
is scheduled to amortize by 10.6% of the initial pool balance prior
to maturity, which is slightly above the 2016 average of 10.4%.
ADDITIONAL CONSIDERATIONS:
High Pari Passu Loan Concentration: Twelve loans representing 46.5%
of the pool by balance are pari passu loans. Ten of the pari passu
loans have their controlling notes securitized in other
transactions. Two loans, In-Rel 8 and Grove City Premium Outlets
totaling 9.46% of the pool's balance, have their controlling note
securitized in this transaction.
Higher Fitch Leverage: At issuance, the transaction had higher
leverage statistics than other Fitch-rated transactions of the same
vintage. The Fitch DSCR and LTV were 1.14x and 108.2%,
respectively.
Property Type Concentration: The pool's largest concentration by
property type is office (31%), followed by retail (27%). Loans
secured by hotel properties comprise of 16% of the pool, including
the largest loan in the pool, Hyatt Regency Huntington Beach Resort
& Spa (7.04%).
RATING SENSITIVITIES
The Rating Outlooks on all classes remain Stable given the
relatively stable performance of the transaction 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.
Factors that would lead to upgrades include stable to improved
asset performance coupled with paydown and/or defeasance.
Factors that lead to downgrades would include an increase in pool
level losses from underperforming and/or specially serviced loans.
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.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
BELLEMEADE RE 2020-1: Moody's Gives (P)B3 Rating on 3 Tranches
--------------------------------------------------------------
Moody's Investors Service assigned provisional ratings to 16
classes of mortgage insurance credit risk transfer notes issued by
Bellemeade Re 2020-1 Ltd. The ratings range from (P)A3 (sf) to
(P)B3 (sf).
Bellemeade Re 2020-1 Ltd. is the first transaction issued in 2020
under the Bellemeade Re program, which transfers to the capital
markets the credit risk of private mortgage insurance (MI) policies
issued by Arch Mortgage Insurance Company (Arch) and United
Guaranty Residential Insurance Company (UGRIC) (each, a subsidiary
of Arch Capital Group, and collectively, the ceding insurer) on a
portfolio of residential mortgage loans. The notes are exposed to
the risk of claims payments on the MI policies, and depending on
the notes' priority, may incur principal and interest losses when
the ceding insurer makes claims payments on the MI policies.
On the closing date, Bellemeade Re 2020-1 Ltd. and the ceding
insurer will enter into a reinsurance agreement providing excess of
loss reinsurance on mortgage insurance policies issued by the
ceding insurer on a portfolio of residential mortgage loans.
Proceeds from the sale of the notes will be deposited into the
reinsurance trust account for the benefit of the ceding insurer and
as security for the issuer's obligations to the ceding insurer
under the reinsurance agreement. The funds in the reinsurance trust
account will also be available to pay noteholders, following the
termination of the trust and payment of amounts due to the ceding
insurer. Funds in the reinsurance trust account will be used to
purchase eligible investments and will be subject to the terms of
the reinsurance trust agreement.
Following the instruction of the ceding insurer, the trustee will
liquidate assets in the reinsurance trust account to (1) make
principal payments to the notes as the insurance coverage in the
reference pool reduces due to loan amortization or policy
termination, and (2) reimburse the ceding insurer whenever it pays
MI claims after the Class B-2 coverage level is written off. While
income earned on eligible investments is used to pay interest on
the notes, the ceding insurer is responsible for covering any
difference between the investment income and interest accrued on
the notes' coverage levels.
The complete rating actions are as follows:
Issuer: Bellemeade Re 2020-1 Ltd.
Cl. M-1A, Assigned (P)A3 (sf)
Cl. M-1B, Assigned (P)Baa3 (sf)
Cl. M-1C, Assigned (P)Ba3 (sf)
Cl. M-1CA, Assigned (P)Ba1 (sf)
Cl. M-1CAR, Assigned (P)Ba1 (sf)
Cl. M-1CAS, Assigned (P)Ba1 (sf)
Cl. M-1CB, Assigned (P)B1 (sf)
Cl. M-1CBR, Assigned (P)B1 (sf)
Cl. M-1CBS, Assigned (P)B1 (sf)
Cl. M-1CS, Assigned (P)Ba3 (sf)
Cl. M-1CR, Assigned (P)Ba3 (sf)
Cl. M-1CRB, Assigned (P)B1 (sf)
Cl. M-1CSB, Assigned (P)B1 (sf)
Cl. M-2A, Assigned (P)B3 (sf)
Cl. M-2AR, Assigned (P)B3 (sf)
Cl. M-2AS, Assigned (P)B3 (sf)
RATINGS RATIONALE
Summary Credit Analysis and Rating Rationale
Moody's expects this insured pool's aggregate exposed principal
balance to incur 2.78% losses in a base case scenario, and 18.63%
losses under loss a Aaa stress scenario. The aggregate exposed
principal balance is the product, for all the mortgage loans
covered by MI policies, of (i) the unpaid principal balance of each
mortgage loan, (ii) the MI coverage percentage, and (iii) for
approximately 8.9% of the mortgage loans where 7.5% of the losses
are covered by existing third-party insurance, 92.5%, and for the
rest of the mortgage loans, 100% (the reinsurance coverage
percentage).
Moody's calculated losses on the pool using its US Moody's
Individual Loan Analysis (MILAN) model based on the loan-level
collateral information as of the cut-off date. Loan-level
adjustments to the model results included, but were not limited to,
adjustments for origination quality.
Collateral Description
Each mortgage loan has an insurance coverage effective date on or
after Feburary 1, 2018, but before December 31, 2019. The reference
pool consists of 173,122 prime, fixed- and adjustable-rate, one- to
four-unit, first-lien fully-amortizing conforming mortgage loans
with a total insured loan balance of approximately $47 billion.
Loans in the reference pool had a loan-to-value (LTV) ratio at
origination that was greater than 80%, with a weighted average of
91.3%. The borrowers in the pool have a weighted average FICO score
of 747, a weighted average debt-to-income ratio of 36.3% and a
weighted average mortgage rate of 3.9%. The weighted average risk
in force (MI coverage percentage) is approximately 24.2% of the
reference pool total unpaid principal balance. The aggregate
exposed principal balance is the portion of the pool's risk in
force that is not covered by existing third party reinsurance.
The weighted average LTV of 91.3% is far higher than those of
recent private label prime jumbo deals, which typically have LTVs
in the high 60's range, however, it is in line with those of recent
STACR high LTV CRT transactions. Insured loans in the reference
pool were originated with LTV ratios greater than 80%. 100% of
insured loans were covered by mortgage insurance at origination
with 97.7% covered by BPMI and 2.3% covered by LPMI.
Underwriting Quality
Moody's took into account the quality of Arch's insurance
underwriting, risk management and claims payment process in its
analysis.
Arch's underwriting requirements address credit, capacity (income),
capital (asset/equity) and collateral. It has a licensed in-house
appraiser to review appraisals.
Lenders submit mortgage loans to Arch for insurance either through
delegated underwriting or non-delegated underwriting program. Under
the delegated underwriting program, lenders can submit loans for
insurance without Arch re-underwriting the loan file. Arch issues
an MI commitment based on the lender's representation that the loan
meets the insurer's underwriting requirement. Arch does not allow
exceptions for loans approved through its delegated underwriting
program. Lenders eligible under this program must be pre-approved
by Arch. Under the non-delegated underwriting program, insurance
coverage is approved after full-file underwriting by the insurer's
underwriters. For Arch's overall portfolio, approximately 57% of
the loans are insured through delegated underwriting and 43%
through non-delegated. Arch follows the GSE underwriting guidelines
via DU/LP but applies additional overlays.
Servicers provide Arch monthly reports of insured loans that are
60-day delinquent prior to any submission of claims. Claims are
typically submitted when servicers have taken possession of the
title to the properties. Claims are submitted by uploading or
entering on Arch's website, electronic transfer or paper.
Arch performs an internal quality assurance review on a sample
basis of delegated and non-delegated underwritten loans to ensure
that (i) the risk exposure of insured mortgage loans is accurately
represented, (ii) lenders submitting loans via delegated
underwriting program are adhering to Arch's guidelines, and (iii)
internal underwriters are following guidelines and maintaining
consistent underwriting standards and processes.
Arch has a solid quality control process to ensure claims are paid
timely and accurately. Similar to the above procedure, Arch's
claims management reviews a sample of paid claims each month.
Findings are used for performance management as well as identified
trends. In addition, there is strong oversight and review from
internal and external parties such as GSE audits, Department of
Insurance audits, audits from an independent account firm, and
Arch's internal audits and compliance. Arch is also SOX compliant.
PwC, an independent account firm, performs a thorough audit of
Arch's claim payment process.
Third-Party Review
Arch engaged Opus Capital Markets Consultants, LLC, to perform a
data analysis and diligence review of a sampling of mortgage loans
files submitted for mortgage insurance. This review included
validation of credit qualifications, verification of the presence
of material documentation as applicable to the mortgage insurance
application, updated valuation analysis and comparison, and a
tape-to-file data integrity validation to identify possible data
discrepancies. The scope does not include a compliance review. The
review sample size was small (only 325 of the total loans in the
reference pool, or 0.19% by loan count).
In spite of the small sample size and a limited TPR scope for
Bellemeade Re 2020-1 Ltd., Moody's did not make an additional
adjustment to the loss levels because, (1) approximately 36% of the
loans in the reference pool have gone through full re-underwriting
by the ceding insurer, (2) the underwriting quality of the insured
loans is monitored under the GSEs' stringent quality control
system, and (3) MI policies will not cover any costs related to
compliance violations.
Scope and results. The third-party due diligence scope focuses on
the following:
Appraisals: The third-party diligence provider also reviewed
property valuation on 325 loans in the sample pool. A Freddie Mac
Home Value Explorer ("HVE") was ordered on the entire population of
325 files. If the resulting value of the AVM was less than 90% of
the value reflected on the original appraisal, or if no results
were returned, a Broker Price Opinion ("BPO") was ordered on the
property. If the resulting value of the BPO was less than 90% of
the value reflected on the original appraisal, an Appraisal Review
appraisal was ordered on the property. Among the 325 loans, one
loan has a valuation variance greater than 5% and no loan has a
variance of greater than 10%. The third-party diligence provider
was not able to obtain property valuations on three mortgage loans
due to the inability to complete the field review assignment during
the due diligence review period.
Credit: The third-party diligence provider reviewed credit on 325
loans in the sample pool. One loan had a final grade of "C" due to
insufficient reserves.
Data integrity: The third-party review firm was provided a data
file with loan level data, which was audited against origination
documents to determine the accuracy of data found within the data
tape.
Reps & Warranties Framework
The ceding insurer does not make any representations and warranties
to the noteholders in this transaction. Since the insured mortgages
are predominantly GSE loans, the individual sellers would provide
exhaustive representations and warranties to the GSEs that are
negotiated and actively monitored. In addition, the ceding insurer
may rescind the MI policy for certain material misrepresentation
and fraud in the origination of a loan, which would benefit the MI
CRT noteholders.
The Notes
Moody's refers to the M-1A, M-1B, M-1C, M-2 and B-1 notes as the
original notes, and the M-1CR, M-1CS, M-1CI, M-1CA, M-1CAR, M-1CAS,
M-1CAI, M-1CB, M-1CBR, M-1CBS, M-1CBI, M-1CRB, M-1CSB, M-2R, M-2S,
M-2I, M-2A, M-2AR, M-2AS, M-2AI, M-2B, M-2BR, M-2BS, M-2BI, M-2RB,
M-2SB notes as the exchangeable notes; together Moody's refers to
them as the notes.
The M-1C notes can be exchanged for M-1CA and M-1CB notes, M-1CR
and M-1CI notes and M-1CS and M-1CI notes.
The M-1CA notes can be exchanged for M-1CAR and M-1CAI notes and
M-1CAS and M-ICAI notes.
The M-1CB notes can be exchanged for M-1CBR and M-1CBI notes and
M-1CBS and M-ICBI notes.
The M-1CRB notes can be exchanged for M-1CB and M-1CAI notes.
The M-1CSB notes can be exchanged for M-1CB and M-1CAI notes.
The M-2 notes can be exchanged for M-2A and M-2B notes, M-2R and
M-2I notes and M-2S and M-2I notes.
The M-2A notes can be exchanged for M-2AR and M-2AI notes and M-2AS
and M-2AI notes.
The M-2B notes can be exchanged for M-2BR and M-2BI notes and M-2BS
and M-2BI notes.
The M-2RB notes can be exchanged for M-2B and M-2AI notes.
The M-2SB notes can be exchanged for M-2B and M-2AI notes.
Classes M-1CAI , M-1CBI, M-1CI, M-2AI, M-2BI and M-2I are
interest-only (IO) tranches referencing the notional balances of
Classes M-1CA, M-1CB, M-1C, M-2A, M-2B and M-2, respectively.
Classes M-2RB, M-2SB, M-1CRB and M-1CSB are each an exchangeable
for two classes that are initially offered at closing. The ratings
of M-2RB, M-2SB, M-1CRB and M-1CSB reference the ratings of Classes
M-2B and M-1CB, respectively. In the event Classes M-1CB and M-2B
are written down, Moody's would continue to rate classes M-2RB,
M-2SB, M-1CRB and M-1CSB consistent with Class M-2B or M-1CB's last
outstanding ratings so long as Classes M-2RB, M-2SB, M-1CRB and
M-1CSB are still outstanding.
Transaction Structure
The transaction structure is very similar to GSE CRT transactions
that Moody's has rated. The ceding insurer will retain the senior
Class A tranche and the first loss Class B-2 tranche. The ceding
insurer will also retain certain portions of each risk coverage
level. The proportion of each coverage level relating to the class
of notes that Bellemeade Re 2020-1 is offering is the funded
percentage of that coverage level. The ceding insurer is retaining
the unfunded portion of each coverage level. The offered notes
benefit from a sequential pay structure. The transaction
incorporates structural features such as a 10-year bullet maturity
and a sequential pay structure for the non-senior tranches,
resulting in a shorter expected weighted average life on the
offered notes.
Funds raised through the issuance of the notes are deposited into a
reinsurance trust account and are distributed either to the
noteholders, when insured loans amortize or MI policies terminate,
or to the ceding insurer for reimbursement of claims paid when
loans default. Interest on the notes is paid from income earned on
the eligible investments and the coverage premium from the ceding
insurer. Interest on the notes will accrue based on the outstanding
balance of the notes, but the ceding insurer will only be obligated
to remit coverage premium based on each note's coverage level.
Credit enhancement in this transaction is comprised of
subordination provided by mezzanine and junior tranches. The rated
M-1A, M-1B and M1C offered notes, excluding exchangeable notes,
have credit enhancement levels of 8.25%, 6.25% and 4.00%,
respectively. The credit risk exposure of the notes depends on the
actual MI losses incurred by the insured pool. MI and investment
losses are allocated in a reverse sequential order starting with
the Class B-2 tranche.
So long as the senior reference tranche is outstanding, and no
performance trigger event occurs, the transaction structure
allocates principal payments on a pro-rata basis between the senior
and non-senior reference tranches. Principal is then allocated
sequentially amongst the non-senior tranches.
Premium Deposit Account (PDA)
The premium deposit account will benefit the transaction upon a
mandatory termination event (e.g. the ceding insurer fails to pay
the coverage premium and does not cure, triggering a default under
the reinsurance agreement), by providing interest liquidity to the
noteholders for 70 days while the assets of the reinsurance trust
account are being liquidated to repay the principal of the notes.
On the closing date, the ceding insurer will establish a cash and
securities account (the PDA) but no initial deposit amount will be
made to the account by the ceding insurer unless the premium
deposit event is triggered. The premium deposit event will be
triggered if the rating of the notes exceed the insurance financial
strength (IFS) rating of the ceding insurer or the ceding insurer's
IFS rating falls below Baa2. If the note ratings exceed that of the
ceding insurer, the insurer will be obligated to deposit into the
premium deposit account the coverage premium only for the notes
that exceeded the ceding insurer's rating. If the ceding insurer's
rating falls below Baa2, it is obligated to deposit coverage
premium for all reinsurance coverage levels.
The required PDA amount for each class of notes and each month is
equal to the excess, if any, of (i) the coupon rate of the note
multiplied by (a) the applicable funded percentage, (b) the
coverage level amount for the coverage level corresponding to such
class of notes and (c) a fraction equal to 70/360, over (ii) two
times the investment income collected on the eligible investments.
Moody's believes the PDA arrangement does not establish a linkage
between the ratings of the notes and the IFS rating of the ceding
insurer because, 1) the required PDA amount is small relative to
the entire deal, 2) the risk of PDA not being funded could
theoretically occur if the ceding insurer suddenly defaults,
causing a rating downgrade from investment grade to default in a
very short period; which is a highly unlikely scenario, and 3) even
if the insurer becomes insolvent, there would be a strong incentive
for the insurer's insolvency regulator to continue to make the
interest payments to avoid losing reinsurance protection provided
by the deal.
Claims Consultant
To mitigate risks associated with the ceding insurer's control of
the trust account and discretion to unilaterally determine the MI
claims amounts (i.e. ultimate net losses), the ceding insurer will
engage Opus Capital Markets, as claims consultant, to verify MI
claims and reimbursement amounts withdrawn from the reinsurance
trust account once the Class B-2 coverage level has been written
down. The claims consultant will review on a quarterly basis a
sample of claims paid by the ceding insurer covered by the
reinsurance agreement. In verifying the amount, the claims
consultant will apply a permitted variance to the total paid loss
for each MI Policy of +/- 2%. The claims consultant will provide a
preliminary report to the ceding insurer containing results of the
verification. If there are findings that cannot be resolved between
the ceding insurer and the claims consultant, the claims consultant
will increase the sample size. A final report will be delivered by
the claims consultant to the trustee, the issuer and the ceding
insurer. The issuer will be required to provide a copy of the final
report to the noteholders and the rating agencies.
Unlike RMBS transactions where there is typically some level of
independent third party oversight by the trustee, the master
servicer and/or the securities administrator, MI CRT transactions
typically do not have such oversight. For example, the ceding
insurer not only has full control of the trust account but can also
determine, at its discretion, the MI claims amount. The ceding
insurer will then direct the trustee to withdraw the funds to
reimburse for the claims paid. Since the trustee is not required to
verify the MI claims amount, there could be a scenario where funds
are withdrawn from the reinsurance trust account in excess of the
amounts necessary to reimburse the ceding insurer. As such, Moody's
believes the claims consultant in this transaction will provide the
oversight to mitigate such risks.
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 of the subordinate bonds 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 RMBS Using the MILAN Framework" published in
October 2019.
BENCHMARK 2018-B3: Fitch Affirms B-sf Rating on Class H-RR Certs
----------------------------------------------------------------
Fitch Ratings affirmed 17 classes of Benchmark 2018-B3 commercial
mortgage pass-through certificates.
RATING ACTIONS
BENCHMARK 2018-B3
Class A-1 08161BAU7; LT AAAsf Affirmed; previously at AAAsf
Class A-2 08161BAV5; LT AAAsf Affirmed; previously at AAAsf
Class A-3 08161BAW3; LT AAAsf Affirmed; previously at AAAsf
Class A-4 08161BAX1; LT AAAsf Affirmed; previously at AAAsf
Class A-5 08161BAY9; LT AAAsf Affirmed; previously at AAAsf
Class A-AB 08161BAZ6; LT AAAsf Affirmed; previously at AAAsf
Class A-S 08161BBA0; LT AAAsf Affirmed; previously at AAAsf
Class B 08161BBB8; LT AA-sf Affirmed; previously at AA-sf
Class C 08161BBC6; LT A-sf Affirmed; previously at A-sf
Class D 08161BAA1; LT BBB-sf Affirmed; previously at BBB-sf
Class E-RR 08161BAC7; LT BBB-sf Affirmed; previously at BBB-sf
Class F-RR 08161BAE3; LT BB+sf Affirmed; previously at BB+sf
Class G-RR 08161BAG8; LT BB-sf Affirmed; previously at BB-sf
Class H-RR 08161BAJ2; LT B-sf Affirmed; previously at B-sf
Class X-A 08161BBD4; LT AAAsf Affirmed; previously at AAAsf
Class X-B 08161BBE2; LT AA-sf Affirmed; previously at AA-sf
Class X-D 08161BAN3; LT BBB-sf Affirmed; previously at BBB-sf
-- Classes X-A, X-B and X-D are interest only.
KEY RATING DRIVERS
Stable Loss Expectations: Performance and loss expectations for the
majority of the pool have remained stable since issuance. There
have been no specially serviced loans since issuance. There is one
Fitch Loan of Concern (3% of the pool), the NJ Distribution
Portfolio, which is secured by two industrial properties located in
North Brunswick and Dayton, NJ. At issuance, the portfolio was
98.8% occupied. However, since issuance, the North Brunswick
property has reportedly lost a large tenant and is now 55.0%
occupied, down from 98.1% at issuance. The Dayton property remains
100% occupied. Fitch has requested an update from the servicer, but
none has been received to date.
Minimal Change in Credit Enhancement: As of the February 2020
distribution date, the pool's aggregate principal balance has paid
down by 0.7% to $1.08 billion from $1.09 billion at issuance. The
transaction is expected to pay down by only 7.6%, based on
scheduled loan maturity balances. Fourteen loans (46% of the pool)
are full-term, interest-only and 17 loans (26.9%) remain in their
partial interest-only periods.
Investment Grade Credit Opinion: The Twelve Oaks Mall loan (4.5% of
the pool) received an investment-grade credit opinion of 'BBB-sf',
on a stand-alone basis, at issuance.
ADDITIONAL CONSIDERATIONS
High Hotel Exposure: Loans secured by hotel properties represent
20% of the pool, including four of the top 10 loans. The largest
property type concentration is office at 35.9%.
Pari Passu Loans: Fourteen loans (49.8% of the pool), including 10
loans (41%) in the top 15, have pari passu loan pieces contributed
to other transactions.
RATING SENSITIVITIES
The Stable Outlooks reflect the overall stable performance of the
pool and expected continued amortization.
Factors that lead to upgrades would include stable to improved
asset performance coupled with paydown and/or defeasance. Upgrades
to the senior classes may occur with improved pool performance and
additional paydown or defeasance.
Factors that lead to downgrades include an increase in pool level
losses from underperforming or specially serviced loans.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
No third-party due diligence was provided or reviewed by Fitch in
relation to this rating.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
BHMS 2018-ATLS: DBRS Confirms BB Rating on Class E Certs
--------------------------------------------------------
DBRS, Inc. confirmed the ratings on the following classes of the
Commercial Mortgage Pass-Through Certificates, Series 2018-ATLS
(the Certificates) issued by BHMS 2018-ATLS:
-- Class A at AAA (sf)
-- Class X-CP at AAA (sf)
-- Class X-NCP at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class HRR at BB (low) (sf)
All trends are Stable. The ratings have been removed from Under
Review with Developing Implications, where they were placed on
November 14, 2019.
On March 1, 2020, DBRS Morningstar finalized its "North American
Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB
Methodology), which presents the criteria for which ratings are
assigned to and/or monitored for North American
single-asset/single-borrower (NA SASB) transactions, large
concentrated pools, rake certificates, ground lease transactions,
and credit tenant lease transactions.
Prior to the finalization of the NA SASB Methodology, the DBRS
Morningstar ratings for the subject transaction and all other DBRS
Morningstar-rated transactions subject to the methodology in
question were previously placed Under Review with Developing
Implications, as the proposed methodology changes were material.
The subject transaction is one of four NA SASB transactions (24
classes of certificates) publicly rated by both Morningstar Credit
Ratings, LLC (MCR) and DBRS Morningstar. As noted in the March 1,
2020, press release, as part of the ongoing consolidation of DBRS
Morningstar and MCR, MCR previously placed its outstanding ratings
on NA SASB transactions Under Review – Analytical Integration
Review.
The subject rating actions are the result of the application of the
NA SASB Methodology in conjunction with the "North American CMBS
Surveillance Methodology," as applicable. Qualitative adjustments
were made to the final loan-to-value (LTV) Sizing Benchmarks used
for this rating analysis.
The subject transaction's underlying loan is secured by the
Atlantis Resort, a 2,917-key luxury beachfront resort located on
Paradise Island in the Bahamas. Also included in the collateral is
the fee interest in amenities including, but not limited to, 40
restaurants and bars, a 60,000 square feet (sf) casino, the
141-acre Aquaventure water park, 73,391 sf of retail space and spa
facilities, and 500,000 sf of meeting and group space. The resort
includes a luxury tower with an additional 495 rooms owned by third
parties as condo-hotel units and 392 timeshare rooms located at the
Harborside Resort, both of which are not a part of the collateral.
The loan is sponsored by BREF ONE, LLC, a subsidiary of Brookfield
Asset Management Inc. (rated A (low) with a Stable trend by DBRS
Morningstar). The hotel is managed by the sponsor-affiliate
Brookfield Hospitality Management with a 20-year management
agreement that expires in 2034. There is also a franchise agreement
in place through 2034 with Marriott International Inc. (Marriott),
with the property marketed under the Marriott brand's Autograph
Collection.
Loan proceeds of $1.2 billion along with $650.0 million in
mezzanine debt spread across three loans were used to refinance
existing debt of $1.7 billion (previously secured in the BHMS
2014-ATLS transaction), return $148.9 million of sponsor equity,
and cover closing costs, leaving $635.0 million of cash equity
remaining behind the transaction. The loan has a two-year
interest-only (IO) original term with five one-year extension
options that are also fully IO.
In the analysis for these rating actions, the DBRS Morningstar NCF
figure of $147.8 million derived at issuance was accepted and a cap
rate of 9.0% was applied, resulting in a DBRS Morningstar Value of
$1.64 billion, a variance of -33.9% from the appraised value at
issuance of $2.49 billion. The DBRS Morningstar Value implies an
LTV of 73.1%, as compared with the LTV on the issuance appraised
value of 48.3%. The cap rate applied is around the midpoint of the
range of DBRS Morningstar Cap Rates for lodging properties.
DBRS Morningstar notes the cap rate is reflective of the property's
location with no true competitor in the area, high property
quality, and condition of the asset relative to the market.
However, in determining the cap rate, consideration was given the
sovereign risk associated with the Bahamas government (currently
investment-grade rated), as well as the heavy reliance on
international tourism. DBRS Morningstar notes that a property of
similar quality and overall appeal, but located in a market with a
more diversified economy and/or location with better proximity to
other travel destinations, would likely see a cap rate applied
further to the low end of the DBRS Morningstar Cap Rate ranges.
The international tourism reliance factor is particularly
noteworthy given the global travel disruptions currently underway
amid the Coronavirus Disease (COVID-19) outbreak. If the outbreak
and related travel restrictions and cancellation trends observed
thus far extend for the moderate to longer-term, DBRS Morningstar
notes the subject will likely see a significant cash flow drop in
the coming months.
Based on the trailing 12-month (T-12) financials ending in
September 2019, the loan reported a net cash flow (NCF) of $178.7
million, well above the YE2018 figure of $118.3 million, and above
the DBRS Morningstar NCF figure of $147.8 million derived at
issuance. The drop in performance at YE2018 was primarily because
of a decline in departmental income, from a large discrepancy in
Other Income, which captures most of the casino revenue for the
resort.
DBRS Morningstar notes the recent opening of the 2,019-key Baha
Mar, a competing resort that opened the first phase of development
in June 2018, located approximately seven miles from the collateral
property. Baha Mar is a $3.5 billion luxury resort that features
three towers of different hotel brands, including the Grand Hyatt,
SLS, and Rosewood as well as a 100,000-sf casino. Baha Mar caters
to a more affluent adult clientele, rather than families, and does
not offer water and marine attractions that are key demand and
revenue drivers at the subject. Baha Mar does offer the largest
casino in the Caribbean, which at issuance was expected to drive
down casino revenue at the subject resort. In, addition, the Baha
Mar resort is newer and has higher-end finishes. However, DBRS
Morningstar maintains that in terms of overall appeal for the vast
majority of visitors to the island, the subject is generally
superior to the Baha Mar because of the longer list of amenities
that appeal to families, recent capital improvements, and more
budget-friendly price point.
Approximately $213.0 million ($73,020/key) in capital improvements
were completed by the sponsor between 2012 and 2017, including a
$25.4 million ($40,448/key) renovation in 2018 to The Coral (629
keys), which targeted newly designed rooms and a pool area, as well
as a brand new lobby in order to compete with the Baha Mar.
According to recent news articles, a renovation of The Reef (495
key; non-collateral) was recently completed, with the borrower
planning an 18- to the 24-month renovation of The Royal Tower
(1,201 keys). At issuance, the sponsor had plans to complete an
$8.0 million ($32,000/key) renovation to The Royal Tower, to
upgrade soft and case goods; however, that money was not reserved
upfront. Per the servicer's most recent update, the budget had been
increased to $9.0 million ($36,000 key).
Based on the T-12 ending March 2019 Smith Travel Research (STR)
report (most recent on file with DBRS Morningstar), The Royal Tower
(1,201 keys) reported occupancy rate, average daily rate (ADR), and
revenue-per-available room (RevPAR) figures of 68.2%, $240, and
$164, respectively, compared with the competitive set's figures of
65.7%, $266, and $175, respectively. The Royal Tower's figures were
an improvement from the T-12 ending March 2018 occupancy rate, ADR,
and RevPAR of 59.7%, $241, and $144, respectively. According to the
T-12 ending April 2019 STR report, The Cove (600 keys) reported
T-12 occupancy rate, ADR, and RevPAR figures of 74.0%, $441, and
$326, respectively, compared with the competitive set's figures of
63.6%, $379, and $241, respectively. The Cove's figures were a
moderate improvement from the T-12 ending March 2018 occupancy
rate, ADR, and RevPAR of 70.1%, $429, and $300, respectively.
The DBRS Morningstar NCF figure applied as part of the analysis
represents a -18.5% variance to the Issuer's NCF, primarily driven
by occupancy and other sources of revenue from hotel and nonhotel
items, including food and beverage outlets, casino operations,
water/marine attractions, retail stores, the water plans, and other
miscellaneous income. The Issuer assumed an occupancy rate of 72.2%
in its underwritten cash flow, while DBRS Morningstar used a 70.0%
occupancy rate. For other sources of revenue, DBRS Morningstar
sourced the T-12 ending March 2018 ratio to total revenue or dollar
amount, with the exception of casino income that was concluded to a
historical average because of general volatility and a recent
spike, and the impact of the Baha Mar.
While performance is currently above DBRS Morningstar's issuance
expectations, hotels typically exhibit higher cash flow volatility,
particularly amid events like the ongoing coronavirus outbreak. If
the outbreak's impact on global travel continues to escalate and
extends into a longer-term, significant cash flow declines at the
subject and other hotel properties around the world can be
expected, at least temporarily. DBRS Morningstar notes the subject
transaction benefits from strong sponsorship, which has shown an
interest in maintaining the competitiveness of the property through
continually investing in capital improvement, and the overall
strong competitive stance for the collateral resort, both of which
should be conducive to the ability to weather any short- to
medium-term effects of the coronavirus outbreak.
Classes X-CP and X-NCP are IO certificates that reference a single
rated tranche or multiple rated tranches. The IO ratings mirror the
lowest-rated applicable reference obligation tranche adjusted
upward by one notch if senior in the waterfall.
Notes: All figures are in U.S. dollars unless otherwise noted.
CONNECTICUT AVENUE 2020-SBT1: Fitch Assigns B Rating on 13 Tranches
-------------------------------------------------------------------
Fitch Ratings has assigned ratings to classes 1M-2A, 1M-2B, 1M-2C,
1M-2D, 1M-2E, 1M-2F, 2M-2G, 2M-2H, 2M-2J, 2M-2K, 2M-2L and related
exchangeable classes from Fannie Mae's risk transfer transaction
Connecticut Avenue Securities Trust, 2020-SBT1 (CAS 2020-SBT1).
This is Fannie Mae's first risk transfer transaction in which
Fannie Mae is transferring credit risk from previously issued CAS
Class B tranches.
RATING ACTIONS
CAS 2020-SBT1
Class 1A-AH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1A-BH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1A-CH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1A-DH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1A-EH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1A-FH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1B-1; LT NRsf New Rating; previously at NR(EXP)sf
Class 1B-1A; LT NRsf New Rating; previously at NR(EXP)sf
Class 1B-1B; LT NRsf New Rating; previously at NR(EXP)sf
Class 1B-1C; LT NRsf New Rating; previously at NR(EXP)sf
Class 1B-1D; LT NRsf New Rating; previously at NR(EXP)sf
Class 1B-1E; LT NRsf New Rating; previously at NR(EXP)sf
Class 1B-1F; LT NRsf New Rating; previously at NR(EXP)sf
Class 1M-2; LT Bsf New Rating; previously at B(EXP)sf
Class 1M-2A; LT Bsf New Rating; previously at B(EXP)sf
Class 1M-2B; LT Bsf New Rating; previously at B(EXP)sf
Class 1M-2C; LT Bsf New Rating; previously at B(EXP)sf
Class 1M-2D; LT Bsf New Rating; previously at B(EXP)sf
Class 1M-2E; LT Bsf New Rating; previously at B(EXP)sf
Class 1M-2F; LT Bsf New Rating; previously at B(EXP)sf
Class 1X-AH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1X-BH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1X-CH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1X-DH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1X-EH; LT NRsf New Rating; previously at NR(EXP)sf
Class 1X-FH; LT NRsf New Rating; previously at NR(EXP)sf
Class 2A-GH; LT NRsf New Rating; previously at NR(EXP)sf
Class 2A-HH; LT NRsf New Rating; previously at NR(EXP)sf
Class 2A-JH; LT NRsf New Rating; previously at NR(EXP)sf
Class 2A-KH; LT NRsf New Rating; previously at NR(EXP)sf
Class 2A-LH; LT NRsf New Rating; previously at NR(EXP)sf
Class 2B-1; LT NRsf New Rating; previously at NR(EXP)sf
Class 2B-1G; LT NRsf New Rating; previously at NR(EXP)sf
Class 2B-1H; LT NRsf New Rating; previously at NR(EXP)sf
Class 2B-1J; LT NRsf New Rating; previously at NR(EXP)sf
Class 2B-1K; LT NRsf New Rating; previously at NR(EXP)sf
Class 2B-1L; LT NRsf New Rating; previously at NR(EXP)sf
Class 2M-2; LT Bsf New Rating; previously at B(EXP)sf
Class 2M-2G; LT Bsf New Rating; previously at B(EXP)sf
Class 2M-2H; LT Bsf New Rating; previously at B(EXP)sf
Class 2M-2J; LT Bsf New Rating; previously at B(EXP)sf
Class 2M-2K; LT Bsf New Rating; previously at B(EXP)sf
Class 2M-2L; LT Bsf New Rating; previously at B(EXP)sf
Class 2X-GH; LT NRsf New Rating; previously at NR(EXP)sf
Class 2X-HH; LT NRsf New Rating; previously at NR(EXP)sf
Class 2X-JH; LT NRsf New Rating; previously at NR(EXP)sf
Class 2X-KH; LT NRsf New Rating; previously at NR(EXP)sf
Class 2X-LH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1AH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1BH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1CH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1DH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1EH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1FH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1GH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1HH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1JH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1KH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-1LH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2AH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2BH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2CH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2DH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2EH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2FH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2GH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2HH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2JH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2KH; LT NRsf New Rating; previously at NR(EXP)sf
Class B-2LH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1AH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1BH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1CH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1DH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1EH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1FH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1GH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1HH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1JH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1KH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-1LH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2AH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2BH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2CH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2DH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2EH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2FH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2GH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2HH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2JH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2KH; LT NRsf New Rating; previously at NR(EXP)sf
Class M-2LH; LT NRsf New Rating; previously at NR(EXP)sf
KEY RATING DRIVERS
High Credit Quality (Positive): The underlying reference pools
backing each security (excluding the Related Combinable and
Recombinable [RCR] classes) consist of either a Fannie Mae high or
low loan-to-value (LTV), CAS actual loss transaction issued in 2015
or 2016. All of the reference pools are of high quality having a
weighted average original FICO score of 749 with no pool having a
current FICO of less than 739. The deals had LTVs ranging from 61%
to 97% at close but through a combination of loan amortization and
strong home price growth, the current weighted average LTVs now
range from 56% to 69%.
Seasoned Mortgage Pools (Positive): The related CAS legacy
transactions referenced as part of this transaction were issued
between 2015 and 2016 and have a weighted average deal age ranging
from 38 to 51 months. Over this time period, there has been
meaningful home price appreciation ranging from 22% to 32%. Credit
events and realized losses to date have been minimal and the pools
are more than 98% current on average. Furthermore, the deals have
seen material pay downs as the largest outstanding pool factor is
62.3%.
Twenty Year Legal Maturity (Neutral): A key difference between the
SBT1 securities and the related CAS legacy transactions is that the
underlyings were structured to a legal final maturity date of 12.5
years at issuance. The SBT1 securities have a 20-year legal final
maturity with a seven-year optional call. As a result, the SBT1
transaction is expected to survive the termination of the
underlying deals, but the reference pools will remain intact. Given
the longer maturity date of the SBT1 rated classes, Fitch did not
apply any maturity benefit to its loss expectations.
Sequential Pay Structure (Positive): Principal payments to the SBT1
securities for each reference pool will be based on the performance
and payments on the underlying reference pools. The structure
distributes principal payments pro-rata between the senior
reference tranche and both the hypothetical and offered subordinate
classes. The most senior subordinate class currently outstanding
for each reference pool will receive the entire portion of
principal allocated to the subordinate bonds until its balance has
been reduced to zero. No principal payments will be allocated to a
subordinate bond associated with a reference pool (excluding RCR
classes) as long as there are still subordinate classes outstanding
with a higher payment priority associated with the same reference
pool. The rated classes associated with the payments of each
reference pool will not receive any principal payments until the
corresponding 'X-H' and 'M-1H' hypothetical tranches have paid off.
There is no cross collateralization among the reference pools and
the transaction operates with an independent waterfall for each
reference pool and related set of securities.
Guaranteed Interest Payments (Positive): Interest payments on the
bonds are made from interest earned from eligible investments, with
Fannie Mae covering any potential shortfalls. Interest payments are
made regardless of pool delinquency and are guaranteed by a 'AAA'
counterparty, so no delinquency stress was run. Principal payments
on the bonds are made from the release of money in the cash
collateral account (CCA), which is funded by the sale of the
securities at close.
No Subordination Floor (Positive): The lack of subordination floor
is a positive for the rated classes related to this transaction.
Since Fitch is rating the subordinate bonds, having a credit
enhancement (CE) floor would lock out the rated bonds and extend
their maturity. The current structure allows for principal payments
to the subordinate classes as long as the triggers for each
corresponding reference pool are passing.
Very Low Operational Risk (Positive): Fitch considers this
transaction to have very low operational risk. Fannie Mae is an
industry leader in residential mortgage activities and is as
assessed as an 'Above-Average' aggregator due to the GSE's strong
seller oversight and risk management controls.
Strong Lender Review and Acquisition Processes (Positive): Based on
its review of Fannie Mae's aggregator platform, Fitch believes that
Fannie Mae has a well-established and disciplined credit-granting
process in place 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.
Tight controls lower operational risk and improve overall loan
quality. The lower risk was accounted for by Fitch by applying a
lower default estimate for each reference pool of 5%.
Due Diligence Review Results (Neutral): While there was no
diligence performed in connection with this transaction, diligence
reviews were performed at the time of the initial rating of the
respective CAS transactions. Fitch has not noted any material
issues over the years with Fannie Mae's processes and no
adjustments have been made in connection with the diligence
results.
Representation Framework (Neutral): The mortgage loans making up
the reference pools are not pledged to secure the securities, and
Fannie Mae is not making R&W regarding the loans. However, because
Fannie Mae's QC review of loan files is limited in scope and does
not include a review of the loan file for compliance with most
local, state and federal laws, significant reliance is placed on
the reps and warranties made by the loan sellers to Fannie Mae. The
substance of the reps made to Fannie Mae by the lenders is
consistent with Fitch's criteria. No adjustment was made to the
expected losses.
RATING SENSITIVITIES
Fitch's analysis incorporates a sensitivity analysis to demonstrate
how the ratings would react to steeper MVDs than assumed at the MSA
level. 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 may be
considered in the surveillance of the transaction. Three sets of
sensitivity analyses were conducted at the state and national
levels to assess the effect of higher MVDs for the subject pool.
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
average model-projected 15.0% at the 'Bsf' level as shown in the
presale report, the analysis indicates that there is some potential
rating migration with higher MVDs compared with the model
projection.
CT CDO IV: Fitch Affirms Csf Ratings on 9 Tranches
--------------------------------------------------
Fitch Ratings has upgraded three and affirmed 30 classes from five
commercial real estate collateralized debt obligations with
exposure to commercial mortgage-backed securities. Fitch has also
withdrawn the ratings on two classes from one CRE CDO.
RATING ACTIONS
CT CDO IV Ltd.
Class D-FL 12642VAF7; LT CCCsf Upgrade; previously at CCsf
Class D-FX 12642VAE0; LT CCCsf Upgrade; previously at CCsf
Class E 12642VAG5; LT Csf Affirmed; previously at Csf
Class F-FL 12642VAJ9; LT Csf Affirmed; previously at Csf
Class F-FX 12642VAH3; LT Csf Affirmed; previously at Csf
Class G 12642TAA3; LT Csf Affirmed; previously at Csf
Class H 12642TAB1; LT Csf Affirmed; previously at Csf
Class J 12642TAC9; LT Csf Affirmed; previously at Csf
Class K 12642TAD7; LT Csf Affirmed; previously at Csf
Class L 12642TAE5; LT Csf Affirmed; previously at Csf
Class M 12642TAF2; LT Csf Affirmed; previously at Csf
Sorin Real Estate CDO I, Ltd./Corp.
Class C Floating Rate Sub 83586TAG9; LT CCCsf Affirmed; previously
at CCCsf
Class D Floating Rate Sub 83586TAJ3; LT Csf Affirmed; previously at
Csf
Class E Floating Rate Sub 83586TAL8; LT Csf Affirmed; previously at
Csf
Class F Fixed Rate Sub 83586TAN4; LT Csf Affirmed; previously at
Csf
N-Star Real Estate CDO IX, Ltd.
Class A-2 Floating Rate Notes 628983AB4; LT Dsf Affirmed;
previously at Dsf
Class A-3 Floating Rate Notes 628983AC2; LT Dsf Affirmed;
previously at Dsf
Class B Floating Rate Notes 628983AD0; LT Dsf Affirmed; previously
at Dsf
Class C Deferrable Fixed Rate Notes 628983AE8; LT Csf Affirmed;
previously at Csf
Class D Deferrable Fltg Rate Notes 628983AF5; LT Csf Affirmed;
previously at Csf
Class E Deferrable Fltg Rate Notes 628983AG3; LT Csf Affirmed;
previously at Csf
Class F Deferrable Fltg Rate Notes 628983AH1; LT Csf Affirmed;
previously at Csf
Class G Deferrable Fltg Rate Notes 628983AJ7; LT Csf Affirmed;
previously at Csf
Class H Deferrable Fltg Rate Notes 628983AK4; LT Csf Affirmed;
previously at Csf
Class J Deferrable Fixed Rate Notes 628983AL2; LT Csf Affirmed;
previously at Csf
Class K Deferrable Fixed Rate Notes 628983AM0; LT Csf Affirmed;
previously at Csf
Halcyon 2005-2, Ltd
Class B XS0231502716; LT Dsf Affirmed; previously at Dsf
Class B XS0231502716; LT WDsf Withdrawn; previously at Dsf
Class C XS0231504092; LT Dsf Affirmed; previously at Dsf
Class C XS0231504092; LT WDsf Withdrawn; previously at Dsf
G-Star 2003-3 Ltd./Corp.
Class A-2 36241WAC6; LT BBBsf Upgrade; previously at BBsf
Class A-3 36241WAE2; LT Csf Affirmed; previously at Csf
Class B-1 36241WAG7; LT Csf Affirmed; previously at Csf
Class B-2 36241WAJ1; LT Csf Affirmed; previously at Csf
Preferred Shares 36241T208; LT Csf Affirmed; previously at Csf
Fitch has affirmed the class B and C notes in Halcyon 2005-2 at
'Dsf' because they have experienced principal writedowns. The
ratings were also withdrawn. The trust balance has been reduced to
zero and no collateral remains.
KEY RATING DRIVERS
Fitch has upgraded the class A-2 notes in G-Star 2003-3 to 'BBBsf'
from 'BBsf' due to increased credit enhancement and positive
ratings migration of the underlying portfolio since the last rating
action. Approximately 22% of the underlying portfolio was upgraded
a weighted average of 3.8 notches since the last rating action. The
repayment of the class A-2 notes is reliant on collateral with
credit characteristics consistent with a 'BBBsf' rating.
Fitch has upgraded the class D-FL and D-FX notes in CT CDO IV to
'CCCsf' from 'CCsf' due to increased credit enhancement and
improved credit quality of the underlying portfolio since the last
rating action. The repayment of the class D-FL and D-FX notes is
reliant on collateral with credit characteristics consistent with a
'CCCsf' rating.
Fitch has affirmed and capped the rating of the class C notes in
Sorin Real Estate CDO I at 'CCCsf' due to the increasing
concentration and adverse selection concerns on the underlying
collateral. Class C is the senior most class of outstanding notes
where timely interest payments are now required per the transaction
documents; any capitalization of interest to the most senior class
constitutes an Event of Default.
Fitch has affirmed the class A-2, A-3 and B notes in N-Star Real
Estate CDO IX at 'Dsf' as a result of the transaction entering an
Event of Default due to the Class A/B Principal Coverage Ratio
being less than 100%.
Fitch has affirmed 24 classes at 'Csf' as default is considered
inevitable due to their undercollateralization or reliance on
collateral with credit characteristics consistent with a 'Csf'
rating.
Fitch has affirmed the class B and C notes in Halcyon 2005-2 at
'Dsf' because they have experienced principal writedowns. The
ratings on these classes have also been withdrawn as the CDO was
terminated in December 2019 and no collateral remains.
RATING SENSITIVITIES
Upgrades to the senior most class in G-Star 2003-3, CT CDO IV and
Sorin Real Estate CDO I are possible with additional paydowns,
improved credit enhancement and positive ratings migration of the
underlying collateral.
Downgrades to these classes are possible should performance of the
underlying bonds deteriorate and/or with any negative rating
migrations on the underlying collateral.
Classes already rated 'Csf' have limited sensitivity to further
negative migration given their highly distressed rating level.
However, there is potential for classes to be downgraded to 'Dsf'
if they are non-deferrable classes that experience any interest
payment shortfalls, if they are classes that experience principal
writedowns or should an Event of Default as set forth in the
transaction documents occur.
CUTWATER LTD 2014-I: Moody's Lowers $7.3MM Cl. E Notes to Caa3
--------------------------------------------------------------
Moody's Investors Service upgraded the ratings on the following
notes issued by Cutwater 2014-I, Ltd.:
US$38,200,000 Class A-2-R Senior Secured Floating Rate Notes Due
July 2026, Upgraded to Aaa (sf); previously on June 8, 2017
Assigned Aa1 (sf)
US$25,000,000 Class B-R Senior Secured Deferrable Floating Rate
Notes Due July 2026, Upgraded to Aa3 (sf); previously on June 8,
2017 Assigned A2 (sf)
Moody's also downgraded the rating on the following notes:
US$7,300,000 Class E Secured Deferrable Floating Rate Notes Due
July 2026, Downgraded to Caa3 (sf); previously on January 28, 2019
Downgraded to Caa1 (sf)
Cutwater 2014-I, Ltd., originally issued in July 2014 and partially
refinanced in June 2017 is a managed cashflow CLO. The notes are
collateralized primarily by a portfolio of broadly syndicated
senior secured corporate loans. The transaction's reinvestment
period ended in July 2018.
RATINGS RATIONALE
The upgrade actions are primarily a result of deleveraging of the
senior notes and an increase in the transaction's
over-collateralization (OC) ratios since January 2019. The Class
A-1a-R notes and Class A-1b-R notes have been paid down by
approximately 47.1% or $85.1 million and 17.7 million,
respectively, since then. Based on the trustee's February 2020
report, the OC ratios for the Class A and Class B are reported at
149.20% and 128.34%, respectively, versus January 2019 levels of
135.84% and 123.78%, respectively.
Nevertheless, the credit quality of the portfolio has deteriorated
since January 2019. Based on the trustee's February 2020 report,
the weighted average rating factor (WARF) is currently 3878
compared to 3319 in January 2019.
The downgrade rating action on the Class E notes reflects the
specific risks to the junior notes posed by par loss observed in
the underlying CLO portfolio. Based on Moody's calculation, the
collateral par balance, including recoveries from defaulted
securities, is currently approximately $240 million, or $10 million
less than the collateral par balance calculated in January 2019,
adjusted for the paydown of the senior notes.
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 $237.0 million, defaulted par of
$10.8 million, a weighted average default probability of 25.27%
(implying a WARF of 3845), a weighted average recovery rate upon
default of 46.23%, a diversity score of 47 and a weighted average
spread of 4.53%.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
March 2019.
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.
DENBURY RESOURCES: Moody's Lowers CFR to Caa2, Outlook Neg.
-----------------------------------------------------------
Moody's Investors Service downgraded Denbury Resources Inc.'s
Corporate Family Rating to Caa2 from B3, Probability of Default
Rating to Caa2-PD from B3-PD, ratings on its senior secured second
lien debt to Caa2 from B3 and ratings on its senior subordinated
debt to Ca from Caa2. The Speculative Grade Liquidity Rating was
downgraded to SGL-4 from SGL-2. The rating outlook has been revised
to negative from stable.
"Denbury has material debt maturities in 2021 and 2022 that will
require external financing and may generate negative free cash flow
in 2020 at current commodity prices," commented James Wilkins,
Moody's Vice President.
The following summarizes the ratings activity.
Downgrades:
Issuer: Denbury Resources Inc.
Probability of Default Rating, Downgraded to Caa2-PD from B3-PD
Speculative Grade Liquidity Rating, Downgraded to SGL-4 from SGL-2
Corporate Family Rating, Downgraded to Caa2 from B3
Senior Subordinated Regular Bond/Debenture, Downgraded to Ca (LGD6)
from Caa2 (LGD6)
Senior Secured Regular Bond/Debenture, Downgraded to Caa2 (LGD4)
from B3 (LGD3)
Outlook Actions:
Issuer: Denbury Resources Inc.
Outlook, Changed To Negative From Stable
RATINGS RATIONALE
The downgrade of Denbury's CFR to Caa2 reflects Moody's expectation
that its revenues will decline in 2021 and the uncertainty over the
company's ability to refinance its debt maturing in 2021. Denbury
generated positive free cash flow in 2019, but may not in 2020 at
lower current oil prices. It benefits from hedges on more than 70%
of projected 2020 oil production and therefore will not feel the
full impact of the decline in oil prices so far in 2020. However
the three way collars do leave Denbury exposed to oil price
declines below the sold put prices. As of year-end 2019, it did not
have hedges on 2021 oil production and could experience a material
drop in cash flow from operations if the current weak commodity
price environment persists. Denbury will likely need external
financing to refinance the 2021 maturities ($615 million of senior
secured second lien notes due in May 2021 and $51 million of senior
subordinated notes due in August 2021) since the revolver
availability and internal sources of cash will not be sufficient to
address the maturities.
Denbury's CFR reflects high leverage, moderate scale and relatively
high cost enhanced oil recovery operations. Denbury continues to
have high financial leverage (retained cash flow to debt below 20%
and ratio of reserves value to debt around 1x), despite shedding
nearly $1.3 billion in debt since 2014, including an exchange offer
completed in June 2019 that improved the company's maturity profile
by extending debt maturing in 2021. The company's two areas of
operation (the US Gulf Coast and the Rocky Mountain region) produce
over 95% oil and offer some asset diversification. The enhanced oil
recovery operations, which account for more than 60% of production,
are more capital intense upfront, require longer lead times and
have higher operating costs, but also provide for a lower risk
asset base, with no exploration risk and long-lived reserves. The
company owns extensive CO2 supply infrastructure as well as CO2
reserves.
The SGL-4 Speculative Grade Liquidity Rating reflects weak
liquidity, driven by the need to obtain external financing to
refinance debt maturing in the second and third quarters of 2021.
The company's primary sources of liquidity are its revolving credit
facility due 2021 and cash flow from operations. The $615 million
revolver, which is subject to a borrowing base, matures in December
2021 (with springing maturities beginning in February 2021, if the
second lien notes due May 2021 are not refinanced). The revolver
was undrawn as of year-end 2019, but had $87 million of letters of
credit outstanding. The credit facility's financial covenants
include a maximum total debt to EBITDA ratio of 5.25x through
December 31, 2020 (4.5x thereafter), maximum senior secured debt to
EBITDA ratio of 2.5x, a minimum interest coverage ratio of 1.25x
and a minimum current ratio of 1x. Moody's expects the company to
remain in compliance with the financial covenants and to generate
positive free cash flow through 2020. The company has $615 million
of senior secured second lien notes maturing in May 2021 and $51
million of subordinated notes maturing in August 2021.
The negative outlook reflects the uncertainty over the ability of
Denbury to refinance its debt maturing in 2021 on a timely basis
and on favorable terms. The ratings could be upgraded if Denbury
refinances its debt maturing in 2021 and 2022, maintains adequate
liquidity as well as maintains stable production. The ratings could
be downgraded if it cannot refinance its debt, interest coverage
declines or liquidity weakens.
The principal methodology used in these ratings was Independent
Exploration and Production Industry published in May 2017.
Denbury Resources Inc., headquartered in Plano, Texas, is an
independent oil and gas company with operations in the Gulf Coast
and Rocky Mountain regions. The company has a significant emphasis
on carbon dioxide enhanced oil recovery (CO2 EOR) operations used
to recover oil from mature fields.
ELEVATION CLO 2020-11: S&P Assigns Prelim 'BB-' Rating to E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elevation
CLO 2020-11 Ltd./Elevation CLO 2020-11 LLC's floating-rate notes.
The note issuance is CLO securitization backed by primarily broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests and
managed by ArrowMark Colorado Holdings LLC, a subsidiary of
ArrowMark Partners.
The preliminary ratings are based on information as of March 9,
2020. 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 diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral management team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
PRELIMINARY RATINGS ASSIGNED
Elevation CLO 2020-11 Ltd./Elevation CLO 2020-11 LLC
Class Rating Amount (mil. $)
A AAA (sf) 320.00
B AA (sf) 60.00
C (deferrable) A (sf) 30.00
D-1 (deferrable) BBB (sf) 27.50
D-2 (deferrable) BBB- (sf) 5.00
E (deferrable) BB- (sf) 15.00
Subordinated notes NR 47.00
NR--Not rated.
FLAGSTAR MORTGAGE 2020-2: Fitch to Rate Class B-5 Certs 'B(EXP)'
----------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by Flagstar Mortgage Trust 2020-2.
RATING ACTIONS
FSMT 2020-2
Class A-1; LT AA+(EXP)sf; Expected Rating
Class A-10; LT AAA(EXP)sf; Expected Rating
Class A-10A; LT AAA(EXP)sf; Expected Rating
Class A-11; LT AAA(EXP)sf; Expected Rating
Class A-11X; LT AAA(EXP)sf; Expected Rating
Class A-12; LT AAA(EXP)sf; Expected Rating
Class A-13; LT AAA(EXP)sf; Expected Rating
Class A-13A; LT AAA(EXP)sf; Expected Rating
Class A-14; LT AA+(EXP)sf; Expected Rating
Class A-15; LT AA+(EXP)sf; Expected Rating
Class A-16A; LT AA+(EXP)sf; Expected Rating
Class A-17A; LT AA+(EXP)sf; Expected Rating
Class A-18; LT AA+(EXP)sf; Expected Rating
Class A-1A; LT AA+(EXP)sf; Expected Rating
Class A-2; LT AAA(EXP)sf; Expected Rating
Class A-2A; LT AAA(EXP)sf; Expected Rating
Class A-3; LT AAA(EXP)sf; Expected Rating
Class A-3A; LT AAA(EXP)sf; Expected Rating
Class A-4; LT AAA(EXP)sf; Expected Rating
Class A-4A; LT AAA(EXP)sf; Expected Rating
Class A-5; LT AAA(EXP)sf; Expected Rating
Class A-5A; LT AAA(EXP)sf; Expected Rating
Class A-6; LT AAA(EXP)sf; Expected Rating
Class A-6A; LT AAA(EXP)sf; Expected Rating
Class A-7; LT AAA(EXP)sf; Expected Rating
Class A-7A; LT AAA(EXP)sf; Expected Rating
Class A-8; LT AAA(EXP)sf; Expected Rating
Class A-8A; LT AAA(EXP)sf; Expected Rating
Class A-9; LT AAA(EXP)sf; Expected Rating
Class A-9A; LT AAA(EXP)sf; Expected Rating
Class A-X-1; LT AA+(EXP)sf; Expected Rating
Class A-X-10; LT AAA(EXP)sf; Expected Rating
Class A-X-2; LT AA+(EXP)sf; Expected Rating
Class A-X-3; LT AAA(EXP)sf; Expected Rating
Class A-X-3A; LT AAA(EXP)sf; Expected Rating
Class A-X-4; LT AA+(EXP)sf; Expected Rating
Class A-X-5; LT AA+(EXP)sf; Expected Rating
Class A-X-6; LT AAA(EXP)sf; Expected Rating
Class A-X-8; LT AAA(EXP)sf; Expected Rating
Class A-X-9; LT AAA(EXP)sf; Expected Rating
Class B-1; LT AA(EXP)sf; Expected Rating
Class B-1A; LT AA(EXP)sf; Expected Rating
Class B-1X; LT AA(EXP)sf; Expected Rating
Class B-2; LT A(EXP)sf; Expected Rating
Class B-2A; LT A(EXP)sf; Expected Rating
Class B-2X; LT A(EXP)sf; Expected Rating
Class B-3; LT BBB(EXP)sf; Expected Rating
Class B-4; LT BB(EXP)sf; Expected Rating
Class B-5; LT B(EXP)sf; Expected Rating
Class B-6-C; LT NR(EXP)sf; Expected Rating
TRANSACTION SUMMARY
The transaction is expected to close on March 27, 2020. The
certificates are supported by 580 jumbo prime (66.9%) and
high-balance conforming (33.1%) loans with a total balance of
approximately $407.38 million. This is the 12th post-crisis
issuance from Flagstar Bank, FSB (Flagstar).
The pool comprises loans that Flagstar originated through its
retail, broker and correspondent channels. The transaction is
similar to previous Fitch-rated prime transactions, with a standard
senior-subordinate, shifting-interest deal structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral pool consists
primarily of 30-year, fully amortizing, high-balance conforming and
jumbo fixed-rate loans to borrowers with strong credit profiles and
low leverage. All of the loans are designated as Safe Harbor
Qualified Mortgages (SHQMs) or Temporary Qualified Mortgages. The
pool has a weighted average (WA) original FICO score of 762 and an
original combined loan to value (CLTV) ratio of 68.7%. The
collateral attributes of the pool are generally consistent with
those of recent prime transactions.
Low Operational Risk (Neutral): Operational risk is well controlled
for in this transaction. Flagstar is experienced in originating and
securitizing prime quality loans and is considered an 'Average'
originator by Fitch. Flagstar is also the named servicer for the
transaction and is responsible for performing primary servicing
functions. The platform is rated 'RPS2-' with a Stable Outlook.
Fitch did not adjust its loss levels based on these operational
assessments.
Geographic Diversification (Neutral): The pool's primary
concentration is in California, representing 47.6% of the pool.
Approximately 34% of the pool is located in the top three MSAs (Los
Angeles, San Francisco and New York), with 20% of the pool located
in the Los Angeles MSA. The pool's regional concentration did not
add to Fitch's 'AAAsf' loss expectations.
Tier 1 R&W Framework (Neutral): The representation and warranty
(R&W) framework is consistent with Fitch's tier 1 framework. The
strong framework combined with the financial condition of the R&W
provider led to neutral treatment in Fitch's loss model and did not
warrant adjustments at the 'AAAsf' level.
Third-Party Due Diligence Results (Positive): Third-party due
diligence was performed by SitusAMC, which is assessed by Fitch as
an 'Acceptable - Tier 1' third-party review (TPR) firm. The review
was performed on a statistically significant random sample of 39%
of the loans in the transaction pool. While the results confirmed
strong loan origination practices consistent with prior Flagstar
transactions, the sample had a high concentration of initial TRID
exceptions considered to be material that were cured with
post-closing documentation. Since due diligence was performed on a
sample of the pool, Fitch extrapolated the results to the remaining
loans that did not receive diligence to address potential TRID
errors that were not cured with post-closing documentation.
However, the adjustment netted with the due diligence credit given
to 39% of the pool decreased Fitch's loss expectations by 7 bps at
the 'AAAsf' rating stress.
Shifting Interest Deal Structure (Negative): The mortgage cash flow
and loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. While there is
only minimal leakage to the subordinate bonds early on in the
transaction, the structure is more vulnerable to defaults occurring
later on in the life of the deal compared to a sequential or
modified sequential structure. The applicable credit support
percentage feature redirects subordinate principal to classes of
higher seniority if specified credit enhancement (CE) levels are
not maintained.
To mitigate tail risk, which arises as the pool seasons and fewer
loans are outstanding, a subordination floor of 1.0% of the
original balance will be maintained for the senior certificates. An
additional subordination floor of 0.70% of the original collateral
balance will be maintained for the subordinate classes.
Extraordinary Trust Expenses (Neutral): Extraordinary trust
expenses including indemnification amounts, costs of arbitration,
and fess/expenses incurred by the reviewer for a review will reduce
the net WA coupon (WAC) of the loans, which does not affect the
contractual interest due on the certificates. Fitch did not make
any adjustment for expenses that reduce the net WAC.
RATING SENSITIVITIES
Fitch's analysis incorporates a sensitivity analysis to demonstrate
how the ratings would react to steeper market value declines (MVDs)
than assumed at the MSA level. 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 may be considered in the surveillance of the transaction.
Three sets of sensitivity analyses were conducted at the state and
national levels to assess the effect of higher MVDs for the subject
pool.
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 4.6% at the base case. The analysis indicates that
there is some potential rating migration with higher MVDs compared
to the model projection.
The defined rating sensitivities determine the stresses to MVDs
that would reduce a rating by one full category, to non-investment
grade and to 'CCCsf'.
FREDDIE MAC 2020-1: DBRS Gives Prov. B(low) Rating on Cl. M Certs
-----------------------------------------------------------------
DBRS, Inc. assigned a provisional rating to the following
Mortgage-Backed Security, Series 2020-1 (the Certificate) to be
issued by Freddie Mac Seasoned Credit Risk Transfer Trust, Series
2020-1 (the Trust):
-- $58.8 million Class M at B (low) (sf)
The B (low) (sf) rating on the Certificate reflects 6.35% of credit
enhancement provided by subordinated certificates in the pool.
Other than the specified class above, DBRS Morningstar does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of seasoned,
reperforming first-lien residential mortgages funded by the
issuance of the certificates, which are backed by 10,992 loans with
a total principal balance of $1,865,280,631 as of the Cut-Off Date
(January 31, 2020).
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 loans are approximately 141 months seasoned and have all been
modified. Each mortgage loan was modified under either
government-sponsored enterprise (GSE) Home Affordable Modification
Program (HAMP) or GSE non-HAMP modification programs. Within the
pool, 3,851 mortgages have forborne principal amounts as a result
of a modification, which equates to 10.0% of the total unpaid
principal balance as of the Cut-Off Date. For 69.6% of the modified
loans, the modifications happened more than two years ago.
The loans are all current as of the Cut-Off Date. Furthermore,
41.4% 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. DBRS Morningstar assumed that all
loans within the pool are exempt from the Qualified Mortgage rules
because of their eligibility to be purchased by Freddie Mac.
The mortgage loans will be serviced by Specialized Loan Servicing
LLC. The servicer will not be advancing any delinquent principal or
interest on any mortgages; however, the servicer is obligated to
advance to third parties any amounts necessary for the preservation
of mortgaged properties or real estate owned properties the Trust
acquires 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 (Class
HAW, Class HA, Class HA-IO, Class HBW, Class HB, Class HB-IO, Class
HTW, Class HT, Class HT-IO, Class HV, Class HZ, Class MAW, Class
MA, Class MAU, Class MA-IO, Class MBW, Class MB, Class MBU, Class
MB-IO, Class MC, Class MTW, Class MT, Class MT-IO, Class MTU, Class
MV, Class MZ, Class M55D, Class M55E, Class M55G, and Class M55I;
collectively, the Guaranteed Certificates). Wilmington Trust
National Association (Wilmington Trust; rated AA (low) with a
Stable trend by DBRS Morningstar) will serve as Trust Agent. Wells
Fargo Bank, N.A. (rated AA with a Stable trend by DBRS Morningstar)
will serve as the Custodian for the Trust. U.S. Bank National
Association (rated AA (high) with a Stable trend by DBRS
Morningstar) will serve as the Securities Administrator for the
Trust and will also act as Paying Agent, Registrar, Transfer Agent,
and Authenticating Agent.
Freddie Mac, as the Seller, will make certain representations and
warranties (R&W) with respect to the mortgage loans. Freddie Mac
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 during the
warranty period, the Trust Agent, Wilmington Trust, will be
responsible for enforcing R&Ws. The warranty period will only be
effective through March 9, 2023 (approximately three years from the
Closing Date), for substantially all R&Ws other than the real
estate mortgage investment conduit R&W, which will not expire.
The mortgage loans will be divided into three loan groups: Group H,
Group M, and Group M55. The Group H loans (3.2% of the pool) were
subject to step-rate modifications and had not yet reached their
final step rate as of December 31, 2019. As of the Cut-Off Date,
the borrower, while still current, has not made any payments
accrued at such a final step rate. Group M loans (88.5% of the
pool) and Group M55 loans (8.3% of the pool) were subject to either
fixed-rate modifications or step-rate modifications that have
reached their final step rates and, as of the Cut-Off Date, the
borrowers have made at least one payment after such mortgage loans
reached their respective final step rates. Each Group M loan has a
mortgage interest rate less than or equal to 5.5% and has no
forbearance or may have forbearance and any mortgage interest rate.
Each Group M55 loan has a mortgage interest rate greater than 5.5%
and has no forbearance.
Principal and interest (P&I) on the Guaranteed Certificates will be
guaranteed by Freddie Mac. The Guaranteed Certificates will be
backed by collateral from each group, respectively. The remaining
certificates (including the subordinate, non-guaranteed,
interest-only mortgage insurance, and residual certificates) will
be cross-collateralized among the three groups.
The transaction employs a pro-rata pay cash flow structure among
the senior group certificates with a sequential-pay feature among
the subordinate certificates. Certain principal proceeds can be
used to cover interest shortfalls on the rated Class M
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 P&I collections
prior to any allocation to the subordinate certificates. The senior
principal distribution amounts vary subject to the satisfaction of
a step-down test. Realized losses are allocated sequentially in
reverse order.
Notes: All figures are in U.S. dollars unless otherwise noted.
FREDDIE MAC 2020-1: Fitch Assigns B-sf Rating on Class M Debt
-------------------------------------------------------------
Fitch rates Freddie Mac's risk-transfer transaction, Seasoned
Credit Risk Transfer Trust Series 2020-1.
RATING ACTIONS
SCRT 2020-1
Class A-IO; LT NRsf New Rating; previously at NR(EXP)sf
Class B; LT NRsf New Rating; previously at NR(EXP)sf
Class B-IO; LT NRsf New Rating; previously at NR(EXP)sf
Class BBIO; LT NRsf New Rating; previously at NR(EXP)sf
Class BX; LT NRsf New Rating; previously at NR(EXP)sf
Class BXS; LT NRsf New Rating; previously at NR(EXP)sf
Class HA; LT NRsf New Rating; previously at NR(EXP)sf
Class HA-IO; LT NRsf New Rating; previously at NR(EXP)sf
Class HAW; LT NRsf New Rating; previously at NR(EXP)sf
Class HB; LT NRsf New Rating; previously at NR(EXP)sf
Class HB-IO; LT NRsf New Rating; previously at NR(EXP)sf
Class HBW; LT NRsf New Rating; previously at NR(EXP)sf
Class HT; LT NRsf New Rating; previously at NR(EXP)sf
Class HT-IO; LT NRsf New Rating; previously at NR(EXP)sf
Class HTW; LT NRsf New Rating; previously at NR(EXP)sf
Class HV; LT NRsf New Rating; previously at NR(EXP)sf
Class HZ; LT NRsf New Rating; previously at NR(EXP)sf
Class M; LT B-sf New Rating; previously at B-(EXP)sf
Class M55D; LT NRsf New Rating; previously at NR(EXP)sf
Class M55E; LT NRsf New Rating; previously at NR(EXP)sf
Class M55G; LT NRsf New Rating; previously at NR(EXP)sf
Class M55I; LT NRsf New Rating; previously at NR(EXP)sf
Class MA; LT NRsf New Rating; previously at NR(EXP)sf
Class MA-IO; LT NRsf New Rating; previously at NR(EXP)sf
Class MAU; LT NRsf New Rating; previously at NR(EXP)sf
Class MAW; LT NRsf New Rating; previously at NR(EXP)sf
Class MB; LT NRsf New Rating; previously at NR(EXP)sf
Class MB-IO; LT NRsf New Rating; previously at NR(EXP)sf
Class MBU; LT NRsf New Rating; previously at NR(EXP)sf
Class MBW; LT NRsf New Rating; previously at NR(EXP)sf
Class MC; LT NRsf New Rating; previously at NR(EXP)sf
Class MI; LT NRsf New Rating; previously at NR(EXP)sf
Class MT; LT NRsf New Rating; previously at NR(EXP)sf
Class MT-IO; LT NRsf New Rating; previously at NR(EXP)sf
Class MTU; LT NRsf New Rating; previously at NR(EXP)sf
Class MTW; LT NRsf New Rating; previously at NR(EXP)sf
Class MV; LT NRsf New Rating; previously at NR(EXP)sf
Class MZ; LT NRsf New Rating; previously at NR(EXP)sf
Class XS-IO; LT NRsf New Rating; previously at NR(EXP)sf
TRANSACTION SUMMARY
SCRT 2020-1 represents Freddie Mac's 14th seasoned credit risk
transfer transaction issued. SCRT 2020-1 consists of three
collateral groups that comprise 10,992 seasoned performing and
re-performing mortgages, with a total balance of approximately
$1.87 billion, of which $186.2 million, or 10.0%, is in
non-interest-bearing deferred principal amounts as of the cutoff
date. The three collateral groups represent 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. Among the loans that are fixed, the
groups are further distinguished by loans that include a portion of
principal forbearance as well as the interest rate on the loans.
The distribution of principal and interest (P&I) and loss
allocations to the rated note is based on a senior subordinate,
sequential structure.
KEY RATING DRIVERS
Distressed Performance History (Negative): The collateral pool
comprises primarily peak-vintage re-performing loans (RPLs), all of
which have been modified. Roughly 41.4% of the pool has been paying
on time for the past 24 months, per the Mortgage Bankers
Association (MBA) methodology, and 15.5% of the loans have
experienced a delinquency within the past 12 months. The pool has a
weighted average (WA) sustainable loan to value ratio (sLTV) of
77.7%, and the WA model FICO score is 671.
Low Operational Risk (Neutral): Operational risk is well controlled
for this transaction. Freddie Mac has an established track record
in residential mortgage activities and is assessed as an 'Above
Average' aggregator by Fitch. Specialized Loan Servicing, LLC (SLS)
is the named servicer for this transaction and is rated 'RPS2+' for
primary servicing functions.
Interest Payment Risk (Negative): In Fitch's timing scenarios, the
M class incurs temporary shortfalls in the 'B-sf' rating category
but is 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 class is subordinated to the
senior bonds as well as repayments made to Freddie Mac for prior
payments on the senior classes. Timely payments of interest are
also at potential risk as principal collections on the underlying
loans can only be used to repay interest shortfalls on the rated
classes after the balance of the senior classes is paid off. This
results in an extended period until potential shortfalls are
ultimately repaid in Fitch's stress scenarios.
Representation and Warranty Framework (Negative): Fitch considers
the representation, warranty and enforcement (RW&E) mechanism
construct for this transaction as weaker than that of 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, pay an indemnity loss amount or
cure the material breach prior to March 9, 2023. 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 'B-sf' expected loss expectations by 21bps to account
for the weaknesses in the reps.
Sequential-Pay Structure (Positive): Once the initial CE of the
senior bonds has reached the target amount and if all performance
triggers are passing, principal is allocated pro rata among the
senior and subordinate classes with the most senior-subordinate
bond receiving the full subordinate share. This structure is a
positive to the rated class as it results in a faster paydown and
allows them to receive principal earlier than under a fully
sequential structure. However, to the extent any of the performance
triggers are failing, principal is distributed sequentially to the
senior classes until triggers pass or the senior classes are paid
in full.
No Servicer P&I Advances (Mixed): The servicer will not advance
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 ultimate payment
of interest to the rated class.
Third-Party Due Diligence Review (Negative): Third-party due
diligence was performed on a statistically random sample of
approximately 12% of the initial loan population for this
transaction. The review was performed by AMC Diligence, LLC (AMC),
which is assessed by Fitch as 'Acceptable - Tier 1'. Approximately
12% of the loan sample were found to have material regulatory
compliance exceptions and received a final due diligence grade of
'C' or 'D'. The exceptions were primarily due to missing final
HUD-1 files that inhibited the TPR from properly testing for
predatory lending. Fitch adjusted its 'Bsf' loss expectations by
less than 10bps to account for loans in the transaction with these
exceptions; however, it is expected that most of these loans would
not be in violation if testing can be completed.
This transaction has an ESG Relevance Score of 4 for human rights,
community relations and access and affordability, as SCRT is a GSE
program that addresses access and affordability while driving
strong performance, contributing to reduced expected losses in the
rating analysis. This transaction also has an ESG Relevance Score
of 4 for customer welfare — fair messaging and privacy and data
security, as SCRT is a GSE program focused on customer welfare and
fair messaging while driving strong performance, contributing to
reduced expected losses in the rating analysis.
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 4.8% at the 'B-sf' 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 that determine
the stresses to MVDs that would reduce a rating by one full
category, to non-investment grade, and to 'CCCsf'.
GALTON FUNDING 2020-H1: DBRS Finalizes B Rating on Class B2 Certs
-----------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the Mortgage
Pass-Through Certificates, Series 2020-H1 (the Certificates) issued
by Galton Funding Mortgage Trust 2020-H1 (GFMT 2020-H1 or the
Issuer) as follows:
-- $189.3 million Class A1 at AAA (sf)
-- $13.9 million Class A2 at AA (high) (sf)
-- $20.7 million Class A3 at A (low) (sf)
-- $10.1 million Class M1 at BBB (low) (sf)
-- $6.3 million Class B1 at BB (low) (sf)
-- $3.7 million Class B2 at B (sf)
The AAA (sf) rating on Class A1 reflects 22.85% of credit
enhancement provided by subordinated notes in the pool. The AA
(high) (sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B
(sf) ratings reflect 17.20%, 8.75%, 4.65%, 2.10%, and 0.60% of
credit enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The Certificates are backed by 316 loans with a total principal
balance of $245,399,156 as of the Cut-Off Date. The mortgage loans
were acquired by Galton Mortgage Acquisition Platform IV H Sponsor
LLC (the Sponsor). The Sponsor-selected the mortgage loans from a
pool of loans originated via the Galton Funding (Galton) Platform
and held by acquisition trusts that meet the Galton acquisition
criteria.
GFMT 2020-H1 is Galton's second securitization that comprises a
targeted mortgage loan collateral pool generally based on the
interest rate of the loans. The pool's weighted-average coupon
(WAC) is 5.282% and the loans have rates that are generally 1.29%
or more above-market mortgage rates as measured by the Freddie Mac
Primary Mortgage Market Survey. The pool's WAC is higher than
Galton's prior shifting-interest securitizations and, as a result,
this transaction employs a cash flow structure that is similar to
Galton's previous high coupon securitization (GFMT 2019-H1) and
many non-Qualified Mortgage (QM) securitizations. The transaction
contains a sequential-pay cash flow structure with a pro-rata
principal distribution among the senior tranches. Principal
proceeds can be used to cover interest shortfalls on Certificates
that have principal payment priority in a given period.
Furthermore, the excess spread will be used to cover losses in the
current period or those allocated in prior periods.
Similar to the prior four Galton securitizations, this transaction
incorporates a unique feature in the calculation of interest
entitlements of the Certificates. The interest entitlements,
through the calculation of the Net WAC Rate, are reduced by the
delinquent interest that would have accrued on the stop advance
loans (i.e., loans that become 120 or more days delinquent or loans
for which the Servicer determines that the principal and interest
(P&I) advance would not be recoverable). In other words, investors
are not entitled to any interest on such severely delinquent
mortgages unless such interest amounts are recovered. The
delinquent interest recovery amounts, if any, will be distributed
sequentially to the P&I certificates.
The originators for the mortgage pool are JMAC Lending, Inc.
(21.3%); LendUS, LLC (10.5%); Parkside Lending, LLC (9.8%);
loanDepot.com, LLC (8.4%); Guaranteed Rate, Inc. (5.1%); and
various other originators, each comprising less than 5.0% of the
mortgage loans.
The mortgages were generally originated pursuant to underwriting
standards that conform to Galton's acquisition criteria. Galton has
established product matrices for different loan programs. The
majority of the loans in this securitization (96.4%) are prime
borrowers (Galton's Jumbo, Prime, and Streamlined First Lien
Programs) with unblemished credit who may not meet prime jumbo or
agency/government guidelines.
Although the mortgage loans were originated to satisfy the Consumer
Financial Protection Bureau's (CFPB) ability-to-repay rules, they
were made to borrowers who generally do not qualify for agency,
government, or private-label non-agency prime jumbo products for
various reasons as described above. In accordance with the CFPB QM
rules, 3.6% of the loans are designated as QM Safe Harbor, 3.6% as
QM Rebuttable Presumption, and 62.6% as non-QM. Approximately 30.2%
of the loans are not subject to the QM rules.
Galton Mortgage Loan Seller LLC (the Servicing Administrator and
the Seller) will generally fund advances (to the extent that the
available aggregate servicing rights strip has first been reduced
to zero to fund such amounts) of delinquent P&I on any mortgage
until such loan becomes 120 days delinquent or until the Servicer
determines that an advance is not recoverable and is obligated to
make advances in respect of taxes, insurance premiums, and
reasonable costs incurred in the course of servicing and disposing
of properties.
The Sponsor intends to retain 5% of the fair value of all
Certificates issued by the Issuer (other than the residual
certificates) to satisfy the credit risk retention requirements
under Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
The Seller and the Sponsor will have the option, but not the
obligation, to repurchase any mortgage loan that becomes 90 or more
days delinquent under the Mortgage Bankers Association delinquency
method until the date on which the Representations and Warranties
Enforcement Party delivers the enforcement initiation report,
provided that such repurchases in aggregate do not exceed 10% of
the total principal balance as of the Cut-Off Date.
The Sponsor has the option to trigger an optional redemption of all
the outstanding certificates on the fourth anniversary of the
closing date or on any date thereafter.
The full description of the strengths, challenges, and mitigating
factors is detailed in the related report.
Notes: All figures are in U.S. dollars unless otherwise noted.
GSAMP TRUST 2004-NC1: Moody's Lowers Rating on Class M-1 Debt to B1
-------------------------------------------------------------------
Moody's Investors Service downgraded the rating of Cl. M-1 issued
from GSAMP Trust 2004-NC1, backed by Subprime loans.
The complete rating action is as follows:
Issuer: GSAMP Trust 2004-NC1
Cl. M-1, Downgraded to B1 (sf); previously on Oct 25, 2017 Upgraded
to Ba1 (sf)
RATINGS RATIONALE
The rating downgrade is due to outstanding interest shortfalls on
the bond that are not expected to be recouped as the bond has a
weak structural mechanism to reimburse outstanding interest
shortfalls. The rating action also reflects the recent performance
and Moody's updated loss expectation on the pool.
The principal methodology used in this rating was "US RMBS
Surveillance Methodology" published in February 2019.
Factors that would lead to an upgrade or downgrade of the rating:
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 3.5% in February 2020 from 3.8% in
February 2019. Moody's forecasts an unemployment central range of
3.8% to 4.2% for the 2020 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 2020. 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. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions.
JP MORGAN 2008-C2: Moody's Affirms C Rating on 2 Tranches
---------------------------------------------------------
Moody's Investors Service affirmed the ratings on three classes in
J.P. Morgan Chase Commercial Mortgage Securities Trust 2008-C2:
Cl. A-J, Affirmed C (sf); previously on Mar 29, 2018 Affirmed C
(sf)
Cl. A-M, Affirmed Caa3 (sf); previously on Mar 29, 2018 Affirmed
Caa3 (sf)
Cl. X*, Affirmed C (sf); previously on Mar 29, 2018 Downgraded to C
(sf)
* Reflects interest-only classes
RATINGS RATIONALE
The ratings on the two P&I classes were affirmed because the
ratings are consistent with Moody's expected loss plus realized
losses. The two P&I classes are both experiencing ongoing interest
shortfalls as a result of the previously modified Westin Portfolio
Loan, representing 96% of the pool.
The rating on the IO class was affirmed based on the credit quality
of its referenced classes.
Moody's rating action reflects a base expected loss of 16.7% of the
current pooled balance, compared to 20.5% at Moody's last review.
Moody's base expected loss plus realized losses is now 20.1% of the
original pooled balance, compared to 21.0% at the last review.
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 rating all classes except
interest-only classes was "Moody's Approach to Rating Large Loan
and Single Asset/Single Borrower CMBS" published in July 2017. The
methodologies used in rating interest-only classes were "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017 and "Moody's Approach to Rating
Structured Finance Interest-Only (IO) Securities" published in
February 2019.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since Moody's has identified
troubled loans representing 96% 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 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 February 12, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 91% to $103.3
million from $1.2 billion at securitization. The certificates are
collateralized by two mortgage loans ranging in size from 4% to 96%
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 one, compared to two at Moody's last review.
One loan, constituting 4% of the pool, is on the master servicer's
watchlist. The watchlist includes loans that meet certain portfolio
review guidelines established as part of the CRE Finance Council
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.
Nineteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $217 million (for an average loss
severity of 78%). There are no loans currently in special
servicing.
As of the February 12, 2020 remittance statement cumulative
interest shortfalls were $61.5 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.
The two remaining loans represent 100% of the pool balance. The
largest loan is the Westin Portfolio Loan ($99 million -- 96.1% of
the pool), which is secured by two Westin hotels (487-room hotel in
La Paloma - Tucson, Arizona; 412-room hotel in Hilton Head, South
Carolina). The loan represents a pari-passu portion of a $199
million mortgage loan. The loan transferred to special servicing in
October 2008 due to imminent default and the borrower filed for
Chapter 11 Bankruptcy in November 2010. In May 2012, a bankruptcy
court in Arizona modified the loan to include a term extension and
the requirement of the borrower to make $500,000 of monthly
principal-only payments for 21 years (split pro rata between the
two pari-passu notes). Various fees, interest, and other expenses
were capitalized into the loan balance as a part of the loan
modification. Performance has improved in recent years with net
operating income increasing each year since 2015. The loan returned
to the master servicer in August 2018. Moody's considers this as a
troubled loan.
The second largest loan is the Lofts at New Roc Loan ($4.0 million
-- 3.9% of the pool), which is secured by a 98-unit residential
cooperative located in New Rochelle, New York. The property is
located in downtown New Rochelle and consists of studio, one, two
and three bedroom units. A portion of the units are owner occupied
with the remaining rental units serving as collateral for the loan.
Amenities include a swimming pool, health club, rooftop terrace,
lounge and parking. The building was 85% leased as of December 2018
compared to 67% in December 2016. The loan is currently on the
watchlist due to low DSCR.
JP MORGAN 2019-2: Moody's Hikes Class B-5 Debt Rating to B1(sf)
---------------------------------------------------------------
Moody's Investors Service upgraded the ratings of 21 tranches,
backed by Prime Jumbo mortgage loans issued by J.P. Morgan Mortgage
Trust. The transactions are backed by first-lien, fully amortizing,
fixed-rate prime quality residential mortgage loans with strong
credit characteristics. JPMMT 2019-INV1 also includes prime jumbo
non-conforming investor mortgages.
The complete rating actions are as follows:
Issuer: J.P. Morgan Mortgage Trust 2019-3
Cl. A-14, Upgraded to Aaa (sf); previously on Apr 30, 2019
Definitive Rating Assigned Aa2 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on Apr 30, 2019
Definitive Rating Assigned Aa2 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Oct 30, 2019 Upgraded
to Aa3 (sf)
Cl. B-2, Upgraded to Aa3 (sf); previously on Oct 30, 2019 Upgraded
to A2 (sf)
Cl. B-3, Upgraded to A3 (sf); previously on Oct 30, 2019 Upgraded
to Baa2 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Apr 30, 2019
Definitive Rating Assigned Ba2 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Apr 30, 2019 Definitive
Rating Assigned B3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2019-5
Cl. A-14, Upgraded to Aa1 (sf); previously on Jun 28, 2019
Definitive Rating Assigned Aa2 (sf)
Cl. A-15, Upgraded to Aa1 (sf); previously on Jun 28, 2019
Definitive Rating Assigned Aa2 (sf)
Cl. B-1, Upgraded to Aa2 (sf); previously on Oct 30, 2019 Upgraded
to Aa3 (sf)
Cl. B-2, Upgraded to A1 (sf); previously on Jun 28, 2019 Definitive
Rating Assigned A3 (sf)
Cl. B-3, Upgraded to Baa1 (sf); previously on Jun 28, 2019
Definitive Rating Assigned Baa3 (sf)
Cl. B-4, Upgraded to Ba1 (sf); previously on Aug 21, 2019 Upgraded
to Ba3 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on Jun 28, 2019 Definitive
Rating Assigned B3 (sf)
Issuer: J.P. Morgan Mortgage Trust 2019-INV1
Cl. A-14, Upgraded to Aaa (sf); previously on May 30, 2019
Definitive Rating Assigned Aa1 (sf)
Cl. A-15, Upgraded to Aaa (sf); previously on May 30, 2019
Definitive Rating Assigned Aa1 (sf)
Cl. B-1, Upgraded to Aa1 (sf); previously on Oct 30, 2019 Upgraded
to Aa2 (sf)
Cl. B-2, Upgraded to Aa3 (sf); previously on Oct 30, 2019 Upgraded
to A1 (sf)
Cl. B-3, Upgraded to A2 (sf); previously on Oct 30, 2019 Upgraded
to Baa1 (sf)
Cl. B-4, Upgraded to Baa3 (sf); previously on Oct 30, 2019 Upgraded
to Ba1 (sf)
Cl. B-5, Upgraded to B1 (sf); previously on May 30, 2019 Definitive
Rating Assigned B3 (sf)
The rating upgrades are primarily due to an increase in credit
enhancement available to the bonds and a decrease in its projected
pool losses. The action reflects the strong performance of the
underlying pool with minimal, if any, serious delinquencies to date
and a faster prepayment rate than originally anticipated. As of
February 2020, the pool factor for J.P. Morgan Mortgage Trust
2019-3 decreased to 51.5%.
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 as fewer loans remain in pool ("tail risk"). The
transactions provide for a credit enhancement floor to the senior
bonds which mitigates tail risk by protecting the senior bonds from
eroding credit enhancement over time.
Its updated loss expectations on the pools incorporate, amongst
other factors, its assessment of the representations and warranties
frameworks of the transactions, the due diligence findings of the
third party reviews received at the time of issuance, and the
strength of the transaction's originators and servicers.
The principal methodology used in these ratings was "Moody's
Approach to Rating US RMBS Using the MILAN Framework" published in
October 2019.
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.
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 3.5% in February 2020 from 3.8% in
February 2019. Moody's forecasts an unemployment central range of
3.8% to 4.2% for the 2020 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 2020. 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. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions.
JPMBB COMMERCIAL 2014-C22: Moody's Affirms Ba1 Rating on UHP Debt
-----------------------------------------------------------------
Moody's Investors Service affirmed the ratings on five classes in
JPMBB Commercial Mortgage Securities Trust 2014-C22 as follows:
Cl. A-3A1, Affirmed Aaa (sf); previously on Apr 5, 2019 Affirmed
Aaa (sf)
Cl. A-3A2, Affirmed Aaa (sf); previously on Apr 5, 2019 Affirmed
Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Apr 5, 2019 Affirmed Aaa
(sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Apr 5, 2019 Affirmed Aaa
(sf)
Cl. UHP***, Affirmed Ba1 (sf); previously on Apr 5, 2019 Affirmed
Ba1 (sf)
*** Reflects rake bond classes
RATINGS RATIONALE
The ratings on four 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 and the
transaction's Herfindahl Index, are within acceptable ranges.
The rating on the non-pooled rake class, Cl. UHP, was affirmed
based on the U-Haul Self Storage Portfolio loan's key metrics,
including Moody's LTV and Moody's stressed DSCR. Cl. UHP is a
non-pooled rake class associated with the U-Haul Self Storage
Portfolio loan.
Moody's rating action reflects a base expected loss of 7.7% of the
current pooled balance, compared to 5.8% at Moody's last review.
Moody's base expected loss plus realized losses is now 6.9% of the
original pooled balance, compared to 5.5% at the last review.
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 rating all tranches except rake
bond classes was "Approach to Rating US and Canadian Conduit/
Fusion CMBS" published in July 2017. The principal methodology used
in rating rake bond classes was "Moody's Approach to Rating Large
Loan and Single Asset/Single Borrower CMBS" published in July
2017.
DEAL PERFORMANCE
As of the February 18, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 10% to $1.0 billion
from $1.12 billion at securitization. The certificates are
collateralized by 70 mortgage loans ranging in size from less than
1% to 9% of the pool, with the top ten loans (excluding defeasance)
constituting 51% of the pool. Six loans, constituting 3% 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 26, compared to 28 at Moody's last review.
Thirteen loans, constituting 21% 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.
There have been no loans liquidated from the pool. Two loans,
constituting 5% of the pool, are currently in special servicing.
The largest specially serviced loan is the 10333 Richmond Loan
($34.4 million -- 3.4% of the pool), which is secured by a 218,680
square foot (SF), 11-story office building located in Houston, TX.
The loan transferred to special servicing in December 2017 due to
imminent monetary default stemming from a decrease in occupancy
caused by several vacated tenants. As of September 2018, the
property was 59% leased, compared to 63% in December 2017, and 71%
in December 2016. The property is located in a relatively more
volatile submarket that is heavily influenced by the energy
industry.
The second largest specially serviced loan is the Charlottesville
Fashion Square Loan ($18.0 million -- 1.8% of the pool), which is
secured by an approximately 360,000 SF retail property located in
Charlottesville, VA. The loan represents a pari-passu portion of a
$45 million mortgage loan. The loan transferred to special
servicing in October 2019 due to imminent non-monetary default.
Sears (29% of Net Rentable Area (NRA)), was a collateral anchor
tenant which vacated this location in early 2019. There have been
several other tenants which recently vacated including Charlotte
Russe, Crazy 8, Payless ShoeSource, Charming Charlie, Motherhood
Maternity, Buckle, Clarkes, Sephora, The Gap. This has impacted
property performance and the loan's DSCR.
Moody's has also assumed a high default probability for one poorly
performing loan, constituting 7% of the pool, and has estimated an
aggregate loss of $45 million (a 36% expected loss on average) from
these specially serviced and troubled loans. The troubled loan is
secured by a mall in Puerto Rico which is discussed in further
detail.
Moody's received full year 2018 operating results for 100% of the
pool, and full or partial year 2019 operating results for 89% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 113%, compared to 114% 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 25% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.9%.
Moody's actual and stressed conduit DSCRs are 1.43X and 0.98X,
respectively, compared to 1.44X and 0.97X 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 conduit loans represent 24% of the pool balance. The
largest loan is the Queens Atrium Loan ($89.2 million -- 8.9% of
the pool), which represents a pari-passu portion of a $178 million
mortgage loan. The loan is secured by two office properties in Long
Island City, New York containing 1.0 million SF. The two buildings
were 100% leased as of September 2019, unchanged from the last
review. The properties are largely occupied by New York City
governmental agencies. The property benefits from three tax
abatements that will fully expire in 2033. Moody's LTV and stressed
DSCR are 116% and 0.86X, respectively, compared to 117% and 0.86X
at the last review.
The second largest loan is the One Met Center Loan ($76.1 million
-- 7.6% of the pool), which is secured by a 15-story, Class A
office property located in East Rutherford, New Jersey. The
property was built in 1986, and is located across from MetLife
Stadium. As of September 2019, the property was 100% occupied,
unchanged from December 2018 and compared to 97% in December 2017.
Moody's LTV and stressed DSCR are 116% and 0.88X, respectively, the
same as at last review.
The third largest loan is the Las Catalinas Mall Loan ($74.4
million -- 7.4% of the pool), which represents a pari-passu portion
of a $129 million loan. The loan is secured by a 355,385 SF
component of a 494,071 SF enclosed regional mall located in Caguas,
Puerto Rico. The property suffered extensive damage from Hurricane
Maria in September 2017, however, all repairs have been completed
and the property is open. The mall was built in 1997 and at
securitization was anchored by Sears (non-collateral) and Kmart
(34% of the collateral NRA). However, Kmart closed its store at
this location in early 2019. Additionally, the NOI as of year-end
2018 declined from the prior two years primarily due to a decline
in rental revenue. As of September 2019, the property was 50%
leased compared to 91% in December 2018, 92% in December 2017, and
94% in December 2016. Moody's considers this as a troubled loan.
KKR INDUSTRIAL 2020-AIP: Moody's Rates Class E Certs '(P)B3'
------------------------------------------------------------
Moody's Investors Service assigned provisional ratings to seven
classes of CMBS securities, issued by KKR Industrial Portfolio
Trust 2020-AIP Commercial Mortgage Pass-Through Certificates,
Series 2020-AIP.
Cl. A, Assigned (P)Aaa (sf)
Cl. X-CP*, Assigned (P)A2 (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba3 (sf)
Cl. F, Assigned (P)B3 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
This securitization is backed by a single loan secured by a first
priority mortgage in the borrowers' fee simple and leasehold
interests in 71 industrial property groups (98 total facilities)
located in seven states. The ratings are based on the collateral
and the structure of the transaction.
The loan's property-level Herfindahl score is 46.1 based on ALA.
Texas represents the largest state concentration with 27 properties
or approximately 31.2% of the ALA and 37.4% of NRA. Atlanta
represents the submarket concentration with 7 properties or
approximately 15.8% of the ALA and 16.6% of NRA.
Moody's approach to rating this transaction involved the
application of both its Large Loan and Single Asset/Single Borrower
CMBS methodology and its IO Rating methodology. The rating approach
for securities backed by a single loan compares the credit risk
inherent in the underlying collateral with the credit protection
offered by the structure. The structure's credit enhancement is
quantified by the maximum deterioration in property value that the
securities are able to withstand under various stress scenarios
without causing an increase in the expected loss for various rating
levels. In assigning single borrower ratings, Moody's also
considers a range of qualitative issues as well as the
transaction's structural and legal aspects.
The credit risk of commercial real estate loans is determined
primarily by two factors: 1) the probability of default, which is
largely driven by the DSCR, and 2) and the severity of loss in the
event of default, which is largely driven by the LTV of the
underlying loan.
The first mortgage balance of $571,600,000 represents a Moody's LTV
of 125.1%. The Moody's first mortgage Actual DSCR is 2.01X and
Moody's first mortgage Stressed DSCR is 0.70X.
Positive features of the transaction include proximity to global
gateway markets, the high share of infill markets, geographic and
tenancy diversity. Offsetting these strengths are the functionality
of certain property subtypes, future development, the age of the
properties, the loan's floating-rate and interest-only mortgage
loan profile, and credit negative legal features.
The principal methodology used in rating all classes except
interest-only classes was "Moody's Approach to Rating Large Loan
and Single Asset/Single Borrower CMBS" published in July 2017. The
methodologies used in rating interest-only classes were "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017 and "Moody's Approach to Rating
Structured Finance Interest-Only (IO) Securities" published in
February 2019.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an
aggregation of adjusted loan level proceeds derived from its
Moody's loan level LTV ratios. Major adjustments to determining
proceeds include leverage, loan structure, and property type. These
aggregated proceeds are then further adjusted for any pooling
benefits associated with loan level diversity, other concentrations
and correlations.
Moody's analysis considers the following inputs to calculate the
proposed IO rating based on the published methodology: original and
current bond ratings and credit estimates; original and current
bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
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 may
indicate that the collateral's credit quality is stronger or weaker
than Moody's had previously anticipated. Factors that may cause an
upgrade of the ratings include significant loan pay downs or
amortization, an increase in the pool's share of defeasance or
overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall
performance of the pool, loan concentration, increased expected
losses from specially serviced and troubled loans or interest
shortfalls.
MFA TRUST 2020-NQM1: DBRS Gives Prov. B Rating on Class B-2 Certs
-----------------------------------------------------------------
DBRS, Inc. assigned the following provisional ratings to the
Mortgage Pass-Through Certificates, Series 2020-NQM1 (the
Certificates) to be issued by MFA 2020-NQM1 Trust (MFA 2020-NQM1 or
the Issuer):
-- $295.2 million Class A-1 at AAA (sf)
-- $22.8 million Class A-2 at AA (sf)
-- $40.9 million Class A-3 at A (sf)
-- $19.3 million Class M-1 at BBB (sf)
-- $13.8 million Class B-1 at BB (sf)
-- $8.7 million Class B-2 at B (sf)
The AAA (sf) rating on Class A-1 reflects 27.45% of credit
enhancement provided by subordinated notes. The AA (sf), A (sf),
BBB (sf), BB (sf), and B (sf) ratings reflect 21.85%, 11.80%,
7.05%, 3.65%, and 1.50% of credit enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
MFA 2020-NQM1 a securitization of a portfolio of first-lien, fixed-
and adjustable-rate, nonprime residential mortgages funded by the
issuance of the Certificates. The Certificates are backed by 1,131
mortgage loans with a total principal balance of $406,875,446 as of
the Cut-Off Date (January 31, 2020).
Citadel Servicing Corporation (CSC) is the originator and servicer
for all loans in this pool.
CSC has four programs to originate loans. The Non-Prime and Maggi
Plus (Maggi+) products are CSC's core mortgage programs with Maggi+
aimed at higher credit profiles. CSC's Outside Dodd-Frank (ODF) and
Outside Dodd-Frank Plus (ODF+) products include loans exempt from
the Consumer Financial Protection Bureau's (CFPB) rules. Within
each program, the mortgages in this transaction were generally
originated using the following documentation requirements:
-- One-, 12-, or 24-month bank statements.
-- Full documentation.
-- Debt service coverage ratio.
-- Business purpose.
-- Asset utilization.
-- Foreign national.
-- Verification of employment.
Although the applicable mortgage loans were originated to satisfy
the CFPB Ability-to-Repay (ATR) rules, they were made to borrowers
who generally do not qualify for an agency, government, or
private-label nonagency prime jumbo products for various reasons.
In accordance with the QM/ATR rules, 68.6% of the loans are
designated as Non-QM. Approximately 31.4% of the loans are made to
investors for business purposes or foreign nationals, which are not
subject to the QM/ATR rules.
The Sponsor, directly or indirectly through a majority-owned
affiliate, will retain an eligible horizontal residual interest
consisting of the Class B-3 and XS Certificates representing at
least 5% of the Certificates to satisfy the credit risk-retention
requirements under Section 15G of the Securities Exchange Act of
1934 and the regulations promulgated thereunder.
On or after the earlier of (1) the distribution date in February
2023 or (2) the date when the aggregate unpaid principal balance of
the mortgage loans is reduced to 30% of the Cut-Off Date balance,
the Depositor, at its option, may redeem all of the outstanding
Certificates at a price equal to the class balances of the related
Certificates plus accrued and unpaid interest, including any Cap
Carryover Amounts. After such a purchase, the Depositor must
complete a qualified liquidation, which requires (1) a complete
liquidation of assets within the Trust and (2) proceeds to be
distributed to the appropriate holders of regular or residual
interests.
Different from most Non-QM transactions, the Servicer will not fund
advances of delinquent principal and interest on any mortgage.
However, the Servicer is obligated to make advances in respect of
taxes, insurance premiums, and reasonable costs incurred in the
course of servicing and disposing of properties.
The transaction employs a sequential-pay cash flow structure with a
pro-rata principal distribution among the senior tranches.
Principal proceeds can be used to cover interest shortfalls on the
Certificates as the more senior outstanding Certificates are paid
in full. Furthermore, the excess spread can be used to cover
realized losses first before being allocated to unpaid Cap
Carryover Amounts due to Class A-1 down to Class B-1.
The ratings reflect transactional strengths that include the
following:
-- Satisfactory third-party due diligence review.
-- Current loans, loan performance, and faster prepayments.
-- Certain loan attributes.
-- Robust pool composition.
-- Improved underwriting standards.
-- Compliance with the ATR rules.
The transaction also includes the following challenges:
-- Representations and warranties framework.
-- Weaker documentation types.
-- Foreign borrowers with no FICO score.
-- Nonprime, non-QM, and investor loans.
-- No servicer advances of delinquent principal and interest.
-- No Master Servicer.
Notes: All figures are in U.S. dollars unless otherwise noted.
MMCAPS FUNDING XVIII: Fitch Affirms Csf Rating on Class D Debt
--------------------------------------------------------------
Fitch Ratings affirmed 39, upgraded six, and revised or assigned
Rating Outlooks to three tranches from nine collateralized debt
obligations backed primarily by trust preferred securities issued
by banks. Rating actions and performance metrics for each CDO are
reported in the accompanying rating action report.
RATING ACTIONS
MMCapS Funding XVIII, Ltd./Corp
Class A-1 60688HAA3; LT Asf Affirmed; previously at Asf
Class A-2 60688HAB1; LT Asf Upgrade; previously at BBBsf
Class B 60688HAC9; LT BBBsf Affirmed; previously at BBBsf
Class C-1 60688HAD7; LT CCCsf Affirmed; previously at CCCsf
Class C-2 60688HAE5; LT CCCsf Affirmed; previously at CCCsf
Class C-3 60688HAF2; LT CCCsf Affirmed; previously at CCCsf
Class D 60688HAG0; LT Csf Affirmed; previously at Csf
Trapeza CDO VI, Ltd./Inc.
Class A-2 89412UAC2; LT AAsf Affirmed; previously at AAsf
Class B-1 89412UAD0; LT CCsf Upgrade; previously at Csf
Class B-2 89412UAE8; LT CCsf Upgrade; previously at Csf
Trapeza CDO V, Ltd./Inc.
Class A1B 89412RAB1; LT AAsf Affirmed; previously at AAsf
Class B 89412RAC9; LT AAsf Upgrade; previously at Asf
Class C-1 89412RAD7; LT CCsf Affirmed; previously at CCsf
Class C-2 89412RAL9; LT CCsf Affirmed; previously at CCsf
Class D 89412RAE5; LT Csf Affirmed; previously at Csf
Trapeza CDO VII, Ltd./Inc.
Class A-1 89412WAA2; LT AAsf Affirmed; previously at AAsf
Class A-2 89412WAC8; LT Asf Affirmed; previously at Asf
Class B-1 89412WAE4; LT Csf Affirmed; previously at Csf
Class B-2 89412WAG9; LT Csf Affirmed; previously at Csf
U.S. Capital Funding V Ltd./Corp.
Class A-1 90342WAA5; LT Asf Affirmed; previously at Asf
Class A-2 90342WAC1; LT BBBsf Affirmed; previously at BBBsf
Class A-3 90342WAE7; LT Bsf Upgrade; previously at CCCsf
Class B-1 90342WAG2; LT Csf Affirmed; previously at Csf
Class B-2 90342WAJ6; LT Csf Affirmed; previously at Csf
Class C 90342WAL1; LT Csf Affirmed; previously at Csf
Trapeza CDO IV, LLC
Class A1B 894126AB7; LT AAsf Affirmed; previously at AAsf
Class B 894126AC5; LT Asf Affirmed; previously at Asf
Class C-1 894126AD3; LT Csf Affirmed; previously at Csf
Class C-2 894126AE1; LT Csf Affirmed; previously at Csf
Class D 894126AF8; LT Csf Affirmed; previously at Csf
Class E 894126AG6; LT Csf Affirmed; previously at Csf
U.S. Capital Funding VI, Ltd./Corp.
Class A-1 903428AA8; LT BBBsf Affirmed; previously at BBBsf
Class A-2 903428AB6; LT Bsf Upgrade; previously at CCCsf
Class B-1 903428AD2; LT Csf Affirmed; previously at Csf
Class B-2 903428AE0; LT Csf Affirmed; previously at Csf
Class C-1 903428AF7; LT Csf Affirmed; previously at Csf
Class C-2 903428AC4; LT Csf Affirmed; previously at Csf
U.S. Capital Funding III, Ltd./Corp.
Class A-2 Floating 90342BAC7; LT AAsf Affirmed; previously at AAsf
Class B-1 Floating 90342BAE3; LT Csf Affirmed; previously at Csf
Class B-2 Floating 90342BAG8; LT Csf Affirmed; previously at Csf
Trapeza CDO III, LLC
Class B 89412MAE6; LT AAsf Affirmed; previously at AAsf
Class C-1 89412MAG1; LT CCsf Affirmed; previously at CCsf
Class C-2 89412MAJ5; LT CCsf Affirmed; previously at CCsf
Class D 89412MAL0; LT Csf Affirmed; previously at Csf
Class E 89412MAN6; LT Csf Affirmed; previously at Csf
KEY RATING DRIVERS
The main driver behind the upgrades was deleveraging from
collateral redemptions and excess spread, which resulted in
paydowns to the senior most notes, ranging between 2% and 79% of
their balances at last review. All nine CDOs paid down the
senior-most notes and increased credit enhancement (CE) levels for
rated liabilities. The magnitude of the deleveraging for each CDO
is reported in the accompanying rating action report.
For seven transactions, the credit quality of the collateral
portfolios, as measured by a combination of Fitch's bank scores and
public ratings improved, with the other two exhibiting negative
credit migration. There were no new deferrals or cures since last
review. One previously deferring bank issuer was marked as
defaulted.
The ratings on 17 classes of notes in the nine transactions have
been capped based on the application of the performing CE cap as
described in Fitch's "U.S. Trust Preferred CDOs Surveillance Rating
Criteria."
The ratings for class A1B in Trapeza CDO IV, Ltd./Inc., class A1B
in Trapeza CDO V, Ltd./Inc. and class A-2 in U.S. Capital Funding
III, Ltd./Corp. are one category lower than the model-implied
ratings. The transaction documents do not conform to Fitch's
"Structured Finance and Covered Bonds Counterparty Rating Criteria"
regarding rating requirements and remedial actions expected for the
issuer account bank. These transactions are allowed to hold cash
and the account bank does not collateralize cash. Therefore, the
three classes of notes are capped at the same rating category as
their issuer account bank.
RATING SENSITIVITIES
Ratings of the notes issued by these CDOs remain sensitive to
significant levels of defaults, deferrals, cures and collateral
redemptions. To address potential risks of adverse selection and
increased portfolio concentration, Fitch applied a sensitivity
scenario, as described in the criteria, to applicable transactions.
MORGAN STANLEY 2005-HQ7: Moody's Lowers Class F Certs to Ca
-----------------------------------------------------------
Moody's Investors Service affirmed the rating on one class and
downgraded the ratings on two classes in Morgan Stanley Capital I
Trust 2005-HQ7, Commercial Mortgage Pass-Through Certificates,
Series 2005-HQ7 as follows:
Cl. E, Downgraded to B2 (sf); previously on November 2, 2018
Affirmed B1 (sf)
Cl. F, Downgraded to Ca (sf); previously on November 2, 2018
Affirmed Caa3 (sf)
Cl. G, Affirmed C (sf); previously on November 2, 2018 Affirmed C
(sf)
RATINGS RATIONALE
The ratings on Class E and Class F were downgraded to an increase
in anticipated losses from the specially serviced loan. One loan,
80% of the pool, is in special servicing and is currently REO.
The rating on Class G was affirmed because the ratings are
consistent with Moody's expected loss plus realized losses. Class G
has already experienced a 22% realized loss as a result of
previously liquidated loans.
Moody's rating action reflects a base expected loss of 61.8% of the
current pooled balance, compared to 31.8% at Moody's last review.
Moody's base expected loss plus realized losses is now 8.5% of the
original pooled balance, compared to 7.9% at the last review.
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, 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.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 80% 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 to the most junior class(es) and the
recovery as a pay down of principal to the most senior class(es).
DEAL PERFORMANCE
As of the February 14, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $41.2 million
from $1.96 billion at securitization. The certificates are
collateralized by 12 mortgage loans ranging in size from less than
1% to 80% of the pool. One loan, constituting 0.3% of the pool, has
defeased and is 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 two, the same as at Moody's last review.
Four loans, constituting 4.1% 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.
Liquidated loans resulted in an aggregate realized loss of $141
million (for an average loss severity of 52%).
There is currently one loan is special servicing, the Crown Ridge
at Fair Oaks Loan ($32.9 million -- 80.0% of the pool), which is
secured by a 191,200 square foot (SF) eight story multi-tenant
office property located in Fairfax, Virginia. The loan was modified
in July 2016 and the modified terms included a term extension, a
principal paydown of 10%, and the remaining debt service payments
were converted to interest-only payments. The largest tenant at
securitization, American Management Systems, Inc. (over 84% of the
NRA), vacated in 2011. The loan transferred to the special servicer
in November 2017 due to imminent maturity default ahead of its
December 2017 maturity date. The special servicer has appointed a
receiver and is working to lease up the property. As of December
2019, the property was 62% leased, compared to 70% as of August
2018.
Moody's received full year 2018 operating results for 100% of the
pool, and full or partial year 2019 operating results for 48% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 41%, compared to 43% 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 17% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10%.
Moody's actual and stressed conduit DSCRs are 1.47X and 3.80X,
respectively, compared to 1.49X and 3.06X 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 14.9% of the pool balance. The
largest loan is the Boston Post Portfolio -- Equinox (B) Loan ($3.4
million -- 8.2% of the pool), which is secured by a 25,314 SF
retail property in Mamaroneck, New York. The property is 100%
occupied by Equinox with a lease expiration of June 2030. Due to
the single tenant nature, Moody's review incorporated a Lit/Dark
analysis. Moody's LTV and stressed DSCR are 51% and 2.11X,
respectively.
The second largest loan is the Holly Hill Self Storage Loan ($1.8
million -- 4.4% of the pool), which is secured by an
eight-building, two story, 51,555 SF self-storage facility located
in Alexandria, Virginia. As of December 2018, the property was 89%
leased, compared to 87% as of December 2017. The loan is fully
amortizing and has amortized 59% since securitization. Moody's LTV
and stressed DSCR are 33% and 3.26X, respectively.
The third largest loan is the Ganassa Tile Loan ($0.9 million --
2.3% of the pool), which is secured by a 29,450 SF industrial
property built in 1989 and located in Ijamsville, Maryland. The
property was 100% occupied as of December 2018, compared to 91% as
of December 2016. The loan is fully amortizing and has amortized
57% since securitization. Moody's LTV and stressed DSCR are 44% and
2.22X, respectively.
MORGAN STANLEY 2007-TOP25: DBRS Confirms C Rating on Class C Certs
------------------------------------------------------------------
DBRS, Inc. confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2007-TOP25 (the Certificates)
issued by Morgan Stanley Capital I Trust, Series 2007-TOP25 (the
Trust) as follows:
-- Class A-J at BBB (low) (sf)
-- Class B at B (sf)
-- Class C at C (sf)
All trends are Stable with the exception of Class C, which has a
rating that does not carry a trend.
The rating confirmations reflect the overall stable performance of
the transaction over the last year. As of the February 2020
remittance, eight of the original 204 loans remain in the Trust
with an aggregate principal balance of $108.1 million. Since
issuance, there has been a collateral reduction of 93.0% as a
result of scheduled loan amortization, successful loan repayments,
principal recovered from liquidated loans, and realized losses from
liquidated loans. To date, 26 loans have been liquidated from the
Trust, resulting in realized losses of $99.3 million. Two loans
were recently liquidated from the Trust with no losses incurred,
contributing to a collateral reduction of 9.6% since DBRS
Morningstar's last full surveillance review of the transaction in
March 2019.
The remaining pool is concentrated by loan size with the two
largest loans, representing 81.2% of the pool, both in special
servicing. DBRS Morningstar's cumulative loss projections, based on
the most recent appraised values for the properties securing loans
in special servicing, suggest that losses will be contained to the
Class C certificate at resolution; however, DBRS Morningstar notes
the high concentration of exposure to large loan defaults for the
remaining certificates and will monitor value updates closely for
the remainder of the loans' tenure in special servicing.
Shoppes at Park Place (Prospectus ID#3; 64.9% of the pool) is
secured by a 325,270-square-foot (sf) retail power center in
Pinellas Park, Florida. The loan transferred to special servicing
in January 2017 for maturity default, which appears to be largely
driven by sponsor issues. October 31, 2019, rent roll showed that
the property was 94.5% occupied, which has been stable since
issuance. Although occupancy has remained stable, the property was
most recently appraised at $81.5 million in January 2019, a
significant decline from the February 2018 appraised value of
$103.0 million. Per special servicer commentary, a foreclosure
trial was conducted in December 2019 and a receiver was appointed
in January 2020 with a foreclosure sale scheduled for March 18,
2020. Although the value decline from 2019 to 2020 is noteworthy,
DBRS Morningstar's loss projections remain relatively moderate with
a loss severity at liquidation expected to be below 20%.
The second-largest loan, Romeoville Towne Center (Prospectus ID#16;
16.3% of the pool), is secured by a 108,242 sf, formerly Dominick's
grocery-anchored shopping center in the Chicago suburb of
Romeoville, Illinois. This loan transferred to special servicing in
January 2017 for maturity default with the title obtained by the
Trust in February 2019. Per the October 2018 appraisal, the
property was valued at $9.1 million, a significant decline from
$27.2 million at issuance. DBRS Morningstar analyzed the loan with
a loss severity exceeding 80.0% as part of this review.
Notes: All figures are in U.S. dollars unless otherwise noted.
MORGAN STANLEY 2007-TOP25: Moody's Lowers Cl. A-J Debt to B1
------------------------------------------------------------
Moody's Investors Service has downgraded the ratings on one class
and affirmed the ratings on four classes in Morgan Stanley Capital
I Trust 2007-TOP25.
Cl. A-J, Downgraded to B1 (sf); previously on Jan 27, 2019 Affirmed
Ba2 (sf)
Cl. B, Affirmed Caa3 (sf); previously on Jan 27, 2019 Downgraded to
Caa3 (sf)
Cl. C, Affirmed C (sf); previously on Jan 27, 2019 Affirmed C (sf)
Cl. D, Affirmed C (sf); previously on Jan 27, 2019 Affirmed C (sf)
Cl. X*, Affirmed C (sf); previously on Jan 27, 2019 Affirmed C
(sf)
* Reflects interest-only classes
RATINGS RATIONALE
The rating on one P&I class, Cl. A-J, was downgraded due to the
deal's exposure to specially serviced loans and Moody's concerns of
potential interest shortfalls. While Cl. A-J benefits from
significant credit support, two of the remaining loans are in
special servicing and account for 81% of the deal.
The ratings on three P&I classes were affirmed because the ratings
are consistent with Moody's expected loss plus realized losses.
The rating on the IO class was affirmed based on the credit quality
of the referenced classes.
Moody's rating action reflects a base expected loss of 41.8% of the
current pooled balance, compared to 36.7% at Moody's last review.
Moody's base expected loss plus realized losses is now 9.2% of the
original pooled balance, compared to 9.1% at the last review.
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 rating all classes except
interest-only class was "Moody's Approach to Rating Large Loan and
Single Asset/Single Borrower CMBS" published in July 2017. The
methodologies used in rating interest-only class were "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower
CMBS" published in July 2017 and "Moody's Approach to Rating
Structured Finance Interest-Only (IO) Securities" published in
February 2019.
Moody's analysis incorporated a loss and recovery approach in
rating the P&I classes in this deal since 81% 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 loan to the most junior classes and the
recovery as a pay down of principal to the most senior classes.
DEAL PERFORMANCE
As of the February 12, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 93% to $108 million
from $1.5 billion at securitization. The certificates are
collateralized by eight mortgage loans ranging in size from less
than 1% to 65% of the pool. One loan, constituting 0.2% of the
pool, has defeased and is 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 2, compared to 3 at Moody's last review.
One loan, constituting 2.1% of the pool, is 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.
Nineteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $98 million (for an average loss
severity of 70%). Two loans, constituting 81% of the pool, are
currently in special servicing. The largest specially serviced loan
is the Shoppes at Park Place Loan ($70.2 million -- 64.9% of the
pool), which is secured by a 325,000 square foot (SF) retail center
located in Pinellas Park, Florida approximately 15 miles west of
Tampa. The property is shadow anchored by Target and Home Depot;
the collateral anchor includes Regal Cinemas (22.4% of the net
rentable area (NRA); lease expiration 10/31/2029). The property was
93% leased as of October 2019, compared to 96% in November 2018.
The loan transferred to special servicing in January 2017 due to
maturity default.
The second largest specially serviced loan is the Romeoville Towne
Center ($17.6 million -- 16.3% of the pool), which is secured by a
108,000 SF retail center located in Romeoville, Illinois, a suburb
of Chicago. The loan transferred to special servicing in March 2014
for imminent default, in connection with the shutting of Dominick's
Supermarkets as part of parent company Safeway's exit from the
greater Chicago market. Dominick's operated as the anchor tenant
and occupied 58% of the center's NRA. The Dominick's lease ran
through the end of February 2019. Due to the vacancy, currently the
property was 38% leased as of November 2019, compared to 94% leased
and 32% occupied at Moody's last review.
Moody's estimates an aggregate $45.2 million loss (52% expected
loss on average) from the specially serviced loans.
As of the February 12, 2020 remittance statement cumulative
interest shortfalls were $2.9 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 2018 operating results for 100% of the
pool, and partial or full year 2019 operating results for 50% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 79%, compared to 71% 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 11% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 11.0%.
Moody's actual and stressed conduit DSCRs are 1.59X and 1.61X,
respectively, compared to 1.88X and 1.66X 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 non-defeased performing loans represent 15.3% of the
pool balance. The largest non-defeased performing loan is the
Franklin Center Loan ($10 million -- 9.2% of the pool), which is
secured by a 320 bed (160 room) nursing home/rehabilitation center
located in Flushing, New York. The property is located 0.4 miles
from Flushing Hospital and 0.9 miles from the New York Presbyterian
Queens Hospital. As of December 2018, the property was 100%
occupied, and has been 100% occupied since securitization. The loan
is interest only for its entire term and is scheduled to mature in
September 2021. Moody's LTV and stressed DSCR are 99% and 1.32X,
respectively.
The second largest non-defeased performing loan is the Cherryvale
Plaza Loan ($4.3 million -- 4.0% of the pool), which is secured by
an approximately 81,000 SF shopping center located in Reisterstown,
Maryland. The property is anchored by Office Depot (25.3% of NRA;
lease expiration 11/30/2021) and Aldi (21.5% of NRA; lease
expiration 12/31/2026). The property was 80% occupied as of
December 2019, compared to 88% at Moody's last review. Moody's LTV
and stressed DSCR are 56% and 1.84X, respectively, compared to 47%
and 2.13X at Moody's last review.
The third largest non-defeased performing loan is the 1750 Boston
Post Road Loan ($2.3 million -- 2.1% of the pool), which is secured
by an approximately 21,000 SF retail property in Milford,
Connecticut. The property is 100% occupied by La-Z-Boy (lease
expiration 11/30/2021 with extension options until 2036). The loan
is fully amortizing. Moody's LTV and stressed DSCR are 43% and
2.34X, respectively, compared to 48% and 2.1X at the last review.
MORGAN STANLEY 2013-C10: Fitch Affirms B Rating on Class H Debt
---------------------------------------------------------------
Fitch Ratings has affirmed 16 classes of Morgan Stanley Bank of
America Merrill Lynch Trust, commercial mortgage pass-through
certificates, series 2013-C10. Fitch has also revised the Rating
Outlook for class F to Stable from Negative.
RATING ACTIONS
MSBAM 2013-C10
Class A-3 61762MBV2; LT AAAsf Affirmed; previously at AAAsf
Class A-3FL 61762MAW1; LT AAAsf Affirmed; previously at AAAsf
Class A-3FX 61762MAY7; LT AAAsf Affirmed; previously at AAAsf
Class A-4 61762MBW0; LT AAAsf Affirmed; previously at AAAsf
Class A-5 61762MCC3; LT AAAsf Affirmed; previously at AAAsf
Class A-S 61762MBY6; LT AAAsf Affirmed; previously at AAAsf
Class A-SB 61762MBU4; LT AAAsf Affirmed; previously at AAAsf
Class B 61762MBZ3; LT AA-sf Affirmed; previously at AA-sf
Class C 61762MCB5; LT A-sf Affirmed; previously at A-sf
Class D 61762MBC4; LT BBB-sf Affirmed; previously at BBB-sf
Class E 61762MBE0; LT BBB-sf Affirmed; previously at BBB-sf
Class F 61762MBG5; LT BB+sf Affirmed; previously at BB+sf
Class G 61762MBJ9; LT BB-sf Affirmed; previously at BB-sf
Class H 61762MBL4; LT Bsf Affirmed; previously at Bsf
Class PST 61762MCA7; LT A-sf Affirmed; previously at A-sf
Class X-A 61762MBX8; LT AAAsf Affirmed; previously at AAAsf
KEY RATING DRIVERS
Increased Credit Enhancement: Credit enhancement has increased
since issuance due to loan payoffs, scheduled amortization and
defeasance. As of the February 2020 distribution date, the pool's
aggregate principal balance was paid down by 13.6% to $1.28 billion
from $1.49 billion at issuance. Seven loans representing 4.4% of
the original pool balance have paid off since issuance. Seven loans
(14.5% of pool) have been fully defeased, including two loans in
the top 15, since Fitch's last rating action. Six loans (20.9%) are
full-term, interest only and the remaining 62 loans (79.1%) are
amortizing.
Relatively Stable Performance: The performance and loss expectation
for the majority of the pool have remained relatively stable since
Fitch's last rating action. There have been no specially serviced
loans since issuance. Fitch has designated six loans (24.9% of
pool) as Fitch Loans of Concern (FLOCs), including four loans in
the top 15 (22.4%).
High Retail Concentration and Regional Mall Exposure: Loans secured
by retail properties represent 43% of the current pool, including
three of the top 15 loans (19.3%), which are secured by regional
malls sponsored by Unibail-Rodamco/O'Connor Capital Partners (10%)
and Simon Property Group (9.3%). All three of these regional mall
loans are flagged as FLOCs for declining occupancy from the loss of
anchor tenants and weak and/or declining sales.
The Westfield Citrus Park loan (10%), which is secured by a
494,007-sf portion of a 1.13 million-sf regional mall located in
Tampa, FL, lost its non-collateral Sears in the third quarter of
2018 and has also experienced a significant decline in collateral
occupancy due to several in-line tenants vacating upon lease
expiration. The property faces continued near-term lease rollover
concerns, flat to declining tenant sales and significant
competition within its trade area.
The Southdale Center loan (7%), which is secured by a 637,107-sf
portion of a 1.06 million-sf regional mall located in Edina, MN,
lost multiple anchor tenants, including the largest collateral
tenant, Herberger's, in August 2018, the non-collateral JCPenney in
2017 and the former third largest collateral tenant, Gordmans, in
2017. Collateral occupancy declined to 58.8% as of September 2019
from 79.7% at YE 2017 and 93.3% at YE 2016. The property faces
declining in-line tenant sales, as well as near-term lease rollover
concerns. The former non-collateral JCPenney box has since been
redeveloped into a Life Time Fitness club and co-working office
space, and there are preliminary redevelopment plans involving the
former Herberger's box.
The Mall at Tuttle Crossing loan (2.2%), which is secured by a
378,891-sf portion of a 1.12 million-sf regional mall located in
Dublin, OH, lost its non-collateral Sears in March 2019. As of
September 2019, total mall occupancy was 77.5%, down from 85.7% at
YE 2017 and 94.3% at YE 2016. Collateral occupancy also declined to
72.8% as of September 2019 from 77.4% at YE 2018, 82.2% at YE 2017
and 91.2% at YE 2016. Macy's had previously closed one of its
non-collateral Furniture/Home/Men's/Kid's store in spring 2017. The
entertainment center, Scene 75, leased the former vacant
non-collateral Macy's store in March 2018 and opened in October
2019. The property faces declining in-line tenant sales, near-term
lease rollover concerns and significant competition within its
trade area.
Alternative Loss Considerations: Fitch applied an alternative
sensitivity scenario on the Westfield Citrus Park, Southdale Center
and Mall at Tuttle Crossing loans, which considered potential
outsized losses of 25%, 15% and 25%, respectively, on these loans'
balloon balances. The Negative Rating Outlooks on classes G and H
reflect this analysis.
Fitch Loans of Concern: In addition to the three regional mall
loans, Fitch designated three other loans (5.7% of pool) as FLOCs,
including one in the top 15 (3.1%). The Hotel Oceana Santa Monica
property, a 70-room full-service luxury boutique hotel located on
Ocean Avenue along the coast in Santa Monica, CA, was closed
between November 2018 and July 2019 as it underwent significant
renovations. Due to the property being offline, the
servicer-reported NOI debt service coverage ratio (DSCR) declined
to 0.24x as of TTM June 2019 from 1.53x in 2018. Fitch will
continue to monitor the property's stabilization.
The Oak Brook Office Center loan (1.6%) is secured by a portfolio
of four suburban office properties located in Oak Brook, IL, 25
miles west of the Chicago CBD. Portfolio occupancy declined to
72.9% as of October 2019 from 76.3% in January 2018 and 89.7% at YE
2016 due to several tenants vacating in 2017 at or prior to their
scheduled lease expirations. There has been limited positive
leasing momentum across the portfolio.
The 262-270 East Fordham Road loan (0.9%), which is secured by a
20,300-sf retail property located in the Bronx, NY, was flagged for
tenant rollover concerns. The property is leased by two tenants.
The lease of the second largest tenant, The Finish Line (35% of
NRA), recently expired at the end of February 2020. Additionally,
although the largest tenant, Modell's (65%), has a long-term lease
that expires in February 2033, the tenant announced plans in
February 2020 to close 24 stores, eight of which will be in New
York. Fitch's inquiry to the servicer for a leasing update for The
Finish Line and whether the Modell's store at the property is on
the company's closing list remains outstanding.
RATING SENSITIVITIES
The Stable Rating Outlooks on classes A-SB through E reflect the
relatively stable performance of the majority of the remaining
pool, increasing credit enhancement and expected continued
amortization. Factors that lead to upgrades would include stable to
improved asset performance coupled with paydown and/or defeasance.
Upgrades of classes B through E may occur with significant
improvement in credit enhancement and/or defeasance but would be
limited based on sensitivity to concentrations or the potential for
future concentration. Classes would not be upgraded above 'Asf' if
there is a likelihood for interest shortfalls. Upgrades to the
below-investment grade rated classes are not likely given the
concerns surrounding the Westfield Citrus Park, Southdale Center
and Mall at Tuttle Crossing loans, but may occur in the later years
of the transaction should credit enhancement increase and there are
minimal FLOCs.
The Negative Rating Outlook on class F was revised to Stable from
Negative due to reduced loss expectations/asset improvement of the
Summerhill Square loan.
The Negative Rating Outlooks on classes G and H reflect the
alternative sensitivity scenario performed on the Westfield Citrus
Park, Southdale Center and Mall at Tuttle Crossing loans and
downgrade concerns should performance of these regional mall FLOCs
continue to decline. Factors that lead to downgrades include an
increase in pool level losses from underperforming or specially
serviced loans. Downgrades to the senior classes A-SB through C are
not likely due to the position in the capital structure and the
high credit enhancement or defeasance. The Negative Rating Outlooks
for classes G and H may be revised to Stable if the performance of
the regional malls improve substantially and/or stabilize with
continued positive leasing momentum.
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.
ESG CONSIDERATIONS
The transaction has an ESG Relevance Score of 4 for Exposure to
Social Impacts due to an outlet mall that is underperforming as a
result of changing consumer preference to shopping which has a
negative impact on the credit profile and is highly relevant to the
ratings.
Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of 3 - ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
NEW RESIDENTIAL 2020-2: DBRS Gives Prov. B Rating on 10 Classes
---------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following
Mortgage-Backed Notes, Series 2020-2 (the Notes) to be issued by
New Residential Mortgage Loan Trust 2020-2 (NRMLT or the Trust):
-- $397.3 million Class A-1 at AAA (sf)
-- $397.3 million Class A1-IO at AAA (sf)
-- $397.3 million Class A-1A at AAA (sf)
-- $397.3 million Class A-1B at AAA (sf)
-- $397.3 million Class A-1C at AAA (sf)
-- $397.3 million Class A1-IOA at AAA (sf)
-- $397.3 million Class A1-IOB at AAA (sf)
-- $397.3 million Class A1-IOC at AAA (sf)
-- $397.3 million Class A-2 at AAA (sf)
-- $412.3 million Class A-3 at AA (sf)
-- $429.0 million Class A-4 at A (sf)
-- $412.3 million Class A-5 at AA (sf)
-- $429.0 million Class A-6 at A (sf)
-- $429.0 million Class IO at A (sf)
-- $15.0 million Class B-1 at AA (sf)
-- $15.0 million Class B1-IO at AA (sf)
-- $15.0 million Class B-1A at AA (sf)
-- $15.0 million Class B-1B at AA (sf)
-- $15.0 million Class B-1C at AA (sf)
-- $15.0 million Class B-1D at AA (sf)
-- $15.0 million Class B1-IOA at AA (sf)
-- $15.0 million Class B1-IOB at AA (sf)
-- $15.0 million Class B1-IOC at AA (sf)
-- $16.7 million Class B-2 at A (sf)
-- $16.7 million Class B2-IO at A (sf)
-- $16.7 million Class B-2A at A (sf)
-- $16.7 million Class B-2B at A (sf)
-- $16.7 million Class B-2C at A (sf)
-- $16.7 million Class B-2D at A (sf)
-- $16.7 million Class B2-IOA at A (sf)
-- $16.7 million Class B2-IOB at A (sf)
-- $16.7 million Class B2-IOC at A (sf)
-- $31.7 million Class B-IO at A (sf)
-- $14.3 million Class B-3 at BBB (sf)
-- $14.3 million Class B3-IO at BBB (sf)
-- $14.3 million Class B-3A at BBB (sf)
-- $14.3 million Class B-3B at BBB (sf)
-- $14.3 million Class B-3C at BBB (sf)
-- $14.3 million Class B3-IOA at BBB (sf)
-- $14.3 million Class B3-IOB at BBB (sf)
-- $14.3 million Class B3-IOC at BBB (sf)
-- $10.2 million Class B-4 at BB (sf)
-- $10.2 million Class B-4A at BB (sf)
-- $10.2 million Class B-4B at BB (sf)
-- $10.2 million Class B-4C at BB (sf)
-- $10.2 million Class B4-IOA at BB (sf)
-- $10.2 million Class B4-IOB at BB (sf)
-- $10.2 million Class B4-IOC at BB (sf)
-- $6.4 million Class B-5 at B (sf)
-- $6.4 million Class B-5A at B (sf)
-- $6.4 million Class B-5B at B (sf)
-- $6.4 million Class B-5C at B (sf)
-- $6.4 million Class B-5D at B (sf)
-- $6.4 million Class B5-IOA at B (sf)
-- $6.4 million Class B5-IOB at B (sf)
-- $6.4 million Class B5-IOC at B (sf)
-- $6.4 million Class B5-IOD at B (sf)
-- $16.7 million Class B-7 at B (sf)
Classes A1-IO, A1-IOA, A1-IOB, A1-IOC, IO, B1-IO, B1-IOA, B1-IOB,
B1-IOC, B2-IO, B2-IOA, B2-IOB, B2-IOC, B-IO, B3-IO, B3-IOA, B3-IOB,
B3-IOC, B4-IOA, B4-IOB, B4-IOC, B5-IOA, B5-IOB, B5-IOC, and B5-IOD
are interest-only notes. The class balances represent notional
amounts.
Classes A1-IO, A-1A, A-1B, A-1C, A1-IOA, A1-IOB, A1-IOC, A-2, A-3,
A-4, A-5, A-6, IO, B-1A, B-1B, B-1C, B-1D, B1-IOA, B1-IOB, B1-IOC,
B-2A, B-2B, B-2C, B-2D, B2-IOA, B2-IOB, B2-IOC, B-IO, B3-IO, B-3A,
B-3B, B-3C, B3-IOA, B3-IOB, B3-IOC, B-4A, B-4B, B-4C, B4-IOA,
B4-IOB, B4-IOC, B-5A, B-5B, B-5C, B-5D, B5-IOA, B5-IOB, B5-IOC,
B5-IOD, and B-7 are exchangeable notes. These classes can be
exchanged for combinations of initial exchangeable notes as
specified in the offering documents.
The AAA (sf) ratings on the Notes reflect 16.65% of credit
enhancement provided by subordinated notes. The AA (sf), A (sf),
BBB (sf), BB (sf), and B (sf) ratings reflect 13.50%, 10.00%,
7.00%, 4.85%, and 3.50% of credit enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
This transaction is a securitization of a seasoned portfolio of
performing and reperforming first-lien residential mortgages funded
by the issuance of the Notes. The Notes are backed by 4,296 loans
with a total principal balance of $476,613,725 as of the Cut-Off
Date (February 1, 2020).
The loans are significantly seasoned with a weighted-average age of
186 months. As of the Cut-Off Date, 91.6% of the pool is current,
7.8% is 30 days delinquent under the Mortgage Bankers Association
(MBA) delinquency method, and 0.6% is in bankruptcy (all bankruptcy
loans are performing or 30 days delinquent). Approximately 65.7%
and 75.9% of the mortgage loans have been zero times 30 days
delinquent (0 x 30) for the past 24 months and 12 months,
respectively, under the MBA delinquency method.
The portfolio contains 4.9% modified loans. The modifications
happened more than two years ago for 86.6% of the modified loans.
All but three loans are exempt from the Consumer Financial
Protection Bureau's ability-to-repay/qualified mortgage rules due
to loan seasoning.
The Seller, NRZ Sponsor IX LLC (NRZ), acquired the loans prior to
the Closing Date in connection with the termination of various
securitization trusts and whole loan purchases. Upon acquiring the
loans, NRZ, through an affiliate, New Residential Funding 2020-2
LLC (the Depositor), will contribute the loans to the Trust. As the
Sponsor, New Residential Investment Corp., through a majority-owned
affiliate, will acquire and retain a 5% eligible vertical interest
in each class of securities to be issued (other than the residual
notes) to satisfy the credit risk retention requirements under
Section 15G of the Securities Exchange Act of 1934 and the
regulations promulgated thereunder. These loans were originated and
previously serviced by various entities through purchases in the
secondary market.
As of the Cut-Off Date, 49.4% of the pool is serviced by Nationstar
Mortgage LLC (Nationstar) doing business as (dba) Mr. Cooper Group,
Inc., 37.2% by PHH Mortgage Corporation, 7.2% by NewRez LLC dba
Shellpoint Mortgage Servicing (SMS), 4.1% by Wells Fargo Bank, and
2.1% by Select Portfolio Servicing. Nationstar will also act as the
Master Servicer, and SMS will act as the Special Servicer.
The Seller will have the option to repurchase any loan that becomes
60 or more days delinquent under the MBA method or any real estate
owned property acquired in respect of a mortgage loan at a price
equal to the principal balance of the loan (Optional Repurchase
Price), provided that such repurchases will be limited to 10% of
the principal balance of the mortgage loans as of the Cut-Off
Date.
Unlike other seasoned reperforming loan securitizations, the
Servicers in this transaction will advance principal and interest
on delinquent mortgages to the extent such advances are deemed
recoverable. The transaction employs a senior-subordinate,
shifting-interest cash flow structure that is enhanced from a
precrisis structure.
The ratings reflect transactional strengths that include underlying
assets with significant seasoning and robust loan attributes with
respect to product types and loan-to-value ratios.
The transaction employs a relatively weak representations and
warranties framework that includes an unrated representation
provider (NRZ), certain knowledge qualifiers and fewer mortgage
loan representations relative to DBRS Morningstar's criteria for
seasoned pools.
Although limited, third-party due diligence was performed on the
pool for regulatory compliance, data integrity, title/lien, and
payment history. Updated Home Data Index and/or broker price
opinions were provided for the pool; however, reconciliation was
not performed on the updated values.
Certain loans have missing assignments or endorsements as of the
Closing Date. Given the relatively clean performance history of the
mortgages and the operational capability of the servicers, DBRS
Morningstar believes that the risk of impeding or delaying
foreclosure is remote.
Notes: All figures are in U.S. dollars unless otherwise noted.
OZLM LTD XV: Moody's Assigns Ba3 Rating on $22MM Class D-R Notes
----------------------------------------------------------------
Moody's Investors Service assigned ratings to eight classes of CLO
refinancing notes issued by OZLM XV, Ltd.
US$4,000,000 Class X-R Senior Secured Floating Rate Notes due 2033
(the "Class X-R Notes"), Assigned Aaa (sf)
US$188,000,000 Class A-1a-R Senior Secured Floating Rate Notes due
2033 (the "Class A-1a-R Notes"), Assigned Aaa (sf)
US$64,000,000 Class A-1b-R Senior Secured Fixed Rate Notes due 2033
(the "Class A-1b-R Notes"), Assigned Aaa (sf)
US$26,500,000 Class A-2a-R Senior Secured Floating Rate Notes due
2033 (the "Class A-2a-R Notes"), Assigned Aa2 (sf)
US$23,500,000 Class A-2b-R Senior Secured Fixed Rate Notes due 2033
(the "Class A-2b-R Notes"), Assigned Aa2 (sf)
US$19,000,000 Class B-R Senior Secured Deferrable Floating Rate
Notes due 2033 (the "Class B-R Notes"), Assigned A2 (sf)
US$25,000,000 Class C-R Senior Secured Deferrable Floating Rate
Notes due 2033 (the "Class C-R Notes"), Assigned Baa3 (sf)
US$22,000,000 Class D-R Senior Secured Deferrable Floating Rate
Notes due 2033 (the "Class D-R Notes"), Assigned Ba3 (sf)
RATINGS RATIONALE
The rationale for the ratings is based on its methodology and
considers all relevant risks particularly those associated with the
CLO's portfolio and structure.
The Issuer is a managed cash flow collateralized loan obligation.
The issued notes are collateralized primarily by a portfolio of
broadly syndicated senior secured corporate loans. At least 90.0%
of the portfolio must consist of first lien senior secured loans
(other than first lien last out loans) and eligible investments,
and up to 10.0% of the portfolio may consist of first lien last out
loans, second lien loans and unsecured loans.
Sculptor Loan Management LP 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 extended five year reinvestment period.
Thereafter, subject to certain restrictions, the Manager may
reinvest unscheduled principal payments and proceeds from sales of
credit risk assets.
The Issuer has issued the Refinancing Notes on March 6, 2020 in
connection with the refinancing of all classes of the secured notes
originally issued on December 20, 2016. On the Refinancing Date,
the Issuer used proceeds from the issuance of the Refinancing Notes
and additional subordinated notes to redeem in full the Refinanced
Original Notes. On the Original Closing Date, the issuer also
issued one class of subordinated notes that remains outstanding.
In addition to the issuance of the Refinancing Notes and additional
subordinated notes, a variety of other changes to transaction
features will occur in connection with the refinancing. These
include: extension of the reinvestment period; extensions of the
stated maturity and non-call period; changes to certain collateral
quality tests; and changes to the overcollateralization test
levels.
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 March 2019.
The key model inputs Moody's used in its analysis, such as par,
weighted average rating factor, diversity score and weighted
average recovery rate, 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: $399,077,975
Defaulted par: $4,109,452
Diversity Score: 2761
Weighted Average Rating Factor (WARF): 2761 (corresponding to a
weighted average default probability of 26.62%)
Weighted Average Spread (WAS): 3.5%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 45.4%
Weighted Average Life (WAL): 9 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
March 2019.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Refinancing Notes is subject to uncertainty.
The performance of the Refinancing 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 Refinancing Notes.
RALI TRUST 2006-QH1: Moody's Hikes Cl. A-1 Debt Rating to Caa1
--------------------------------------------------------------
Moody's Investors Service upgraded the rating of Class A-1 from
RALI Series 2006-QH1 Trust, backed by Option ARM loans.
The complete rating action is as follows:
Issuer: RALI Series 2006-QH1 Trust
Cl. A-1, Upgraded to Caa1 (sf); previously on Dec 1, 2010
Downgraded to Ca (sf)
RATINGS RATIONALE
The rating upgrade of Class A-1 from RALI Series 2006-QH1 Trust
reflects a correction to the cash-flow modeling previously used by
Moody's in rating this transaction. In prior rating actions, its
modeling of the total amount of principal paid to the bonds was
incorrectly capped at the total amount of principal collected on
the collateral and did not include the excess interest amount,
thereby overestimating losses for Class A-1. This error has now
been corrected, and the rating action reflects this change. The
action also reflects the recent performance of the underlying pool
and Moody's updated loss expectations on the pool.
The principal methodology used in this rating was "US RMBS
Surveillance Methodology" published in February 2019.
Factors that would lead to an upgrade or downgrade of the rating:
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 3.5% February 2020 from 3.8% in
February 2019. Moody's forecasts an unemployment central range of
3.8% to 4.2% for the 2020 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 2020. 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. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions.
SBALR COMMERCIAL 2020-RR1: DBRS Finalizes B(low) Rating on F Certs
------------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2020-RR1 issued by SBALR Commercial Mortgage 2020-RR1 Trust:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at A (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)
All trends are Stable.
The collateral consists of 59 fixed-rate loans secured by 91
commercial and multifamily properties. Two separate groups of
loans, the Emerald Bronx Multifamily Portfolio loans and the Gutman
and Hoffman Multifamily Portfolio loans, each have the same
sponsor, property type, and assets located in the same or similar
submarkets. Although these two groups of loans are not
cross-collateralized or cross defaulted, the DBRS Morningstar
analysis of this transaction incorporates these groups of loans as
single loans, resulting in a modified loan count of 51, and the
loan number referenced within this report reflects this total. The
transaction employs a sequential pass-through structure. The pool
was analyzed to determine the ratings, reflecting the long-term
probability of loan default within the term and its liquidity at
maturity. When the cutoff loan balances were measured against the
DBRS Morningstar Stabilized Net Cash Flow (NCF) and their
respective actual constants, the initial DBRS Morningstar
Weighted-Average (WA) Debt Service Coverage Ratio (DSCR) of the
pool was 1.39 times (x), and 22 loans, representing 29.4% of the
pool, had a DBRS Morningstar DSCR below 1.30x, a threshold
indicative of a higher likelihood of midterm default. One loan,
representing 1.0% of the pool, had a DBRS Morningstar DSCR below
1.00x. The pool additionally includes 17 loans comprising a
combined 23.1% of the pool balance with a DBRS Morningstar
Loan-to-Value (LTV) ratio in excess of 67.0%, a threshold generally
indicative of above-average default frequency. The WA DBRS
Morningstar LTV of the pool at issuance was 65.5%, and the pool is
scheduled to amortize down to a DBRS Morningstar WA LTV of 58.2% at
maturity.
The property has 24 loans, representing 62.2% of the pool balance,
that are secured by multifamily properties. Multifamily properties
typically have low NCF volatility because of granular rent rolls
despite the short-term nature of the leases. In addition,
multifamily loans have exhibited lower default frequency, resulting
in lower expected losses.
The deal has favorable credit metrics as evidenced by a WA DBRS
Morningstar LTV and Balloon WA LTV of 65.5% and 58.2%,
respectively. In addition, only four loans, representing 5.5% of
the trust balance, have an issuance LTV of 75.0% or higher.
Historical data generally demonstrates that loans with lower LTVs
at issuance have a lower probability of default.
The pool has 32 loans, representing 41.8% of the pool balance that
should amortize down by 10.0% to 20.0% over their respective terms.
In addition, there are 12 loans, representing 17.9% of the pool
balance, that have expected amortization in excess of 20.0% of the
original loan balance. The transaction's scheduled amortization by
maturity is 10.9%, which is much higher than recent traditional
conduit transactions. Loan amortization is correlated with lower
levels of refinancing risk.
The pool is heavily concentrated based on loan size, as the largest
loan group in the pool (the Emerald Bronx Multifamily Portfolio)
alone constitutes 27.5% of the pool balance. Together with the
Gutman and Hoffman Multifamily Portfolio, the top two loan groups
represent 33.5% of the pool balance. Although the pool has 51
modeled loan groups, it has a concentration profile similar to a
pool of 11 equally sized loans. In addition, the eight Emerald
Bronx Multifamily Portfolio loans and the two Gutman and Hoffman
Multifamily Portfolio loans are not cross-collateralized and cross
defaulted, exposing them to selective default risk.
By treating them each as single loans because of their sponsorship,
locations, and property types, DBRS Morningstar is amplifying the
concentration effects of these loans on the pool in the pooling
simulation analysis within the CMBS Insight Model, which implicitly
accounts for loan concentration, resulting in high AAA loss
estimates. Compared with a pool that has a concentration profile
similar to a pool of 20 equally sized loans but a WA expected loss
equal to the subject transaction, the subject transaction's AAA
loss estimate is several points higher.
Thirty loans, representing 38.4% of the pool, are secured by
properties located in DBRS Morningstar Market Ranks of 3 or 4,
which are considered lighter suburban in nature, including four of
the top 10 loans (Hurstbourne Landings and Oak Run Apartments,
Kingsley Building, Crystal Townhomes, and University Plaza).
Properties located in these light suburban locations have
historically performed poorly and often have limited barriers to
entry or minimal growth in the metropolitan statistical area. Areas
with a Market Rank of 7 or 8 are generally more urban and can
benefit from greater liquidity, even during times of economic
stress.
However, two loans, representing 29.9% of the pool are located in
markets with a DBRS Morningstar Market Rank of 7. These loans are
the largest two in the pool, the Emerald Bronx Portfolio and the
Gutman and Hoffman Multifamily Portfolio. Market Rank 7 represents
dense urban areas that benefit from greater liquidity, even in
times of stress, and these areas have historically performed very
well. This urban concentration brings up the WA DBRS Morningstar
Market Rank to a relatively strong 4.55.
Eight loans, representing 11.6% of the pool by allocated loan
balance, are secured by hospitality properties. Hotels have the
highest cash flow volatility of all property types, as their
income—which is derived from daily contracts rather than
multiyear leases and their expenses, which are often mostly
fixed—account for a relatively large proportion of revenue. As a
result, revenue can decline sharply in the event of a downturn and
cash flow may decline more exponentially because of high operating
leverage.
These loans have modest going-in leverage with a WA DBRS
Morningstar LTV of only 64.00% and benefit from substantial
amortization, resulting in a low WA DBRS Morningstar Balloon LTV of
51.04%.
Classes X-A and X-B are interest-only (IO) certificates that
reference a single rated tranche or multiple rated tranches. The IO
rating mirrors the lowest-rated applicable reference obligation
tranche adjusted upward by one notch if senior in the waterfall.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2015-C30: Fitch Affirms B-sf Rating on Class F Certs
----------------------------------------------------------------
Fitch Ratings affirmed 12 classes of Wells Fargo Commercial
Mortgage Trust 2015-C30 commercial pass-through certificates.
RATING ACTIONS
WFCM 2015-C30
Class A-3 94989NBD8; LT AAAsf Affirmed; previously at AAAsf
Class A-4 94989NBE6; LT AAAsf Affirmed; previously at AAAsf
Class A-S 94989NBG1; LT AAAsf Affirmed; previously at AAAsf
Class A-SB 94989NBF3; LT AAAsf Affirmed; previously at AAAsf
Class B 94989NBK2; LT AA-sf Affirmed; previously at AA-sf
Class C 94989NBL0; LT A-sf Affirmed; previously at A-sf
Class D 94989NAL1; LT BBB-sf Affirmed; previously at BBB-sf
Class E 94989NAN7; LT BB-sf Affirmed; previously at BB-sf
Class F 94989NAQ0; LT B-sf Affirmed; previously at B-sf
Class PEX 94989NBM8; LT A-sf Affirmed; previously at A-sf
Class X-A 94989NBH9; LT AAAsf Affirmed; previously at AAAsf
Class X-E 94989NAA5; LT BB-sf Affirmed; previously at BB-sf
KEY RATING DRIVERS
Minimal Changes to Credit Enhancement: There has been pay down of
6.2%, bringing the current balance to $695 million from $740
million at issuance. Six loans (14.7% of the pool) are fully
defeased including two loans in the top 15. Excluding defeased
loans, there are four loans representing 1.5% of the pool that are
IO for the full term. An additional 31 loans representing 52.7% of
the pool have partial IO periods. Of the partial IO loans, five
loans representing 8.05% of the pool have not yet begun to
amortize.
Stable Loss Expectations: Pool performance remains generally stable
since the last rating action with specially serviced loans
comprising less than 2.00% of the pool balance.
Specially Serviced Loans/FLOC: Two loans (1.95% of the pool) have
transferred to Special Servicing and both are flagged as Fitch
Loans of Concern (FLOC). Eisenhower Crossing (0.86% of the pool)
transferred to Special Servicing in February 2019 due to imminent
monetary default. Occupancy fell from 90% as of YE 2016 to 53% by
YE 2017 after HH Gregg (37% of NRA) vacated upon filing for Chapter
11 Bankruptcy. As of September 2019, the debt service coverage
ratio (DSCR) had fallen to 0.36x with an occupancy of 50%, a
decline from 91% at issuance. Bristol Retail Portfolio (1.09% of
the pool) transferred to Special Servicing in February 2019 due to
a failure to implement cash management related to a net cash flow
DSCR of 1.06x. As of September 2019, occupancy was 74% resulting in
a DSCR of 1.14x primarily due to tenant rollover, increased
competition, decreased demand and a decrease in average rental
rates. In addition to the Specially Serviced Loans, there two loans
in the top 15 designated as FLOC. Riverpark Square (8.26% of the
pool), the second largest loan in the pool, is considered a FLOC
due to concerns with low sales at the property and Nordstrom's
scheduled 2023 lease expiration. Riverpark Square is a five-story
regional mall located in the central business district of Spokane,
WA. As of September 2019, the NOI DSCR was 2.06x. As of YE 2019,
inline tenant sales (excluding Apple) were $332 per square foot,
down from $336 per square foot at YE 2018; and, Nordstrom tenant
sales were $139 per square foot, down from $174 per square foot at
YE 2018 . Private Mini Storage Portfolio (1.40% of the pool), is
considered a FLOC due to declining occupancy and performance. As of
September 2019, the NOI DSCR was 0.23x with an occupancy of 77%,
down from 85% at securitization. Following a new ownership
transfer, the recent OSAR contains a significant increase in
expense items.
Alternative Loss Considerations: Fitch performed a Sensitivity
assuming a 25% loss on Riverpark Square, to test the volatility of
the ratings given concerns associated with the low tenant sales and
Nordstrom rollover risk. The sensitivity did not impact the
ratings.
Multifamily/Co-op Pool Concentration: Multifamily properties make
up 35.7% of the pool, which is significantly higher than the
average multifamily concentration for similar vintage transactions.
Five loans (19.3%) in the top 15, including the largest loan in the
pool, Somerset Park Apartments (10.6% of the pool) are secured by
collateral backed by multifamily properties. Of the multifamily
concentration, approximately 6.5% of the pool is secured by co-ops
located in New York.
RATING SENSITIVITIES
The Stable Rating Outlooks reflect the stable performance of the
majority of the pool. Factors that could lead to upgrades include
stable to improved asset performance coupled with pay down and/or
defeasance. Upgrades to classes B through D may occur with
significant improvement to credit enhancement but may be limited
due to potential performance volatility given the concentration of
loans located in secondary and tertiary markets which includes nine
of the top 15 loans. Classes would not be upgraded above 'Asf' if
there is a likelihood for interest shortfalls. Upgrades to the
below investment grade rated classes are not likely given the
limited improvement to credit enhancement from pay down and
sensitivity to concentration and FLOCs. Upgrades to these lower
rated classes may occur in the later years of the transaction
should credit enhancement increase and there are minimal FLOCs, but
may be limited if the deal becomes concentrated.
Factors that could lead to downgrades include an increase in
expected pool level losses from underperforming specially serviced
loans. While currently not expected, classes E and F could be
downgraded if additional loans become FLOCs. Downgrades to the
senior classes A-3 through D are not likely due to the position in
the capital structure and stable performance of the majority of the
pool.
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.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
WOODMONT 2017-3: S&P Assigns 'BB (sf)' Rating to Class E-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-1-R, A-2-R,
B-R, C-R, D-R, and E-R replacement notes from Woodmont 2017-3
L.P./Woodmont 2017-3 LLC, a CLO originally issued in September 2017
that is managed by MidCap Financial Services Capital Management
LLC. S&P withdrew its ratings on the original class A-1, A-2, B, C,
D, and E notes following payment in full on the March 10, 2020,
refinancing date.
On the March 10, 2020, refinancing date, the proceeds from the
class A-1-R, A-2-R, B-R, C-R, D-R, and E-R replacement note
issuances were used to redeem the original class A-1, A-2, B, C, D,
and E notes as outlined in the transaction document provisions.
Therefore, S&P withdrew its ratings on the original notes in line
with their full redemption, and it is assigning ratings to the
replacement notes.
The replacement notes are being issued via a supplemental
indenture.
S&P's 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 its criteria,
S&P's 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, S&P's analysis considered the transaction's ability to
pay timely interest or ultimate principal, or both, to each of the
rated tranches.
"The assigned ratings reflect our opinion that the credit support
available is commensurate with the associated rating levels," S&P
said.
"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," the rating agency said.
RATINGS ASSIGNED
Woodmont 2017-3 L.P./Woodmont 2017-3 LLC
Replacement class Rating Amount (mil $)
A-1-R AAA (sf) 280.00
A-2-R AAA (sf) 27.50
B-R AA (sf) 35.00
C-R (deferrable) A (sf) 35.00
D-R (deferrable) BBB- (sf) 30.00
E-R (deferrable) BB (sf) 30.00
Subordinated notes NR 77.05
RATINGS WITHDRAWN
Woodmont 2017-3 L.P./Woodmont 2017-3 LLC
Original class Rating
To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
B NR AA (sf)
C (deferrable) NR A (sf)
D (deferrable) NR BBB- (sf)
E (deferrable) NR BB (sf)
Subordinated notes NR NR
NR--Not rated.
YORK CLO-4: S&P Assigns BB- (sf) Rating to Class E-R Notes
----------------------------------------------------------
S&P Global Ratings assigned its ratings to York CLO-4 Ltd.'s
floating-rate notes.
The note issuance is a CLO transaction backed by primarily broadly
syndicated speculative-grade (rated 'BB+' and lower) senior secured
term loans that are governed by collateral quality tests.
The ratings reflect:
-- The diversification of the collateral pool;
-- The credit enhancement provided through the subordination of
cash flows, excess spread, and overcollateralization;
-- The experience of the collateral management team, which can
affect the performance of the rated notes through collateral
selection, ongoing portfolio management, and trading; and
-- The legal structure of the transaction, which is expected to be
bankruptcy remote.
RATINGS ASSIGNED
York CLO-4 Ltd.
Class Rating Amount (mil. $)
X-R AAA (sf) 2.00
A-1-R AAA (sf) 246.50
A-2-R AAA (sf) 11.80
B-R AA (sf) 43.80
C-R (deferrable) A (sf) 23.90
D-R (deferrable) BBB- (sf) 21.80
E-R (deferrable) BB- (sf) 18.60
Subordinated notes NR 40.00
NR--Not rated.
[*] DBRS Takes Rating Action on 579 Classes From 33 U.S. RMBS Deals
-------------------------------------------------------------------
DBRS, Inc. took rating actions on 579 classes from 33 U.S.
residential mortgage-backed security (RMBS) transactions. Of the
579 classes reviewed, DBRS Morningstar upgraded six ratings,
confirmed 569 ratings, and discontinued four ratings.
The Affected Ratings is available at https://bit.ly/2W2OsAU
The rating upgrades reflect positive performance trends and
increases in credit support sufficient to withstand stresses at
their new rating levels. The rating confirmations reflect asset
performance and credit-support levels that are consistent with the
current ratings. The discontinued ratings reflect the transactions
exercising their cleanup call option or the full repayment of
principal to bondholders.
The rating actions result from DBRS Morningstar's application of
its "U.S. RMBS Surveillance Methodology" published in February
2020.
The pools backing these RMBS transactions consist of pre-crisis
prime, Alt-A, option adjustable-rate mortgage, second-lien, and
subprime collateral.
The ratings assigned to the securities below differ from the
ratings implied by the quantitative model. DBRS Morningstar
considers this difference to be a material deviation, but in this
case, the ratings on the subject notes reflect additional seasoning
warranted to substantiate a further upgrade and deal or tranche
performance that is not fully reflected in the projected model
output:
-- Aegis Asset-Backed Securities Trust 2005-3, Mortgage-Backed
Notes, Series 2005-3, Class M2
-- Asset-Backed Funding Corporation Series 2004-OPT5, ABFC
Asset-Backed Certificates, Series 2004-OPT5, Class M-1
-- Asset-Backed Securities Corporation Home Equity Loan Trust,
Series NC 2006-HE2, Asset-Backed Pass-Through Certificates, Series
NC 2006-HE2, Class A1
-- Asset-Backed Securities Corporation Home Equity Loan Trust,
Series NC 2006-HE4, Asset-Backed Pass-Through Certificates, Series
NC 2006-HE4, Class A5
-- Asset-Backed Securities Corporation Home Equity Loan Trust,
Series NC 2006-HE4, Asset-Backed Pass-Through Certificates, Series
NC 2006-HE4, Class A6
-- Accredited Mortgage Loan Trust 2005-4, Asset-Backed Notes,
Series 2005-4, Class M-1
-- ACE Securities Corp. Home Equity Loan Trust, Series 2006-ASAP1,
Asset-Backed Pass-Through Certificates, Series 2006-ASAP1, Class
M-1
-- Banc of America Funding 2007-E Trust, Mortgage Pass-Through
Certificates, Series 2007-E, Class 4-A-1
-- Banc of America Funding 2007-E Trust, Mortgage Pass-Through
Certificates, Series 2007-E, Class 9-A-1
-- Bear Stearns Mortgage Funding Trust 2007-AR2, Mortgage
Pass-Through Certificates, Series 2007-AR2, Class A-1
-- Bear Stearns Mortgage Funding Trust 2007-AR2, Mortgage
Pass-Through Certificates, Series 2007-AR2, Class A-2
-- Carrington Mortgage Loan Trust, Series 2007-HE1, Asset-Backed
Pass-Through Certificates, Series 2007-HE1, Class A-2
-- Carrington Mortgage Loan Trust, Series 2007-HE1, Asset-Backed
Pass-Through Certificates, Series 2007-HE1, Class A-3
-- Carrington Mortgage Loan Trust, Series 2007-HE1, Asset-Backed
Pass-Through Certificates, Series 2007-HE1, Class A-4
-- Citigroup Mortgage Loan Trust 2006-AMC1, Asset-Backed
Pass-Through Certificates, Series 2006-AMC1, Class A-1
-- Citigroup Mortgage Loan Trust 2006-HE2, Asset-Backed
Pass-Through Certificates, Series 2006-HE2, Class M-1
-- Citigroup Mortgage Loan Trust 2006-HE2, Asset-Backed
Pass-Through Certificates, Series 2006-HE2, Class M-2
-- CWABS Asset-Backed Certificates Trust 2006-SPS1, Asset-Backed
Certificates, Series 2006-SPS1, Class A
[*] Moody's Takes Action on $173MM of ARM/RMBS Issued 2004-2005
---------------------------------------------------------------
Moody's Investors Service upgraded the rating of six tranches from
three transactions and downgraded five tranches from three
transactions backed by Option ARM and Subprime loans.
The complete rating actions are as follows:
Issuer: DSLA Mortgage Loan Trust 2004-AR3
Cl. B-1, Downgraded to Ba3 (sf); previously on Jun 7, 2016 Upgraded
to Ba1 (sf)
Cl. B-2, Downgraded to Ca (sf); previously on Jun 7, 2016 Upgraded
to Caa3 (sf)
Issuer: Bear Stearns Asset Backed Securities I Trust 2005-TC1
Cl. M-3, Downgraded to B1 (sf); previously on Feb 27, 2018 Upgraded
to Ba3 (sf)
Cl. M-7, Upgraded to Caa3 (sf); previously on Jun 21, 2019 Upgraded
to Ca (sf)
Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through
Certificates, Series 2004-WWF1
Cl. M-4, Downgraded to B2 (sf); previously on Nov 18, 2014 Upgraded
to B1 (sf)
Cl. M-5, Downgraded to B2 (sf); previously on May 18, 2017 Upgraded
to B1 (sf)
Issuer: RAMP Series 2005-RZ3 Trust
Cl. M-3, Upgraded to Aaa (sf); previously on Jun 21, 2019 Upgraded
to Aa2 (sf)
Cl. M-4, Upgraded to A2 (sf); previously on Jun 21, 2019 Upgraded
to Baa1 (sf)
Cl. M-5, Upgraded to B2 (sf); previously on Jul 17, 2017 Upgraded
to Caa1 (sf)
Issuer: WaMu Mortgage Pass-Through Certificates, Series 2005-AR19
Cl. A-1C3, Upgraded to B1 (sf); previously on Jun 10, 2019 Upgraded
to B3 (sf)
Cl. A-1C4, Upgraded to B1 (sf); previously on Jun 10, 2019 Upgraded
to B3 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance and Moody's
updated loss expectations on the underlying pools. The rating
upgrades are a result of improving performance of the related pools
and/or an increase in credit enhancement available to the bonds.
The rating downgrades for DSLA Mortgage Loan Trust 2004-AR3 are due
to weaker performance of the underlying collateral. The remaining
downgrades are due to outstanding interest shortfalls on the bonds
which are not expected to be recouped as the bonds have weak
reimbursement mechanisms for interest shortfalls.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in February 2019.
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 3.5% in February 2020 from 3.8% in
February 2019. Moody's forecasts an unemployment central range of
3.8% to 4.2% for the 2020 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 2020. 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. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions.
*********
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