/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/200705.mbx T R O U B L E D C O M P A N Y R E P O R T E R Sunday, July 5, 2020, Vol. 24, No. 186 Headlines AASET TRUST 2014-1: Fitch Affirms Class C Notes at BBsf ANGEL OAK 2020-3: DBRS Assigns Prov. B Rating on Class B-2 Certs ANGEL OAK 2020-3: Fitch Gives Bsf Rating on Class B-2 Certs ARROYO MORTGAGE 2020-1: S&P Rates Class B-2 Notes 'B+(sf)' BABSON CLO 2014-I: Moodys' Lowers Rating on Class E Notes to Caa3 BANK 2020-BNK27: Fitch Gives B+sf Rating on Class G Certs BBCMS MORTGAGE 2020-C7: DBRS Finalizes B Rating on Class F Certs BUNKER HILL 2020-1: DBRS Assigns Prov. B Rating on Class B-2 Notes CES ENERGY: DBRS Confirms B(high) Issuer Rating CFCRE COMMERCIAL 2011-C2: Moody's Cuts Class G Certs to B3 CIM TRUST 2020-R5: Fitch to Rate Class B2 Notes 'B(EXP)sf' CITIGROUP MORTGAGE 2020-EXP1: Fitch Rates Class B-2 Certs 'Bsf' CITIGROUP MORTGAGE 2020-EXP1: Moody's Rates Class B-2 Certs 'B2' CITIGROUP MORTGAGE 2020-EXP1: Moody's Rates Class B-2 Certs (P)B2 COMM 2012-CCRE1: Moody's Lowers Rating Class G Certs to Caa2 COMM 2012-CCRE2: Moody's Lowers Rating on Class G Certs to Caa1 COMM 2012-CCRE3: Moody's Lowers Rating on Class G Certs to Caa3 COMM 2012-CCRE4: Moody's Lowers Rating on Class E Certs to C COMM 2012-CCRE5: Fitch Affirms CCC Rating on Class G Certs COMM 2012-CCRE5: Moody's Lowers Class G Certs to Caa1 COMM 2017-COR2: Fitch Affirms Class G-RR Debt at B-sf CREW ENERGY: DBRS Lowers Issuer Rating to B(low), Trend Negative ELEVATION CLO 2017-6: Moody's Cuts Class F Notes to Caa2 GS MORTGAGE 2012-GC6: Moody's Lowers Rating on Cl. F Certs to Caa1 GS MORTGAGE-BACKED 2020-INV1: Fitch Rates Class B-5 Certs 'Bsf' HILDENE TRUPS 2020-3: Moody's Gives '(P)Ba3' on Class B Notes ICG US 2017-1: Moody's Confirms Class E Notes at Ba3 JP MORGAN 2020-4: Moody's Cuts Assigns B3 Ratings on 2 Tranches JPMDB COMMERCIAL 2016-C4: Fitch Affirms B- Rating on Class F Certs JPMDB COMMERCIAL 2020-COR7: Fitch Rates Class H-RR Certs 'B+sf' LB-UBS COMMERCIAL 2005-C5: Fitch Hikes Rating on Cl. J Certs to BB LEGACY MORTGAGE 2017-RPL2: Fitch Rates Class B2 Debt 'B-sf' MADISON PARK XVI: Moody's Cuts Class E Notes to Caa2 MF1 LTD 2020-FL3: DBRS Finalizes B(low) Rating on Class G Notes MORGAN STANLEY 2016-C30: Fitch Affirms BB-sf Rating on 2 Tranches MUSKOKA 2019-1: DBRS Lowers Tranche C Amount to Prov. BB(high) NASSAU LTD 2017-II: Moody's Cuts Rating on Class E Notes to B1 OCTAGON INVESTMENT 25: Moody's Cuts Ratings on 2 Tranches to B3 OCTAGON INVESTMENT 46: S&P Assigns Prelim BB- Rating to E Notes PARKLAND CORP: DBRS Assigns BB Rating on $400MM 6% Unsec. Notes PIONEER AIRCRAFT: Fitch Affirms BBsf Rating on Series C Notes PSMC TRUST 2020-2: Fitch Rates Class B-5 Debt 'Bsf' RESIDENTIAL MORTGAGE 2020-2: DBRS Assigns BB Rating on B-1 Notes RMF BUYOUT 2020-2: DBRS Finalizes BB Rating on Class M4 Notes SEQUIOIA MORTGAGE 2020-MC1: Fitch Rates Class B-2 Certs 'Bsf' SLM PRIVATE: S&P Lowers Ratings on 8 Classes to 'B- (sf)' SLM STUDENT 2003-12: Fitch Affirms Class B Notes at BBsf SLM STUDENT 2003-4: Fitch Affirms Bsf Rating on 6 Tranches STEELE CREEK 2016-1: Moody's Cuts $6MM Class F-R Notes to Caa1 TERWIN MORTGAGE 2004-13ALT: Moody's Cuts 2 Tranches Rating to Caa2 UBS COMMERCIAL 2017-C2: Fitch Affirms Class H-RR Certs at CCCsf UBS-BARCLAYS 2013-C6: Moody's Cuts Class F Certs to Caa1 UBS-BARCLAYS COMMERCIAL 2012-C2: Moody's Cuts Class G Certs to C VENTURE 35: Moody's Lowers Rating on Class E Notes to B1 VENTURE XXV: Moody's Lowers Rating on Class E Notes to B1 VERUS SECURITIZATION 2020-3: DBRS Finalizes B Rating on B-2 Certs VISTA POINT 2020-1: DBRS Finalizes B(low) Rating on Class B2 Certs WACHOVIA BANK 2005-C21: Fitch Affirms CCCsf Rating on Cl. E Certs WELLS FARGO 2018-C46: Fitch Affirms Class G-RR Certs at B-sf WELLS FARGO 2020-2: DBRS Finalizes B(low) Rating on Class B5 Certs WELLS FARGO 2020-2: Fitch Rates Class B-5 Certs 'B+sf' WELLS FARGO 2020-2: Moody's Rates Class B-5 Debt 'B1' WESTLAKE AUTOMOBILE 2020-2: DBRS Finalizes BB Rating on E Notes WFRBS COMMERCIAL 2011-C2: Fitch Affirms CCC Rating on F Certs WFRBS COMMERCIAL 2011-C4: Moody's Cuts Class G Certs to Ca(sf) [*] DBRS Cuts Ratings on Five Preferred Shares of Split-Share Cos. [*] S&P Discontinues 'D (sf)' Ratings on Five U.S. CMBS Deals [*] S&P Takes Various Actions on 76 Classes From 17 U.S. RMBS Deals ********* AASET TRUST 2014-1: Fitch Affirms Class C Notes at BBsf ------------------------------------------------------- Fitch Ratings affirms the ratings on all classes of Apollo Aviation Securitization Equity Trust 2014-1 Refinancing Loan, a 2018 Refinance and AASET 2017-1 Trust, and on the class A and B notes of AASET 2019-1 Trust. The Rating Outlooks for the class A and B notes on AASET 2019-1 and on all classes of AASET 2014-1 and AASET 2017-1 remain Negative. AASET 2019-1's class C notes were placed on Rating Watch Negative. AASET 2014-1, 2018 Refinance - Class A; LT Asf; Affirmed - Class B; LT BBBsf; Affirmed - Class C; LT BBsf; Affirmed AASET 2017-1 Trust - Class A 000366AA2; LT Asf; Affirmed - Class B 000366AB0; LT BBBsf; Affirmed - Class C 000366AC8; LT BBsf; Affirmed AASET 2019-1 Trust - Class A 00256DAA0; LT Asf; Affirmed - Class B 00256DAB8; LT BBBsf; Affirmed - Class C 00256DAC6; LT BBsf; Rating Watch On TRANSACTION SUMMARY The rating actions reflect ongoing deterioration of all airline lessee credits backing the leases in each transaction pool, downward pressure on certain aircraft values, Fitch's updated assumptions and stresses, and resulting impairments to modeled cash flows and coverage levels. Fitch revised or maintained the Negative Rating Outlook on each tranche for the transaction, reflecting Fitch's base case expectation for the structure to withstand immediate and near-term stresses at the updated assumptions, and stressed scenarios commensurate with their respective ratings. Certain tranches of the transactions were placed on RWN, given the limited ability to cover further downward stress to modeled cash flow coverage levels from the ongoing pandemic hitting airlines, aircraft values, and other related downside events at the current modeled scenarios and ratings. On March 31, 2020, Fitch revised the Outlook for all series of notes issued by AASET 2014-1, 2017-1, and 2019-1 to Negative as a part of its aviation ABS portfolio review, due to the ongoing impact of the coronavirus pandemic on the global macro and travel/airline sectors. This unprecedented worldwide pandemic continues to evolve rapidly and negatively affect airlines across the globe. To accurately reflect its global recessionary environment and the impact on airlines backing these pools, Fitch updated rating assumptions for both rated and non-rated airlines with a vast majority of ratings moving lower. This was a key driver of these rating actions, along with modeled cash flows. Furthermore, recessionary timing was brought forward to start immediately. This scenario further stresses airline credits, asset values and lease rates immediately, while incurring remarketing and repossession cost and downtime, at each relevant rating stress level. Previously, Fitch assumed that the first recession commenced six months from either the transaction closing date or date of subsequent reviews. Carlyle Aviation Partners Ltd. (parent: The Carlyle Group, rated BBB+/Stable) and its affiliates manage certain funds (the SASOF Funds). AASET 2014-1, 2017-1, and 2019-1 purchased the initial aircraft in their respective pools from the SASOF Funds. Carlyle Aviation Management Limited (CAML; not rated by Fitch), an indirect subsidiary of CAP, is the servicer for both transactions. Fitch believes the servicer can adequately service these transactions based on its experience as a lessor and overall servicing capabilities. KEY RATING DRIVERS Deteriorating Airline Lessee Credit: The credit profiles of the airline lessees in the pools have further deteriorated due to the coronavirus-related impact on all global airlines in 2020, resulting in lower lessee rating assumptions utilized for this review. The proportion of airline lessees assumed to have an Issuer Default Rating of 'CCC' or lower increased to 63.9% from 48.8% for AASET 2014-1 from the last full review in January 2020, rose to 65.4% from 28.3% for AASET 2017-1 from the last full review in May 2019, and increased to 85.0% compared to 47.5% at closing for AASET 2019-1. Newly-assumed 'CCC' credit airlines in AASET 2014-1 include Bangkok Airways, Onur Air, and Tui Airways. For AASET 2017-1, 'CCC' assumed lessees now include Air Transat, Air Europa, Bangkok Airways, Air Macau, and Viva Air Colombia. In AASET 2019-1, newly-assumed 'CCC' lessees include Utair, Volotea Airlines, Azul Linhas Aereas Brasileiras S/A, and Caribbean Airlines. All these assumptions reflect these airlines' ongoing deteriorating credit profiles and fleet in the current operating environment due to the coronavirus-related impact on the sector. Asset Quality and Appraised Pool Value: Each pool consists of older mid-to-end-of-life aircraft (weighted-average age of 18.6 years for 2014-1, 15.7 years for 2017-1 and 16.6 years for 2019-1) and leases with short remaining terms (WA 3.1 years remaining term for 2014-1, 2.3 years for 2017-1, and 3.2 years for 2019-1). Both pools include widebody aircraft concentrations, totaling 28.7% in 2014-1 with five such aircraft, 17.6% in 2017-1 with two aircraft, and 28.8% or five aircraft in AASET 2019-1. WBs typically incur higher repossession, transition, reconfiguration and maintenance costs. Due to ongoing market value pressures for WBs and worsening supply and demand value dynamics for these aircraft, Fitch utilized market values as opposed to base values for cash flow modeling, and then further applied an additional immediate and permanent 5% value haircut, after taking into account depreciation applied by Fitch since the last appraisals of December 2019 for 2017-1 and January 2020 for 2014-1 and 2019-1. The additional immediate value haircut was not applied for a 777-200ER in AASET 2019-1 due to a conservative value derivation, which aligns the Fitch-modeled value to other comparable WB aircraft of the same vintage, and to account for value softness observed in WB aircraft. The remaining aircraft in both pools consist of narrow body aircraft, which Fitch utilized BVs given ongoing market dynamics, consistent with prior review. For this review, Fitch utilized the average of the two lowest and most current appraisal values (BV for NB and MV for WB) for each pool, with the exception of the 777-200ER in 2019-1. For this aircraft, Fitch used the average MV of the three appraisers. For the engines in AASET 2014-1, Fitch used the average of the two lowest and most current market values. The appraisals were provided by Avitas, BK Associates Inc and morten beyer & agnew Inc. (mba) for AASET 2014-1. Appraisers for AASET 2017-1 and AASET 2019-1 are Avitas, Collateral Valuations, Inc. and mba. This approach results in Fitch modeled pool values of $307.1 million for AASET 2014-1, $326.1 million for AASET 2017-1, and $338.7 million for AASET 2019-1. This is notably lower compared to $341.2 million, $353.8 million, and $387.9 million as stated in the June 2020 servicer reports. Transaction Performance to Date: Lease collections and transaction cash flows for both transactions have trended down since the beginning of 2020 due to impact from the pandemic. AASET 2014-1 received $2.9 million in rent collections in the June collection, down 58% from a year prior but only down 5% from the May collection. AASET 2017-1 received $1.8 million in rent collections in the June collection period, down 52% from a year prior. AASET 2019-1 received $1.7 million in rent collection in the June collection period, down 81% from a year prior and 58% from the May collection period. During the June collection, AASET 2017-1 and AASET 2019-1 available cashflow was insufficient to pay any note principal amount, reaching the senior maintenance reserve amount step, while AASET 2014-1 payments reached the series A scheduled principal payment amount step. To date, there have been nine, 12, and one aircraft sales in AASET 2014-1, 2017-1, and 2019-1, respectively. The debt-service-coverage-ratio triggers for AASET 2014-1 remain above their respective cash trap triggers and rapid amortization event triggers, although they have declined compared to February levels. Due to sustained lower cash inflows over the last few months, the DSCR for AASET 2017-1 and AASET 2019-1 dropped sharply in June to 0.80x and 1.13x, respectively, tripping the DSCR rapid amortization trigger for the first time. As a result of the coronavirus pandemic, AASET 2014-1, 2017-1, and 2019-1 had nine, six, and nine lessees that are delinquent and behind on lease payments by at least one-month, in each case accounting for 50%,42%, and 61% of their respective pools. The servicer is expecting the number of lessees in arrears to increase due to the coronavirus pandemic. Nearly all lessees across each transaction has requested some form of payment relief/deferrals, consistent across peer aircraft ABS pools due to disruptions related to the coronavirus pandemic. For modeling purposes, Fitch assumed three months of lease deferrals for all airlines, with contractual lease payments resuming thereafter plus additional repayment of deferred amounts over a six-month period. Fitch Assumptions, Stresses and Cash Flow Modeling: Nearly all CAML servicer-driven Fitch assumptions are unchanged from the prior rating reviews for each transaction, and include consistent repossession and remarketing costs, new lease and extended lease terms assumed. Please see each transaction's published presale at close for further information on these assumptions and stresses. Two, seven, and four aircraft on lease are expected to mature within the next 12 months for AASET 2014-1, AASET 2017-1, and AASET 2019-1, respectively. For these near-term maturities, Fitch assumed an additional three-month downtime stress at lease-end in addition to lessor-specific remarketing downtime assumptions in order to account for potential remarketing challenges in placing this aircraft with a new lessee in the current distressed environment. With the grounding of global fleets and significant reduction in air travel, maintenance revenue and costs will be affected and are expected to decline due to airline lessee credit issues and grounded aircraft. Maintenance revenues were haircut by 50% over the next immediate 12 months for these reviews, and such missed payments were assumed to be recouped in the following 12 months thereafter starting in June 2021. Maintenance costs over the immediate six months were assumed to be incurred as reported. Costs in the next 12 months were haircut to 50% of their original schedules. Over the following 12 months, the 50% of deferred costs in prior periods were assumed to be repaid every month in addition to the scheduled maintenance costs. RATING SENSITIVITIES The Negative Rating Outlooks on the notes for AASET 2014-1, 2017-1, and 2019-1 reflect the potential for further negative rating actions due to concerns surrounding the ultimate impact of the coronavirus pandemic, and resulting performance concerns associated with airlines, aircraft values and other assumptions across the aviation industry due to the severe decline in travel and grounding of airlines. At close, Fitch conducted multiple rating sensitivities analyses to evaluate the impact of changes to a number of the variables in the analysis. The performance of aircraft operating lease securitizations is affected by various factors, which in turn could have an impact on the assigned ratings. Due to the correlation between global economic conditions and the airline industry, the ratings can be affected by the strength of the macro-environment over the remaining term of this transaction. In the initial rating analysis, Fitch found the transaction to exhibit sensitivity to the timing or severity of assumed recessions. Fitch also found that greater default probability of the leases has a material impact on the ratings. The timing or degree of technological advancement in the commercial aviation space and the impacts these changes would have on values, lease rates, and utilization, would have a moderate impact on the ratings. Factors that could, individually or collectively, lead to positive rating action/upgrade: Up: Base Assumptions with Stronger Residual Value Realization The Aircraft ABS sector has a rating cap of 'Asf'. All subordinate tranches carry one category of ratings lower than the senior tranche and remain below the initial ratings. However, if the assets in this pool experience stronger residual value realization than what Fitch modeled, or if it experiences a stronger lease collection in flow than Fitch's stressed scenarios, the transaction could perform better than expected. Future upgrades beyond current ratings would not be considered due to the rating cap in the sector, the industry cyclicality, and weaker lessee mix present in ABS pools and uncertainty around future lessee mix, all combined with the negative impact on the coronavirus on the global travel/airline sectors and ultimately ABS transactions. Under this scenario, residual value recoveries at time of sale are assumed at 70% of their depreciated market values up from 50% in the base case for certain aircraft that are less marketable. For AASET 2014-1 and 2017-1, net cash flow increases by approximately $23.2 million and $26.0 million at 'Asf' rating category. Under the scenario, all classes for both transactions are able to pass under the 'Asf' rating category. For AASET 2019-1, net cash flow increase to $27.7 million at 'Asf' rating category. Class A and B notes are able to pass under the 'Asf' rating category and class C is able to pass under the 'BBBsf' rating category. Factors that could, individually or collectively, lead to negative rating action/downgrade: Down: Base Assumptions with 10% Weaker Widebody Values The pools contain large concentration of widebody aircraft at approximately 29%, 18%, and 29% for AASET 2014-1, 2017-1, and 2019-1, respectively, and any further softening in widebody values could lead to further downward rating action. Due to downward market value pressure on widebodies, and worsening supply and demand value dynamics, Fitch explores the potential cash flow decline if widebody values are reduced further by 10% of Fitch's modeled value for cash flow modeling. For AASET 2014-1, net cash flow declines by approximately $2.8 million at the 'Asf' rating category. The class A and B pass under the 'Asf' scenario while the class C passes the 'BBsf' scenario. For AASET 2017-1 net cash flow declines by $1.5 million at the 'Asf' rating category. The class A and B are able to pass at the 'Asf' and class C passes under the 'BBsf' scenario. For AASET 2019-1, net cash flow declines by approximately $3.1 million at the 'Asf' rating category. Class A passes under the 'Asf' scenario, class B passes under the' BBBsf' scenario, and class C passes under the 'Bsf' scenario. Down: Base Assumptions with Jurisdictional Downtime Six months During the coronavirus pandemic, it is likely aircraft would be difficult to place in a new lease or extended with the current lessee. Given a global impact on the airline industry, supply of aircraft would outweigh the demand/pool of eligible new lessees and airlines are utilizing only a small portion of its fleet. As a result, the time to find a new lessee (downtime) is most likely to increase compared to pre-coronavirus times, especially for those leases expected to expire in the short term. Under this scenario, leases that mature during the first recession (i.e. within the next 48 months) were assumed to have six months of additional downtime. For AASET 2014-1, net cash flow declined by approximately $3.9 million at the 'Asf' rating category. The class A and B pass under the 'Asf' scenario while the class C passes the 'Bsf' scenario. For AASET 2017-1, net cash flow declines by $3.1 million at the 'Asf' rating category. Classes A and B are able to pass under the 'Asf' scenario and class C passes under the 'BBsf' stress scenario. For AASET 2019-1, net cash flow declines by approximately $3.9 million at the 'Asf' rating category. Class A passes under the 'Asf' scenario, class B passes under the' BBBsf' scenario, and class C passes under the 'Bsf' scenario. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). ANGEL OAK 2020-3: DBRS Assigns Prov. B Rating on Class B-2 Certs ---------------------------------------------------------------- DBRS, Inc. assigned provisional ratings to the following Mortgage-Backed Certificates, Series 2020-3 (the Certificates) to be issued by Angel Oak Mortgage Trust 2020-3 (the Trust): -- $368.6 million Class A-1 at AAA (sf) -- $39.5 million Class A-2 at AA (sf) -- $38.5 million Class A-3 at A (sf) -- $30.2 million Class M-1 at BBB (sf) -- $10.6 million Class B-1 at BB (sf) -- $11.9 million Class B-2 at B (sf) The AAA (sf) rating on the Class A-1 Certificates reflects 30.50% of credit enhancement provided by subordinated Certificates. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 23.05%, 15.80%, 10.10%, 8.10%, and 5.85% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. This securitization is a portfolio of primarily first-lien fixed- and adjustable-rate nonprime and expanded prime residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 1,356 loans with a total principal balance of $530,343,036 as of the Cut-Off Date (June 1, 2020). Angel Oak Mortgage Solutions LLC (79.4%), Angel Oak Home Loans LLC (AOHL; 8.4%), and Angel Oak Prime Bridge, LLC (0.04%) (collectively, Angel Oak) originated approximately 87.9% of the pool while third-party originators (TPO) contributed the remaining 12.1% of the pool. Angel Oak originated the first-lien mortgages primarily under the following nine programs: Bank Statement, Platinum, Portfolio Select, Investor Cash Flow, Non-Prime General, Non-Prime General, Non-Prime Recent Housing, Non-Prime Foreign National, Non-Prime Investment Property, and Asset Qualifier. For more information regarding these programs, see the related presale report. In addition, second-lien mortgage loans make up 1.8% of the pool. The TPO originated all but four of the second-lien loans. Angel Oak originated the remaining four loans under the guidelines established by Fannie Mae and overlaid by Angel Oak. Select Portfolio Servicing, Inc. (SPS) is the Servicer for all loans. AOHL will act as Servicing Administrator and Wells Fargo Bank, N.A. (rated AA with a Negative trend by DBRS Morningstar) will act as the Master Servicer. U.S. Bank National Association (rated AA (high) with a Negative trend by DBRS Morningstar) will serve as Trustee, Paying Agent, and Custodian. Although the applicable mortgage loans were originated to satisfy the Consumer Financial Protection Bureau (CFPB) Ability-to-Repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government, or private-label nonagency prime products for various reasons. In accordance with the CFPB Qualified Mortgage (QM)/ATR rules, 1.7% of the loans are designated as QM Safe Harbor, 0.8% are designated as QM Rebuttable Presumption, and 80.7% are designated as non-QM. Approximately 16.8% of the loans are made to investors for business purposes and are thus not subject to the QM/ATR rules. The Servicer will generally fund advances of delinquent principal and interest (P&I) on any mortgage until such loan becomes 180 days delinquent. The Servicer is also obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing of properties. The Seller will have the option, but not the obligation, to repurchase any nonliquidated mortgage loan that is 90 or more days delinquent under the Mortgage Bankers Association method at the Repurchase Price, provided that such repurchases in aggregate do not exceed 10% of the total principal balance as of the Cut-Off Date. On or after the three-year anniversary of the Closing Date, Angel Oak Mortgage Trust I, LLC (the Depositor) has the option to purchase all outstanding certificates (Optional Redemption) at a price equal to the outstanding class balance plus accrued and unpaid interest, including any cap carryover amounts and any outstanding Pre-Closing Deferred Amounts. After such purchase, the Depositor then has the option to complete a qualified liquidation, which requires a complete liquidation of assets within the Trust and the distribution of proceeds to the appropriate holders of regular or residual interests. 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 Class A-1 and A-2 Certificates sequentially (IIPP). For more subordinate Certificates, principal proceeds can be used to cover interest shortfalls as the more senior Certificates are paid in full. Furthermore, excess spread can be used to cover realized losses and prior period bond writedown amounts first before being allocated to unpaid cap carryover amounts to Class A-1 down to Class M-1. CORONAVIRUS DISEASE (COVID-19) IMPACT The coronavirus pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to rise in the coming months for many residential mortgage-backed security (RMBS) asset classes, some meaningfully. The non-QM sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans that may fall outside of the CFPB's ATR rules, which became effective on January 10, 2014. Non-QM loans encompass the entire credit spectrum. They range from high-FICO, high-income borrowers who opt for interest-only or higher debt-to-income ratio mortgages, to near-prime debtors who have had certain derogatory pay histories but were cured more than two years ago, to nonprime borrowers whose credit events were only recently cleared, among others. In addition, some originators offer alternative documentation or bank statement underwriting to self-employed borrowers in lieu of verifying income with Form W-2, Wage and Tax Statements or tax returns. Finally, foreign nationals and real estate investor programs, while not necessarily non-QM in nature, are often included in non-QM pools. As a result of the coronavirus, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under its moderate scenario, (see "Global Macroeconomic Scenarios: June Update," published on June 1, 2020), for the non-QM asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecasted unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the non-QM asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes that loans originated to (1) borrowers with recent credit events, (2) self-employed borrowers, or (3) higher loan-to-value (LTV) ratio borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with prior credit events have exhibited difficulties in fulfilling payment obligations in the past and may revert to spotty payment patterns in the near term. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers with lower equity in their properties generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy. In addition, for this transaction, as permitted by the Coronavirus Aid, Relief, and Economic Security Act, signed into law on March 27, 2020, 18.2% of the borrowers are on forbearance plans because the borrowers reported financial hardship related to coronavirus. These forbearance plans allow temporary payment holidays, followed by repayment once the forbearance period ends. SPS, in collaboration with Angel Oak, is generally offering borrowers a three-month payment forbearance plan. Beginning in month four, the borrower can repay all of the missed mortgage payments at once or opt to go on a repayment plan to catch up on missed payments for a maximum generally of six months. During the repayment period, the borrower needs to make regular payments and additional amounts to catch up on the missed payments. For Angel Oak's approach to forbearance loans, SPS would attempt to contact the borrowers before the expiration of the forbearance period and evaluate the borrowers' capacity to repay the missed amounts. As a result, SPS, in collaboration with Angel Oak, may offer a repayment plan or other forms of payment relief, such as deferrals of the unpaid P&I amounts or a loan modification, in addition to pursuing other loss mitigation options. For this deal, DBRS Morningstar applied additional assumptions to evaluate the impact of potential cash flow disruptions on the rated tranches, stemming from (1) lower P&I collections and (2) limited servicing advances on delinquent P&I. These assumptions include: (1) Increasing delinquencies for the AAA (sf) and AA (sf) rating levels for the first 12 months, (2) Increasing delinquencies for the A (sf) and below rating levels for the first nine months, (3) Applying no voluntary prepayments for the AAA (sf) and AA (sf) rating levels for the first 12 months, (4) Delaying the receipt of liquidation proceeds for the AAA (sf) and AA (sf) rating levels for the first 12 months. The ratings reflect transactional strengths that include the following: -- Improved underwriting standards; -- Robust loan attributes and pool composition; -- Satisfactory third-party due diligence review; -- Faster prepayments across non-QM; -- Compliance with ATR rules; and -- A strong servicer. The transaction also includes the following challenges: -- Borrowers on forbearance plans; -- Representations and warranties framework and provider; -- Nonprime, QM Rebuttable Presumption, or non-QM loans; and -- Servicer advances of delinquent P&I. Notes: All figures are in U.S. dollars unless otherwise noted. ANGEL OAK 2020-3: Fitch Gives Bsf Rating on Class B-2 Certs ----------------------------------------------------------- Fitch Ratings has assigned ratings to the residential mortgage-backed certificates issued by Angel Oak Mortgage Trust 2020-3. AOMT 2020-3 - Class A-1; LT AAAsf New Rating - Class A-2; LT AAsf New Rating - Class A-3; LT Asf New Rating - Class A-IO-S; LT NRsf New Rating - Class B-1; LT BBsf New Rating - Class B-2; LT Bsf New Rating - Class B-3; LT NRsf New Rating - Class M-1; LT BBB-sf New Rating - Class XS; LT NRsf New Rating TRANSACTION SUMMARY Fitch Ratings has assigned ratings to the residential mortgage-backed certiﬁcates to be issued by Angel Oak Mortgage Trust 2020-3, Mortgage-Backed Certiﬁcates, Series 2020-3, as indicated. The certiﬁcates are supported by 1,356 loans with a balance of $530.34 million as of the cut-off date. This will be the ninth Fitch-rated transaction consisting of loans majority originated by several Angel Oak-afﬁliated entities. The certiﬁcates are secured mainly by nonqualiﬁed mortgages as deﬁned by the Ability to Repay rule. Of the loans, 87.9% were originated by several Angel Oak entities, which include Angel Oak Mortgage Solutions LLC (79.4%), Angel Oak Home Loans LLC (8.4%) and Angel Oak Prime Bridge LLC (0.04%). The remaining 12.1% of the loans were originated third-party originators. Of the pool, 80.7% is made up of loans designated as Non-QM, 1.7% as Safe-Harbor QM, 0.8% as a higher priced QM and the remaining 16.8% is not subject to ATR. KEY RATING DRIVERS Revised GDP Due to the Coronavirus: The coronavirus and the resulting containment efforts resulted in revisions to Fitch's GDP estimates for 2020. Fitch's baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from the coronavirus, an Economic Risk Factor ﬂoor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' and below. Liquidity Stress for Payment Forbearance (Negative): The outbreak of the coronavirus and widespread containment efforts in the U.S. will result in increased unemployment and cash ﬂow disruptions. To account for the cash ﬂow disruptions, Fitch assumed deferred payments on a minimum of 40% of the pool for the ﬁrst six months of the transaction at all rating categories, with a reversion to its standard delinquency and liquidation timing curve by month 10. This assumption is based on observations of legacy Alt-A delinquencies and past due payments following Hurricane Maria in Puerto Rico. The cash ﬂows on the certiﬁcates will not be disrupted for the ﬁrst six months due to principal and interest advancing on delinquent loans by the servicer. However, after month six, the lowest ranked classes may be vulnerable to temporary interest shortfalls to the extent there is not enough funds available once the more senior bonds are paid. Stop Advance Structure (Mixed): The transaction has a stop advance feature where the servicer will advance delinquent P&I up to 180 days. While the limited advancing of delinquent P&I beneﬁts the pool's projected loss severity, it reduces liquidity. To account for the reduced liquidity of a limited advancing structure, principal collections are available to pay timely interest to the 'AAAsf', 'AAsf' and 'Asf' rated bonds. Fitch expects 'AAAsf' and 'AAsf' rated bonds to receive timely payments of interest and all other bonds to receive ultimate interest. Additionally, as of the closing date, the deal beneﬁts from approximately 292bps of excess spread, which will be available to cover shortfalls prior to any writedowns. The servicer Select Portfolio Servicing will provide P&I advancing on delinquent loans, even the loans on a coronavirus forbearance plan. If SPS is not able to advance, the master servicer (Wells Fargo Bank, N.A.) will advance P&I on the certiﬁcates. Payment Forbearance (Mixed): Of the borrowers in the pool, 20.8% (239 loans) are on a coronavirus relief plan. Speciﬁcally, 18.2% are on a coronavirus forbearance plan and the remaining 2.6% are solely having their payment deferred. Approximately 7% of the borrowers on a coronavirus forbearance relief plan have been making their payments and are contractually current, while the remaining borrowers (approximately 11%) have not been making their payments and are delinquent. Fitch considered the borrowers who are on coronavirus relief plan that are cash ﬂowing as current, while the borrowers who are not cash ﬂowing were treated as delinquent. Angel Oak is offering borrowers a three-month payment forbearance plan. Beginning in month four, the borrower can opt to reinstate (i.e. repay the three missed mortgage payments in a lump sum) or repay the missed amounts with a repayment plan. If reinstatement or a repayment plan is not affordable, the missed payments will be added to the end of the loan term due at payoff or maturity as a deferred principal. If the borrower does not become current under a repayment plan or is not able to make payments after a deferral plan was granted, other loss mitigation options will be pursued. The servicer will continue to advance during the forbearance period. Recoveries of advances will be repaid either from reinstated or repaid amounts from loans where borrowers are on a repayment plan. For loans with deferrals of missed payments, the servicer can recover advances from the principal portion of collections, which may result in a mismatch between the loan balance and certiﬁcate balance. While this may increase realized losses, the 292bps of excess spread as of the closing date should be available to absorb these amounts and reduce the potential for writedowns. Expanded Prime Credit Quality (Mixed): The collateral consists of 15-year, 20-year, 25-year, 30-year and 40-year mainly ﬁxed-rate loans (2.0% of the loans are adjustable rate); 9.3% of the loans are interest-only loans and the remaining 90.7% are fully amortizing loans. The pool is seasoned approximately seven months in aggregate, as determined by Fitch. The borrowers in this pool have strong credit proﬁles, with a 721 weighted-average FICO and moderate leverage (80.3% loan-to-value ratio). The pool contains 83 loans over $1 million, with the largest being $3.0 million. Self-employed borrowers make up 67.8% of the pool, 22.7% of the pool are salaried employees, and 9.6% of the pool comprises investor cash ﬂow loans. Fitch considered 8.2% of borrowers as having a prior credit event in the past seven years, and 0.5% of the pool was underwritten to nonpermanent residents. The pool characteristics resemble recent nonprime collateral, and therefore, the pool was analyzed using Fitch's nonprime model. Bank Statement Loans Included (Negative): Approximately 56% (618 loans) were made to self-employed borrowers underwritten to a bank statement program (25% to a 24-month bank statement program and 31% to a 12-month bank statement program) for verifying income in accordance with either AOHL's or AOMS's guidelines, which is not consistent with Appendix Q standards or Fitch's view of a full documentation program. To reﬂect the additional risk, Fitch increases the probability of default by 1.5x on the bank statement loans. High Investor Property Concentration (Negative): Of the pool, 16.8% is made up of investment properties --7.2% of loans were underwritten using the borrower's credit proﬁle, while the remaining 9.6% were originated through the originators' investor cash ﬂow program that targets real estate investors qualiﬁed on a debt service coverage ratio basis. The borrowers of the non-DSCR investor properties in the pool have strong credit proﬁles, with a WA FICO of 719 (as calculated by Fitch) and an original combined loan-to-value ratio of 75.4%. DSCR loans have a WA FICO of 743 (as calculated by Fitch) and an original CLTV of 64.5%. Fitch increased the PD by approximately 2.0x for the cash ﬂow ratio loans (relative to a traditional income documentation investor loan) to account for the increased risk. Geographic Concentration (Negative): Approximately 36% of the pool is concentrated in California, with relatively low MSA concentration. The largest MSA concentration is in the Los Angeles MSA (19.0%), followed by the Miami MSA (9.7%) and the Atlanta MSA (4.2%). The top three MSAs account for 32.9% of the pool. As a result, there was a 1bp increase to the 'AAA' expected loss to account for geographic concentration. Modiﬁed Sequential Payment Structure (Neutral): The structure distributes collected principal pro rata among the class A certiﬁcates while shutting out the subordinate bonds from principal until all three classes have been reduced to zero. To the extent that either the cumulative loss trigger event or the delinquency trigger event occurs in a given period, principal will be distributed sequentially to the class A-1, A-2 and A-3 bonds until they are reduced to zero. Low Operational Risk (Positive): Operational risk is well controlled for in this transaction. Angel Oak employs robust sourcing and underwriting processes and is assessed by Fitch as an 'Average' originator. Primary and master servicing functions will be performed by SPS and Wells Fargo, rated 'RPS1-'/Negative and 'RMS1-'/Negative, respectively. Fitch's Long-Term Issuer Default Rating for SPS's parent, Credit Suisse Inc., is 'A'/Stable as of May 29, 2020. The sponsor's retention of at least 5% of the bonds helps ensure an alignment of interest between the issuer and investors. R&W Framework (Negative): AOHL will be providing loan-level representations and warranties to the loans in the trust. If the entity is no longer an ongoing business concern, it will assign to the trust its rights under the mortgage loan purchase agreements with the originators, which include repurchase remedies for R&W breaches. While the loan-level reps for this transaction are substantially consistent with a Tier I framework, the lack of an automatic review for loans other than those with ATR realized loss and the nature of the prescriptive breach tests, which limit the breach reviewers' ability to identify or respond to issues not fully anticipated at closing, resulted in a Tier 2 framework. Fitch increased its loss expectations (94bps at the 'AAAsf' rating category) to mitigate the limitations of the framework and the non-investment-grade counterparty risk of the provider. The number of unnecessary R&W breach reviews due to a loan going delinquent due to coronavirus forbearance should be limited since the R&W review trigger is based on the loan having a realized loss and an ATR violation. Due Diligence Review Results (Positive): Third-party due diligence was performed on 100% of loans in the transaction. The loans were reviewed by SitusAMC and Clayton, both of which are assessed by Fitch as an 'Acceptable - Tier 1' third-party review firm, as well as Digital Risk, assessed as 'Acceptable - Tier 2'. The results of the review confirm strong origination practices with only a few material exceptions. Exceptions on loans with 'B' or 'C' grades either had strong mitigating factors or were mostly accounted for in Fitch's loan loss model. Fitch applied a credit for the high percentage of loan level due diligence, which reduced the 'AAAsf' loss expectation by 42bps. RATING SENSITIVITIES Fitch incorporates a sensitivity analysis to demonstrate how the ratings would react to steeper market value declines 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 that may be considered in the surveillance of the transaction. Sensitivity analyses were conducted at the state and national levels to assess the effect of higher MVDs for the subject pool as well as lower MVDs, illustrated by a gain in home prices. Factors that could, individually or collectively, lead to negative rating action/downgrade: This defined negative rating 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 'AAA'. The analysis indicates that there is some potential rating migration with higher MVDs for all rated classes, compared with the model projection. Factors that could, individually or collectively, lead to positive rating action/upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or in other words positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10.0%. Excluding the senior classes, which are already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modeling process uses the modification of these variables to reflect asset performance in up and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. For enhanced disclosure of on Fitch's stresses and sensitivities, please refer to the transaction's presale report. Fitch also added a Coronavirus Sensitivity Analysis that contemplates a more severe and prolonged economic stress caused by a re-emergence of infections in the major economies, before a slow recovery begins in 2Q21. Under this severe scenario, Fitch expects the ratings to be affected by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term impact arising from coronavirus disruptions on these economic inputs will likely affect both investment- and speculative-grade ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Third-party loan-level results were reviewed by Fitch for this transaction. Where applicable, the due diligence firms, SitusAMC, Clayton and Digital Risk examined 100% of the loan files in three areas: compliance review, credit review and valuation review. AMC and Clayton are assessed by Fitch as a Tier 1 TPR firm and Digital Risk is assessed by Fitch as a Tier 2 firm. The results of the reviews indicated an overall loan quality in line with other prior transactions from the issuer and other Fitch-rated nonprime transaction Approximately 34%, or 461 loans, were assigned a final credit grade of 'B'. The credit exceptions graded 'B' were approved by the originator or waived by Angel Oak due to the presence of compensating factors. Roughly 28% of the loans were graded 'B' for compliance exceptions. The majority of these exceptions are either TILA-RESPA Integrated Disclosure (TRID)-related issues that were corrected with subsequent documentation, no adjustments were applied for the 'B' graded loans. Fitch adjusted two loans that received a final grade of 'C'. One of the loans received a compliance grade of 'C' due to a material exception to the TRID rule, which is a standard $15,500 to the LS to account for the increased risk of statutory damages (this increase to the LS was immaterial and did not affect the expected losses). The remaining loan receive a property valuation grade of 'C' due to the secondary desk review having a negative variance greater than 10% from the original appraised value. The lower property value was substituted into the LTV as part of the loan loss analysis. Form "ABS Due Diligence 15E" was reviewed and used as a part of the rating for this transaction. DATA ADEQUACY Fitch relied on an independent third-party due diligence review performed on 100% of the pool. The third-party due diligence was generally consistent with Fitch's "U.S. RMBS Rating Criteria." AMC, Clatyon and Digital Risk were engaged to perform the review. Loans reviewed under this engagement were given compliance, credit and valuation grades, and assigned initial grades for each subcategory. Minimal exceptions and waivers were noted in the due diligence reports. Refer to the Third-Party Due Diligence section for more detail. Fitch also utilized data files that were made available by the issuer on its SEC Rule 17g-5 designated website. Fitch received loan-level information based on the American Securitization Forum's data layout format, and the data are considered to be comprehensive. The ASF data tape layout was established with input from various industry participants, including rating agencies, issuers, originators, investors and others to produce an industry standard for the pool-level data in support of the U.S. RMBS securitization market. The data contained in the ASF layout data tape were reviewed by the due diligence companies, and no material discrepancies were noted. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). ARROYO MORTGAGE 2020-1: S&P Rates Class B-2 Notes 'B+(sf)' ---------------------------------------------------------- S&P Global Ratings assigned its ratings to Arroyo Mortgage Trust 2020-1's mortgage-backed notes. The note issuance is an RMBS securitization backed by first-lien, fixed- and adjustable-rate, fully amortizing residential mortgage loans to both prime and nonprime borrowers (some with interest-only periods) secured by single-family residential properties, planned-unit developments, condominiums, and two- to four-family residential properties. The majority of the loans are non-qualified mortgage loans. After S&P assigned preliminary ratings on June 23, 2020, classes A-1A and A-1B were introduced to replace the existing class A-1. The new classes A-1A and A-1B receive interest pro rata from the interest distribution waterfall. In addition, a cumulative loss trigger was introduced so that in the principal distribution waterfall, principal is paid pro rata between classes A-1A and A-1B if the trigger test passes, and otherwise paid sequentially if the trigger test fails. The interest and principal distributions for the other classes remain unchanged. The final 'BBB+ (sf)', 'BB+ (sf)', and 'B+ (sf)' ratings assigned to classes M-1, B-1, and B-2, respectively, are higher than the preliminary ratings S&P assigned. This is due to the additional credit enhancement resulting from excess spread, as a result of lower final coupons. The ratings reflect S&P's view of: -- The pool's collateral composition; -- The transaction's credit enhancement; -- The transaction's associated structural mechanics; -- The transaction's representation and warranty framework; -- The geographic concentration; -- The mortgage aggregator, Western Asset Management Co. LLC as investment manager for Western Asset Mortgage Capital Corp; and -- The impact that the economic stress brought on by the COVID-19 virus is likely to have on the performance of the mortgage borrowers in the pool and liquidity available in the transaction. S&P acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly," S&P said. RATINGS ASSIGNED Arroyo Mortgage Trust 2020-1 Class Rating(i) Amount ($) A-1A AAA (sf) 266,790,000 A-1B AAA (sf) 31,658,000 A-2 AA (sf) 13,518,000 A-3 A (sf) 17,963,000 M-1 BBB+ (sf) 11,739,000 B-1 BB+ (sf) 5,870,000 B-2 B+ (sf) 4,090,000 B-3 NR 4,091,648 A-IO-S NR Notional(ii) XS NR Notional(ii) Owner trust certificate NR N/A (i)The ratings assigned to the classes address the ultimate payment of interest and principal. (ii) Notional amount will equal the aggregate stated principal balance of the mortgage loans as of the first day of the related due period. NR--Not rated. N/A--Not applicable. BABSON CLO 2014-I: Moodys' Lowers Rating on Class E Notes to Caa3 ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Babson CLO Ltd. 2014-I: US$29,125,000 Class D Senior Secured Deferrable Floating Rate Notes Due July 21, 2025, Downgraded to B1 (sf); previously on April 17 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$5,525,000 Class E Senior Secured Deferrable Floating Rate Notes Due July 21, 2025, Downgraded to Caa3 (sf); previously on April 17 2020 B3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D and Class E notes. The CLO, issued in June 2014 and partially refinanced in March 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 downgrades on the Class D, and E notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has eroded, exposure to Caa-rated assets has increased significantly, and expected losses on certain notes have increased materially. Based on Moody's calculation, the weighted average rating factor is 3504 as of June 2020, or 12.7% worse compared to 3109 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2954 reported in the June 2020 trustee report [2] by 550 points. Moody's noted that Moody's noted that approximately 36.0% of the CLO's par was from obligors assigned a negative outlook and 2.5% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (after any adjustments for negative outlook and watchlist for possible downgrade) is approximately 19% as of June 2020. Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class B-R, Class C, Class D and Class E notes as of June 2020 at 163.34%, 127.98%, 107.46%, and 104.28%, respectively. Finally, Moody's also considered manager's investment decisions and trading strategies. 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 $194.3 million, defaulted par of $5.3 million, a weighted average default probability of 23.45% (implying a WARF of 3504), a weighted average recovery rate upon default of 48.6%, a diversity score of 45 and a weighted average spread of 3.32%. Moody's also analyzed the CLO by incorporating an approximately $4.2 million par haircut in calculating the OC and interest diversion test ratios. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; additional OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. 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 rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of corporate assets from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. BANK 2020-BNK27: Fitch Gives B+sf Rating on Class G Certs --------------------------------------------------------- Fitch Ratings has assigned the following ratings and Rating Outlooks to BANK 2020-BNK27 commercial mortgage pass-through certificates, series 2020-BNK27: -- $2,528,000 class A-1 'AAAsf'; Outlook Stable; -- $4,339,000 class A-SB 'AAAsf'; Outlook Stable; -- $130,000,000d 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; -- $274,008,000d class A-5 'AAAsf'; Outlook Stable; -- $0d class A-5-1 'AAAsf'; Outlook Stable; -- $0d class A-5-2 'AAAsf'; Outlook Stable; -- $0d class A-5-X1 'AAAsf'; Outlook Stable; -- $0d class A-5-X2 'AAAsf'; Outlook Stable; -- $410,875,000a class X-A 'AAAsf'; Outlook Stable; -- $93,181,000a class X-B 'AA-sf'; Outlook Stable; -- $68,968,000d 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; -- $24,213,000 class B 'AA-sf'; Outlook Stable; -- $21,277,000 class C 'A-sf'; Outlook Stable; -- $16,875,000b class D 'BBBsf'; Outlook Stable. -- $16,875,000ab class X-D 'BBBsf'; Outlook Stable; -- $5,870,000b class E 'BBB-sf'; Outlook Stable; -- $10,272,000b class F 'BB+sf'; Outlook Stable; -- $5,869,000b class G 'B+sf'; Outlook Stable; The following classes are not rated by Fitch: -- $22,745,784 class H; -- $30,892,883c 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) Exchangeable Certificates. The class A-4, class A-5 and class A-S are 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-4 may be surrendered (or received) for the received (or surrendered) classes A-4-1, A-4-2, A-4-X1 and A-4-X2. The class A-5 may be surrendered (or received) for the received (or surrendered) classes A-5-1, A-5-2, A-5-X1 and A-5-X2. The class A-S may be surrendered (or received) for the received (or surrendered) classes A-S-1, A-S-2, A-S-X1 and A-S-X2. The ratings of the exchangeable classes would reference the ratings on the associated referenced or original classes. Fitch published its expected ratings on June 15, 2020, and the following changes have since occurred: The balances for classes A-4 and A-5 were finalized. At the time the expected ratings were published, the initial certificate balances of classes A-4 and A-5 were expected to be approximately $404,008,000 in aggregate, subject to a 5% variance. The final class balances for classes A-4 and A-5 are $130,000,000 and $274,008,000, respectively. Additionally, class X-B no longer references class C. Fitch's rating on class X-B was updated to 'AA-', reflecting the rating of class B, the lowest class referenced tranche whose payable interest has an effect on the interest-only payments. The classes above reflect the final ratings and deal structure. BANK 2020-BNK27 - Class A-1; LT AAAsf New Rating - Class A-4; LT AAAsf New Rating - Class A-4-1; LT AAAsf New Rating - Class A-4-2; LT AAAsf New Rating - Class A-4-X1; LT AAAsf New Rating - Class A-4-X2; LT AAAsf New Rating - Class A-5; LT AAAsf New Rating - Class A-5-1; LT AAAsf New Rating - Class A-5-2; LT AAAsf New Rating - Class A-5-X1; LT AAAsf New Rating - Class A-5-X2; LT AAAsf New Rating - Class A-S; LT AAAsf New Rating - Class A-S-1; LT AAAsf New Rating - Class A-S-2; LT AAAsf New Rating - Class A-S-X1; LT AAAsf New Rating - Class A-S-X2; LT AAAsf New Rating - Class A-SB; LT AAAsf New Rating - Class B; LT AA-sf New Rating - Class C; LT A-sf New Rating - Class D; LT BBBsf New Rating - Class E; LT BBB-sf New Rating - Class F; LT BB+sf New Rating - Class G; LT B+sf New Rating - Class H; LT NRsf New Rating - RR Interest; LT NRsf New Rating - Class X-A; LT AAAsf New Rating - Class X-B; LT AA-sf New Rating - Class X-D; LT BBBsf New Rating TRANSACTION SUMMARY The certificates represent the beneficial ownership interest in the trust, primary assets of which are 36 loans secured by 46 commercial properties having an aggregate principal balance of $617,857,668 as of the cut-off date. The loans were contributed to the trust by Wells Fargo Bank, National Association, Morgan Stanley Mortgage Capital Holdings LLC and Bank of America, National Association. Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 63.4% of the properties by balance, cash flow analysis of 87.8% and asset summary reviews on 100.0% of the pool. Coronavirus Impact: The ongoing containment effort related to the coronavirus pandemic may have an adverse impact on near-term revenue, like bad debt expense and rent relief, and operating expenses, like sanitation costs, for some properties in the pool. Delinquencies may occur in the coming months as forbearance programs are put in place, although the ultimate impact on credit losses will depend heavily on the severity and duration of the negative economic impact due to the coronavirus pandemic, and to what degree fiscal interventions by the U.S. government can mitigate the impact on consumers. Per the offering documents, all of the loans are current and not subject to any forbearance or modification requests. KEY RATING DRIVERS Lower Fitch Leverage than Recent Transactions: The pool's Fitch debt service coverage ratio of 1.45x is better than the YTD 2020 and 2019 averages of 1.31x and 1.26x, respectively, for other Fitch-rated multiborrower transactions. The pool's loan-to-value of 90.0% is below the YTD 2020 and 2019 averages of 99.0% and 103.0% respectively. Excluding the credit assessed collateral, the pool has a Fitch DSCR and LTV of 1.46x and 105.2%, respectively. Investment-Grade Credit Opinion Loans: Five loans, representing 38.0% of the pool, received investment-grade credit opinions. This is significantly above the YTD 2020 and 2019 averages of 27.8% and 14.2%, respectively. Bellagio Hotel & Casino (9.9% of pool), 55 Hudson Yards (8.7% of pool) and 1633 Broadway (6.5% of pool) each received a standalone credit opinion of 'BBB-sf'. With 8.1% of the pool, 525 Market received a standalone credit opinion of 'A-sf', and 560 Mission Street (4.9% of pool) received a standalone credit opinion of 'AA-sf'. Minimal Amortization: Twenty-nine loans (92.4% of pool) are full-term interest-only loans, and five loans (5.9% of pool) are partial IO. Based on the scheduled balance at maturity, the pool will pay down by only 1.2%, which is well below the YTD 2020 and 2019 averages of 4.3% and 5.9%, respectively. Concentrated Pool: The top 10 loans constitute 65.9% of the pool, which is greater than the YTD 2020 average of 52.7% and the 2019 average of 51.0%. Additionally, the loan concentration index of 531 is greater than the YTD 2020 and 2019 averages of 393 and 379, respectively. RATING SENSITIVITIES This section provides insight into the sensitivity of ratings when one assumption is modified, while holding others equal. For U.S. CMBS, the sensitivity reflects the impact of changes to property net cash flow in up- and down-environments. The result should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: Declining cash flow decreases property value and capacity to meet its debt service obligations. The table below indicates the model-implied rating sensitivity to changes in one variable, Fitch NCF: Original rating: AAAsf / AA-sf / A-sf / BBBsf/ BBB-sf / BB+sf / B+sf -- 10% NCF decline: AA-sf / A-sf / BBBsf / BBB-sf/ BB+sf / B+sf / B+sf -- 20% NCF decline: Asf / BBB+sf / BBB-sf / BB-sf/ Bsf / CCCsf / CCCsf -- 30% NCF decline: BBB+sf / BBB-sf / BB-sf / CCCsf/ CCCsf / CCCsf / CCCsf Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Similarly, improvement in cash flow increases property value and capacity to meet its debt service obligations. The table below indicates the model-implied rating sensitivity to changes to the same one variable, Fitch NCF: Original Rating: AAAsf / AA-sf / A-sf / BBBsf/ BBB-sf / BB+sf / B+sf -- 20% NCF Increase: AAAsf / AAAsf / AAsf / Asf / A-sf / BBB+sf / BBB-sf BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Fitch was provided with Form ABS Due Diligence-15E as prepared by Deloitte & Touche LLP. The third-party due diligence described in Form 15E focused on a comparison and re-computation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on the analysis or conclusions. A copy of the ABS Due Diligence Form 15-E received by Fitch in connection with this transaction may be obtained via the link at the bottom of the related Rating Action Commentary. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). BBCMS MORTGAGE 2020-C7: DBRS Finalizes B Rating on Class F Certs ---------------------------------------------------------------- DBRS Morningstar Finalizes Provisional Ratings on BBCMS Mortgage Trust 2020-C7 CMBS June 25, 2020 DBRS, Inc. finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2020-C7 issued by BBCMS Mortgage Trust 2020-C7 (BBCMS 2020-C7): -- Class A-1 at AAA (sf) -- Class A-2 at AAA (sf) -- Class A-3 at AAA (sf) -- Class A-4 at AAA (sf) -- Class A-5 at AAA (sf) -- Class A-SB at AAA (sf) -- Class X-A at AAA (sf) -- Class X-B at AAA (sf) -- Class A-S at AAA (sf) -- Class B at AA (high) (sf) -- Class C at A (high) (sf) -- Class D at BBB (low) (sf) -- Class X-E at BB (high) (sf) -- Class E at BB (sf) -- Class X-F at B (high) (sf) -- Class F at B (sf) All trends are Stable. Classes D, X-E, E, X-F, and F will be privately placed. The transaction consists of 49 fixed-rates loans secured by 153 commercial and multifamily properties. The transaction is of a sequential-pay pass-through structure. Six loans, representing 33.5% of the pool, are shadow-rated investment grade by DBRS Morningstar. The conduit pool was analyzed to determine the final ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Morningstar Net Cash Flow and their respective actual constants, the initial DBRS Morningstar Weighted-Average (WA) Debt Service Coverage Ratio (DSCR) of the pool was 2.23 times (x). Five loans, accounting for 9.8% of the pool balance, had a DBRS Morningstar DSCR below 1.32x, a threshold indicative of a higher likelihood of midterm default. The pool additionally includes 15 loans, comprising a combined 18.3% of the pool balance, with a DBRS Morningstar Loan-to-Value Ratio (LTV) in excess of 67.1%, a threshold generally indicative of above-average default frequency. The DBRS Morningstar WA LTV of the pool at issuance was 54.5%, and the pool is scheduled to amortize down to a DBRS Morningstar WA LTV of 50.7% at maturity. These credit metrics are based on A note balances. Eleven loans, representing 34.4% of the pool, are in areas identified as DBRS Morningstar Market Ranks 7 or 8, which are generally characterized as highly dense urbanized areas that benefit from increased liquidity driven by consistently strong investor demand, even during times of economic stress. DBRS Morningstar Market Ranks 7 or 8 benefit from lower default frequencies than less dense suburban, tertiary, and rural markets. Urban markets represented in the deal include New York, San Francisco, Seattle, and Los Angeles. Term default risk is low, as indicated by a strong DBRS Morningstar DSCR of 2.23x. Even with the exclusion of the shadow-rated loans, representing 33.5% of the pool, the deal exhibits a very favorable DBRS Morningstar DSCR of 1.73x. While the pool demonstrates favorable loan metrics with DBRS Morningstar WA Issuance and Balloon LTVs of 54.5% and 50.7%, respectively, it also exhibits heavy leverage barbelling. There are six loans accounting for 33.5% of the pool with investment-grade shadow ratings and a WA LTV of 35.7%. The pool also has nine loans, comprising 13.3% of the pool balance, with an issuance LTV lower than 59.3%, a threshold historically indicative of relatively low-leverage financing. There are 15 loans, comprising 18.3% of the pool balance, with an issuance LTV higher than 67.1%, a threshold historically indicative of relatively high-leverage financing and generally associated with above-average default frequency. The WA expected loss of the pool's investment-grade component was approximately 0.1%, while the WA expected loss of the pool’s conduit component was substantially higher at more than 2.4%, further illustrating the barbelled nature of the transaction. The DBRS Morningstar WA expected loss exhibited by the loans that were identified as representing relatively high-leverage financing was 4.5%. This is considerably higher than the conduit component's WA expected loss of 2.4%, and the pool's credit enhancement reflects the higher leverage of this component of 15 loans with an issuance LTV in excess of 67.1%. Twenty-five loans, representing a combined 63.9% of the pool by allocated loan balance, are structured with full-term interest-only (IO) periods. An additional 12 loans, representing 22.6% of the pool, have partial IO periods ranging from 12 months to 60 months. Expected amortization for the pool is only 5.5%, which is less than recent conduit securitizations. Of the 25 loans structured with full-term IO periods, 10 loans, representing 31.5% of the pool by allocated loan balance, are located in areas with a DBRS Morningstar Market Rank of 6, 7, or 8. These markets benefit from increased liquidity even during times of economic stress. Six of the 25 identified loans, representing 33.5% of the total pool balance, are shadow-rated investment grade by DBRS Morningstar: Parkmerced, 525 Market Street, The Cove at Tiburon, Acuity Portfolio, F5 Tower, and 650 Madison Avenue. With regard to the Coronavirus Disease (COVID-19) pandemic, the magnitude and extent of performance stress posed to global structured finance transactions remains highly uncertain. This considers the fiscal and monetary policy measures and statutory law changes that have already been implemented or will be implemented to soften the impact of the crisis on global economies. Some regions, jurisdictions, and asset classes are, however, feeling more immediate effects. DBRS Morningstar continues to monitor the ongoing coronavirus pandemic and its impacts on both the commercial real estate sector and the global fixed income markets. Accordingly, DBRS Morningstar may apply additional short-term stresses to its rating analysis, for example by front-loading default expectations and/or assessing the liquidity position of a structured finance transaction with more stressful operational risk and/or cash flow timing considerations. Classes X-A, X-B, X-E, and X-F are 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. BUNKER HILL 2020-1: DBRS Assigns Prov. B Rating on Class B-2 Notes ------------------------------------------------------------------ DBRS, Inc. assigned provisional ratings to the following Mortgage-Backed Notes, Series 2020-1 (the Notes) to be issued by Bunker Hill Loan Depositary Trust 2020-1 (BHLD 2020-1): -- $135.2 million Class A-1 at AAA (sf) -- $9.3 million Class A-2 at AA (sf) -- $12.5 million Class A-3 at A (low) (sf) -- $10.5 million Class M-1 at BBB (sf) -- $7.2 million Class B-1 at BB (sf) -- $6.0 million Class B-2 at B (sf) Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. The AAA (sf) rating on the Class A-1 Notes reflects 28.25% of credit enhancement provided by subordinated notes. The AA (sf), A (low) (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 23.30%, 16.65%, 11.10%, 7.30%, and 4.10% of credit enhancement, respectively. This transaction is a securitization of a portfolio of fixed- and adjustable-rate prime and nonprime first-lien residential mortgages funded by the issuance of the Notes. The Notes are backed by 560 loans with a total principal balance of $188,494,662 as of the Cut-Off Date (June 1, 2020). Compared with BHLD 2019-3, the overall collateral characteristics of the pool backing BHLD 2020-1 is stronger and the transaction structure has been modified into a simple sequential structure, in contrast to the pro rata senior structure in the prior transaction. The Representations and Warranties (R&W) framework and enforcement mechanism of BHLD 2020-1 are similar to that of BHLD 2019-3. In accordance with U.S. credit risk retention requirements, Grand Avenue Acquisition Company, LLC (the Sponsor), either directly or through a Majority-Owned Affiliate, will retain an eligible horizontal residual interest consisting of the Class B-3 and Class XS Notes representing not less than 5% economic interest in the transaction, to satisfy the requirements under Section 15G of the Securities and Exchange Act of 1934 and the regulations promulgated thereunder. Such retention aligns sponsor and investor interest in the capital structure. The Sellers, shown in the Transaction Parties section below, are investment funds advised by Oaktree Capital Management, L.P. (Oaktree or the Aggregator) under an indemnification agreement between the funds and the Sponsor. Oaktree has invested over $4.0 billion of capital since 2008 as an aggregator of performing and nonperforming mortgage loans as well as an equity investor in Selene Finance LP, as residential mortgage servicer, and in Genesis Capital LLC, an originator of fix and flip loans. Since launching the non-Qualified Mortgage (QM) platform in 2018, Oaktree has acquired over $1.0 billion of residential mortgage loans and issued three non-QM residential mortgage-backed security (RMBS) deals in 2019. The Aggregator's platform includes several investment funds and separate accounts that make investments in the residential assets, including non-QM loans. The funds include real estate debt (inception in 2010; $3.2 billion in assets under management (AUM)), real estate income (inception in 2016; $1.2 billion in AUM), and real estate opportunities (inception in 1994; $5.2 billion in AUM). The Aggregator does not use its own underwriting guidelines and generally acquires loans from various approved mortgage originators based on an investment criterion that, among other factors, includes lower borrower loan-to-value (LTV) ratios and higher credit scores. Through bulk purchases, Oaktree acquired the mortgage loans from Metro City Bank (Metro City; 47.6%), A&D (33.8%), Citadel Servicing Corporation (Citadel or CSC; 18.1%), and other originators (0.5%). For more details, please refer to the Transaction Counterparties section. Citadel will service approximately 18.1% of the mortgage loans by balance directly or through subservicers. A&D will be the Servicer of record for approximately 33.8% of the loans and will use Specialized Loan Servicing LLC (SLS), a Delaware limited-liability company, as subservicer to service the loans. SLS will also service approximately 0.5% of the loans and Metro City will service the remaining 47.6%. DBRS Morningstar conducted an aggregator review of Oaktree, an originator and servicer review of CSC and Metro City, a servicer review of SLS, and an originator review of A&D, and deems them to be acceptable. Wells Fargo Bank, N.A. (rated AA with a Negative trend by DBRS Morningstar) will act as Master Servicer, Paying Agent, Certificate Registrar, Note Registrar, REMIC Administrator, and Custodian. The Bank of New York Mellon (rated AA (high) with a Stable trend by DBRS Morningstar) will serve as an Indenture Trustee. Grand Avenue Acquisition Company, LLC will serve as the R&W Provider for approximately 52.4% of the loans by balance. Metro City will serve as the R&W Provider for the remaining 47.6% of the loan balance. The repurchases made by the Sponsor are subject to the $25 million cap; however, the cap does not apply to the repurchases by Metro City. Although 55.0% of the mortgage loans by balance were originated to satisfy the Consumer Financial Protection Bureau (CFPB) Ability-to-Repay (ATR) 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, including but not limited to income documentation requirements, limited credit history, loan size and debt-to-income (DTI), a prior housing or credit event, or prior mortgage delinquency. Approximately 45.0% of the loans were originated under programs that are exempt from the ATR rules. The Servicers will fund advances of delinquent principal and interest (P&I) on any respective mortgage until such loan becomes 180 days delinquent, and they are obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing of properties. The loans originated by Citadel will not be subject to any P&I Advances, and the Master Servicer will have no obligation to make any P&I Advances for any such loans. However, all Servicers will be required to pay customary, reasonable, and/or necessary expenses (servicing advances) incurred in the performance of the servicing obligations, including the mortgagor's escrow payments (escrow advances). On or after the earlier of (1) the three-year anniversary of the Closing Date or (2) the date when the aggregate stated principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Depositor may, at the direction of the Class XS Noteholders, purchase all outstanding Notes (call the deal) at a price equal to the greater of the sum of (1) the outstanding class balance plus accrued and unpaid interest, including any cap carryover amounts; unreimbursed advances; any fees, expenses, and indemnification amounts of the transaction parties; and (2) the sum of balance of the mortgage loans plus accrued and unpaid interest thereon and the fair market value of each real estate owned property, less estimated liquidation expenses; unreimbursed advances and fees; expenses; and indemnification amounts of the transaction parties. The Depositor may also purchase all of the Notes from the Noteholders (call the deal) at a price equal to the aggregate outstanding Notes balance of all classes, accrued and unpaid interest thereon (including any cap carryover amounts and step-up interest payment amounts). Unlike the prior BHLD securitizations, which incorporate a pro rata feature among the senior tranches, this transaction employs a sequential-pay cash flow structure across the entire capital stack. Also, principal proceeds can be used to cover interest shortfalls on the A-1 and A-2 Notes before paying principal to the outstanding senior Notes sequentially. The Coronavirus Disease (COVID-19) pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to rise in the coming months for many RMBS asset classes, some meaningfully. The non-QM sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans that may fall outside of the CFPB's ATR rules, which became effective on January 10, 2014. Non-QM loans encompass the entire credit spectrum and range from high-FICO, high-income borrowers who opt for interest-only or higher DTI ratio mortgages, to near-prime debtors who have had certain derogatory pay histories but were cured more than two years ago, to nonprime borrowers whose credit events were only recently cleared, among others. In addition, some originators offer alternative documentation or bank statement underwriting to self-employed borrowers in lieu of verifying income with W-2s or tax returns. Finally, foreign nationals and real estate investor programs, while not necessarily non-QM in nature, are often included in non-QM pools. As a result of the coronavirus, DBRS Morningstar expects increased delinquencies and loans on forbearance plans as well as a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under the moderate scenario in its commentary, Global Macroeconomic Scenarios: June Update, published on June 1, 2020, for the non-QM asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what was previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecasted unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the non-QM asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes loans originated to (1) borrowers with recent credit events, (2) self-employed borrowers, or (3) higher LTV ratio borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with prior credit events have exhibited difficulties in fulfilling payment obligations in the past and may revert to spotty payment patterns in the near term. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy. In addition, for this transaction, as permitted by the Coronavirus Aid, Relief, and Economic Security Act, signed into law on March 27, 2020, 36 mortgage borrowers (7.5% of the aggregate pool balance, as of June 1, 2020) are on forbearance plans because of financial hardship related to coronavirus. The forbearance plan allows temporary payment holidays followed by repayment once the forbearance period ends. The Servicer, in collaboration with the Sponsor, is generally offering borrowers a three-month payment forbearance plan. Beginning in month four, the borrower can repay all of the missed mortgage payments at once or opt for other loss mitigation options. Prior to the end of the applicable forbearance period, the Servicer will contact each related borrower to identify the options available to address related forborne payment amounts. As a result, the Servicer, in conjunction with or at the direction of the Sponsor, may offer a repayment plan or other forms of payment relief, such as deferral of the unpaid P&I amounts or a loan modification, in addition to pursuing other loss mitigation options. For these loans, DBRS Morningstar applied additional assumptions to evaluate the impact of potential cash flow disruptions on the rated tranches, stemming from (1) lower P&I collections and (2) limited servicing advances on delinquent P&I. These assumptions include: (1) Increasing delinquencies on the AAA (sf) and AA (sf) rating levels for the first 12 months and on the A (sf) and below rating levels for the first nine months, (2) Assuming no voluntary prepayments for the first 12 months for AAA (sf) and AA (sf) rating levels, and (3) Delaying the receipt of liquidation proceeds during the first 12 months for the AAA (sf) and AA (sf) rating levels. Notes: All figures are in U.S. dollars unless otherwise noted. CES ENERGY: DBRS Confirms B(high) Issuer Rating ----------------------------------------------- DBRS Limited confirmed CES Energy Solutions Corp.'s Issuer Rating and Senior Unsecured Notes (the Senior Notes) rating at B (high). The Recovery Rating of the Senior Notes remains unchanged at RR4. All trends are Negative. DBRS Morningstar also removed the ratings from Under Review with Negative Implications, where they were placed on March 26, 2020. DBRS Morningstar placed the ratings Under Review with Negative Implications in response to the extreme price declines and heightened volatility in crude oil markets largely caused by the rapid spread of the Coronavirus Disease (COVID-19) and the concurrent crude oil-price war between OPEC (led by Saudi Arabia) and Russia. Subsequently, DBRS Morningstar revised its commodity price assumptions to factor in (1) the impact of the coronavirus pandemic on crude oil demand as lockdowns ease, (2) the significant buildup in global oil inventories, and (3) the impact of production cuts recently implemented by OPEC+. DBRS Morningstar also considered CES' measures to adjust to the weaker pricing environment. The rating confirmation reflects DBRS Morningstar's expectation that, despite the projected weakness in 2020 under the revised assumptions, the Company's key credit metrics will improve in 2021 and 2022 and remain supportive of the current ratings. DBRS Morningstar's approach is to rate through the cycle and give due weight to projected credit metrics when it anticipates a return to more normalized market conditions. DBRS Morningstar believes that CES is in a better position to withstand the current downturn than the previous 2016 downturn because the Company (1) improved its market position materially since the last downturn, especially in the U.S. Permian basin; (2) increased revenue contribution from the production and specialty chemical segment where demand is driven by existing production and is typically more stable and recurring than demand in the drilling fluid segment; and (3) rationalized its cost structure and has low maintenance capital expenditures (capex). These measures have allowed CES to generate a free cash flow (FCF; cash flow after capex and dividends) surplus over the last three years, despite service pricing remaining relatively flat since the last downturn. CES has also benefitted from the growth of horizontal drilling in North America, which has increased the intensity of chemical usage. Between 2014 and 2019, North American oil and natural gas production has increased by approximately 32% while the average land rig count has reduced by 53% over the same period. CES reduced its budgeted capex in 2020 to $30.0 million from $50.0 million; suspended common dividend payments; applied for the Canadian government's Canada Emergency Wage Subsidy program; and initiated cost-reduction measures that should provide additional cash savings. DBRS Morningstar expects these measures, along with solid results in Q1 2020, to allow the Company to remain FCF neutral in 2020. In addition, similar to the last downturn, DBRS Morningstar expects overall debt levels to decline as the Company monetizes working capital and materially reduces the draws on its credit facilities ($93.5 million in Q1-2020). Nevertheless, DBRS Morningstar expects key credit metrics to deteriorate in 2020 as reduced drilling activity, production shut-ins, and negative pricing pressure will likely result in significantly lower earnings and operating cash flow (OCF). DBRS Morningstar expects earnings, OCF, and FCF surplus to improve in 2021 and 2022 as drilling activity improves and production shut-ins reverse on the assumption of stronger commodity prices. While earnings and OCF are unlikely to reach 2019 levels, DBRS Morningstar expects overall debt levels to be materially lower because of minimal draws under the $170.0 million and USD 50.0 million revolving credit facilities (the Credit Facility). Consequently, DBRS Morningstar expects CES' key credit metrics to improve in 2021 and 2022 and its overall financial risk profile to remain supportive of the current rating. DBRS Morningstar notes the outlook for crude oil demand and pricing remains fluid. While demand for drilling and completion services should increase as commodity prices increase, the magnitude of improvement is uncertain. If the recovery in commodity prices and, consequently, activity levels fall short of DBRS Morningstar's base-case assumptions, the Company's overall financial risk profile may not support the current ratings. The Negative trends reflect this risk, which DBRS Morningstar considers to be elevated. DBRS Morningstar believes that the Company has sufficient liquidity to navigate the current downturn. The Senior Notes are also not repayable until October 2024. CES had drawn $93.5 million at the end of Q1 2020 under its Credit Facility maturing in September 2022. DBRS Morningstar expects the Credit Facility to remain largely unutilized over the next three years as the Company uses proceeds of an expected working capital release (due to expected lower activity levels) to pay down existing balances. Since senior debt for covenant calculations excludes the Senior Notes, CES has adequate headroom under the covenant senior debt-to-EBITDA not to exceed 2.50 times (x). The headroom under the covenant EBITDA-to-interest expense greater than 2.50x is relatively lower; however, at its option, CES can step down its minimum covenant threshold to 1.50x for three consecutive quarters. The Company can exercise its stepdown once prior to the Credit Facility's maturity date. DBRS Morningstar expects CES to remain in compliance with the applicable covenants on the Credit Facility under its base-case assumptions. DBRS Morningstar may change the trend to Stable if the demand/supply dynamics in the crude oil markets continue to improve, leading to greater confidence that activity levels and, consequently, the Company's key credit metrics improve in line with DBRS Morningstar's base-case assumptions. Conversely, DBRS Morningstar may take a negative rating action if activity levels and key credit metrics fall below DBRS Morningstar's expectations. Notes: All figures are in Canadian dollars unless otherwise noted. CFCRE COMMERCIAL 2011-C2: Moody's Cuts Class G Certs to B3 ---------------------------------------------------------- Moody's Investors Service has affirmed the ratings on six classes and downgraded the ratings on four classes in CFCRE Commercial Mortgage Trust 2011-C2, Commercial Mortgage Pass-Through Certificates Series 2011-C2, as follows: Cl. A-4, Affirmed Aaa (sf); previously on Jan 28, 2020 Affirmed Aaa (sf) Cl. A-J, Affirmed Aaa (sf); previously on Jan 28, 2020 Affirmed Aaa (sf) Cl. B, Affirmed Aaa (sf); previously on Jan 28, 2020 Affirmed Aaa (sf) Cl. C, Affirmed Aa2 (sf); previously on Jan 28, 2020 Upgraded to Aa2 (sf) Cl. D, Affirmed A2 (sf); previously on Jan 28, 2020 Affirmed A2 (sf) Cl. E, Downgraded to Ba1 (sf); previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to B1 (sf); previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. G, Downgraded to B3 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade Cl. X-A*, Affirmed Aaa (sf); previously on Jan 28, 2020 Affirmed Aaa (sf) Cl. X-B*, Downgraded to B2 (sf); previously on Apr 17, 2020 B1 (sf) Placed Under Review for Possible Downgrade * Reflects interest-only classes RATINGS RATIONALE The ratings on five principal and interest classes were affirmed due to the pool's significant exposure to defeased loans and the transaction's key metrics, including Moody's loan-to-value ratio and Moody's stressed debt service coverage ratio (DSCR), are within acceptable ranges. The ratings on three P&I classes were downgraded due to a decline in pool performance and higher anticipated losses driven primarily by the decline in performance and refinance concerns of the RiverTown Crossings Mall loan, representing 26% of the pool. The loan has a scheduled maturity date within the next 12 months and may face significant refinance risk due to the current retail environment. The rating on the interest-only Class X-A was affirmed based on the credit quality of the referenced classes. The rating on the IO Class X-B was downgraded due to a decline in the credit quality of its referenced classes. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regardsthe coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's rating action reflects a base expected loss of 3.8% of the current pooled balance, compared to 3.4% at Moody's last review. Moody's base expected loss plus realized losses is now 1.9% of the original pooled balance, compared to 1.8% 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 methodologies used in rating all classes except interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the June 17, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 57.8% to $326.9 million from $774.1 million at securitization. The certificates are collateralized by 28 mortgage loans ranging in size from less than 1% to 26.2% of the pool, with the top ten loans (excluding defeasance) constituting 49% of the pool. Fourteen loans, constituting 46.3% 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 4, compared to 5 at Moody's last review. As of the June 2020 remittance report, all loans were reported as current on their debt service payments. Six loans, constituting 15.7% of the pool, are on the master servicer's watchlist, of which three loan, representing 8.2% of the pool, indicate the borrower has requested relief in relation to coronavirus impact on the property. 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. Two loans have been liquidated from the pool, contributing to an aggregate realized loss of $2.3 million (for an average loss severity of 30%). No loans are currently in special servicing. Moody's has also assumed a high default probability for one poorly performing loan, constituting 1.1% of the pool. The troubled loan is secured by a mixed use (retail/multifamily) property in Dearborn, Michigan. The loan has been on the watchlist due to a low debt service coverage ratio which triggered the cash management period. As of September 2019, the multifamily portion was 58% occupied and the commercial portion was 58% occupied. The DSCR has been below 1.00X since 2017. Moody's received full year 2019 operating results for 95% of the pool, and partial year 2020 operating results for 59% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 102%, compared to 84% 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 reflects a weighted average haircut of 26.9% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.7%. Moody's actual and stressed conduit DSCRs are 1.32X and 1.18X, respectively, compared to 1.50X and 1.33X 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 34.8% of the pool balance. The largest loan is the RiverTown Crossings Mall Loan ($85.6 million -- 26.2% of the pool), which represents a pari-passu portion of a $133.5 million mortgage loan. The loan is secured by an approximately 635,800 SF portion of a 1.2 million SF regional mall located in Grandville, Michigan. The property was built in 2000 and is anchored by Macy's, Sears, Kohl's, J.C. Penney, Dick's Sporting Goods and Celebration Cinemas. The sponsor purchased a vacant, former Younkers, anchor box (150,081 SF) in 2019 for $4.4 million. The only collateral anchors are Dick's Sporting Goods and Celebration Cinemas, and both tenants have renewed their leases in early 2020 for an additional five years. Excluding the former Younkers space, the total property was 94% leased as of March 2020 and the in-line occupancy was 88%, compared to 87% in March 2019. For the trailing twelve-month period ending March 2020, comparable in-line sales (less than 10,000 SF) were $361 PSF, compared to $382 PSF for the year ending December 2019. The Celebration Cinemas has shown strong historical sales of above $500,000 per screen. While property performance generally improved through 2016, it has since declined due primarily to lower rental revenues. The property's 2019 NOI was 12% lower than in 2018 but remained 3% higher than underwritten levels. The mall re-opened in June 2020 after a temporary closure from the coronavirus outbreak. The loan has amortized 13.4% since securitization and has an upcoming maturity in June 2021. The loan is current through its June 2020 payment Moody's LTV and stressed DSCR are 112% and 1.14X, respectively, The second largest loan is the Marketplace at Santee Loan ($19.6 million -- 6.0% of the pool), which is secured by an approximately 71,000 SF retail property located in Santee, California. The area is in a busy retail corridor and is surrounded by several non-collateral anchors in the area including Lowe's, Costco, and Walmart. The property is anchored by Sprouts (41% of NRA) with a lease expiration in January 2024. As of December 2019, the property was 95% occupied compared to 100% in 2018 and 90% at securitization. The loan has amortized 13.7% since securitization and has an upcoming maturity date in July 2021. The loan was placed on the watchlist in April 2020 due to hardship caused by the coronavirus outbreak. The servicer indicated they are processing the borrower's forbearance request. Moody's LTV and stressed DSCR are 104% and 0.94X, respectively, compared to 100% and 0.97X at the last review. The third largest loan is the River Street Inn Loan ($8.7 million -- 2.7% of the pool), which is secured by an 86-key limited service hotel located in the historic downtown district of Savannah, Georgia. The collateral also includes approximately 16,000 SF of retail space. The primary demand driver comes from tourism due to its proximity to the Savannah River Walk. For the trailing twelve-month period ending March 2018 the property's NOI was 82% higher than securitization and the actual NOI DSCR was 2.89X. The DSCR for the loan has been above 2.00X since 2013 and the loan has amortized nearly 18% since securitization. The loan matures in August 2021 and Moody's LTV and stressed DSCR are 77% and 1.41X, respectively. CIM TRUST 2020-R5: Fitch to Rate Class B2 Notes 'B(EXP)sf' ---------------------------------------------------------- Fitch Ratings has assigned expected ratings to CIM Trust 2020-R5. CIM Trust 2020-R5 - Class A1; LT AAA(EXP)sf Expected Rating - Class A1-A; LT AAA(EXP)sf Expected Rating - Class A1-B; LT AAA(EXP)sf Expected Rating - Class A1-IO; LT AAA(EXP)sf Expected Rating - Class M1; LT AA(EXP)sf Expected Rating - Class M1-IO; LT AA(EXP)sf Expected Rating - Class M2; LT A(EXP)sf Expected Rating - Class M2-IO; LT A(EXP)sf Expected Rating - Class M3; LT BBB(EXP)sf Expected Rating - Class M3-IO; LT BBB(EXP)sf Expected Rating - Class B1; LT BB(EXP)sf Expected Rating - Class B2; LT B(EXP)sf Expected Rating - Class B3; LT NR(EXP)sf Expected Rating - Class A-IO-S; LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY The notes are supported by one collateral group that consists of 2,222 seasoned performing loans and re-performing loans with a total balance of approximately $338.4 million, which includes $14.5million, or 4%, of the aggregate pool balance in non-interest-bearing deferred principal amounts, as of the cut-off date. Distributions of principal and interest and loss allocations are based on a traditional senior-subordinate, sequential structure. The sequential-pay structure locks out principal to the subordinated notes until the most senior notes outstanding are paid in full. The servicers will not be advancing delinquent monthly payments of P&I. KEY RATING DRIVERS Revised GDP Due to Coronavirus (Negative): Coronavirus and the resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Its baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from coronavirus, an Economic Risk Factor floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' ratings and below. Distressed Performance History (Negative): The collateral pool consists primarily of peak-vintage, seasoned performing and RPLs. Of the pool, 2.5% was 30 days delinquent as of the cut-off date or currently on a deferral plan and treated as delinquent in Fitch's analysis, and 44.6% of loans are current but have had recent delinquencies or incomplete pay strings. 49% of the loans are seasoned over 24 months and have been paying on time for the past 24 months. Roughly 69% have been modified. Payment Deferrals (Negative): As of the cutoff date, approximately 2.5% (by UPB) of the loans in the pool have received and are still on coronavirus deferral relief. To account for potential permanent hardship and default risk as these borrowers are not cashflowing, Fitch assumed all loans with active deferrals to be 30-days delinquent. This assumption resulted in an increase to Fitch's 'AAAsf' expected loss of less than 100bps. Expected Payment Forbearance and Deferrals Related to Coronavirus (Negative): The outbreak of coronavirus and widespread containment efforts in the U.S. will result in increased unemployment and cash flow disruptions. Mortgage payment forbearance or deferrals will provide immediate relief to affected borrowers and Fitch expects servicers to broadly adopt this practice. The missed payments will result in interest shortfalls that will likely be recovered, the timing of which will depend on repayment terms; if interest is added to the underlying balance as a non-interest-bearing amount, repayment will occur at refinancing, property liquidation, or loan maturity. To account for the potential for cash flow disruptions, Fitch assumed deferred payments on a minimum of 40% of the pool for the first six months of the transaction at all rating categories with a reversion to its standard delinquency and liquidation timing curve by month 10. The 40% assumption is based on observed peak delinquencies for legacy Alt-A collateral. Under these assumptions the 'AAAsf' and 'AAsf' classes did not incur any shortfalls and are expected to receive timely payments of interest. The cash flow waterfall providing for principal otherwise distributable to the lower rated bonds to pay timely interest to the 'AAAsf' and 'AAsf' bonds and availability of excess spread also mitigate the risk of interest shortfalls. The 'Asf' through 'Bsf' rated classes incurred temporary interest shortfalls that were ultimately recovered. Low Operational Risk (Neutral): Operational risk is well controlled for in this transaction. Chimera has actively purchased re-performing loans over the past 12 years and is assessed as an 'Average' aggregator by Fitch. Fay Servicing, LLC and Select Portfolio Servicing, Inc. will be the named servicers for the transaction after the closing date and are responsible for primary and special servicing functions. Fitch views SPS as a strong servicer of RPLs and is rated 'RPS1-'. High rated servicers receive a credit in Fitch's loss model which helped decrease the loss expectations for the pool by 76 bps at the 'AAAsf' rating stress. Issuer retention of at least 5% of the bonds also helps ensure an alignment of interest between both the issuer and investor. Adequate Servicing Fee (Neutral): Fitch determined that the stated servicing fee (including the excess servicing fee strip) of approximately 50 bps is sufficient to attract subsequent servicers even under a period of poor performance and high delinquencies. The stated 50 bps was more than sufficient to cover Fitch's stressed servicing fee for this transaction of 40 bps. Due Diligence Review Results (Negative): Third-party due diligence was performed on 100% of the pool by SitusAMC, Clayton Services and Opus CMC which are assessed by Fitch as an 'Acceptable - Tier 1 and Tier 2' TPR firm. The results of the review indicate moderate operational risk with approximately 14% of the loans assigned a 'C' or 'D' grade. 7% of the pool was graded 'D' for missing or estimated final HUD-1 documents yet is subject to testing for compliance with predatory lending regulations. Fitch applied loss severity adjustments for these loans due to exposure additional assignee liability, which was approximately 50 bps at the 'AAAsf' rating stress. However, the overall concentration of material exceptions is consistent with prior Fitch-rated RPL RMBS. Representation Framework (Negative): The loan-level representations and warranties are mostly consistent with a tier 1 framework. While the framework is strong, repurchase obligations are designated to a separate fund that does not hold an investment grade rating, and the fund may have issues fulfilling repurchases in times of economic stress. Fitch increased its loss expectations by 111 bps at the 'AAAsf' rating category to account for the non-investment grade counterparty risk of the R&W provider. No Servicer P&I Advances (Mixed): The servicer will not be advancing delinquent monthly payments of P&I, which reduce liquidity to the trust. P&I advances made on behalf of loans that become delinquent and eventually liquidate reduce liquidation proceeds to the trust. Due to the lack of P&I advancing, the loan-level loss severity is less for this transaction than for those where the servicer is obligated to advance P&I. Structural provisions and cash flow priorities, together with increased subordination, provide for timely payments of interest to the 'AAAsf' and 'AAsf' rated classes. Sequential-Pay Structure (Positive): The transaction's cash flow is based on a sequential-pay structure whereby the subordinate classes do not receive principal until the senior classes are repaid in full. Losses are allocated in reverse-sequential order. Furthermore, the provision to re-allocate principal to pay interest on the 'AAAsf' and 'AAsf' rated notes prior to other principal distributions is highly supportive of timely interest payments to that class in the absence of servicer advancing. Deferred Amounts (Negative): Non-interest-bearing principal forbearance amounts totaling $14.5 million (4.3%) of the UPB are outstanding on 722 loans. Fitch included the deferred amounts when calculating the borrower's loan-to-value ratio and sustainable LTV, despite the lower payment and amounts not being owed during the term of the loan. The inclusion resulted in a higher probability of default and LS than if there were no deferrals. Fitch believes that borrower default behavior for these loans will resemble that of the higher LTVs, as exit strategies (i.e. sale or refinancing) will be limited relative to those borrowers with more equity in the property. RATING SENSITIVITIES Fitch 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 that may be considered in the surveillance of the transaction. Sensitivity analyses was conducted at the state and national levels to assess the effect of higher MVDs for the subject pool as well as lower MVDs, illustrated by a gain in home prices. Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: This defined negative rating 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 39.4% at 'AAA'. The analysis indicates that there is some potential rating migration with higher MVDs for all rated classes, compared with the model projection. Specifically, a 10% additional decline in home prices would lower all rated classes by one full category. Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or in other words positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10%. Excluding the senior class which is already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. Specifically, a 10% gain in home prices would result in a full category upgrade for the rated class excluding those being assigned ratings of 'AAAsf'. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling process uses the modification of these variables to reflect asset performance in up- and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Fitch has added a Coronavirus Sensitivity Analysis that that includes a prolonged health crisis resulting in depressed consumer demand and a protracted period of below-trend economic activity that delays any meaningful recovery to beyond 2021. Under this severe scenario, Fitch expects the ratings to be impacted by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term impact arising from coronavirus disruptions on these economic inputs will likely affect both investment and speculative grade ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. CRITERIA VARIATION There is one variation to Fitch's U.S. RMBS Rating Criteria. Almost 50% of the loans had a tax and title search performed outside of the six-month window that Fitch looks for in its criteria. Given the fairly minor amount of unpaid taxes and liens as well as the fact that all of the searches were performed within one year, Fitch deemed the dated searches immaterial to the rating and did not make any adjustments. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 A third-party regulatory compliance review was completed on approximately 100% of the loans in the transaction pool. The review was performed by SitusAMC, Clayton Services, and Opus CMC which are assessed by Fitch as an 'Acceptable - Tier 1 and Tier 2' TPR firm. The due diligence testing scope is consistent with Fitch criteria for RPL RMBS. Approximately 14% of loans were assigned a grade of 'C' or 'D'. Fitch applied loss severity adjustments on 7% of the pool (162 loans) graded 'C' or 'D' because the loan files reviewed had missing or estimated final HUD-1 documents. The final HUD-1 is necessary to test for compliance with predatory lending regulations, and the inability to test them may expose the trust to potential assignee liability which adds risk for bond investors. Fitch adjusted its loss expectation at the 'AAAsf' rating stress by approximately 50bps to reflect these additional risks. The remaining 'C' and 'D' grades (7% of the pool or 153 loans) reflect missing final HUD-1 documents for loans that are not subject to predatory lending, missing state disclosures, and other absent compliance related documents where the assignee liability is outside of the applicable statute of limitations. No adjustment to loss expectations were made for these loans. Form ABS Due Diligence 15E was received and reviewed in accordance with this transaction. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). CITIGROUP MORTGAGE 2020-EXP1: Fitch Rates Class B-2 Certs 'Bsf' --------------------------------------------------------------- Fitch Ratings has assigned final ratings to the residential mortgage backed certificates issued by Citigroup Mortgage Loan Trust 2020-EXP1. CMLTI 2020-EXP1 - Class A-1-A; LT AAAsf New Rating - Class A-1-B; LT AAAsf New Rating - Class A-2; LT AAsf New Rating - Class A-3; LT Asf New Rating - Class A-IO-S; LT NRsf New Rating - Class B-1; LT BBsf New Rating - Class B-2; LT Bsf New Rating - Class B-3; LT NRsf New Rating - Class M-1; LT BBBsf New Rating TRANSACTION SUMMARY The certificates are supported by 431 loans with a balance of $364.01 million as of the May 31, 2020 cut-off date. This will be the first Citigroup Mortgage Loan Trust Expanded-Prime transaction consisting of loans originated by various originators and aggregated by Citigroup Global Markets Realty, Corp. All the loans in the transaction comply with the Ability-to-Repay Rule or are not subject to the ATR Rule. Approximately 44% of the loans in the pool are designated as Non-Qualified Mortgage, 25% qualified as Safe Harbor QM, 4% are Higher Priced QM, and 28% are exempt from QM as they are investor properties. KEY RATING DRIVERS Revised GDP Due to COVID-19: The coronavirus pandemic and the resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Its baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% growth for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from COVID-19, an Economic Risk Factor floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' ratings and below. Liquidity Stress for Payment Forbearance (Negative): The outbreak of COVID-19 and widespread containment efforts in the U.S. will result in increased unemployment and cash flow disruptions. To account for the cash flow disruptions, Fitch assumed deferred payments on a minimum of 40% of the pool for the first six months of the transaction at all rating categories with a reversion to its standard delinquency and liquidation timing curve by month 10. This assumption is based on observations of legacy Alt-A delinquencies and past due payments following Hurricane Maria in Puerto Rico. There is no advancing of delinquent principal and interest in this transaction, but there is a three-month reserve fund to cover interest shortfalls and the Net WAC is based off of the interest-bearing balance of the loans. Both of these features should limit the amount of interest shortfalls to the bonds. However, if the three-month reserve fund is not fully funded, the lowest ranked classes may be vulnerable to temporary interest shortfalls to the extent there are not enough funds available once the more senior bonds are paid. No Servicer Advances (Mixed): The servicers will not make advances of delinquent P&I on any of the mortgage loans. As a result, the loss severity is lower, but principal will need to be used to pay interest to the notes, which will result in more credit enhancement being needed. Payment Forbearance (Neutral): None of the loans in the pool are on a COVID-19 forbearance plan. After the cut-off date, one borrower called Shellpoint to discuss a COVID-19 forbearance plan, but on the same day the borrower made their June payment. As a result, all the loans are contractually current and analyzed as such by Fitch. Both Fay and Shellpoint are offering forbearance up to six months for borrowers seeking COVID-19 relief. At the end of the forbearance period, the borrower can opt to reinstate (i.e. repay the missed mortgage payments in a lump sum) or repay the missed amounts with a repayment plan. If reinstatement or a repayment plan is not affordable, the servicers will pursue other loss mitigation options, which may include adding the missed payments to the end of the loan term due at payoff or maturity as deferred principal. The servicers will not be advancing delinquent principal and interest while the borrower is on a forbearance plan. Expanded Prime Credit Quality (Mixed): The collateral consists of mainly fixed-rate loans (roughly 30% are adjustable rate) that amortize over 30 years or 40 years. The majority of the loans (88.3%) are fully amortizing; however, 11.7% are interest-only (IO loans). The pool is seasoned approximately eight months in aggregate. The borrowers in this pool have strong credit profiles with a 751 weighted-average FICO (as determined by Fitch) and moderate leverage (77.8% sLTV). In addition, the pool contains 118 loans over $1.0 million and the largest loan is $3.15 million. 2.9% of the pool consists of borrowers with prior credit events in the past seven years, and 1.97% of the pool was underwritten to foreign nationals. There are no second lien loans in the pool. The pool characteristics resemble recent expanded prime collateral, and, therefore, the pool was analyzed using Fitch's non-prime model. Non-QM Loans (Negative): 43.5% of the loans are Non-QM loans. The majority of these loans (26.1%) are Non-QM since they were underwritten to ATR and were not tested for QM. The remaining loans are Non-QM due to the loans being interest-only loans (8.6%), having a DTI greater than 43% (4.8%), providing alternative documents (3.0%), or were designated as investor-Non-QM rather than ATR exempt since the cash out proceeds could not be verified (1.1%). Fitch increased the 'AAA' loss by 27 bps to account for the risk associated with the Non-QM loans. High Investor Property Concentration (Negative): Approximately 29% of the pool is comprised of investor loans. All of these loans were underwritten to the borrower's credit profile (credit score and debt-to-income ratio) rather than an investor cash flow program that underwrites the loan based on a debt service coverage ratio (DSCR). These loans have strong credit profiles of 771 WA credit score (as calculated by Fitch) and an original CLTV of 65.7%. To account for the additional risk of investor occupied home, Fitch increased the PD by 55% compared to owner occupied homes. Loans with Shared Appreciation (Negative): 5.4% of the loans in the pool are first liens with shared appreciation. These loans used subordinate financing to contribute to the down payment, and this amount plus a percent of the home's appreciation is owed to the equity contributor when the home is sold. To account for the additional financing, the shared appreciation amount was included as a junior lien, and the CLTV was increased as a result. Loan Documentation (Positive): Fitch considered approximately 90% of the pool as being underwritten to a full documentation program. Roughly 98% of the pool had income fully verified. Specifically, 73% of the loans were underwritten to 24 months of W2s or tax returns and approximately 26% were confirmed as being full documentation per Fannie Mae's Desktop Underwriter. Only 0.55% of the pool was underwritten to a 24-month bank statement program, 0.67% was underwritten to a 12-month bank statement program, and 0.35% was underwritten using one year of income documentation. The majority of the loans had fully verified assets and employment. 33% of the pool is comprised of self-employed borrowers. Sequential Payment Structure (Positive): The transaction has a straight sequential-pay structure whereby the subordinate classes do not receive principal until the senior classes are repaid in full. Losses are allocated in reverse-sequential order with the senior support class taking losses prior to the super senior class. The provision to re-allocate principal to pay interest on the 'AAA' and 'AA' rated notes prior to principal distribution to the 'AAA' notes and prioritizing the payment of interest prior to principal distribution for the remaining notes is highly supportive of timely interest payments to the classes in the absence of servicer advancing. In addition, there is a three-month reserve fund that is funded upfront by the seller and continuously funded from excess cash flow following the payment of interest to the bonds. This reserve fund can be used to pay interest if needed. Fitch calculated the excess spread to be 2.30% as of the closing date. Excess cash flow can be used to prevent interest shortfalls if needed. Foreign Nationals (Negative): Roughly 1.97%, or eight loans, are loans to nonpermanent residents. Fitch treated the loans to non-permanent residents as investor occupied, nonfull documentation loans, and removed the liquid reserves to account for the risk in relying on foreign paystubs, bank accounts and currency risk. For the borrowers without a credit score, Fitch assumed 650. Geographic Concentration (Negative): Approximately 62% of the pool is concentrated in California with relatively low MSA concentration. The largest MSA concentration is in Los Angeles MSA (22.4%) followed by the San Francisco MSA (21%) and the San Jose MSA (6%). The top three MSAs account for 49.4% of the pool. As a result, there was a 1.08x adjustment for geographic concentration, which resulted in the 'AAA' expected loss increasing by 53 bps. Low Operational Risk (Neutral): Operational risk is well controlled for this transaction. Fitch has reviewed the Citigroup Global Mortgage Realty Corp acquisition platform and assessed it as 'Above Average' due to robust risk controls. Shellpoint Mortgage Servicing, rated 'RPS2-' by Fitch, and Fay Servicing, LLC, rated 'RPS3+', are the named servicer for approximately 60% and 40% of the transaction pool, respectively. Fitch did not apply adjustments to the expected losses due to the low operational risk of the counterparties involved in the transaction. Citi is also retaining at least 5% of each class of bonds to ensure an alignment of interest between the issuer and investors. There is no master servicer for this transaction. Since there is no advancing of delinquent principal and interest, and the servicers are rated 'RPS2+' and 'RPS3+', Fitch is comfortable that there is no master servicer in this transaction. R&W Framework (Positive): The transaction sponsor, Citigroup Global Mortgage Realty Corp, is providing loan-level representations and warranties with respect to the loans in the trust. The R&W framework for this transaction is consistent with a Tier 1 as it meets all of Fitch's loan level R&Ws and has an automatic review and a robust enforcement mechanism. In addition to the framework, CGMRC is an investment grade counterparty with a Long-Term Issuer Default Rating of 'A', which helps support possible repurchase obligations of the sponsor. Fitch reduced its loss expectations 38 bps at the 'AAAsf' rating category to reflect the Tier 1 framework and strong financial counterparty strength. The 120-day delinquency automatic review trigger will exclude loans subject to a forbearance plan or other loss mitigation measure due to a hardship resulting from a pandemic or national emergency. This will limit the number of unnecessary R&W breach reviews due to a loan going delinquent due to COVID-19 or FEMA disaster forbearance. Third-Party Due Diligence Review (Positive): Third-party due diligence was performed on 100% of loans in the transaction by SitusAMC, Clayton and EdgeMac. Both SitusAMC and Clayton are assessed by Fitch as 'Acceptable - Tier 1' and EdgeMac is assessed as 'Acceptable - Tier 3'. 100% of the loans received a final grade of 'A' or 'B', which indicates strong origination processes with no presence of material exceptions. Approximately 49% of loans received a final grade of 'B' for immaterial exceptions that were mitigated with strong compensating factors or were largely accounted for in Fitch's loan loss model. Fitch applied a credit for the high percentage of loan level due diligence, which reduced the 'AAAsf' loss expectation by 31bps. The cash flow model indicated that the A-2 class could be rated 'AA+', the M-1 could be rated 'BBB+' and B-1 could be rated 'BB+'; however, Fitch assigned flat ratings to all classes ('AA', 'BBB' and 'BB', respectively) based on the current market environment and uncertainty due to COVID-19. RATING SENSITIVITIES Fitch's analysis incorporates a sensitivity analysis to demonstrate how the ratings would react to steeper market value declines 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 be considered in the surveillance of the transaction. Two sets of sensitivity analyses were conducted at the state and national level to assess the effect of higher MVDs for the subject pool. Factors that could, individually or collectively, lead to negative rating action/downgrade: This defined negative rating 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 39% at 'AAA'. The analysis indicates that there is some potential rating migration with higher MVDs for all rated classes, compared with the model projection. Factors that could, individually or collectively, lead to positive rating action/upgrade: This defined positive rating sensitivity analysis how the ratings would react to negative MVDs at the national level (positive home price growth with no assumed overvaluation). The analysis assumes positive home price growth of 10.0%. Excluding the senior classes that are already rated 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling process uses the modification of these variables to reflect asset performance in up- and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. For enhanced disclosure of Fitch's stresses and sensitivities, please refer to the transaction's presale report. Fitch has also added a Coronavirus Sensitivity Analysis that contemplates a more severe and prolonged economic stress caused by a re-emergence of infections in the major economies, before a slow recovery begins in 2Q21. Under this severe scenario, Fitch expects the ratings to be impacted by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term impact arising from coronavirus disruptions on these economic inputs will likely affect both investment and speculative grade ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form "ABS Due Diligence 15E" was reviewed and used as a part of the rating for this transaction. A third-party due diligence review was completed on 100% of the loans in this transaction. The review was done by SitusAMC, and Clayton, assessed by Fitch as 'Acceptable - Tier 1' TPR firms, and EdgeMac, assessed as 'Acceptable - Tier 3'. The due diligence scope was consistent with Fitch criteria for newly originated loans, and the results indicate sound origination quality with no incidence of material defects. Loan exceptions were deemed to be immaterial. No due diligence adjustment was applied to this transaction. DATA ADEQUACY Fitch relied on an independent third-party due diligence review performed on 100% of the loans. The third-party due diligence was consistent with Fitch's "U.S. RMBS Rating Criteria." The sponsor engaged SitusAMC, Clayton, and EdgeMac to perform the review. Loans reviewed under this engagement were given compliance, credit and valuation grades and assigned initial grades for each subcategory. Fitch also utilized data files that were made available by the issuer on its SEC Rule 17g-5 designated website. The loan-level information Fitch received was provided in the American Securitization Forum's data layout format. The ASF data tape layout was established with input from various industry participants, including rating agencies, issuers, originators, investors and others, to produce an industry standard for the pool-level data in support of the U.S. RMBS securitization market. The data contained in the data tape layout were populated by the due diligence company, and no material discrepancies were noted. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. CITIGROUP MORTGAGE 2020-EXP1: Moody's Rates Class B-2 Certs 'B2' ---------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to seven classes of certificates issued by Citigroup Mortgage Loan Trust Inc. 2020-EXP1. The ratings range from Aaa (sf) to B2 (sf). This deal represents the first CMLTI transaction in 2020 and the tenth rated issue from the shelf since its inception in 2015. However, this is Citigroup's first transaction backed by loans underwritten to sellers expanded prime programs which typically have certain credit parameters that are outside of traditional prime jumbo programs. Such programs typically expand the low end of the eligible FICO range from 680 to 600, while increasing the high end of the loan to-value ratio range from 85% to 95%, and allow loans with non-QM characteristics, such as debt-to-income ratios greater than 43% and interest-only loans. The collateral pool comprises 431 fully amortizing fixed and adjustable-rate and interest only first lien mortgage loans, with 90.0% of the loans having an original term to maturity of 30 years. Approximately 7.7% of the loans are interest only with 40-year maturity. The pool includes loans with non-QM characteristics (43.50%), such as debt-to-income ratios greater than 43% and interest only loans. Shellpoint Mortgage Servicing and Fay Servicing, LLC, will be primary servicers on the deal, servicing approximately 59.8% and 40.2% of the loans, respectively. There is no master servicer in this transaction. U.S. Bank National Association will be the trust administrator and the trustee is U.S. Bank Trust National Association. Moreover, the servicers will not advance any scheduled principal or interest on delinquent mortgages. The transaction has a sequential payment structure with an interest reserve account that will be fully funded at closing by the sponsor and will cover interest shortfalls to any certificates that pay principal and interest up to and including the Class B-3 certificates. The required amount in the account will equal three months of interest distribution for all the P&I certificates as of the distribution date and will be replenished from interest collections on an ongoing basis, to the extent it falls below the required amount. Any funds in the reserve account in excess of the required amount will be released to the sponsor. The complete rating action are as follows. Issuer: Citigroup Mortgage Loan Trust Inc. 2020-EXP1 Cl. A-1-A, Definitive Rating Assigned Aaa (sf) Cl. A-1-B, Definitive Rating Assigned Aa1 (sf) Cl. A-2, Definitive Rating Assigned Aa3 (sf) Cl. A-3, Definitive Rating Assigned A3 (sf) Cl. M-1, Definitive Rating Assigned Baa3 (sf) Cl. B-1, Definitive Rating Assigned Ba2 (sf) Cl. B-2, Definitive Rating Assigned B2 (sf) RATINGS RATIONALE Summary credit analysis and rating rationale Moody's expected loss for this pool in a baseline scenario-mean is 1.34%, in a baseline scenario-median is 0.86%, and reaches 14.75% at stress level consistent with its Aaa rating. Its analysis has considered the effect of the COVID-19 outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of mortgage loans. Specifically, for US RMBS, loan performance will weaken due to the unprecedented spike in the unemployment rate, which may limit borrowers' income and their ability to service debt. The softening of the housing market will reduce recoveries on defaulted loans, also a credit negative. Furthermore, borrower assistance programs, such as forbearance, may adversely impact scheduled cash flows to bondholders. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's increased its model-derived median expected losses by 11% (15% for the mean) and its Aaa losses by 5% to reflect the likely performance deterioration resulting from of a slowdown in US economic activity in 2020 due to the COVID-19 outbreak. Moody's regards the COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's bases its ratings on the certificates on the credit quality of the mortgage loans, the structural features of the transaction, its assessments of the origination quality and servicing arrangement, the strength of the third party due diligence, the representations and warranties framework of the transaction and the degree of alignment of interest between the sponsor and the investors. Collateral description CMLTI 2020-EXP1's collateral pool is comprised of 431 first lien mortgage loans with an unpaid principal balance of $364,014,993. Although the pool contains expanded prime loans with some riskier features such as interest only loans with 40-year maturities, a relatively high percentage of investor loans, and pockets of loans with prior derogatory credit events, lower FICOs or higher LTVs, overall, the majority of the borrowers in the transaction have high FICO scores, high monthly residual income, significant liquid cash reserves, high income and sizeable equity in their properties comparable to other expanded prime jumbo pools Moody's has rated. The primary borrower has an average monthly income of $18,545 and average liquid cash reserves of $384,488. Approximately 43.5% and 3.7% of the mortgage loans are non-QM or QM mortgage loans under rebuttable presumption, respectively. As explained in its methodology, Moody's made an incremental adjustment to its expected loss to account for the potential increased risk of legal challenges from defaulted borrowers, which could result in the trust bearing the legal expenses associated with defending against such claims. This risk is mitigated by the relatively strong credit quality of the borrowers, since they are less likely to default. Borrowers with more than three mortgages represented 14.5% (by loan balance) of the pool. Moody's evaluates loans to borrowers with multiple properties to determine if the transaction warrants additional loss adjustments. Moody's has made an adjustment on mortgage loans where the borrower owns more than 3 properties to reflect an "investor" level of riskiness associated with multiple properties for loans listed as owner-occupied or second homes. 89.62% of the loans in the pool have never been delinquent since origination. 9.68% of the loans were 30 days delinquent only once, and 0.47% (3 loans) and 0.22% (1 loan) of the loans were 30 days delinquent more than once and 60 days delinquent, respectively; all delinquencies are measures using the Mortgage Banking Association method. Moody's made no additional adjustment to its losses given that the 30-day delinquencies were due to a servicing transfer. All loans are current as of the cut-off date. 7.7% of the loans in the pool amortize over 40 years and have either a 7 year or a 10-year initial interest only period. To account for this extended maturity profile and lack of amortization during the early years of the loan, Moody's made an adjustment to its collateral losses. 7.0% of the borrowers in the pool have experienced some forms of prior credit event such as bankruptcy and/or foreclosure. However, except for one loan, all these credit events have taken place more than four years ago. Moody's considers the length of time since the credit event, the higher WA FICO (733), lower WA CLTV (77.7%) and low WA DTI (35.9%) for the affected loans relative to the total pool as mitigating factors, and as a result, Moody's made no additional adjustment to its collateral losses 33 loans (5.4% by loan balance) are shared appreciation loans, i.e. loans where a third party contributed equity towards the down payment of the mortgage loan. In the loan tape for this transaction, the equity contribution is accounted for as a junior lien (without any associated P&I) on the property. Therefore, this equity contribution by the third party is reflected in CLTV but is not reflected in LTV 13 loans (2.1% by loan balance) have bi-weekly payments instead of monthly payments. By making a mortgage payment every two weeks, the borrower is effectively making 13 monthly payments per year instead of 12 monthly payments. The actual interest paid over the life of the loan is also reduced because of faster amortization. Aggregation quality The aggregator of this pool is Citigroup Global Markets Realty Corp. The aggregator acquired the loans in the pool from various originators including Commerce Home Mortgage, LoanDepot, VNB and Goldwater Bank, and other aggregators such as Galton and MaxEx. Approximately 73.4%, 7.9%, 6.1%, 5.2%, 5.2% and 2.2% of the loans in the pool were acquired from GMRF Mortgage Acquisition Company, LLC, Commerce Home Mortgage, LLC, loanDepot.com, LLC, Valley National Bank, MaxEx, LLC, and Goldwater Bank NA, respectively. All the loans were underwritten to each respective seller's guidelines instead of Citigroup's own guidelines. Based on the information provided related to Citigroup Global Markets Realty Corp.'s valuation and risk management practices, the 100% due diligence, the transparent representation and warranty framework, and strong alignment of interests/risk retention, Moody's did not make any adjustments to its losses based on its review of the aggregator. Origination quality Moody's did not adjust its expected loss assumptions for loans underwritten to Galton's, loanDepot's, and VNB's programs in spite of certain weaknesses in underwriting guidelines such as lower FICO score requirement accompanied with allowance for higher LTV and DTI ratio loans. This is because quantitative factors such as lower FICO and higher LTV limits are already captured in its MILAN model. However, there are some smaller originators/sellers in this pool whose guidelines Moody's did not review. Moody's increased its loss assumptions for these originators/sellers in order to account for this uncertainty in origination quality. Servicing arrangement Moody's considers the overall servicing arrangement for this pool as adequate, and as a result Moody's did not make any adjustments to its base case and Aaa stress loss assumptions based on the servicing arrangement. Fay and Shellpoint are the two named servicers. The servicing fee will be based on a step-up incentive fee structure with a minimum monthly base fee of $10 per loan and additional fees for delinquent or defaulted loans. In spite of the step-up incentive fee, the fee will not exceed the aggregate servicing fee of 25 bps for this transaction. In its cashflow model, Moody's has assumed a servicing fee of 25 bps. There is no master servicer in this transaction. U.S. Bank National Association will be the trust administrator and the trustee is U.S. Bank Trust National Association. Moreover, the servicers will not advance any scheduled principal or interest on delinquent mortgages. Moody's did not apply any adjustment to its expected losses for the lack of master servicer due to the following: (1) There is no P&I advancing in this transaction which obviates the need for a master servicer to step in if the primary servicer is unable to do so, (2) Although limited in depth and scope, there is still third party oversight of Fay and Shellpoint from the GSEs, the CFPB, the accounting firms and state regulators, (3) the complexity of the loan product is low and the pool credit quality is generally good, reducing the complexity of servicing and reporting, and (4) U.S. Bank National Association, as the trust administrator, will be responsible for aggregating the reports from the servicers and reporting to investors, but also appoint a replacement servicer at the direction of the controlling holder. The fees paid to the successor servicer cannot exceed the aggregate servicing fee of 25 bps. COVID-19 impacted borrowers As of the cut-off date, no borrower under any mortgage loan has entered into a COVID-19 related forbearance plan with the servicer. However, there is one loan where the servicer has noted that the borrower has been impacted by COVID-19 hardship. The servicer is currently evaluating the hardship request. Generally, the borrower must initially contact the servicer and attest they have been impacted by a COVID-19 hardship and that they require payment assistance. The servicer will offer an initial forbearance period to the borrower, which can be extended if the borrower attests that they require additional payment assistance. At the end of the forbearance period, if the borrower is unable to make the forborne payments on such mortgage loan as a lump sum payment or does not enter into a repayment plan, the servicer may defer the missed payments, which could be added as a noninterest-bearing payment due at the end of the loan term. If the borrower can no longer afford to make payments in line with the original loan terms, the servicer would typically work with the borrower to modify the loan (although the servicer may utilize any other loss mitigation option permitted under the pooling and servicing agreement with respect to such mortgage loan at such time or anytime thereafter). Of note, per the transaction documents, any principal forbearance amount created in connection with any modification (whether as a result of a COVID-19 forbearance or otherwise) will be recognized as a realized loss only if it is written off or forgiven by the servicer. Third-party review The Sponsor engaged AMC Diligence, LLC, Clayton Services, LLC, and Edge Mortgage Advisory Company, LLC as independent third-party review firms. They conducted a review of credit, property valuations, regulatory compliance and data accuracy checks for 100% (431) of the loans in the pool. Each mortgage loan was reviewed by only one of the TPR firms and each TPR firm produced one or more reports detailing its review procedures and the related results. These firms conducted detailed credit, valuation, regulatory compliance and data integrity reviews on 100% of the mortgage pool. The TPR results indicated compliance with the originators' underwriting guidelines for majority of loans, no material compliance issues, and no appraisal defects. Overall, the loans that had exceptions to the originators' underwriting guidelines had strong documented compensating factors such as low DTIs, low LTVs, high reserves, high FICOs, or clean payment histories. The TPR firms also identified minor compliance exceptions for reasons such as inadequate RESPA disclosures (which do not have assignee liability) and TILA/RESPA Integrated Disclosure violations related to fees that were out of variance but then were cured and disclosed. In this transaction, 63 of the non-conforming loans had a property valuation review only consisting of a Collateral Underwriter and no other third-party valuation product such as a CDA and field review. Moody's considers the use of Collateral Underwriter for non-conforming loans to be credit negative due to (1) the lack of human intervention which increases the likelihood of missing emerging risk trends, (2) the limited track record of the software and limited transparency into the model and (3) GSE focus on non-jumbo loans which may lower reliability on jumbo loan appraisals. However, Moody's has not applied an adjustment to the loss for such loans since the statistically significant sample size and valuation results of the loans that were reviewed using a third-party valuation product such as a CDA (which Moody's considers to be a more accurate third-party valuation product) were sufficient and the original appraisal balances for such loans were not significantly higher than that of appraisal values for loans which had both a CU score and another valuation product. R&W framework Moody's assessed CMLTI 2020-EXP1's R&W framework for this transaction as adequate, consistent with that of other prime jumbo transactions for which the breach review process is thorough, transparent and objective, and the costs and manner of review are clearly outlined at issuance. An effective R&W framework protects a transaction against the risk of loss from fraudulent or defective loans. Moody's assessed the R&W framework based on three factors: (a) the financial strength of the R&W provider, (b) the strength of the R&Ws (including qualifiers and sunsets), and (c) the effectiveness of the enforcement mechanisms. The loan level R&Ws are strong and, in general, either meet or exceed the baseline set of credit-neutral R&Ws Moody's identified for US RMBS. The mechanisms for enforcing breaches of R&Ws are generally strong. The trust administrator is obligated to hire an independent breach reviewer to perform a review when a loan either becomes 120 days delinquent or it liquidates at a loss. Of note, loans in forbearance due to a pandemic or national emergency will not be reviewed while in forbearance. Unlike some R&W frameworks that prescribe specific tests for the reviewer to perform, the scope of the review is open and not specifically defined. If a material R&W breach is discovered, the R&W provider will be obligated to cure the defect, repurchase the loan, or reimburse any realized loss. One exception is that there will be no obligation to remedy a breach of R&W if the defect that gave rise to the R&W breach was disclosed in the PPM. Moody's did not make any R&W adjustment for this deal. Transaction structure CMLTI 2020-EXP1 features a structure that allocates principal payments sequentially to the bonds, instead of the shifting-interest structure that is typical of prime and expanded prime transactions Moody's rates, benefitting the senior bondholders. In addition, the excess spread in this transaction can be used to absorb losses before any excess is released to the sponsor, while in typical prime and expanded prime structures the excess spread is absorbed by the interest-only tranches. The transaction also features an interest reserve account, which can be used to pay bondholders in the event delinquent loans and the lack of P&I advancing to cover their payments causes interest shortfalls. The combination of the reserve account and the excess spread substantially mitigate the risk of shortfalls. On the closing date, the sponsor is expected to fund the interest reserve account up to its target of three months of interest distributions. Interest payments to the bonds will be made using the interest remittance amount; principal will be paid sequentially to all the bonds using the principal remittance amount. Any excess spread will be used to first replenish the interest reserve account to its target amount before being used to reimburse realized loss, Net WAC shortfall and unpaid expenses/fees. Any funds in the reserve account in excess of the required amount will be released to the sponsor. Realized loss and certificate write-down will be allocated in reverse sequential order starting with Class B-3. There is more than 2% excess spread (annualized) available in the deal. When excess spread is a form of credit enhancement, it can provide a significant amount of credit protection to investors. However, the amount of protection actually provided by excess spread will depend on: (1) WAC deterioration or yield compression resulting from (i) high-yielding mortgage loans prepaying or defaulting at a faster pace than other mortgage loans; or (ii) modifications of loan interest rates lowering the average rate (2) the speed with which mortgage loans prepay or default during the life of the securitization and (3) The amount of excess spread that "leaks out" of the transaction before it is needed to protect investors. The risk of leakage is typically highest in the early months of a transaction when losses are relatively low. In its analysis, Moody's accounted for WAC deterioration by applying a 25% haircut to the weighted average interest rate of the mortgage loans in the pool. It used this calculated lower interest rate in its cash flow modeling. Other factors were taken into account by applying a higher prepayment rate in its cash flow model. It applied a CPR of approximately 30% which is higher than 20-25% CPR range in its methodology due to the fact that better credit quality pools tend to prepay faster. In addition, the higher prepayment rate was derived based on historical prepayment rates of loans with similar characteristics. 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 April 2020. CITIGROUP MORTGAGE 2020-EXP1: Moody's Rates Class B-2 Certs (P)B2 ----------------------------------------------------------------- Moody's Investors Service assigned provisional ratings to seven classes of certificates issued by Citigroup Mortgage Loan Trust Inc. 2020-EXP1. The ratings range from (P)Aaa (sf) to (P)B2 (sf). This deal represents the first CMLTI transaction in 2020 and the tenth rated issue from the shelf since its inception in 2015. However, this is Citigroup's first transaction backed by loans underwritten to sellers expanded prime programs which typically have certain credit parameters that are outside of traditional prime jumbo programs. Such programs typically expand the low end of the eligible FICO range from 680 to 600, while increasing the high end of the loan to-value (LTV) ratio range from 85% to 95%, and allow loans with non-QM characteristics, such as debt-to-income (DTI) ratios greater than 43% and interest-only loans. The collateral pool comprises 431 fully amortizing fixed and adjustable-rate and interest only first lien mortgage loans, with 90.0% of the loans having an original term to maturity of 30 years. Approximately 7.7% of the loans are interest only with 40-year maturity. The pool includes loans with non-QM characteristics (43.50%), such as debt-to-income ratios greater than 43% and interest only loans. Shellpoint Mortgage Servicing and Fay Servicing, LLC, will be primary servicers on the deal, servicing approximately 59.8% and 40.2% of the loans, respectively. There is no master servicer in this transaction. U.S. Bank National Association will be the trust administrator and the trustee are U.S. Bank Trust National Association. Moreover, the servicers will not advance any scheduled principal or interest on delinquent mortgages. The transaction has a sequential payment structure with an interest reserve account that will be fully funded at closing by the sponsor and will cover interest shortfalls to any certificates that pay principal and interest (P&I certificates) up to and including the Class B-3 certificates. The required amount in the account will equal three months of interest distribution for all the P&I certificates as of the distribution date and will be replenished from interest collections on an ongoing basis, to the extent it falls below the required amount. Any funds in the reserve account in excess of the required amount will be released to the sponsor. The complete rating action are as follows. Issuer: Citigroup Mortgage Loan Trust Inc. 2020-EXP1 Cl. A-1-A, Rating Assigned (P)Aaa (sf) Cl. A-1-B, Rating Assigned (P)Aa1 (sf) Cl. A-2, Rating Assigned (P)Aa3 (sf) Cl. A-3, Rating Assigned (P)A3 (sf) Cl. M-1, Rating Assigned (P)Baa3 (sf) Cl. B-1, Rating Assigned (P)Ba2 (sf) Cl. B-2 Rating Assigned (P)B2 (sf) RATINGS RATIONALE Summary credit analysis and rating rationale Moody's expected loss for this pool in a baseline scenario-mean is 1.34%, in a baseline scenario-median is 0.86%, and reaches 14.75% at stress level consistent with its Aaa rating. Its analysis has considered the effect of the COVID-19 outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of mortgage loans. Specifically, for US RMBS, loan performance will weaken due to the unprecedented spike in the unemployment rate, which may limit borrowers' income and their ability to service debt. The softening of the housing market will reduce recoveries on defaulted loans, also a credit negative. Furthermore, borrower assistance programs, such as forbearance, may adversely impact scheduled cash flows to bondholders. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's increased its model-derived median expected losses by 11% (15% for the mean) and its Aaa losses by 5% to reflect the likely performance deterioration resulting from of a slowdown in US economic activity in 2020 due to the COVID-19 outbreak. Moody's regards the COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's bases its ratings on the certificates on the credit quality of the mortgage loans, the structural features of the transaction, its assessments of the origination quality and servicing arrangement, the strength of the third party due diligence, the representations and warranties (R&W) framework of the transaction and the degree of alignment of interest between the sponsor and the investors. Collateral description CMLTI 2020-EXP1's collateral pool is comprised of 431 first lien mortgage loans with an unpaid principal balance of $364,014,993. Although the pool contains expanded prime loans with some riskier features such as interest only loans with 40-year maturities, a relatively high percentage of investor loans, and pockets of loans with prior derogatory credit events, lower FICOs or higher LTVs, overall, the majority of the borrowers in the transaction have high FICO scores, high monthly residual income, significant liquid cash reserves, high income and sizeable equity in their properties comparable to other expanded prime jumbo pools Moody's has rated. The primary borrower has an average monthly income of $18,545 and average liquid cash reserves of $384,488. Approximately 43.5% and 3.7% of the mortgage loans are non-QM or QM mortgage loans under rebuttable presumption, respectively. As explained in its methodology, Moody's made an incremental adjustment to its expected loss to account for the potential increased risk of legal challenges from defaulted borrowers, which could result in the trust bearing the legal expenses associated with defending against such claims. This risk is mitigated by the relatively strong credit quality of the borrowers, since they are less likely to default. Borrowers with more than three mortgages represented 14.5% (by loan balance) of the pool. Moody's evaluates loans to borrowers with multiple properties to determine if the transaction warrants additional loss adjustments. Moody's has made an adjustment on mortgage loans where the borrower owns more than 3 properties to reflect an "investor" level of riskiness associated with multiple properties for loans listed as owner-occupied or second homes. 89.62% of the loans in the pool have never been delinquent since origination. 9.68% of the loans were 30 days delinquent only once, and 0.47% (3 loans) and 0.22% (1 loan) of the loans were 30 days delinquent more than once and 60 days delinquent, respectively; all delinquencies are measures using the Mortgage Banking Association (MBA) method. Moody's made no additional adjustment to its losses given that the 30-day delinquencies were due to a servicing transfer. All loans are current as of the cut-off date. 7.7% of the loans in the pool amortize over 40 years and have either a 7 year or a 10-year initial interest only period. To account for this extended maturity profile and lack of amortization during the early years of the loan, Moody's made an adjustment to its collateral losses. 7.0% of the borrowers in the pool have experienced some forms of prior credit event such as bankruptcy and/or foreclosure. However, except for one loan, all these credit events have taken place more than four years ago. Moody's considers the length of time since the credit event, the higher WA FICO (733), lower WA CLTV (77.7%) and low WA DTI (35.9%) for the affected loans relative to the total pool as mitigating factors, and as a result, Moody's made no additional adjustment to its collateral losses 33 loans (5.4% by loan balance) are shared appreciation loans, i.e. loans where a third party contributed equity towards the down payment of the mortgage loan. In the loan tape for this transaction, the equity contribution is accounted for as a junior lien (without any associated P&I) on the property. Therefore, this equity contribution by the third party is reflected in CLTV but is not reflected in LTV 13 loans (2.1% by loan balance) have bi-weekly payments instead of monthly payments. By making a mortgage payment every two weeks, the borrower is effectively making 13 monthly payments per year instead of 12 monthly payments. The actual interest paid over the life of the loan is also reduced because of faster amortization. Aggregation quality The aggregator of this pool is Citigroup Global Markets Realty Corp. The aggregator acquired the loans in the pool from various originators including Commerce Home Mortgage, LoanDepot, VNB and Goldwater Bank, and other aggregators such as Galton and MaxEx. Approximately 73.4%, 7.9%, 6.1%, 5.2%, 5.2% and 2.2% of the loans in the pool were acquired from GMRF Mortgage Acquisition Company, LLC (Galton), Commerce Home Mortgage, LLC, loanDepot.com, LLC (loanDepot), Valley National Bank (VNB), MaxEx, LLC, and Goldwater Bank NA, respectively. All the loans were underwritten to each respective seller's guidelines instead of Citigroup's own guidelines. Based on the information provided related to Citigroup Global Markets Realty Corp.'s (CGMRC) valuation and risk management practices, the 100% due diligence, the transparent representation and warranty framework, and strong alignment of interests/risk retention, Moody's did not make any adjustments to its losses based on its review of the aggregator. Origination quality Moody's did not adjust its expected loss assumptions for loans underwritten to Galton's, loanDepot's, and VNB's programs in spite of certain weaknesses in underwriting guidelines such as lower FICO score requirement accompanied with allowance for higher LTV and DTI ratio loans. This is because quantitative factors such as lower FICO and higher LTV limits are already captured in its MILAN model. However, there are some smaller originators/sellers in this pool whose guidelines Moody's did not review. Moody's increased its loss assumptions for these originators/sellers in order to account for this uncertainty in origination quality. Servicing arrangement Moody's considers the overall servicing arrangement for this pool as adequate, and as a result Moody's did not make any adjustments to its base case and Aaa stress loss assumptions based on the servicing arrangement. Fay and Shellpoint are the two named servicers. The servicing fee will be based on a step-up incentive fee structure with a minimum monthly base fee of $10 per loan and additional fees for delinquent or defaulted loans. In spite of the step-up incentive fee, the fee will not exceed the aggregate servicing fee of 25 bps for this transaction. In its cashflow model, Moody's has assumed a servicing fee of 25 bps. There is no master servicer in this transaction. U.S. Bank National Association will be the trust administrator and the trustee are U.S. Bank Trust National Association. Moreover, the servicers will not advance any scheduled principal or interest on delinquent mortgages. Moody's did not apply any adjustment to its expected losses for the lack of master servicer due to the following: (1) There is no P&I advancing in this transaction which obviates the need for a master servicer to step in if the primary servicer is unable to do so, (2) Although limited in depth and scope, there is still third party oversight of Fay and Shellpoint from the GSEs, the CFPB, the accounting firms and state regulators, (3) the complexity of the loan product is low and the pool credit quality is generally good, reducing the complexity of servicing and reporting, and (4) U.S. Bank National Association, as the trust administrator, will be responsible for aggregating the reports from the servicers and reporting to investors, but also appoint a replacement servicer at the direction of the controlling holder. The fees paid to the successor servicer cannot exceed the aggregate servicing fee of 25 bps. COVID-19 impacted borrowers As of the cut-off date, no borrower under any mortgage loan has entered into a COVID-19 related forbearance plan with the servicer. However, there is one loan where the servicer has noted that the borrower has been impacted by COVID-19 hardship. The servicer is currently evaluating the hardship request. Generally, the borrower must initially contact the servicer and attest they have been impacted by a COVID-19 hardship and that they require payment assistance. The servicer will offer an initial forbearance period to the borrower, which can be extended if the borrower attests that they require additional payment assistance. At the end of the forbearance period, if the borrower is unable to make the forborne payments on such mortgage loan as a lump sum payment or does not enter into a repayment plan, the servicer may defer the missed payments, which could be added as a noninterest-bearing payment due at the end of the loan term. If the borrower can no longer afford to make payments in line with the original loan terms, the servicer would typically work with the borrower to modify the loan (although the servicer may utilize any other loss mitigation option permitted under the pooling and servicing agreement with respect to such mortgage loan at such time or anytime thereafter). Of note, per the transaction documents, any principal forbearance amount created in connection with any modification (whether as a result of a COVID-19 forbearance or otherwise) will be recognized as a realized loss only if it is written off or forgiven by the servicer. Third-party review The Sponsor engaged AMC Diligence, LLC (AMC), Clayton Services, LLC, and Edge Mortgage Advisory Company, LLC as independent third-party review firms. They conducted a review of credit, property valuations, regulatory compliance and data accuracy checks ("full review") for 100% (431) of the loans in the pool. Each mortgage loan was reviewed by only one of the TPR firms and each TPR firm produced one or more reports detailing its review procedures and the related results. These firms conducted detailed credit, valuation, regulatory compliance and data integrity reviews on 100% of the mortgage pool. The TPR results indicated compliance with the originators' underwriting guidelines for majority of loans, no material compliance issues, and no appraisal defects. Overall, the loans that had exceptions to the originators' underwriting guidelines had strong documented compensating factors such as low DTIs, low LTVs, high reserves, high FICOs, or clean payment histories. The TPR firms also identified minor compliance exceptions for reasons such as inadequate RESPA disclosures (which do not have assignee liability) and TILA/RESPA Integrated Disclosure (TRID) violations related to fees that were out of variance but then were cured and disclosed. In this transaction, 63 of the non-conforming loans had a property valuation review only consisting of a Collateral Underwriter and no other third-party valuation product such as a CDA and field review. Moody's considers the use of Collateral Underwriter for non-conforming loans to be credit negative due to (1) the lack of human intervention which increases the likelihood of missing emerging risk trends, (2) the limited track record of the software and limited transparency into the model and (3) GSE focus on non-jumbo loans which may lower reliability on jumbo loan appraisals. However, Moody's has not applied an adjustment to the loss for such loans since the statistically significant sample size and valuation results of the loans that were reviewed using a third-party valuation product such as a CDA (which Moody's considers to be a more accurate third-party valuation product) were sufficient and the original appraisal balances for such loans were not significantly higher than that of appraisal values for loans which had both a CU score and another valuation product. R&W framework Moody's assessed CMLTI 2020-EXP1's R&W framework for this transaction as adequate, consistent with that of other prime jumbo transactions for which the breach review process is thorough, transparent and objective, and the costs and manner of review are clearly outlined at issuance. An effective R&W framework protects a transaction against the risk of loss from fraudulent or defective loans. Moody's assessed the R&W framework based on three factors: (a) the financial strength of the R&W provider, (b) the strength of the R&Ws (including qualifiers and sunsets), and (c) the effectiveness of the enforcement mechanisms. The loan level R&Ws are strong and, in general, either meet or exceed the baseline set of credit-neutral R&Ws Moody's identified for US RMBS. The mechanisms for enforcing breaches of R&Ws are generally strong. The trust administrator is obligated to hire an independent breach reviewer to perform a review when a loan either becomes 120 days delinquent or it liquidates at a loss. Of note, loans in forbearance due to a pandemic or national emergency will not be reviewed while in forbearance. Unlike some R&W frameworks that prescribe specific tests for the reviewer to perform, the scope of the review is open and not specifically defined. If a material R&W breach is discovered, the R&W provider will be obligated to cure the defect, repurchase the loan, or reimburse any realized loss. One exception is that there will be no obligation to remedy a breach of R&W if the defect that gave rise to the R&W breach was disclosed in the PPM. Moody's did not make any R&W adjustment for this deal. Transaction structure CMLTI 2020-EXP1 features a structure that allocates principal payments sequentially to the bonds, instead of the shifting-interest structure that is typical of prime and expanded prime transactions Moody's rates, benefitting the senior bondholders. In addition, the excess spread in this transaction can be used to absorb losses before any excess is released to the sponsor, while in typical prime and expanded prime structures the excess spread is absorbed by the interest-only tranches. The transaction also features an interest reserve account, which can be used to pay bondholders in the event delinquent loans and the lack of P&I advancing to cover their payments causes interest shortfalls. The combination of the reserve account and the excess spread substantially mitigate the risk of shortfalls. On the closing date, the sponsor is expected to fund the interest reserve account up to its target of three months of interest distributions. Interest payments to the bonds will be made using the interest remittance amount; principal will be paid sequentially to all the bonds using the principal remittance amount. Any excess spread will be used to first replenish the interest reserve account to its target amount before being used to reimburse realized loss, Net WAC shortfall and unpaid expenses/fees. Any funds in the reserve account in excess of the required amount will be released to the sponsor. Realized loss and certificate write-down will be allocated in reverse sequential order starting with Class B-3. There is more than 2% excess spread (annualized) available in the deal. When excess spread is a form of credit enhancement, it can provide a significant amount of credit protection to investors. However, the amount of protection actually provided by excess spread will depend on: (1) WAC deterioration or yield compression resulting from (i) high-yielding mortgage loans prepaying or defaulting at a faster pace than other mortgage loans; or (ii) modifications of loan interest rates lowering the average rate (2) the speed with which mortgage loans prepay or default during the life of the securitization and (3) The amount of excess spread that "leaks out" of the transaction before it is needed to protect investors. The risk of leakage is typically highest in the early months of a transaction when losses are relatively low. In its analysis, Moody's accounted for WAC deterioration by applying a 25% haircut to the weighted average interest rate of the mortgage loans in the pool. Moody's used this calculated lower interest rate in its cash flow modeling. Other factors were taken into account by applying a higher prepayment rate in its cash flow model. Moody's applied a CPR of approximately 30% which is higher than 20-25% CPR range in its methodology due to the fact that better credit quality pools tend to prepay faster. In addition, the higher prepayment rate was derived based on historical prepayment rates of loans with similar characteristics. 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 April 2020. COMM 2012-CCRE1: Moody's Lowers Rating Class G Certs to Caa2 ------------------------------------------------------------ Moody's Investors Service affirmed the ratings on six classes and downgraded the ratings on five classes that remain under review for downgrade in COMM 2012-CCRE1 Mortgage Trust, Commercial Pass-Through Certificates, Series 2012-CCRE1 as follows: Cl. A-3, Affirmed Aaa (sf); previously on Mar 29, 2019 Affirmed Aaa (sf) Cl. A-M, Affirmed Aaa (sf); previously on Mar 29, 2019 Affirmed Aaa (sf) Cl. A-SB, Affirmed Aaa (sf); previously on Mar 29, 2019 Affirmed Aaa (sf) Cl. B, Affirmed Aa2 (sf); previously on Mar 29, 2019 Affirmed Aa2 (sf) Cl. C, Affirmed A2 (sf); previously on Mar 29, 2019 Affirmed A2 (sf) Cl. D, Downgraded to Ba2 (sf) and Remains on Review for Possible Downgrade; previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. E, Downgraded to B1 (sf) and Remains on Review for Possible Downgrade; previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to B2 (sf) and Remains on Review for Possible Downgrade; previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. G, Downgraded to Caa2 (sf) and Remains on Review for Possible Downgrade; previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade Cl. X-A*, Affirmed Aaa (sf); previously on Mar 29, 2019 Affirmed Aaa (sf) Cl. X-B*, Downgraded to B3 (sf) and Remains on Review for Possible Downgrade; previously on Apr 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade *Reflects Interest-Only Classes RATINGS RATIONALE The ratings on five principal and interest (P&I) classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on four P&I classes, Class D, Class E, Class F and Class G, were downgraded due to a decline in pool performance and higher anticipated losses driven primarily by the recent decline in performance and significant exposure to two regional malls, the Crossgates Mall loan (15.2% of the pool) sponsored by Pyramid Management Group and RiverTown Crossings Mall loan (6.9% of the pool), sponsored by Brookfield Properties. The two regional mall loans, representing 22% of the pool, are scheduled to mature within the next 12 -- 24 months and may face significant refinance risk due to the current retail environment. The ratings on four P&I classes remain on review for possible downgrade due to the significant exposure and uncertainty around the future performance of the regional mall loans, particularly the Crossgates Mall loan which is currently more than 60 days delinquent and last paid through its March 2020 payment date. The rating on the interest-only (IO) class, Class X-A, was affirmed based on the credit quality of the referenced classes. The rating on the IO class, Class X-B, was downgraded due to a decline in the credit quality of the referenced classes. The rating on the class remains on review for possible downgrade due to the referenced P&I classes that remain on review for possible downgrade. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's rating action reflects a base expected loss of 6.4% of the current pooled balance, compared to 1.9% at Moody's last review. Moody's base expected loss plus realized losses is now 4.8% of the original pooled balance, compared to 1.5% 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 methodologies used in rating all classes except interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the June 17, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 26% to $690.1 million from $932.8 million at securitization. The certificates are collateralized by 41 mortgage loans ranging in size from less than 1% to 15.2% of the pool, with the top ten loans (excluding defeasance) constituting 55.9% of the pool. Nine loans, constituting 20.2% 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 13, compared to 16 at Moody's last review. As of the June 2020 remittance report, loans representing 76% were current or within their grace period on their debt service payments, 9% were delinquent between 30-59 days and 15% were delinquent at 60 days or more. Nine loans, constituting 19.8% 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. No loans have been liquidated from the pool and one loan, constituting 15.2% of the pool, is currently in special servicing. The specially serviced loan is the Crossgates Mall ($104.7 million -- 15.2% of the pool), which represents a pari-passu portion of a $261.7 million mortgage loan. The loan is secured by a two-story, 1.3 million square foot (SF) super regional mall located in Albany, New York. The mall is anchored by Macy's (non-collateral), J.C. Penney, Dick's Sporting Goods, Burlington Coat Factory, Best Buy and Regal Crossgates 18. As of March 2020, the total mall and collateral occupancy was 96%. The in-line occupancy was 89% occupied compared to 88% in March 2019. Furthermore, property performance has been stable and the 2019 net operating income was 2% higher than securitization levels. The loan was transferred to special servicing in April 2020 as a result of the coronavirus outbreak and is last paid through its March 2020 payment date. New York suspension of non-essential business closures attributed to the mall remaining closed, with certain tenants offering curbside pick-up in the exterior of the mall. As a result of the closure, many tenants have not remitted rent in recent months. The special servicer indicated they are in discussions with the borrower to formulate a resolution plan. The mall represents a dominant super-regional mall with over 10 anchors and junior anchors and benefits from its location at the junction of Interstate 87 and Interstate 90. Moody's received full year 2019 operating results for 100% of the pool, and partial year 2020 operating results for 38% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 87%, compared to 84% 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 17.2% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.1%. Moody's actual and stressed conduit DSCRs are 1.68X and 1.37X, respectively, compared to 1.69X and 1.37X 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 20.4% of the pool balance. The largest loan is the Creekside Plaza Loan ($52.5 million -- 7.6% of the pool), which is secured by an approximately 228,000 SF, Class A, three-building office complex located in San Leandro, California. The collateral also includes an above-ground parking structure. As of March 2020, the property was 100% occupied compared to 78% in 2019. The lease-up is due to the expansion and space consolidation of Alameda County and Alameda Health Systems with an expected rent start date in November 2020. The largest tenant concentration is leased by various divisions of Alameda County accounting for approximately 68% of net rentable area (NRA) with varying lease expiration dates. After an initial year-year interest-only period, the loan has amortized 4.6% since securitization. Moody's LTV and stressed DSCR are 96% and 1.07X, respectively, compared to 98% and 1.05X at the last review. The second largest loan is the RiverTown Crossings Mall Loan ($47.9 million -- 6.9% of the pool), which represents a pari-passu portion of a $133.5 million mortgage loan. The loan is secured by an approximately 635,800 SF portion of a 1.2 million SF regional mall located in Grandville, Michigan. The property was built in 2000 and is anchored by Macy's, Sears, Kohl's, J.C. Penney, Dick's Sporting Goods and Celebration Cinemas. The sponsor purchased a vacant, former Younkers, anchor box (150,081 SF) in 2019 for $4.4 million. The only collateral anchors are Dick's Sporting Goods and Celebration Cinemas, and both tenants have renewed their leases in early 2020 for an additional five years. Excluding the former Younkers space, the total property was 94% leased as of March 2020 and the in-line occupancy was 88% occupied compared to 87% in March 2019. For the TTM period ending March 2020, reported comparable in-line sales (less than 10,000 SF) was $361 PSF compared to $382 PSF for the year ending December 2019. The Celebration Cinemas has shown strong historical sales of above $500,000 per screen. While property performance generally improved through 2016 it has declined since then primarily due to lower rental revenues. The property's 2019 NOI was 12% lower than in 2018 but remained 3% higher than underwritten levels. The mall re-opened in June 2020 after temporary closure from the coronavirus outbreak. The loan has amortized 13.4% since securitization and has an upcoming maturity in June 2021. The loan is current through its June 2020 payment. Moody's LTV and stressed DSCR are 112% and 1.14X, respectively, compared to 76% and 1.39X at the last review. The third largest loan is the Westgate Shopping Center Loan ($40.4 million -- 5.9% of the pool), which is secured by an approximately 470,700 SF of a 597,500 SF anchored retail center located in Rocky River, Ohio. The property is anchored by Target (non-collateral), Lowe's, Kohl's, Marshalls, Earth Fare, and Petco. Lowe's and Kohl's own their own stores and pay ground rent. Earth Fare (6% of NRA) filed for bankruptcy in February 2020 and is expected to close all their stores. As of March 2020, the property was 93% occupied including Earth Fare. The property's NOI has decreased year-over-year since 2015 due to a decreasing trend in revenue and increasing expenses. The loan was placed on the watchlist in June 2020 as a collection in process and has been past due on their payment since May 2020. Moody's LTV and stressed DSCR are 120% and 0.86X, respectively, compared to 94% and 1.07X at the last review. COMM 2012-CCRE2: Moody's Lowers Rating on Class G Certs to Caa1 --------------------------------------------------------------- Moody's Investors Service affirmed the ratings on twelve classes and downgraded the ratings on four classes in COMM 2012-CCRE2 Mortgage Trust, Commercial Pass-Through Certificates, Series 2012-CCRE2 as follows: Cl. A-SB, Affirmed Aaa (sf); previously on Jun 4, 2019 Affirmed Aaa (sf) Cl. A-3, Affirmed Aaa (sf); previously on Jun 4, 2019 Affirmed Aaa (sf) Cl. A-4, Affirmed Aaa (sf); previously on Jun 4, 2019 Affirmed Aaa (sf) Cl. A-M, Affirmed Aaa (sf); previously on Jun 4, 2019 Affirmed Aaa (sf) Cl. A-M-PEZ, Affirmed Aaa (sf); previously on Jun 4, 2019 Affirmed Aaa (sf) Cl. B, Affirmed Aa2 (sf); previously on Jun 4, 2019 Affirmed Aa2 (sf) Cl. B-PEZ, Affirmed Aa2 (sf); previously on Jun 4, 2019 Affirmed Aa2 (sf) Cl. C, Affirmed A2 (sf); previously on Jun 4, 2019 Affirmed A2 (sf) Cl. C-PEZ, Affirmed A2 (sf); previously on Jun 4, 2019 Affirmed A2 (sf) Cl. D, Affirmed Baa1 (sf); previously on Jun 4, 2019 Affirmed Baa1 (sf) Cl. E, Downgraded to Ba1 (sf); previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to B1 (sf); previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. G, Downgraded to Caa1 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade Cl. PEZ**, Affirmed A1 (sf); previously on Jun 4, 2019 Affirmed A1 (sf) Cl. X-A*, Affirmed Aaa (sf); previously on Jun 4, 2019 Affirmed Aaa (sf) Cl. X-B*, Downgraded to B1 (sf); previously on Apr 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade *Reflects Interest-Only Classes **Reflects Exchangeable Class RATINGS RATIONALE The ratings on ten principal and interest (P&I) classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on three P&I classes, Cl. E, Cl. F and Cl. G, were downgraded due to a decline in pool performance and higher anticipated losses driven primarily by the recent decline in performance of the Crossgates Mall loan (5.9% of the pool) sponsored by Pyramid Management Group. The loa is currently more than 60 days delinquent and last paid through its March 2020 payment date. It is scheduled to mature within the next 24 months and may face significant refinance risk due to the current retail environment. The rating on the interest-only (IO) class, Cl. X-A, was affirmed based on the credit quality of the referenced classes. The rating on the IO class, Cl. X-B, was downgraded due to a decline in the credit quality of the referenced classes. The rating on the exchangeable class was affirmed due to the due to the weighted average rating factor (WARF) of the exchangeable classes. The actions conclude the review for downgrade initiated on April 17, 2020. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's rating action reflects a base expected loss of 4.2% of the current pooled balance, compared to 1.7% at Moody's last review. Moody's base expected loss plus realized losses is now 3.4% of the original pooled balance, compared to 1.4% 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 methodologies used in rating all classes except exchangeable classes and interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the June 17, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 19.4% to $1.06 billion from $1.32 billion at securitization. The certificates are collateralized by 48 mortgage loans ranging in size from less than 1% to 9.9% of the pool, with the top ten loans (excluding defeasance) constituting 64% of the pool. One loan, constituting 8.3% of the pool, have investment-grade structured credit assessments. Sixteen loans, constituting 16.8% 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 13, compared to 15 at Moody's last review. As of the June 2020 remittance report, loans representing 93% were current or within their grace period on their debt service payments and 7% were delinquent at 60 days or more. Thirteen loans, constituting 30.2% 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 which have liquidated at a loss. One loan, constituting 5.9% of the pool, is currently in special servicing. The specially serviced loan is the Crossgates Mall ($62.8 million -- 5.9% of the pool), which represents a pari-passu portion of a $261.7 million mortgage loan. The loan is secured by a two-story, 1.3 million square foot (SF) super regional mall located in Albany, New York. The mall is anchored by Macy's (non-collateral), J.C. Penney, Dick's Sporting Goods, Burlington Coat Factory, Best Buy and Regal Crossgates 18. As of March 2020, the total mall and collateral occupancy was 96%. The in-line occupancy was 89% occupied compared to 88% in March 2019. Furthermore, property performance has been stable and the 2019 net operating income was 2% higher than securitization levels. The loan was transferred to special servicing in April 2020 as a result of the coronavirus outbreak and is last paid through its March 2020 payment date. New York suspension of non-essential business closures attributed to the mall remaining closed, with certain tenants offering curbside pick-up in the exterior of the mall. As a result of the closure, many tenants have not remitted rent in recent months. The special servicer indicated they are in discussions with the borrower to formulate a resolution plan. The mall represents a dominant super-regional mall with over 10 anchors and junior anchors and benefits from its location at the junction of Interstate 87 and Interstate 90. Moody's has also assumed a high default probability for two poorly performing loans, constituting 2.7% of the pool, and has estimated an aggregate loss of $19.6 million (a 21% expected loss on average) from the specially serviced and troubled loans. Moody's received full year 2019 operating results for 83% of the pool, and partial year 2020 operating results for 18% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 98%, compared to 90% 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 17.5% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.6%. Moody's actual and stressed conduit DSCRs are 1.55X and 1.12X, respectively, compared to 1.64X and 1.19X 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 loan with a structured credit assessment is the 520 Eighth Avenue Loan ($88.7 million -- 8.3% of the pool), which is secured by three adjacent and interconnected office buildings that have been combined into a single office property. The properties are located at 520 8th Avenue, 266 West 37th Street and 261 West 36th Street, totaling 758,000 SF. The buildings are occupied by a diverse mix of tenants including not-for-profit associations, professional services firms, media and entertainment services companies. The property was 96% leased as of December 2019, slightly down from 100% in December 2018. Moody's structured credit assessment and stressed DSCR are aa3 (sca.pd) and 1.53X, respectively. The top three conduit loans represent 29.3% of the pool balance. The largest loan is the 260 and 261 Madison Avenue Loan ($105 million -- 9.9% of the pool), which is secured by two Class-B office towers located in midtown Manhattan on Madison Avenue between East 36th and East 37th Street. The properties total approximately 840,000 SF of office space, 37,000 SF of retail space, and a 46,000 SF parking garage. This loan represents a pari-passu portion of a $231.0 million first mortgage. As of December 2019, the properties had a combined occupancy of 90.5%, compared to 87% as of December 2018 and 90% at securitization. Approximately 19% of the net rentable area (NRA) has lease rollover in 2021, including the largest tenant, McLaughlin & Stern LLP (12.5% of NRA). Other tenants at the property include coworking and shared office space tenants Knotel (4.9% of NRA) and WeWork (4.8% of NRA). Moody's LTV and stressed DSCR are 120% and 1.50X, respectively, compared to 97% and 1.81X at the last review. The second largest loan is the 77 K Street Loan ($104.7 million -- 9.8% of the pool), which is secured by an approximately 327,000 SF Class-A office building located in the Capitol Hill submarket of Washington, D.C. The property was built in 2008 for a total cost of $113 million. The property was 100% leased as of December 2019, unchanged from December 2018 and up from 93% at securitization. The largest tenant, the Internal Revenue Service (IRS) (51% of NRA) has extended their lease for an additional 10 years with a lease expiration in December 2030. Moody's LTV and stressed DSCR are 89% and 1.09X, respectively, compared to 91% and 1.07X at the last review. The third largest loan is the 1055 West 7th Street Loan ($102.4 million -- 9.6% of the pool), which is secured by an approximately 616,000 SF office Class-A property located in downtown Los Angeles, California. The property was built in 1987 and is 32 stories high. The building is located just west of Interstate 110, one block away from the 7th Street Metro Station, and a few blocks from the Staples Convention Center. As of September 2019, the property was 89% leased, compared to 83% in September 2018 and 85% at securitization. The largest tenant, L.A. Care Health Plan (47% of net rentable area), is expected to consolidate its employees to a nearby building at 1200 West 7th Street in 2024. Moody's LTV and stressed DSCR are 109% and 0.96X, respectively, compared to 103% and 0.98X at the last review. COMM 2012-CCRE3: Moody's Lowers Rating on Class G Certs to Caa3 --------------------------------------------------------------- Moody's Investors Service affirmed the ratings on four classes, placed three classes on review for downgrade and downgraded the ratings on five classes that remain on review for downgrade in COMM 2012-CCRE3 Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2012-CCRE3 as follows: Cl. A-3, Affirmed Aaa (sf); previously on Jul 19, 2018 Affirmed Aaa (sf) Cl. A-M, Affirmed Aaa (sf); previously on Jul 19, 2018 Affirmed Aaa (sf) Cl. A-SB, Affirmed Aaa (sf); previously on Jul 19, 2018 Affirmed Aaa (sf) Cl. B, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Jul 19, 2018 Affirmed Aa3 (sf) Cl. C, A3 (sf) Placed Under Review for Possible Downgrade; previously on Jul 19, 2018 Affirmed A3 (sf) Cl. D, Downgraded to Baa3 (sf) and Remains on Review for Possible Downgrade; previously on Apr 17, 2020 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. E, Downgraded to B1 (sf) and Remains on Review for Possible Downgrade; previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to B3 (sf) and Remains on Review for Possible Downgrade; previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. G, Downgraded to Caa3 (sf) and Remains on Review for Possible Downgrade; previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade Cl. X-A*, Affirmed Aaa (sf); previously on Jul 19, 2018 Affirmed Aaa (sf) Cl. X-B*, Downgraded to Caa1 (sf) and Remains on Review for Possible Downgrade; previously on Apr 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. PEZ**, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Jul 19, 2018 Affirmed Aa3 (sf) * Reflects interest-only classes ** Reflects exchangeable classes RATINGS RATIONALE The ratings on three P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on four P&I classes were downgraded due to higher anticipated losses driven primarily by the decline in performance and significant exposure to three regional malls, Solano Mall (11% of the pool), Crossgate Mall (10% of the pool) and Emerald Square Mall (7% of the pool). Furthermore, the three regional mall loans, representing 27% of the pool, are scheduled to mature within the next two years and may face significant refinance risk due to the current retail environment. The ratings on Cl. B and Cl C. was placed on review for possible downgrade, and the ratings on four P&I classes, Class D, Class E, Class F and Class G, remain on review for possible downgrade due to the significant exposure and uncertainty around the future performance of the two regional malls loans recently transferred to special servicing as a result of the coronavirus pandemic, Solano Mall and Crossgates Mall, both of which are more than 60 days delinquent on their debt service payments. The rating on one IO class, Cl. X-B, was downgraded and remains on review for possible downgrade due to a decline in the credit quality of the referenced exchangeable classes and those referenced P&I classes were placed on review for possible downgrade. The ratings on IO Class X-A was affirmed based on the credit quality of the referenced classes. The rating on the exchangeable class, Class PEZ, was placed on review for possible downgrade due to its referenced P&I classes being placed on review for possible downgrade. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's rating action reflects a base expected loss of 9.6% of the current pooled balance, compared to 2.5% at Moody's last review. Moody's base expected loss plus realized losses is now 7.5% of the original pooled balance, compared to 2.0% 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 methodologies used in rating all classes except exchangeable classes and interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the June 17, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 22% to $973 million from $1.25 billion at securitization. The certificates are collateralized by 40 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten loans (excluding defeasance) constituting 70% of the pool. Eleven loans, constituting 15% 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 12, compared to a Herf of 15 at Moody's last review. As of the June 2020 remittance report, loans representing 62% were current on their debt service payments, 7% were beyond their grace period but less than 30 days late, 10% were between 30 -- 59 days delinquent and 21% were between 60 -- 89 days delinquent. Eight loans, constituting 17% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Five loans, constituting 21% of the pool, are currently in special servicing. Three of the specially serviced loans, representing 21% of the pool, have transferred to special servicing since March 2020. The largest specially serviced loan is the Solano Mall Loan ($105.0 million -- 10.8% of the pool), which is secured by a 561,000 square feet (SF) portion of 1.1 million SF super regional mall located in Fairfield, California. The mall's non-collateral anchors include Macy's, J.C. Penney, and Sears, however, Sears previously announced plans to close its store in July 2020. The largest collateral tenant is Edwards Cinemas (11.2% of NRA, lease expiration December 2024). Property performance has continued to decline from securitization and the property's 2019 net operating income (NOI) was 27% lower than securitization levels due to both lower total revenues and increased operating expenses. Furthermore, several major collateral tenants including Forever 21 (13% of NRA), 24 Hour Fitness (5% of NRA) and Express (1% of NRA) have announced plans to close their locations at the mall. The property was 94% leased as of December 2019, compared to 98% leased as of December 2017, however, the 2019 occupancy includes the tenants with plans to vacate. The loan is interest only for its entire term and matures in July 2022. The mall re-opened in late May after its temporary closure, however, the loan transferred to special servicing in June 2020 for imminent default as a result of the coronavirus pandemic and is last paid through its March 2020 payment date. The second largest specially serviced loan is the Crossgates Mall Loans A-1A2 and A-1B2 ($94.2 million -- 9.7% of the pool) which represents a pari-passu portion of a $261.7 million mortgage loan. The loan is secured by a two-story, 1.3 million square foot (SF) super regional mall located in Albany, New York. The mall is anchored by Macy's (non-collateral), J.C. Penney, Dick's Sporting Goods, Burlington Coat Factory, Best Buy and Regal Crossgates 18. As of March 2020, the total mall and collateral occupancy was 96% and the in-line occupancy was 89%, compared to 88% in March 2019. The property performance has been stable and the 2019 net operating income was 2% higher than securitization levels. The loan was transferred to special servicing in May 2020 as a result of the coronavirus outbreak and is last paid through its March 2020 payment date. New York suspension of non-essential business closures attributed to the mall remaining closed, with certain tenants offering curbside pick-up in the exterior of the mall. As a result of the closure, many tenants have not remitted rent payments in recent months. The special servicer indicated they are in discussions with the borrower to formulate a resolution plan. The mall represents a dominant super-regional mall with over 10 anchors and junior anchors and benefits from its location at the junction of Interstate 87 and Interstate 90. However, due to reopening uncertainty and delinquent debt service payments, Moody's identified this as a troubled loan. The remaining two specially serviced loans are secured by limited service hotel properties in Georgia and in South Carolina that transferred to special servicing in April 2019 and November 2019, respectively, due to declining performance from securitization. Moody's has also assumed a high default probability for two poorly performing loans, constituting 11.5% of the pool. The largest troubled loan is the Emerald Square Mall Loan, which is secured by a 564,501 SF portion of a 1,022,923 SF enclosed super-regional mall in North Attleboro, Massachusetts. The mall is anchored by a Macy's, Macy's Home, Sears and J.C. Penney, of which only J.C. Penney is collateral for the loan. While all anchors remain at the property, property performance has declined since securitization due to lower rental revenues. The reported 2019 revenues were $5 million lower than in 2012, leading to a decline in NOI of 26% for the same period. As of December 2019, the property was 80% leased, compared to 83% as of March 2018 and 90% at securitization. The mall re-opened on June 10 after closing temporarily during the pandemic. The loan sponsor, Simon Property Group, recently classified this mall under their "Other Properties." The loan has amortized nearly 14% since securitization, however, the loan is on the master servicer watchlist due its late payments and is last paid through its April 2020 payment date. The other troubled loan is secured by two properties of mixed use located in Washington, DC. The properties performance has declined due to the recent departure of a large tenant at one of the properties and the 2019 actual DSCR was below 1.00X. Moody's received full year 2018 and 2019 operating results for 99% and 96% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 99%, compared to 88% 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 23% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.6%. Moody's actual and stressed conduit DSCRs are 1.64X and 1.13X, respectively, compared to 1.89X and 1.29X 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 28% of the pool balance. The largest loan is the 260 and 261 Madison Avenue Loan ($126.0 million -- 12.9% of the pool), which is secured by two Class-B office towers located in midtown Manhattan on Madison Avenue between East 36th and East 37th Street. The properties total approximately 840,000 SF of office space, 37,000 SF of retail space, and a 46,000 SF parking garage. This loan represents a pari-passu portion of a $231.0 million first mortgage. As of December 2019, the properties had a combined occupancy of 90.5%, compared to 87% as of December 2018 and 90% at securitization. The property faces upcoming lease roll of 19% in 2021, which includes the largest tenant, McLaughlin & Stern LLP (12.5% of net rentable area; 115,500 SF). The property's NOI has declined in recent years due to increases in operating expenses. The loan is interest only throughout its entire term and Moody's LTV and stressed DSCR are 120% and 0.81X, respectively, compared to 97% and 0.98X at the last review. The second largest loan is the Prince Building Loan ($75.0 million -- 7.7% of the pool), which is secured by a pari passu portion of a $200.0 million first-mortgage loan. The loan is secured by the fee interest in a 12-story retail and office building, totaling 355,000 SF and located in the SoHo neighborhood of Manhattan. The property contains 69,346 SF of retail space and 285,257 SF of office space. The property was built in 1897 and was acquired by the sponsor in 2003. The property's NOI has generally declined since securitization due to slightly lower rental revenues and significant increase in operating expenses. The property has benefited from recent leasing and was 94% leased as of March 2020 compared to 91% at year-end 2019. Major office tenants at the property include Group Nine Media, Inc. Zoc Doc and Equinox. The loan is interest only throughout its entire term and Moody's LTV and stressed DSCR are 116% and 0.81X, respectively, compared to 87% and 1.09X at the last review. The third largest loan is the Midland Park Mall Loan ($72.8 million -- 7.5% of the pool), which is secured by a 277,659 SF portion of a 629,405 SF regional mall located in Midland, Texas. The property's non-collateral anchors are Dillard's and J.C. Penney. The property also includes one vacant, former Sears, non-collateral anchor box. The property is the dominant regional mall in the Midland-Odessa metropolitan area and performance has continually improved since securitization. The 2019 NOI was up over 50% from 2012 as a result of significant increases in rental revenue. The collateral was 93% leased as of December 2019, compared to 97% leased as of March 2018. The loan sponsor is Simon Property Group and the loan remains current through its June 2020 payment date. The loan has amortized 14% since securitization and Moody's LTV and stressed DSCR are 74% and 1.46X, respectively, compared to 63% and 1.55X at the last review. COMM 2012-CCRE4: Moody's Lowers Rating on Class E Certs to C ------------------------------------------------------------ Moody's Investors Service has affirmed the ratings on five classes and downgraded the ratings on five classes in COMM 2012-CCRE4 Mortgage Trust, Commercial Pass-Through Certificates, Series 2012-CCRE4 as follows: Cl. A-SB, Affirmed Aaa (sf); previously on Aug 17, 2018 Affirmed Aaa (sf) Cl. A-3, Affirmed Aaa (sf); previously on Aug 17, 2018 Affirmed Aaa (sf) Cl. A-M, Affirmed Aaa (sf); previously on Aug 17, 2018 Affirmed Aaa (sf) Cl. B, Downgraded to A3 (sf); previously on Apr 17, 2020 A2 (sf) Placed Under Review for Possible Downgrade Cl. C, Downgraded to Ba2 (sf); previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. D, Downgraded to Caa2 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade Cl. E, Downgraded to C (sf); previously on Apr 17, 2020 Caa3 (sf) Placed Under Review for Possible Downgrade Cl. F, Affirmed C (sf); previously on Aug 17, 2018 Downgraded to C (sf) Cl. X-A*, Affirmed Aaa (sf); previously on Aug 17, 2018 Affirmed Aaa (sf) Cl. X-B*, Downgraded to Baa3 (sf); previously on Apr 17, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade * Reflects interest-only classes RATINGS RATIONALE The ratings on three principal and interest classes were affirmed because the transaction's key metrics, including Moody's loan-to-value ratio, Moody's stressed debt service coverage ratio and the transaction's Herfindahl Index, are within acceptable ranges. The ratings on four P&I classes, Cl. B, Cl. C, Cl. D and Cl. E, were downgraded due to a decline in pool performance and higher anticipated losses from the specially serviced (21.2% of the pool) and troubled loans. The two specially serviced loans are secured by regional malls, Fashion Outlets of Las Vegas, which is already REO (real estate owned) and Eastview Mall and Commons. The rating on one P&I class was affirmed because the ratings are consistent with Moody's expected loss. The rating on the interest-only class, Cl. X-A, was affirmed based on the credit quality of the referenced classes. The rating on the IO class, Cl. X-B, was downgraded due to a decline in the credit quality of the referenced classes. The actions conclude the review for downgrade initiated on April 17, 2020. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's rating action reflects a base expected loss of 12.9% of the current pooled balance, compared to 8.7% at Moody's last review. Moody's base expected loss plus realized losses is now 10.0% of the original pooled balance, compared to 7.5% 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 methodologies used in rating all classes except interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the June 17, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 22.3% to $863 million from $1.11 billion at securitization. The certificates are collateralized by 37 mortgage loans ranging in size from less than 1% to 14.5% of the pool, with the top ten loans (excluding defeasance) constituting 60.8% of the pool. Eleven loans, constituting 19.3% 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 11, compared to 16 at Moody's last review. As of the June 2020 remittance report, loans representing 74% were current or within their grace period on their debt service payments, 4% were 30 days delinquent, 15% were delinquent at 60 days and 7% were REO. Four loans, constituting 6.4% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council 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. Three loans have been liquidated from the pool, contributing to a minimal aggregate realized loss. Two loans, constituting 21.2% of the pool, are currently in special servicing. The largest specially serviced loan is the Eastview Mall and Commons Loan ($120.0 million -- 13.9% of the pool), which represents a pari-passu portion in $210.0 million first mortgage loan. The loan is secured by a 725,000 SF portion of a 1.4 million super-regional mall and an 86,000 SF portion of a 341,000 SF adjacent retail power center. The property is located in Victor, New York, approximately 15 miles southeast of Rochester. The Eastview Mall's non-collateral anchors include Macy's, Von Maur, JC Penney, and Lord & Taylor. The total mall, including the non-collateral anchors, was 93% leased as of March 2020 with an inline occupancy at 79%. One non-collateral anchor, Sears, vacated in 2018 but is reported to be backfilled by a Dicks Sporting Goods. The property's net operating income has declined since securitization due to lower base rent and higher expenses. The mall is considered to be the dominant mall in the area. The Eastview Commons portion is a power center. The non-collateral anchors at the power center include Target & Home Depot. The loan is interest only for entire 10 years term. The loan transferred to special servicing in June 2020 due to imminent default as a result of the coronavirus outbreak and is last paid through its March 2020 payment date. The second largest specially serviced loan is the Fashion Outlets of Las Vegas Loan ($63.1 million -- 7.3% of the pool), which is secured by the leasehold interest in a 376,000 SF enclosed outlet center located in Primm, Nevada, approximately 40 miles southwest of Las Vegas. The property is located right off of I-15 at the border between California and Nevada and is attached to the Primm Valley Resort, one of three hotel-casinos located in the immediate vicinity of the property. The property is subject to a long-term ground lease that expires in December 2048, with one 25-year renewal option. The loan was transferred to the special servicer in August 2017 due to imminent maturity default, after the sponsor indicated that they would be unable to refinance the loan at its maturity in November 2017. A receiver was appointed in January 2018 and the receiver remains in control of all property cash flows and is attempting to stabilize operations. The foreclosure process concluded, and the property became REO in September 2018. Moody's has also assumed a high default probability for three poorly performing loans, constituting 6.5% of the pool, and has estimated an aggregate loss of $102.5 million (a 43% expected loss on average) from the specially serviced and troubled loans. The largest troubled loan is the Emerald Square Mall Loan (4.0% of the pool), which is secured by a 564,501 SF portion of a 1,022,923 SF enclosed super-regional mall in North Attleboro, Massachusetts. The mall is anchored by a Macy's, Macy's Home, Sears and J.C. Penney, of which only J.C. Penney is collateral for the loan. While all anchors remain at the property, performance has declined since securitization due to lower rental revenues. The 2019 NOI has declined 26% since securitization. As of December 2019, the property was 80% leased, compared to 83% as of March 2018 and 90% at securitization. The mall re-opened on June 10 after closing temporarily due to the coronavirus outbreak. The loan sponsor, Simon Property Group, recently classified this mall under their "Other Properties". The loan has amortized early 14% since securitization however, the loan is on the master servicer watchlist due its late payments and is last paid through its April 2020 payment date. The other troubled loans are secured by a mixed-use property located in Baltimore, Maryland and a hotel property located in Los Angeles, California. The performance of both the properties has declined since securitization. Moody's received full year 2019 operating results for 94% of the pool, and partial year 2020 operating results for 42% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 95%, compared to 93% 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 16.4% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.0%. Moody's actual and stressed conduit DSCRs are 1.85X and 1.23X, respectively, compared to 1.88X and 1.23X 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 22.9% of the pool balance. The largest loan is The Prince Building Loan ($125.0 million -- 14.5% of the pool), which is secured by a pari-passu portion of a $200.0 million first-mortgage loan. The loan is secured by the fee interest in a 12-story retail and office building, totaling 355,000 SF and located in the SoHo neighborhood of Manhattan. The property contains 69,346 SF of retail space and 285,257 SF of office space. The property was built in 1897 and was acquired by the sponsor in 2003. The property's NOI has generally declined since securitization due to slightly lower rental revenues and significant increase in operating expenses. The property has benefited from recent leasing and was 94% leased as of March 2020 compared to 91% in December 2019. Major office tenants at the property include Group Nine Media, Inc. Zoc Doc and Equinox. The loan is interest only throughout its entire term and Moody's LTV and stressed DSCR are 116% and 0.81X, respectively, compared to 87% and 1.09X at the last review. The second largest loan is the TMI Hospitality Portfolio Loan ($37.6 million -- 4.4% of the pool), which is secured by a portfolio of five limited service and five extended stay hotels located across six states (Texas, Illinois, Michigan, South Dakota, Iowa, and Minnesota). The portfolio is represented by Residence Inn by Marriott, Fairfield Inn, Fairfield Inn & Suites, Courtyard by Marriott, and TownePlace Suites. As of the trailing twelve months ending March 2020, the portfolio was 70% occupied. The loan has amortized 18.2% since securitization. Moody's LTV and stressed DSCR are 86% and 1.47X, respectively, compared to 73% and 1.68X at the last review. The third largest loan is the Dadeland Office Park Loan ($35.0 million -- 4.1% of the pool), which is secured by two seven-story class B office buildings, one two-story class B office building, and a structured parking garage located in Kendal, Florida approximately 10 miles south of downtown Miami. The buildings were constructed between 1971 and 1975 and renovated between 2008 and 2010. As of March 2020, the total property was 93% leased. Leases representing over 21% of the NRA are scheduled to expire prior to the loan maturity in October 2022. Moody's LTV and stressed DSCR are 116% and 0.91X, respectively, compared to 99% and 1.07X at the last review. COMM 2012-CCRE5: Fitch Affirms CCC Rating on Class G Certs ---------------------------------------------------------- Fitch Ratings has downgraded two classes and affirmed 11 classes of Deutsche Bank Securities, Inc., commercial pass-through certificates, series 2012-CCRE5). The Rating Outlook on the class F notes remains Negative. COMM 2012-CCRE5 - Class A-3 12623SAD2; LT AAAsf; Affirmed - Class A-4 12623SAE0; LT AAAsf; Affirmed - Class A-M 12623SAJ9; LT AAAsf; Affirmed - Class A-SB 12623SAC4; LT AAAsf; Affirmed - Class B 12623SAL4; LT AAsf; Affirmed - Class C 12623SAQ3; LT Asf; Affirmed - Class D 12623SAS9; LT BBB+sf; Affirmed - Class E 12623SAU4; LT BBB-sf; Affirmed - Class F 12623SAW0; LT Bsf; Affirmed - Class G 12623SAY6; LT CCCsf; Affirmed - Class PEZ 12623SAN0; LT Asf; Affirmed - Class X-A 12623SAF7; LT AAAsf; Affirmed - Class X-B 12623SAG5; LT AAsf; Affirmed KEY RATING DRIVERS Increased Loss Expectations: The downgrades reflect increased loss expectations and performance declines of the Fitch Loans of Concern since Fitch's prior rating action. Nine loans (22.6% of pool) were designated FLOCs, including the largest loan, Eastview Mall and Commons (10.8%), secured by a regional mall and power center in Victor, NY and one loan (2%) in special servicing. Five FLOCs (8%) were designated FLOCs primarily due to the expected impact of the coronavirus pandemic in the near term. Regional Mall Fitch Loan of Concern: The largest loan in the pool, Eastview Mall and Commons (10.8%), secured by approximately 8000,000 sf of a 1.7 million sf regional mall and power center in Victor, NY, was designated as a FLOC due to declining collateral occupancy and revenue and performance concerns. YE 2019 servicer-reported net operating income was 12% below YE 2018 and 19% below issuance. The non-collateral Sears, which is owned by Seritage Growth Properties, closed in the fourth quarter of 2018. Per media reports, Dick's Sporting Goods is anticipated to backfill the space. Also, per media reports, Lord & Taylor, a non-collateral anchor, recently announced plans to liquidate all of its stores. At YE 2019 collateral occupancy and servicer-reported NOI DSCR were 89% and 1.77x, respectively, down from 89% and 2.01x at YE 2018 and 94% and 2.19x at issuance. Fitch requested anchor sales information and a summary of comparative in-line sales; however, according to the servicer the information was not available or tenants do not report. The mall closed on March 19, 2020 and remains closed due to the coronavirus pandemic. Specially Serviced Loan: Belvedere Plaza (2%), secured by a 288,522 sf, grocery-anchored retail center in Decatur, GA, less than 10 miles from Atlanta, transferred to special servicing in June 2020 for payment default. The center is anchored by Kroger, which leases 26.5% NRA through January 2023. Other notable tenants include Dollar Tree, which leases approximately 6.5% NRA through June 2024. At YE 2019 occupancy and servicer-reported NOI DSCR were 82% and 1.02x, respectively. This is down from issuance when occupancy and servicer-reported NOI DSCR were 93% and 1.57x, respectively. The decline is primarily related to competition with a Wal-Mart Supercenter located diagonally across the property's intersection and weak submarket fundamentals. Servicer updates remain outstanding due to the recent transfer. Increase in Credit Enhancement: As of the June 2020 distribution date, the pool's aggregate balance has been paid down by 26.6% to $832.4 million from $1.134 billion at issuance. Forty-three loans (88.6%) are amortizing. Eleven loans (20.9%) are fully defeased and one (3.5%) is in the process of being fully defeased. Pool/Maturity Concentrations: Forty-five of the original 63 loans remain in the pool. All remaining loans mature in 2022. Based on property type, the largest concentrations are retail at 36.2%, office at 32.6% and multifamily at 11.6%. Exposure to Coronavirus Pandemic: Four loans (4.2%) are secured by hotel properties. The weighted average NOI DSCR for all the non-defeased hotel loans is 3.05x. These hotel loans could sustain a weighted average decline in NOI of 68% before DSCR falls below 1.00x. Fourteen loans (36.2%) are secured by retail properties, including one regional mall loan, the largest loan in the pool: Eastview Mall and Commons (10.8%; Victor, NY). The weighted average NOI DSCR for all non-defeased retail loans is 1.94%. These retail loans could sustain a weighted average decline in NOI of 49% before DSCR falls below 1.00x. Additional coronavirus specific base case stresses were applied to one hotel loan (0.7%), four retail loans (17.6%) and West Town Apartments (2.2%) due to its student housing property subtype. These additional coronavirus specific stresses contributed to the downgrades of classes F and G and Negative Outlook on class F. RATING SENSITIVITIES The Stable Outlooks on classes A-SB through E reflect the overall stable performance of the pool and expected continued amortization. The Negative Outlook on class F reflects concerns with the FLOCs, primarily Eastview Mall and Commons and Belvedere Plaza, as well as refinance concerns for the pool with all remaining loans maturing in 2022. Factors that could, individually or collectively, lead to positive rating action/upgrade: Factors that lead to upgrades would include stable to improved asset performance coupled with paydown and/or defeasance. Upgrades of classes B and C would likely occur with continued improvement in CE and/or defeasance; however increased concentrations, further underperformance of FLOCs and decline in performance of loans expected to be impacted by the coronavirus pandemic could cause this trend to reverse. Upgrades of classes D and E is considered unlikely and 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 of classes F and G is not likely due to performance concerns with the FLOCs but could occur if performance of the FLOCs improves and/or if there is sufficient CE, which would likely occur if the non-rated classes are not eroded and the senior classes pay-off. Factors that could, individually or collectively, lead to negative rating action/downgrade: Factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. Downgrades of classes A-3 through C are not likely due to the position in the capital structure. Downgrades of classes D through E could occur if additional loans become FLOCs, with further underperformance of the FLOCs and decline in performance and lack of recovery of loans expected to be impacted by the coronavirus pandemic in the near-term. Classes F and G could be downgraded further if losses are considered possible, probable, imminent or are realized. In addition to its baseline scenario, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects that a greater percentage of classes may be assigned a Negative Outlook or those with Negative Outlooks will be downgraded one or more categories. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS COMM 2012-CCRE5 has an ESG Relevance Score of 4 for Exposure to Social Impacts due to malls that are 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 rating. This impact contributed to the downgrades of classes F and G and Negative Outlook on class F. 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(ies), either due to their nature or the way in which they are being managed by the entity(ies). COMM 2012-CCRE5: Moody's Lowers Class G Certs to Caa1 ----------------------------------------------------- Moody's Investors Service has affirmed the ratings on ten classes, confirmed the rating on one class, and downgraded the ratings on two classes in COMM 2012-CCRE5 Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2012-CCRE5 as follows: Cl. A-3, Affirmed Aaa (sf); previously on Jan 24, 2020 Affirmed Aaa (sf) Cl. A-4, Affirmed Aaa (sf); previously on Jan 24, 2020 Affirmed Aaa (sf) Cl. A-M, Affirmed Aaa (sf); previously on Jan 24, 2020 Affirmed Aaa (sf) Cl. A-SB, Affirmed Aaa (sf); previously on Jan 24, 2020 Affirmed Aaa (sf) Cl. B, Affirmed Aa1 (sf); previously on Jan 24, 2020 Affirmed Aa1 (sf) Cl. C, Affirmed A1 (sf); previously on Jan 24, 2020 Affirmed A1 (sf) Cl. D, Affirmed Baa1 (sf); previously on Jan 24, 2020 Affirmed Baa1 (sf) Cl. E, Confirmed at Baa3 (sf); previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to Ba3 (sf); previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. G, Downgraded to Caa1 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade Cl. X-A*, Affirmed Aaa (sf); previously on Jan 24, 2020 Affirmed Aaa (sf) Cl. X-B*, Affirmed Aa1 (sf); previously on Jan 24, 2020 Affirmed Aa1 (sf) Cl. PEZ**, Affirmed Aa2 (sf); previously on Jan 24, 2020 Affirmed Aa2 (sf) * Reflects Interest-Only Classes ** Reflects Exchangeable Class RATINGS RATIONALE The ratings on seven P&I classes were affirmed and one class was confirmed because the transaction's key metrics, including Moody's loan-to-value ratio, Moody's stressed debt service coverage ratio and the transaction's Herfindahl Index, are within acceptable ranges. The ratings on two P&I classes, Cl. F and Cl. G, were downgraded due to a decline in pool performance driven primarily by the decline in performance of a regional mall, Eastview Mall and Commons. The mall, representing 10.8% of the pool, is scheduled to mature in September 2022. The ratings on two interest only classes were affirmed based on the credit quality of the referenced classes. The ratings on one exchangeable class, Cl. PEZ, was affirmed based on the credit quality of its referenced exchangeable classes. The actions conclude the review for downgrade initiated on April 17, 2020. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained, and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's rating action reflects a base expected loss of 5.1% of the current pooled balance, compared to 3.5% at Moody's last review. Moody's base expected loss plus realized losses is now 3.8% of the original pooled balance, compared to 2.6% 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 methodologies used in rating all classes except exchangeable classes and interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the June 10, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 27% to $832.4 million from $1.13 billion at securitization. The certificates are collateralized by 45 mortgage loans ranging in size from less than 1% to 10.8% of the pool, with the top ten loans (excluding defeasance) constituting 54.4% of the pool. Two loans, constituting 10.6% of the pool, have investment-grade structured credit assessments. Eleven loans, constituting almost 20.9% 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 16, compared to 17 at Moody's last review. As of the June 2020 remittance report, loans representing 83% were current or within their grace period on their debt service payments, 3% were one or less than one-month delinquent and 14% were delinquent at 60 days or more. Eleven loans, constituting 9.8% 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 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. No loans have been liquidated from the pool since securitization. There is currently one loan in special servicing, constituting 2.0% of the pool balance. The Belvedere Plaza Loan was transferred to special servicing in June 2020 as a result of the coronavirus outbreak, and is currently 90 days delinquent. The loan is secured by a 288,522 square foot retail shopping center anchored by Kroger, located in Decatur, Georgia. Property performance has declined since securitization due to lower revenues. As of September 2019, occupancy was 84% compared to 90% as of December 2018. Moody's received full or partial year 2019 operating results for 100% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 94%, compared to 96% at the last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 22% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.6%. Moody's actual and stressed conduit DSCRs are 1.51X and 1.15X, respectively, compared to 1.60X and 1.14X 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 largest loan with a structured credit assessment is the 200 Varick Street Loan ($59.0 million -- 7.1% of the pool), which is secured by a 12-story, 430,000 SF office property located in lower Manhattan, New York. As of December 2019, the property was 99% occupied, essentially unchanged since the last review. The property's occupancy has remained roughly the same for a number of years and performance has been stable. However, there is near term lease rollover risk as 22% of the net rentable area expires in 2020. The loan has amortized by 15.7% since securitization. Moody's structured credit assessment and stressed DSCR are a2 (sca.pd) and 1.58X, respectively, compared to aa3 (sca.pd) and 1.76X at the last review. The second largest loan with a structured credit assessment is the Ritz-Carlton South Beach Loan ($29.5 million -- 3.5% of the pool), which is secured by a beachfront land parcel in Miami Beach, Florida. The land is subject to a long-term ground lease which is set to expire in 2128. The improvements include a 375-room luxury hotel. Moody's considered the value of the ground and the improvements when assessing the risk of the loan. Moody's structured credit assessment is aaa (sca.pd), the same as at last review. The top three conduit loans represent 23.6% of the pool balance. The largest loan is the Eastview Mall and Commons Loan ($90.0 million -- 10.8% of the pool), which represents a pari-passu portion in $210 million first mortgage loan. The loan is secured by a 725,000 SF portion of a 1.4 million super-regional mall and an 86,000 SF portion of a 341,000 SF adjacent retail power center. The property is located in Victor, New York, approximately 15 miles southeast of Rochester. The Eastview Mall's non-collateral anchors include Macy's, Von Maur, JC Penney, and Lord & Taylor. The total mall, including the non-collateral anchors, was 93% leased as of March 2020 with an inline occupancy at 79%. One non-collateral anchor, Sears, vacated in 2018 but is reported to be backfilled by a Dicks Sporting Goods. The property's NOI has declined below securitization levels due to lower base rent and higher expenses. The loan has a maturity date in September 2022. The mall is considered to be the dominant mall in the area. The Eastview Commons portion is a power center. The non-collateral anchors at the power center include Target & Home Depot. The loan is interest only for entire 10 years term. The pari-passu portion of this loan in COMM 2012-CCRE4 transferred to special servicing in June 2020 for imminent default as a result of the coronavirus outbreak. Due to the delinquent debt service payments and troubled retail environment, Moody's has identified this as a troubled loan. The second largest loan is the Metroplex Loan ($55.6 million -- 6.7% of the pool), which is secured by an 18 story, 404,000 SF office property in the Mid-Wilshire office submarket of Los Angeles, California. As of December 2019, the property was 87% occupied, compared to 90% as of April 2018 and 91% in December 2017. The largest tenant, County of Los Angeles (28% of NRA), has recently renewed the lease until April 2025. The loan has amortized 13.7% since securitization and Moody's LTV and stressed DSCR are 105% and 0.95X, respectively, compared to 106% and 0.94X at the last review. The third largest loan is the Widener Building Loan ($50.6 million -- 6.1% of the pool), which is secured by an 18-story multi-tenant Class B office building located in Philadelphia, Pennsylvania. The building has approximately 423,000 SF of office space with 32,000 SF of ground floor retail space. The property was 91% occupied as of September 2019, the same as of December 2018 and compared to 100% in December 2017. The largest tenant is Philadelphia Municipal Authority (44% of NRA), with a lease expiration in January 2026. The loan has amortized 14.4% since securitization. Moody's LTV and stressed DSCR are 93% and 1.05X, respectively, compared to 94% and 1.04X at the last review. COMM 2017-COR2: Fitch Affirms Class G-RR Debt at B-sf ----------------------------------------------------- Fitch Ratings has affirmed all classes of COMM 2017-COR2 Mortgage Trust, Series 2017-COR2. COMM 2017-COR2 - Class A-1 12595EAA3; LT AAAsf; Affirmed - Class A-2 12595EAC9; LT AAAsf; Affirmed - Class A-3 12595EAD7; LT AAAsf; Affirmed - Class A-M 12595EAF2; LT AAAsf; Affirmed - Class A-SB 12595EAB1; LT AAAsf; Affirmed - Class B 12595EAG0; LT AA-sf; Affirmed - Class C 12595EAH8; LT A-sf; Affirmed - Class D 12595EAN5; LT BBBsf; Affirmed - Class E-RR 12595EAQ8; LT BBB-sf; Affirmed - Class F-RR 12595EAS4; LT BBsf; Affirmed - Class G-RR 12595EAU9; LT B-sf; Affirmed - Class X-A 12595EAE5; LT AAAsf; Affirmed - Class X-B 12595EAJ4; LT AA-sf; Affirmed - Class X-D 12595EAL9; LT BBBsf; Affirmed KEY RATING DRIVERS Increased Loss Expectations, Coronavirus Exposure: The social and market disruption caused by the effects of the coronavirus pandemic and related containment measures has contributed to the increased loss expectations for the pool. Fitch expects that pool performance will decline in the next year, driven mainly by the two largest Fitch Loans of Concern. The largest FLOC is the fourth largest loan, Grand Hyatt Seattle (5.5% of the pool). It is secured by a 457-room full-service hotel in downtown Seattle, WA. It is located across the street from the Washington State Convention Center. The subject outperforms competitive set, which includes the Renaissance Seattle, which is also securitized in the pool and shares a sponsor with the subject loan. Performance of Grand Hyatt Seattle has dipped in the last year. The subject's TTM occupancy, ADR and RevPAR were 75.9%, $236.66 and $179.54, respectively, according to the March 2020 STR report. Compared to prior year, occupancy is down 12.8%, while ADR is down 4.7% and RevPAR is down 16.9%. Occupancy and RevPAR at issuance were 85.8% and $205.84, respectively. At issuance, Fitch noted new supply coming online in the submarket. The sponsor recently completed a new 1,260-room Hyatt Regency, which is not considered a direct competitor. Performance for 2020 is expected to decline significantly compared to prior years as travel has slowed to a halt in many gateway markets due to the spread of coronavirus. The sponsor has requested debt service relief and the loan is in forbearance. The second largest FLOC is the Renaissance Seattle (5.5% of the pool). It is secured by a 557-room full-service hotel in downtown Seattle, WA. It is located approximately one-half mile from the Washington State Convention Center. The subject's performance compared to its competitive set has improved in the last year, although occupancy, ADR and RevPAR are down slightly (1.7% on average). Occupancy, ADR and RevPAR for the TTM ended March 2020 are 81.6%, $206.82 and $168.87, respectively. Occupancy and RevPAR at issuance were 85% and $171. Performance for 2020 is expected to decline significantly compared to prior years as travel has slowed to a halt in many gateway markets due to the spread of coronavirus. The sponsor has requested debt service relief and the loan is in forbearance. A third FLOC (0.9% of the pool) is backed by an anchored retail property in Colorado Springs, CO. The largest tenant was Gold's Gym (56.7% of the NRA through September 2022); however, the location permanently closed in April 2020 after Gold's Gym declared bankruptcy due to the spread of coronavirus. The gym's closure triggered a co-tenancy clause with the third largest tenant, Tiger Rock Martial Arts (3.7% of the NRA through January 2023). It is not known whether the tenant has chosen to execute its option to leave. Fitch's analysis included increased stresses to these three loans and an additional five loans (three retail and two hotels) in light of the coronavirus outbreak. These stresses are the primary contributors to the Negative Outlooks. Minimal Change to Credit Enhancement: The deal closed in September 2017. Since issuance, the pool has paid down by 0.95% from an aggregate balance of $916.5 million to $907.7 million as of the June 2020 distribution. Approximately 42.5% of the pool is interest-only for the full term. An additional 17 loans were originally structured with partial interest-only periods. Of these, eight loans (17.7% of the pool) have not yet begun to amortize. The servicer has recently granted forbearance requests for 10 loans (35.5% of the pool). RATING SENSITIVITIES The Outlooks on classes A-1 through D and the IO classes X-A and X-B remain Stable. The Outlook on classes E-RR, F-RR and G-RR were already Negative following Fitch's bulk vintage review in May 2020. Factors that could, individually or collectively, lead to positive rating action/upgrade: Factors that lead to upgrades would include improved performance coupled with pay down and/or defeasance. An upgrade to classes B and C would occur with continued pay down or increased defeasance, but would be limited as concentrations increase. Upgrades of classes D would only occur with significant improvement in credit enhancement and stabilization of the FLOCs. Classes would not be upgraded above 'Asf' if there is likelihood for interest shortfalls. An upgrade to classes E-RR, F-RR and G-RR is not likely unless performance of the FLOCs improves and if performance of the remaining pool is stable, and would not likely occur until later years in the transaction assuming losses were minimal. Factors that could, individually or collectively, lead to negative rating action/downgrade: Factors that lead to downgrades include an increase in pool level losses from underperforming loans. Downgrades to the classes rated 'AAAsf' are not considered likely due to the position in the capital structure, but may occur at 'AAAsf' or 'AA-sf' should interest shortfalls occur. Downgrades to classes B and C are possible should Fitch's projected losses increase due to declined pool performance or loan defaults. A downgrade to class D is possible should the performance of FLOCs decline further. In addition to its baseline scenario, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects that a greater percentage of classes may be assigned a Negative Rating Outlook or those with Negative Outlooks will be downgraded one or more categories. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). CREW ENERGY: DBRS Lowers Issuer Rating to B(low), Trend Negative ---------------------------------------------------------------- DBRS Limited downgraded Crew Energy Inc.'s Issuer Rating to B (low) from B and the rating on its Senior Unsecured Notes (the Notes) to B (low) from B with a recovery rating of RR4. All trends are Negative. DBRS Morningstar also removed Crew Energy's ratings from Under Review with Negative Implications, where they were placed on March 26, 2020. DBRS Morningstar placed Crew Energy's ratings Under Review with Negative Implications in response to the extreme decline in prices and heightened volatility in crude oil markets largely caused by the rapid spread of the Coronavirus Disease (COVID-19) and the concurrent crude oil-price war between OPEC (led by Saudi Arabia) and Russia. Subsequently, DBRS Morningstar revised its commodity price assumptions to factor in (1) the impact of the coronavirus pandemic on crude oil demand as lockdowns ease, (2) the significant buildup in global oil inventories, and (3) the impact of production cuts recently implemented by OPEC+. The downgrade accounts for DBRS Morningstar's expectation that Crew Energy's key credit metrics will be weak and below the threshold to support a B rating under DBRS Morningstar's revised commodity price assumptions (see DBRS Morningstar's May 15, 2020, commentary titled "As Coronavirus Lockdowns Ease, DBRS Morningstar Resets Outlook for Oil and Natural Gas Prices"). Based on its price forecast, DBRS Morningstar expects the Company's credit metrics to remain weak through 2021 before recovering and strengthening by 2022. Crew Energy has taken a number of actions to mitigate the severe commodity price declines, including reducing capital spending in 2020 (company guidance of $35 million to $40 million versus net capital expenditures of $95 million in 2019) and reducing overhead and operating costs. Based on its outlook, DBRS Morningstar expects natural gas prices in Western Canada to be relatively more steady through 2022. Since approximately 70% to 75% of the Company's production mix (depending on the level of shut-in production) is natural gas, this should provide some relief from the downward pressure on revenue caused by weak crude oil and liquids prices. Crew Energy's guidance for production this year is 20,000 barrels of oil equivalent per day (boe/d) to 22,000 boe/d which, at the midpoint, is 8% lower than average production volumes in 2019. The Company shut in up to 4,300 boe/d of lower-margin production during a period in May and continues to manage production due to volatile and weak commodity prices. In spite of the pressure on cash flow and the key credit metrics, Crew Energy has managed its liquidity position reasonably well. As a result of a strategic infrastructure transaction announced earlier in 2020 involving interests in the Company's two natural gas-processing facilities, Crew Energy received initial proceeds of $35 million in Q1 2020 that it used to primarily reduce debt. The Company expects to receive additional net cash proceeds of $23 million in Q4 2020, which it will also use primarily for debt reduction. As part of the transaction, Crew Energy committed to multiyear natural gas-processing agreements. The Company also has an option, exercisable between January 2021 and June 2023, to dispose of up to an additional 11.43% interest in the two facilities for consideration of up to $37.5 million. If the option is exercised, Crew Energy would be required to enter into a 20-year processing commitment with the purchaser. At the end of Q1 2020, the Company had drawn $31.0 million on its revolving bank credit facility with $11.4 million in letters of credit that the facility also backs. Crew Energy recently completed a borrowing base review of its facility and, given the weak price environment, the capacity will likely be reduced from the borrowing base of $235 million at year-end 2019. Furthermore, $300 million of Notes do not mature until March 2024 and there are no financial covenants on the Notes. Supporting the B (low) rating are the Company's (1) capital and operational flexibility as it operates the majority of its production; (2) significant inventory of drilling locations that could provide a source of future production; and (3) ability to optimize pricing for its natural gas production with takeaway pipeline capacity secured to access U.S. markets in addition to its ability to sell in Western Canada if pricing is better. The limitation on the ratings, in addition to the weak credit metrics, is the Company's heavy concentration of reserves and production in Northeastern British Columbia in the Montney liquids-rich natural gas resource play. In assessing the Company's credit risk profile, DBRS Morningstar's approach is to rate through the cycle and give due weight to projected credit metrics when DBRS Morningstar anticipates a return to a more normalized operating and pricing environment. On this basis and considering DBRS Morningstar's base-case pricing scenario, Crew Energy's credit profile supports the downgrade to B (low) from B. In DBRS Morningstar's view, the risk is that a recovery in crude oil and liquids prices falls short of DBRS Morningstar's base-case price assumptions and that Crew Energy's overall financial risk profile will not support a B (low) rating. The Negative trends reflect this risk, which DBRS Morningstar currently deems to be elevated. DBRS Morningstar will likely change the trends to Stable if the demand/supply fundamentals in crude oil and liquids markets continue to improve, leading to greater confidence that commodity prices and consequently the Company's key credit metrics recover in line with DBRS Morningstar's base-case assumptions. Conversely, if oil prices and Crew Energy's key credit metrics drop below DBRS Morningstar's expectations, DBRS Morningstar may take a negative rating action. Notes: All figures are in Canadian dollars unless otherwise noted. ELEVATION CLO 2017-6: Moody's Cuts Class F Notes to Caa2 -------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Elevation CLO 2017-6, Ltd.: Moody's downgraded the rating on the following notes: US$20,250,000 Class E Secured Deferrable Floating Rate Notes due 2029 (the "Class E Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$9,000,000 Class F Secured Deferrable Floating Rate Notes due 2029 (the "Class F Notes"), Downgraded to Caa2 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$24,750,000 Class D Secured Deferrable Floating Rate Notes due 2029 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D, Class E, and Class F Notes. The collateralized loan obligation, issued in July 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 will end in October 2021. RATINGS RATIONALE The downgrades on the Class E and Class F notes reflect the credit deterioration and par loss observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially and the credit enhancement available to the CLO notes has eroded, exposure to Caa-rated assets has increased significantly, and expected losses on certain notes have increased materially. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the risk posed to, and the expected losses on, the Class D Notes continue to be consistent with the current rating of the notes after taking into account the CLO's latest portfolio, its relevant structural features, its actual OC levels, and the level of credit enhancement available to it from cash flows that would be diverted as a result of coverage test failures. Consequently, Moody's has confirmed the rating on the Classes D Notes. Based on the June 2020 trustee report, the weighted average rating factor was 3300 as of June 2020, or 18% worse compared to a WARF of 2827 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2805 reported in the June 2020 trustee report [2] by 495 points. Moody's noted that approximately 30% of the CLO's par was from obligors assigned a negative outlook and 5% from obligors whose ratings are on review for downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 19% of the CLO par as of June 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $443.8 million, or $6.2 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class D notes, Class E notes, and Class F notes as of June 2020 at 112.7%, 107.2%, and 104.9%, respectively. 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 $441.3 million, defaulted par of $5.6 million, a weighted average default probability of 26.43% (implying a WARF of 3287), a weighted average recovery rate upon default of 46.83%, a diversity score of 83 and a weighted average spread of 3.48%. Moody's also analyzed the CLO by incorporating an approximately $5.8 million par haircut in calculating the OC and interest diversion test ratios. Finally, Moody's also considered in its analysis the CLO manager's recent investment decisions and trading strategies. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of corporate assets. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regardsthe coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. GS MORTGAGE 2012-GC6: Moody's Lowers Rating on Cl. F Certs to Caa1 ------------------------------------------------------------------ Moody's Investors Service affirmed the ratings on seven and downgraded the ratings of two classes in GS Mortgage Securities Trust 2012-GC6, Commercial Mortgage Pass-Through Certificates, Series 2012-GC6 as follows: Cl. A-3, Affirmed Aaa (sf); previously on Feb 18, 2020 Affirmed Aaa (sf) Cl. A-AB, Affirmed Aaa (sf); previously on Feb 18, 2020 Affirmed Aaa (sf) Cl. A-S, Affirmed Aaa (sf); previously on Feb 18, 2020 Affirmed Aaa (sf) Cl. B, Affirmed Aa2 (sf); previously on Feb 18, 2020 Upgraded to Aa2 (sf) Cl. C, Affirmed A2 (sf); previously on Feb 18, 2020 Upgraded to A2 (sf) Cl. D, Affirmed Baa3 (sf); previously on Feb 18, 2020 Affirmed Baa3 (sf) Cl. E, Downgraded to B1 (sf); previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to Caa1 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade Cl. X-A*, Affirmed Aaa (sf); previously on Feb 18, 2020 Affirmed Aaa (sf) *Reflects Interest-Only Class RATINGS RATIONALE The ratings on six principal and interest (P&I) classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on two P&I classes, Cl. E and Cl. F, were downgraded due to a decline in pool performance and higher anticipated losses due to the increase in specially serviced loans (7.7% of the pool compared to 2.4% at last review) and troubled loans. Furthermore, the deal has significant exposure to retail properties (41% of the pool), including a regional mall representing 12% of the pool and hotel properties (15% of the pool). The rating on the interest-only (IO) class was affirmed based on the credit quality of the referenced classes. The actions conclude the review for downgrade initiated on April 17, 2020. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's rating action reflects a base expected loss of 3.6% of the current pooled balance, compared to 1.4% at Moody's last review. Moody's base expected loss plus realized losses is now 2.9% of the original pooled balance, compared to 1.2% 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 methodologies used in rating all classes except interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the June 12, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 19% to $935.5 million from $1.2 billion at securitization. The certificates are collateralized by 68 mortgage loans ranging in size from less than 1% to 11.6% of the pool, with the top ten loans (excluding defeasance) constituting 43% of the pool. One loan, constituting 8.4% of the pool, has an investment-grade structured credit assessment. Thirty-one loans, constituting 38.8% 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 12, compared to 14 at Moody's last review. As of the June 2020 remittance report, loans representing 78% were current or within their grace period on their debt service payments, 18% were less than one month, 3 % were 30 days and 1% were delinquent at 60 days or more. Fourteen loans, constituting 17.4% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. One loan has been liquidated from the pool, resulting in a minimal loss to the pool. Four loans, constituting 7.7% of the pool, are currently in special servicing. The largest specially serviced loan is the Audubon Crossing and Audubon Commons Loan ($40.6 million -- 4.3% of the pool), which is secured by two adjacent shopping centers, known as Audubon Crossing and Audubon Commons, that total 449,170 square feet (SF) and are located in Audubon, NJ. Audubon Crossing is a 345,976 SF shopping center anchored by a Wal-Mart and was 88% leased as of April 2020. Audubon Commons is approximately 110,000 SF shopping center anchored by Acme Markets and was 92% leased as of April 2020. The loan recently transferred for imminent monetary default in May 2020 as a result of the coronavirus outbreak. The second largest specially serviced loan is secured by a retail property and transferred to special servicing in May 2020 as a result of the coronavirus outbreak and has requested relief. The other two specially serviced loans are secured by hotel and office properties and transferred to special servicing in March 2018 and August 2017, respectively. Moody's has also assumed a high default probability for three poorly performing loans, constituting 2.6% of the pool, and has estimated an aggregate loss of $18.9 million (a 22% expected loss on average) from these specially serviced and troubled loans. Moody's received full year 2019 operating results for 97% of the pool, and partial year 2020 operating results for 14% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 99%, compared to 84% 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 25.6% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.1%. Moody's actual and stressed conduit DSCRs are 1.29X and 1.13X, respectively, compared to 1.48X and 1.32X 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 loan with a structured credit assessment is the ELS Portfolio Loan ($78.2 million -- 8.4% of the pool), which consists of 12 cross-collateralized and cross-defaulted loans secured by manufactured housing communities and recreational vehicle (RV) parks. Currently only ten properties remain as two loans (secured by two properties) have defeased. The remaining properties are located across five states and consist of a total of 4,693 pads. The portfolio was 91% leased as of December 2019, compared to 79% in 2018 and 94% at securitization. The loan's partial interest-only term has expired, and the loan has amortized approximately 22% since securitization. Moody's structured credit assessment and stressed DSCR are a2 (sca.pd) and 1.53X, respectively. The top three conduit loans represent 20.7% of the pool balance. The largest loan is the Meadowood Mall Loan ($108.9 million -- 11.6% of the pool), which is secured by a 405,000 SF portion of an 885,000 SF regional mall in Reno, Nevada. Mall anchors include J.C. Penney, Macy's and Macy's Men's and Home store. The property was formerly anchored by Sears who vacated their space in mid-2018. Half of the former Sears space has since been leased to Round1, a bowling and entertainment venue which opened in August 2019. Except for the Macy's South store, all of the anchors are independently owned and are not contributed as collateral for the loan. The total property was 95% leased, and in-line occupancy was 84% as of December 2019, compared to total mall occupancy of 85% in December 2018. The loan benefits from amortization and has amortized almost 13% since securitization. Moody's LTV and stressed DSCR are 107% and 1.06X, respectively, compared to 90% and 1.15X at the last review. The second largest loan is the LHG Hotel Portfolio Loan ($48.9 million -- 5.2% of the pool), which is secured by a portfolio of 12 limited service hotels located across six states and totaling 852 rooms. The hotel flags are Residence Inn, Fairfield Inn, Fairfield Inn & Suites, Courtyard by Marriot and Country Inn & Suites. The portfolio was 73% occupied as of December 2019 compared to 77% in 2018 and 75% at securitization. The loan benefits from amortization and has paid down 18% since securitization. While property performance had improved from securitization through 2018, the 2019 NOI dropped 17% from 2018 due to a decline in room revenue. Moody's LTV and stressed DSCR are 103% and 1.21X, respectively, compared to 80% and 1.54X at the last review. The third largest loan is the Lincoln Square Shopping Center Loan ($35.9 million -- 3.8% of the pool), which is secured by a 444,438 SF anchored power center located in Arlington, Texas. The center is situated within a mile of the new Dallas Cowboys stadium, The Ballpark at Arlington (baseball) and the Six Flags Hurricane Harbor amusement park. Anchor tenants include Studio Movie Grill, Stein Mart, Ross Dress for Less, Stein Mart, and Bed, Bath and Beyond. The property was 73% leased as of March 2020, compared to 76% in 2019 and 90% at securitization. While property performance was stable since securitization, the 2019 NOI dropped 22% from 2018. Moody's LTV and stressed DSCR are 110% and 0.95X, respectively. GS MORTGAGE-BACKED 2020-INV1: Fitch Rates Class B-5 Certs 'Bsf' --------------------------------------------------------------- Fitch Ratings has assigned the following ratings to the residential mortgage-backed certificates issued by GS Mortgage-Backed Securities Trust 2020-INV1: GSMBS 2020-INV1 - Class A-1; LT AAAsf New Rating - Class A-10; LT AAAsf New Rating - Class A-11; LT AAAsf New Rating - Class A-11-X; LT AAAsf New Rating - Class A-12; LT AAAsf New Rating - Class A-12-X; LT AAAsf New Rating - Class A-13; LT AAAsf New Rating - Class A-14; LT AAAsf New Rating - Class A-2; LT AAAsf New Rating - Class A-3; LT AA+sf New Rating - Class A-4; LT AA+sf New Rating - Class A-5; LT AAAsf New Rating - Class A-6; LT AAAsf New Rating - Class A-7; LT AAAsf New Rating - Class A-8; LT AAAsf New Rating - Class A-9; LT AAAsf New Rating - Class A-9-X; LT AAAsf New Rating - Class A-IO-S; LT NRsf New Rating - Class A-R; LT NRsf New Rating - Class A-X-1; LT AA+sf New Rating - Class A-X-2; LT AAAsf New Rating - Class A-X-3; LT AA+sf New Rating - Class A-X-4; LT AA+sf New Rating - Class A-X-5; LT AAAsf New Rating - Class A-X-6; LT AA+sf New Rating - Class A-X-7; LT AAAsf New Rating - Class B-1; LT AAsf New Rating - Class B-1-A; LT AAsf New Rating - Class B-1-X; LT AAsf New Rating - Class B-2; LT Asf New Rating - Class B-2-A; LT Asf New Rating - Class B-2-X; LT Asf New Rating - Class B-3; LT BBBsf New Rating - Class B-3-A; LT BBBsf New Rating - Class B-3-X; LT BBBsf New Rating - Class B-3-Y; LT BBBsf New Rating - Class B-3-Z; LT BBBsf New Rating - Class B-4; LT BBsf New Rating - Class B-5; LT Bsf New Rating - Class B-6; LT NRsf New Rating - Class B-6-Y; LT NRsf New Rating - Class B-6-Z; LT NRsf New Rating - Class B-X; LT BBBsf New Rating KEY RATING DRIVERS Revised GDP Due to the Coronavirus (Negative): The coronavirus and containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Fitch's baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from the coronavirus, an Economic Risk Factor floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' and below. Payment Holidays Related to the Coronavirus (Negative): The outbreak of the coronavirus and widespread containment efforts in the U.S. will result in increased unemployment and cash flow disruptions. To account for the cash flow disruptions, Fitch assumed delinquent payments on a minimum of 25% of the pool for the first six months of the transaction at all rating categories with a reversion to its standard delinquency and liquidation timing curve by month 10. This assumption is based on observations of past-due payments following Hurricane Maria in Puerto Rico. For many Shellpoint Mortgage Servicing serviced deals, the servicer used one-month deferrals for the month of May. This significantly affected the liquidity to the structure as Shellpoint removed its advancing obligation, as the borrowers remained contractually current. Numerous Shellpoint-serviced deals experienced write-downs and interest shortfalls at the bottom of the capital structure. For this transaction, Shellpoint modified its loss mitigation strategy, and will be offering three months of forbearance, which it will advance P&I on. At the end of those three months, the servicer will allow the borrower to reinstate, but will have the opportunity to recoup advances. As of the cutoff date, the issuer confirmed that no loans were delinquent, no loans had entered a forbearance program, and the servicer is not expected to defer scheduled payment dates. P&I Advancement Recoupment (Mixed): To the extent that borrowers enter into a coronavirus-related payment forbearance plan, the servicer will be required to make advances of principal and interest to the bonds. While the advances will allow for timely interest payments to the bonds, reimbursement of advances to the servicer from funds other than those recovered by the borrower may result in write-downs later in the life of the transaction, when the loan is deemed modified due to a deferral of the missed payments or advances are deemed to be nonrecoverable. If missed payments during the forbearance period are not capitalized, there could be a mismatch between what is paid on the loans compared with what is due on the bonds, since the servicer can fully repay itself from collections. While Fitch views this risk as remote, given the lack of any borrowers currently on a forbearance plan, Fitch adjusted its credit enhancement to account for advance recovery impact. 100% Investor Loans (Negative): All of the loans in the pool were made to investors, and over 98% of the loans in the pool are conforming loans, which were underwritten to Fannie Mae and Freddie Mac's guidelines and were approved per Desktop Underwriter or Loan Product Advisor, Fannie Mae and Freddie Mac's automated underwriting systems, respectively. The remaining 2% of the loans were underwritten to the underlying originators' guidelines and were full documentation loans. All loans were underwritten to the borrower's credit risk, unlike investor cash flow loans, which are underwritten to the property's income. Compared with owner occupied homes, Fitch views investor loans as riskier and increases the PD by 50% and LS by 10% to reflect the additional risk compared with owner-occupied homes. High Credit Quality (Positive): The collateral consists of mostly 30-year FRM fully-amortizing loans, seasoned approximately seven months in aggregate, based on the difference between origination date and cutoff date. The borrowers in this pool have strong credit profiles of 768 FICO scores and relatively low leverage of 67.3% sustainable loan-to-value. Multi-Family (Negative): 28% of the loans in the pool are multi-family homes, which Fitch views as riskier than single-family homes, since the borrower may be relying on the rental income to pay the mortgage payment on the property. To account for this risk, Fitch adjusts the PD upwards by 25% from the baseline for multi-family homes. Geographic Concentration (Negative): Approximately 48% of the pool is concentrated in California with relatively low MSA concentration. The largest MSA concentration is in Los Angeles MSA (18%) followed by the New York MSA (11%) and the San Francisco MSA (8%). The top three MSAs account for 37% of the pool. As a result, there was a 1.02x probability of default adjustment for the geographic concentration. 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 in the life of the transaction, the structure is more vulnerable to defaults occurring at a later stage compared with a sequential or modified sequential structure. To help mitigate tail risk, which arises as the pool seasons and fewer loans are outstanding, a subordination floor of 1.25% of the original balance will be maintained for the senior certificates and a subordination floor of 1.05% of the original balance will be maintained for the subordinate certificates. Representation Framework (Negative): The loan-level representation, warranty and enforcement framework is consistent with Tier 2 quality. Fitch increased its loss expectations by 86 bps at the 'AAAsf' rating category as a result of the Tier 2 framework and the underlying sellers supporting the repurchase obligations of the RW&E providers. The Tier 2 framework was driven by the inclusion of knowledge qualifiers without a clawback provision and the narrow testing construct, which limits the breach reviewers' ability to identify or respond to issues not fully anticipated at closing. Low Operational Risk (Neutral): Operational risk is well controlled for in this transaction. Goldman Sachs is assessed by Fitch as an 'Above Average' aggregator for newly originated loans due to the company's robust sourcing strategy and seller oversight, experienced senior management and staff, strong risk management framework and corporate governance controls. Primary and master servicing responsibilities are performed by Shellpoint and Nationstar Mortgage, both of which are rated by Fitch as 'RPS2-' and 'RMS2+', respectively. Fitch did not apply adjustments for operational risk based on these assessments. Due Diligence Review Results (Positive): Third-party due diligence was performed on 100% of loans in the transaction. Due diligence was performed by SitusAMC, Opus, and Digital Risk, which are assessed by Fitch as 'Acceptable - Tier 1', 'Acceptable - Tier 2' and 'Acceptable - Tier 2', respectively. The scope of the review is consistent with Fitch criteria for newly originated RMBS and the results are generally similar to prior prime RMBS transactions. Credit exceptions were minimal and supported by strong mitigating factors, and compliance exceptions were primarily cured with subsequent post-close documentation. While Fitch did not apply adjustments based on these results of the review, Fitch gave a credit for the high percentage of loan-level due diligence, which reduced the 'AAAsf' loss expectation by 42 bps. RATING SENSITIVITIES Fitch 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 that may be considered in the surveillance of the transaction. Sensitivity analyses was conducted at the state and national levels to assess the effect of higher MVDs for the subject pool as well as lower MVDs, illustrated by a gain in home prices. Factors That Could, Individually or Collectively, Lead to a Negative Rating Action/Downgrade: This defined negative rating 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 'AAA'. The analysis indicates that there is some potential rating migration with higher MVDs for all rated classes, compared with the model projection. Factors That Could, Individually or Collectively, Lead to a Positive Rating Action/Upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level or, in other words, positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10.0%. Excluding the senior classes which are already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modeling process uses the modification of these variables to reflect asset performance in up and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. For enhanced disclosure on Fitch's stresses and sensitivities, please refer to the transaction's presale report. Fitch has also added a Coronavirus Sensitivity Analysis that contemplates a more severe and prolonged economic stress caused by a reemergence of infections in the major economies, before a slow recovery begins in 2Q21. Under this severe scenario, Fitch expects the ratings to be impacted by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term effects arising from coronavirus disruptions on these economic inputs will likely affect both investment and speculative grade ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by Opus, AMCSitus Diligence, LLC. and Digital Risk. The third-party due diligence described in Form 15E focused on credit, compliance and valuation. Fitch considered this information in its analysis, and it did not have an effect on Fitch's analysis or conclusions. Fitch believes the overall results of the review generally reflected strong underwriting controls. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). HILDENE TRUPS 2020-3: Moody's Gives '(P)Ba3' on Class B Notes -------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to two classes of notes to be issued by Hildene TruPS Securitization 2020-3, Ltd. Moody's rating action is as follows: US$117,125,000 Class A Senior Secured Floating Rate Notes due 2038 (the "Class A Notes"), Assigned (P)A1 (sf) US$28,750,000 Class B Mezzanine Secured Deferrable Floating Rate Notes due 2038 (the "Class B Notes"), Assigned (P)Ba3 (sf) The Class A Notes and the Class B Notes are referred to herein, together, as the "Rated Notes." RATINGS RATIONALE The rationale for the ratings is based on its methodology and considers all relevant risks particularly those associated with the CDO's portfolio and structure. Hildene 2020-3 is a static cash flow TruPS CDO. The issued notes will be collateralized primarily by a portfolio of (1) trust preferred securities, senior notes and subordinated notes issued by US community banks and their holding companies and (2) TruPS and surplus notes issued by insurance companies and their holding companies. Moody's expects the portfolio to be 100% ramped as of the closing date. Hildene Structured Advisors, LLC will direct the selection, acquisition and disposition of the assets on behalf of the Issuer. The Manager will direct the disposition of any defaulted securities or credit risk securities. The transaction prohibits any asset purchases or substitutions at any time. In addition to the Rated Notes, the Issuer will issue one class of subordinated notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. The portfolio of this CDO consists of (1) TruPS, senior notes and subordinated notes issued by 29 US community banks and (2) TruPS and surplus notes issued by two insurance companies, the majority of which Moody's does not rate. Moody's assesses the default probability of bank obligors that do not have public ratings through credit scores derived using RiskCalc™, an econometric model developed by Moody's Analytics. Moody's evaluation of the credit risk of the bank obligors in the pool relies on FDIC Q4-2019 financial data. Moody's assesses the default probability of insurance company obligors that do not have public ratings through credit assessments provided by its insurance ratings team based on the credit analysis of the underlying insurance companies' annual statutory financial reports. Moody's assumes a fixed recovery rate of 10% for both the bank and insurance obligations. In addition, its analysis considered the concentrated nature of the portfolio. There are 11 issuers that constitutes 3% or more of the portfolio par. Moody's ran a stress scenario in which it assumed a two-notch downgrade for these obligors for up to 30% of the portfolio par. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $175,750,000 Weighted Average Rating Factor: 929 Weighted Average Spread (WAS) for floating assets only: 2.933% Weighted Average Coupon (WAC) for fixed assets only: 6.478% Weighted Average Spread (WAS) for fixed to floating assets: 4.980% Weighted Average Coupon (WAC) for fixed to floating assets: 6.158% Weighted Average Recovery Rate (WARR): 10.0% Weighted Average Life (WAL): 9.91 years In addition to the quantitative factors that Moody's explicitly models, qualitative factors were part of the rating committee consideration. Moody's considers the structural protections in the transaction, the risk of an event of default, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transaction, influenced the final rating decision. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Its analysis has considered the effect on the performance of bank and insurance assets from the collapse in United States economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Methodology Underlying the Rating Action: The principal methodology used in these ratings was "Moody's Approach to Rating TruPS CDOs" published in June 2020. 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 portfolio consists primarily of unrated assets whose default probability Moody's assesses through credit scores derived using RiskCalc™ or credit assessments. Because these are not public ratings, they are subject to additional estimation uncertainty. Moody's obtained a loss distribution for this CDO's portfolio by simulating defaults using Moody's CDOROM, which used Moody's assumptions for asset correlations and fixed recoveries in a Monte Carlo simulation framework. Moody's then used the resulting loss distribution, together with structural features of the CDO, as an input in its CDOEdge cash flow model. ICG US 2017-1: Moody's Confirms Class E Notes at Ba3 ---------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by ICG US CLO 2017-1, Ltd.: US$22,000,000 Class D Senior Secured Deferrable Floating Rate Notes Due April 30, 2029 (current outstanding balance of $22,000,000), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$18,000,000 Class E Senior Secured Deferrable Floating Rate Notes Due April 30, 2029 (current outstanding balance of $18,000,000), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D notes and Class E notes. The CLO, issued in March 2017 and partially refinanced in October 2019, 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 will end in October 2021. RATINGS RATIONALE Despite the credit quality deterioration stemming from economic shocks triggered by the coronavirus outbreak, Moody's concluded that the risk posed to, and the expected losses on, the Class D notes and Class E notes continue to be consistent with the current ratings on the notes after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. In particular, the notes are supported by the credit enhancement provided by collateral par coverage as well as the structural protection provided by better than average excess spread available in the event of OC and interest diversion test failures. Consequently, Moody's has confirmed the ratings on the Class D notes and Class E notes. Based on Moody's calculation, the weighted average rating factor was 3553 as of May 2020, or 20% worse compared to a WARF of 2944 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2842 reported in the May 2020 trustee report [2] by 711 points, a degree of failure which Moody's observed to be higher than the average for other BSL CLOs. Moody's noted that approximately 30% of the CLO's par was from obligors assigned a negative outlook, and 8% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 26% of the CLO par as of May 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $399.7 million, or approximately $0.33 million less than the deal's ramp-up target par balance. Notably, Moody's observes that the deal has outperformed other BSL CLOs in preserving collateral coverage. Moody's calculated the OC ratios (excluding haircuts) for the Class A/B, Class C, Class D and Class E notes as of May 2020 at 132.34%, 121.85%, 114.19%, and 108.61%, respectively. Moody's noted that partly as a result of meaningful OC par haircuts, the interest diversion test was recently failing, which if were to occur on the next payment date would result in a portion of excess interest collections being diverted towards reinvestment in collateral. 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 portfolio par and principal proceeds balance of $396.3 million, defaulted par of $5.2 million, a weighted average default probability of 28.32% (implying a WARF of 3553), a weighted average recovery rate upon default of 46.81%, a diversity score of 71, and a weighted average spread of 3.72%. Moody's also analyzed the CLO by incorporating an approximately $13.6 million par haircut in calculating the OC and interest diversion test ratios. Finally, Moody's also considered in its analysis the CLO manager's recent investment decisions and trading strategies. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of corporate assets. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regardsthe coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. JP MORGAN 2020-4: Moody's Cuts Assigns B3 Ratings on 2 Tranches --------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to 55 classes of residential mortgage-backed securities issued by J.P. Morgan Mortgage Trust 2020-4. The ratings range from Aaa (sf) to B3 (sf). The certificates are backed by 763 fully-amortizing fixed-rate mortgage loans with a total balance of $534,399,556, as of the June 1, 2020 cut-off date. The loans have original terms to maturity of up to 30 years. Similar to prior JPMMT transactions, JPMMT 2020-4 includes agency-eligible mortgage loans (approximately 48.3% by loan balance) underwritten to the government sponsored enterprises guidelines, in addition to prime jumbo non-agency eligible mortgages purchased by J.P. Morgan Mortgage Acquisition Corp., the sponsor and mortgage loan seller, from various originators. United Shore Financial Services, LLC d/b/a United Wholesale Mortgage and Shore Mortgage, Quicken Loans, LLC, and loanDepot.com, LLC originated approximately 48.0%, 23.0%, and 15.8% of the mortgage loans (by balance) in the pool, respectively. All other originators accounted for less than 10% of the pool by balance. With respect to the mortgage loans, each originator made a representation and warranty that the mortgage loan constitutes a qualified mortgage under the qualified mortgage rule. United Shore will service about 48.0% of the mortgage loans (subserviced by Cenlar, FSB), Quicken Loans will service about 23.0% of the mortgage loans, loanDepot will service about 15.8% (subserviced by Cenlar, FSB), and remaining servicers each account for less than 10% of the aggregate principal balance. The servicing fee for loans serviced by loanDepot and United Shore will be based on a step-up incentive fee structure with additional fees for servicing delinquent and defaulted loans. Quicken Loans, AmeriHome Mortgage Company LLC and USAA Federal Savings Bank have a fixed fee servicing framework. Nationstar Mortgage LLC will be the master servicer and Citibank, N.A. will be the securities administrator and Delaware trustee. Pentalpha Surveillance LLC will be the representations and warranties breach reviewer. Distributions of principal and interest and loss allocations are based on a typical shifting interest structure that benefits from senior and subordination floors. The complete rating actions are as follows: Issuer: J.P. Morgan Mortgage Trust 2020-4 Cl. A-1, Rating Assigned Aaa (sf) Cl. A-2, Rating Assigned Aaa (sf) Cl. A-3, Rating Assigned Aaa (sf) Cl. A-3-A, Rating Assigned Aaa (sf) Cl. A-3-X*, Rating Assigned Aaa (sf) Cl. A-4, Rating Assigned Aaa (sf) Cl. A-4-A, Rating Assigned Aaa (sf) Cl. A-4-X*, Rating Assigned Aaa (sf) Cl. A-5, Rating Assigned Aaa (sf) Cl. A-5-A, Rating Assigned Aaa (sf) Cl. A-5-X*, Rating Assigned Aaa (sf) Cl. A-6, Rating Assigned Aaa (sf) Cl. A-6-A, Rating Assigned Aaa (sf) Cl. A-6-X*, Rating Assigned Aaa (sf) Cl. A-7, Rating Assigned Aaa (sf) Cl. A-7-A, Rating Assigned Aaa (sf) Cl. A-7-X*, Rating Assigned Aaa (sf) Cl. A-8, Rating Assigned Aaa (sf) Cl. A-8-A, Rating Assigned Aaa (sf) Cl. A-8-X*, Rating Assigned Aaa (sf) Cl. A-9, Rating Assigned Aaa (sf) Cl. A-9-A, Rating Assigned Aaa (sf) Cl. A-9-X*, Rating Assigned Aaa (sf) Cl. A-10, Rating Assigned Aaa (sf) Cl. A-10-A, Rating Assigned Aaa (sf) Cl. A-10-X*, Rating Assigned Aaa (sf) Cl. A-11, Rating Assigned Aaa (sf) Cl. A-11-A, Rating Assigned Aaa (sf) Cl. A-11-AI*, Rating Assigned Aaa (sf) Cl. A-11-B, Rating Assigned Aaa (sf) Cl. A-11-BI*, Rating Assigned Aaa (sf) Cl. A-11-X*, Rating Assigned Aaa (sf) Cl. A-12, Rating Assigned Aaa (sf) Cl. A-13, Rating Assigned Aaa (sf) Cl. A-14, Rating Assigned Aa2 (sf) Cl. A-15, Rating Assigned Aa2 (sf) Cl. A-16, Rating Assigned Aaa (sf) Cl. A-17, Rating Assigned Aaa (sf) Cl. A-X-1*, Rating Assigned Aa1 (sf) Cl. A-X-2*, Rating Assigned Aa1 (sf) Cl. A-X-3*, Rating Assigned Aaa (sf) Cl. A-X-4*, Rating Assigned Aa2 (sf) Cl. B-1, Rating Assigned Aa3 (sf) Cl. B-1-A, Rating Assigned Aa3 (sf) Cl. B-1-X*, Rating Assigned Aa3 (sf) Cl. B-2, Rating Assigned A3 (sf) Cl. B-2-A, Rating Assigned A3 (sf) Cl. B-2-X*, Rating Assigned A3 (sf) Cl. B-3, Rating Assigned Baa3 (sf) Cl. B-3-A, Rating Assigned Baa3 (sf) Cl. B-3-X*, Rating Assigned Baa3 (sf) Cl. B-4, Rating Assigned Ba3 (sf) Cl. B-5, Rating Assigned B3 (sf) Cl. B-5-Y, Rating Assigned B3 (sf) Cl. B-X*, Rating Assigned Baa1 (sf) *Reflects Interest-Only Classes RATINGS RATIONALE Summary Credit Analysis and Rating Rationale Moody's expected loss for this pool in a baseline scenario-mean is 0.49% and reaches 5.88% at a stress level consistent with its Aaa ratings. Its analysis has considered the effect of the COVID-19 outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of mortgage loans. Specifically, for US RMBS, loan performance will weaken due to the unprecedented spike in the unemployment rate, which may limit borrowers' income and their ability to service debt. The softening of the housing market will reduce recoveries on defaulted loans, also a credit negative. Furthermore, borrower assistance programs, such as forbearance, may adversely impact scheduled cash flows to bondholders. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's expected loss for this pool in a baseline scenario-mean is 0.49%, in a baseline scenario-median is 0.27%, and reaches 5.88% at a stress level consistent with its Aaa ratings. These losses incorporate an additional stress of 10%, 15% and 5%, respectively, to account for the increased likelihood of deterioration in the performance of the underlying mortgage loans as a result of a slowdown in US economic activity in 2020 due to the coronavirus outbreak. Moody's regards the COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Servicing practices, including tracking COVID-19-related loss mitigation activities, may vary among servicers in the transaction. These inconsistencies could impact reported collateral performance and affect the timing of any breach of performance triggers, servicer advance recoupment, the extent of servicer fees, and additional expenses for R&W breach reviews when loans become seriously delinquent. Moody's may infer and extrapolate from the information provided based on this or other transactions or industry information, or make stressed assumptions. Moody's bases its ratings on the certificates on the credit quality of the mortgage loans, the structural features of the transaction, its assessments of the origination quality and servicing arrangement, the strength of the third-party due diligence and the R&W framework of the transaction. Collateral Description JPMMT 2020-4 is a securitization of a pool of 763 fully-amortizing fixed-rate mortgage loans with a total balance of $534,399,556 as of the cut-off date, with a weighted average remaining term to maturity of 360 months, and a WA seasoning of 4.2 months. The WA current FICO score is 767 and the WA original combined loan-to-value ratio is 68.8%. The characteristics of the loans underlying the pool are generally comparable to those of other JPMMT transactions backed by prime mortgage loans that Moody's has rated. Aggregation/Origination Quality Moody's considers JPMMAC's aggregation platform to be adequate and Moody's did not apply a separate loss-level adjustment for aggregation quality. In addition to reviewing JPMMAC as an aggregator, Moody's has also reviewed the originator(s) contributing a significant percentage of the collateral pool (above 10%). Additionally, Moody's increased its base case and Aaa loss expectations for certain originators of non-conforming loans where Moody's do not have clear insight into the underwriting practices, quality control and credit risk management. Moody's did not make an adjustment for GSE-eligible loans, since those loans were underwritten in accordance with GSE guidelines. In addition, Moody's reviewed the loan performance for some of these originators. It viewed the loan performance as comparable to the GSE loans due to consistently low delinquencies, early payment defaults and repurchase requests. United Shore and LoanDepot originated approximately 58.7% and 26.5% of the non-conforming mortgage loans (by balance) in the pool, respectively. All other originators accounted for less than 10% of the non-conforming mortgage loans by balance. United Shore (originator): Loans originated by United Shore have been included in several prime jumbo securitizations that Moody's has rated. United Shore originated approximately 48.0% of the mortgage loans by pool balance (compared with about 86.9% by pool balance in JPMMT 2019-9). The majority of these loans were originated under United Shore's High Balance Nationwide program which are processed using the Desktop Underwriter automated underwriting system, and are therefore underwritten to Fannie Mae guidelines. The loans receive a DU Approve Ineligible feedback due to the loan amount only. Moody's made a negative origination adjustment (i.e. Moody's increased its loss expectations) for United Shore's loans due mostly to 1) the lack of statistically significant program specific loan performance data and 2) the fact that United Shore's High Balance Nationwide program is unique and fairly new and no performance history has been provided to Moody's on these loans. Under this program, the origination criteria rely on the use of GSE tools (DU/LP) for prime-jumbo non-conforming loans, subject to Qualified Mortgage overlays. More time is needed to assess United Shore's ability to consistently produce high-quality prime jumbo residential mortgage loans under this program. loanDepot (originator) contributed 15.8% by loan balance to the pool. Founded in 2009 and launched in 2010, loanDepot has funded approximately $180 billion residential mortgage loans to date. After its initial launch, loanDepot's growth strategy included acquiring independent retail platforms across the country and using mobile, licensed lending officers to build a nationwide retail presence. loanDepot is primarily engaged in the origination of residential mortgages and home equity loans. In addition to its core lending activities, loanDepot has also invested in several strategic joint ventures whose services complement its core mortgage lending business such as escrow, settlement, title, closing, new home construction and investment management. Moody's considers LoanDepot an adequate originator of prime jumbo loans. As a result, Moody's did not make any adjustments to its loss levels for these loans. Quicken Loans (originator, rated long-term senior unsecured Ba1) contributed 22.9% by loan balance to the pool. Quicken Loans is one of the largest US residential mortgage originators and the largest retail originator. Quicken Loans' origination of agency-eligible loans is designed to be executed in accordance with underwriting guidelines established by the Fannie Mae Single Family Selling Guide and the Freddie Mac Single Family Seller/Servicer Guide. Quicken Loans generally requires that each agency-eligible mortgage loan have valid findings and an approve or accept response from the requirements of the automated underwriting systems of the GSEs, and that documentation requirements for income, employment and/or assets are generally followed. All the loans in this transaction originated by Quicken Loans are agency-eligible mortgage loans, underwritten to the government sponsored enterprises guidelines, therefore, Moody's did not apply any adjustment to its expected losses. Servicing Arrangement Moody's considers the overall servicing arrangement for this pool to be adequate given the strong servicing arrangement of the servicers, as well as the presence of a strong master servicer to oversee the servicers. The servicers are contractually obligated to the issuing entity to service the related mortgage loans. However, the servicers may perform their servicing obligations through sub-servicers. In this transaction, Nationstar Mortgage LLC (Nationstar Mortgage Holdings Inc. rated B2) will act as the master servicer. The servicers are required to advance principal and interest on the mortgage loans. To the extent that the servicers are unable to do so, the master servicer will be obligated to make such advances. In the event that the master servicer, Nationstar, is unable to make such advances, the securities administrator, Citibank (rated Aa3) will be obligated to do so to the extent such advance is determined by the securities administrator to be recoverable. COVID-19 Impacted Borrowers Per its conversation with multiple servicers in the market, the process related to borrower relief efforts for COVID-19 impacted loans is generally similar across servicers. Typically, the borrower must contact the servicer and attest they have been impacted by a COVID-19 hardship and that they require payment assistance. The servicer will offer an initial forbearance period to the borrower, which can be extended if the borrower attests that they require additional payment assistance. At the end of the forbearance period, if the borrower is unable to make the forborne payments on such mortgage loan as a lump sum payment or does not enter into a repayment plan, the servicer may defer the missed payments, which could be added as a non-interest-bearing payment due at the end of the loan term. If the borrower can no longer afford to make payments in line with the original loan terms, the servicer would typically work with the borrower to modify the loan (although the servicer may utilize any other loss mitigation option permitted under the pooling and servicing agreement with respect to such mortgage loan at such time or any time thereafter). Servicing Fee Framework The servicing fee for loans serviced by United Shore and LoanDepot will be based on a step-up incentive fee structure with a monthly base fee of $40 per loan and additional fees for servicing delinquent and defaulted loans. Quicken Loans, AmeriHome and USAA FSB will be paid a monthly flat servicing fee equal to one-twelfth of 0.25% of the remaining principal balance of the mortgage loans. The servicing fee framework is comparable to other recent JPMMT transactions backed by prime mortgage loans that Moody's has rated. By establishing a base servicing fee for performing loans that increases when loans become delinquent, the fee-for-service structure aligns monetary incentives to the servicer with the costs of servicing. The servicer receives higher fees for labor-intensive activities that are associated with servicing delinquent loans, including loss mitigation, than they receive for servicing a performing loan, which is less costly and labor-intensive. The fee-for-service compensation is reasonable and adequate for this transaction because it better aligns the servicer's costs with the deal's performance. Furthermore, higher fees for the more labor-intensive tasks make the transfer of these loans to another servicer easier, should that become necessary. The incentive structure includes an initial monthly base servicing fee of $40 for all performing loans and increases according to a pre-determined delinquent and incentive servicing fee schedule. The delinquent and incentive servicing fees will be deducted from the available distribution amount and Class B-6 net WAC. The transaction does not have a servicing fee cap, so, in the event of a servicer replacement, any increase in the base servicing fee beyond the current fee will be paid out of the available distribution amount. Third-Party Review Four third party review firms, AMC Diligence, LLC, Clayton Services LLC, Digital Risk LLC and Opus Capital Markets Consultants, LLC (collectively, TPR firms) verified the accuracy of the loan-level information that Moody's received from the sponsor. These firms conducted detailed credit, valuation, regulatory compliance and data integrity reviews on 100% of the mortgage pool. The TPR results indicated compliance with the originators' underwriting guidelines for majority of loans, no material compliance issues, and no appraisal defects. Overall, the loans that had exceptions to the originators' underwriting guidelines had strong documented compensating factors such as low DTIs, low LTVs, high reserves, high FICOs, or clean payment histories. The TPR firms also identified minor compliance exceptions for reasons such as inadequate RESPA disclosures (which do not have assignee liability) and TILA/RESPA Integrated Disclosure violations related to fees that were out of variance but then were cured and disclosed. R&W Framework JPMMT 2020-4's R&W framework is in line with that of other JPMMT transactions where an independent reviewer is named at closing, and costs and manner of review are clearly outlined at issuance. Its review of the R&W framework considers the financial strength of the R&W providers, scope of R&Ws (including qualifiers and sunsets) and enforcement mechanisms. The R&W providers vary in financial strength. The creditworthiness of the R&W provider determines the probability that the R&W provider will be available and have the financial strength to repurchase defective loans upon identifying a breach. An investment grade rated R&W provider lends substantial strength to its R&Ws. Moody's analyzes the impact of less creditworthy R&W providers case by case, in conjunction with other aspects of the transaction. The R&W providers are unrated and/or financially weaker entities. Moody's applied an adjustment to the loans for which these entities provided R&Ws. No other party will backstop or be responsible for backstopping any R&W providers who may become financially incapable of repurchasing mortgage loans. With respect to the mortgage loan R&Ws made by such originators or the aggregator, as applicable, as of a date prior to the closing date, JPMMAC will make a "gap" representation covering the period from the date as of which such R&W is made by such originator or the aggregator, as applicable, to the cut-off date or closing date, as applicable. Additionally, no party will be required to repurchase or substitute any mortgage loan until such loan has gone through the review process. Trustee and Master Servicer The transaction Delaware trustee is Citibank. The custodian's functions will be performed by Wells Fargo Bank, N.A. The paying agent and cash management functions will be performed by Citibank. Nationstar, as master servicer, is responsible for servicer oversight, servicer termination and for the appointment of any successor servicer. In addition, Nationstar is committed to act as successor if no other successor servicer can be found. The master servicer is required to advance principal and interest if the servicer fails to do so. If the master servicer fails to make the required advance, the securities administrator is obligated to make such advance. Tail Risk & Subordination Floor This deal has a standard shifting interest structure, with a subordination floor to protect against losses that occur late in the life of the pool when relatively few loans remain (tail risk). When the total senior subordination is less than 0.75% of the original pool balance, the subordinate bonds do not receive any principal and all principal is then paid to the senior bonds. The subordinate bonds benefit from a floor as well. When the total current balance of a given subordinate tranche plus the aggregate balance of the subordinate tranches that are junior to it amount to less than 0.65% of the original pool balance, those tranches that are junior to it do not receive principal distributions. The principal those tranches would have received is directed to pay more senior subordinate bonds pro-rata. In addition, until the aggregate class principal amount of the senior certificates (other than the interest only certificates) is reduced to zero, if on any distribution date, the aggregate subordinate percentage for such distribution date drops below 6.00% of current pool balance, the senior distribution amount will include all principal collections and the subordinate principal distribution amount will be zero. Moody's calculates the credit neutral floors for a given target rating as shown in its principal methodology. The senior subordination floor is equal to an amount which is the sum of the balance of the six largest loans at closing multiplied by the higher of their corresponding MILAN Aaa severity or a 35% severity. The credit neutral floor for Aaa rating is $4,007,997. The senior subordination floor of 0.75% and subordinate floor of 0.65% are consistent with the credit neutral floors for the assigned ratings. Transaction Structure The transaction has a shifting interest structure in which the senior bonds benefit from a number of protections. Funds collected, including principal, are first used to make interest payments to the senior bonds. Next, principal payments are made to the senior bonds. Next, available distribution amounts are used to reimburse realized losses and certificate write-down amounts for the senior bonds (after subordinate bond have been reduced to zero i.e. the credit support depletion date). Finally, interest and then principal payments are paid to the subordinate bonds in sequential order. Realized losses are allocated in a reverse sequential order, first to the lowest subordinate bond. After the balance of the subordinate bonds is written off, losses from the pool begin to write off the principal balance of the senior support bond, and finally losses are allocated to the super senior bonds. In addition, the pass-through rate on the bonds (other than the Class A-R Certificates) is based on the net WAC as reduced by the sum of (i) the reviewer annual fee rate and (ii) the capped trust expense rate. In the event that there is a small number of loans remaining, the last outstanding bonds' rate can be reduced to zero. The Class A-11 Certificates will have a pass-through rate that will vary directly with the rate of one-month LIBOR and the Class A-11-X Certificates will have a pass-through rate that will vary inversely with the rate of one-month LIBOR. If the securities administrator notifies the depositor that it cannot determine one-month LIBOR in accordance with the methods prescribed in the sale and servicing agreement and a benchmark transition event has not yet occurred, one-month LIBOR for such accrual period will be one-month LIBOR as calculated for the immediately preceding accrual period. Following the occurrence of a benchmark transition event, a benchmark other than one-month LIBOR will be selected for purposes of calculating the pass-through rate on the class A-11 certificates. 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 rating all classes except interest-only classes was "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in April 2020. JPMDB COMMERCIAL 2016-C4: Fitch Affirms B- Rating on Class F Certs ------------------------------------------------------------------ Fitch Ratings has affirmed 13 classes of JPMDB Commercial Mortgage Securities Trust 2016-C4 commercial mortgage pass-through certificates. JPMDB 2016-C4 - Class A-1 46646RAG8; LT AAAsf; Affirmed - Class A-2 46646RAH6; LT AAAsf; Affirmed - Class A-3 46646RAJ2; LT AAAsf; Affirmed - Class A-S 46646RAN3; LT AAAsf; Affirmed - Class A-SB 46646RAK9; LT AAAsf; Affirmed - Class B 46646RAP8; LT AA-sf; Affirmed - Class C 46646RAQ6; LT A-sf; Affirmed - Class D 46646RAB9; LT BBB-sf; Affirmed - Class E 46646RAC7; LT BB-sf; Affirmed - Class F 46646RAD5; LT B-sf; Affirmed - Class X-A 46646RAL7; LT AAAsf; Affirmed - Class X-B 46646RAM5; LT AA-sf; Affirmed - Class X-C 46646RAA1; LT BBB-sf; Affirmed KEY RATING DRIVERS Increased Loss Expectations: Despite a majority of the pool exhibiting relatively stable performance, loss expectations have increased since issuance primarily due to an increase in Fitch Loans of Concern and additional stresses applied due to the coronavirus. Fitch identified 11 loans (21.1%) as FLOCs, including two (6.4%) loans in the top 15 and two loans (3.8%) in special servicing. The largest FLOC is the Westin Memphis loan (3.4%). The loan is secured by a 203-key hotel located in the Memphis, TN near the Beale Street Entertainment District. According to the TTM April 2020 STR report, the hotel reported 66.1% occupancy (compared to 82.2% at issuance), $203.52 ADR, and $134.43 RevPar. The subject's penetration rates were reported to be 101.7%, 114.0%, and 114.8% for occupancy, ADR, and RevPAR, respectively. Given the drop in occupancy and expected revenue decline caused by the coronavirus pandemic, the loan has been designated as a FLOC. The largest loan in special servicing is the 100 East Wisconsin Avenue loan (2.4%). The loan is secured by a 435,629-sf office building located in downtown Milwaukee, WI. It transferred to the special servicer in May 2020 due to COVID-19 relief request and imminent default. According to the sponsor, net cash flow is expected to decline in the near term due to the largest tenant vacating and other tenants requesting COVID-19 related rent relief. The sponsor has requested a loan modification and is working to submit a proposal for the servicer to review. The other loan in special servicing is secured by a 150-key hotel located in Troy, MI (1.4%). It also transferred in May 2020 for payment default and has experienced low occupancy due to coronavirus. A receiver has been appointed and the servicer expects to sell the property through the receiver. There are four other loans in the pool (6.2%) that are delinquent and have requested relief due to issues caused by COVID-19. Fitch will continue to monitor the outcome of these loans. Minimal Changes in Credit Enhancement: Credit Enhancement has had minimal change since issuance due to limited amortization, no loan payoffs and no defeasance. As of the June 2020 distribution date, the pool's aggregate principal balance has been reduced by 2.0% to $1.10 billion resulting in minimal increases in CE to the senior classes. Six of the largest 15 loans, representing 33.3% of the pool, are full-term interest-only loans. In total, there are eight full-term interest-only loans representing 38.2% of the pool. Additionally, there are three loans representing 11.2% of the pool that remain in their partial interest-only period. Office Concentration: The pool has an above-average concentration of office properties accounting for 52.7% of loans. Fitch-rated transactions in 2016 had an average office concentration of 28.7%. Coronavirus Exposure: Six loans (11.6%) are secured by hotel properties and have a weighted average NOI debt service coverage ratio of 2.54x. And six loans (15.7%), which have a weighted average NOI DSCR of 1.96x, are secured by retail properties. The base case analysis applied additional stresses to four of the hotel loans and two of the retail loans due to their vulnerability to the coronavirus pandemic. These additional stresses contributed to maintaining the Negative Outlook on class F and revising the Outlook for class E to Negative. RATING SENSITIVITIES The Negative Outlooks on classes E and F reflect the potential for future downgrades due to performance concerns as a result of the economic slowdown stemming from the coronavirus pandemic. The Stable Outlooks on classes A-1 through D reflect the overall stable pool performance for the majority of the pool and expected continued paydown. Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: -- Sensitivity factors that lead to upgrades would include stable to improved asset performance coupled with pay down and/or defeasance. Upgrades to the 'Asf' and 'AAsf' categories would likely occur with significant improvement in CE and/or defeasance; however, adverse selection, increased concentrations and/or further underperformance of the FLOCs or loans expected to be negatively affected by the coronavirus pandemic could cause this trend to reverse. Upgrades to the 'BBBsf' category would also take into account these factors, but would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if there were likelihood for interest shortfalls. Upgrades to the 'Bsf' and 'BBsf' categories are not likely until the later years in a transaction and only if the performance of the remaining pool is stable and/or properties vulnerable to the coronavirus return to pre-pandemic levels, and there is sufficient CE to the classes. Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: -- Sensitivity factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. Downgrades to the 'AAsf' and 'AAAsf' categories are not likely due to the position in the capital structure, but may occur at the 'AAsf' and 'AAAsf' categories should interest shortfalls occur or should the impact from the ongoing coronavirus pandemic be greater than currently expected. Downgrades to the 'Asf' and/or 'BBBsf' category would occur if a high proportion of the pool defaults and expected losses increase significantly. Downgrades to the 'Bsf' and 'BBsf' categories would occur should loss expectations increase due to an increase in specially serviced loans and/or the loans vulnerable to the coronavirus pandemic not stabilize. The Rating Outlook on class H-RR may be revised back to Stable if the performance of the FLOCs and/or properties vulnerable to the coronavirus stabilize once the pandemic is over. In addition to its baseline scenario related to the coronavirus, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects additional negative rating actions, including downgrades or Negative Rating Outlook revisions. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). JPMDB COMMERCIAL 2020-COR7: Fitch Rates Class H-RR Certs 'B+sf' --------------------------------------------------------------- Fitch Ratings has assigned final ratings and Rating Outlooks on JPMDB Commercial Mortgage Securities Trust 2020-COR7 commercial mortgage pass-through certificates, series 2020-COR7. JPMDB 2020-COR7 -- Class A-1; LT AAAsf New Rating -- Class A-2; LT AAAsf New Rating -- Class A-3; LT AAAsf New Rating -- Class A-4; LT AAAsf New Rating -- Class A-5; LT AAAsf New Rating -- Class A-S; LT AAAsf New Rating -- Class A-SB; LT AAAsf New Rating -- Class B; LT AA-sf New Rating -- Class C; LT A-sf New Rating -- Class D; LT BBBsf New Rating -- Class E; LT BBB-sf New Rating -- Class F-RR; LT BBB-sf New Rating -- Class G-RR; LT BBsf New Rating -- Class H-RR; LT B+sf New Rating -- Class NR-RR; LT NRsf New Rating -- Class X-A; LT AAAsf New Rating -- Class X-B; LT AA-sf New Rating -- Class X-D; LT BBB-sf New Rating -- $13,360,000 class A-1 'AAAsf'; Outlook Stable; -- $49,250,000 class A-2 'AAAsf'; Outlook Stable; -- $80,800,000 class A-3 'AAAsf'; Outlook Stable; -- $145,000,000 class A-4 'AAAsf'; Outlook Stable; -- $193,813,000 class A-5 'AAAsf'; Outlook Stable; -- $26,960,000 class A-SB 'AAAsf'; Outlook Stable; -- $565,557,000a class X-A 'AAAsf'; Outlook Stable; -- $25,460,000a class X-B 'AA-sf'; Outlook Stable; -- $56,374,000 class A-S 'AAAsf'; Outlook Stable; -- $25,460,000 class B 'AA-sf'; Outlook Stable; -- $37,279,000 class C 'A-sf'; Outlook Stable; -- $30,733,000ab class X-D 'BBB-sf'; Outlook Stable; -- $22,732,000b class D 'BBBsf'; Outlook Stable; -- $8,001,000b class E 'BBB-sf'; Outlook Stable; -- $14,730,000bc class F-RR 'BBB-sf'; Outlook Stable; -- $15,457,000bc class G-RR 'BBsf'; Outlook Stable; -- $7,274,000bc class H-RR 'B+sf'; Outlook Stable. Fitch does not rate the following class: -- $30,915,614bc class NR-RR. (a) Notional amount and IO. (b) Privately placed and pursuant to Rule 144A. (c) Non-offered Horizontal credit-risk retention interest. Since Fitch published its expected ratings on June 23, 2020, the following changes occurred: The balances for classes A-4 and A-5 were finalized. At the time that the expected ratings were published, the initial certificate balances of classes A-4 and A-5 were expected to be approximately $338,813,000 in aggregate, subject to a 5% variance. The final class balances for classes A-4 and A-5 are $145,000,000 and $193,813,000, respectively. TRANSACTION SUMMARY The certificates represent the beneficial ownership interest in the trust, primary assets of which are 34 loans secured by 149 commercial properties having an aggregate principal balance of $727.4 million as of the cut-off date. The loans were contributed to the trust by JPMorgan Chase Bank, LoanCore Capital Markets LLC, German American Capital Corporation and Goldman Sachs Mortgage Company. Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 55.9% of the properties by balance, cash flow analysis of 95.8% and asset summary reviews on 100% of the pool. Coronavirus Impact: The ongoing containment effort related to the coronavirus (which causes the COVID-19 disease) pandemic may have an adverse impact on near-term revenue (i.e., bad debt expense and rent relief) and operating expenses (i.e. sanitation costs) for some properties in the pool. Delinquencies may occur in the coming months as forbearance programs are put in place, although the ultimate impact on credit losses will depend heavily on the severity and duration of the negative economic impact of the coronavirus pandemic, and to what degree fiscal interventions by the U.S. federal government can mitigate the impact on consumers. Per the offering documents, all of the loans are current; however, the sponsors for two loans, Hampton Roads Office Portfolio (5.8% of pool) and Willow Lake Tech Center (0.7% of pool), have negotiated loan modifications to defer ongoing capex and Rollover reserve account deposits. Please see the Additional Coronavirus Forbearance Provisions section on page 13 of the presale report for more detail. KEY RATING DRIVERS Fitch Leverage Exceeds that of Recent Transactions: The pool has slightly higher leverage than other, recent, Fitch-rated multiborrower transactions. The pool's Fitch LTV of 101.6% is higher than the YTD 2020 average of 99.0%, but lower than the 2019 average of 103.0%. The pool's Fitch DSCR of 1.20x is lower than the YTD 2020 average of 1.31x and the 2019 average of 1.26x. Significant Office and California Concentrations: Loans secured primarily by office properties account for 79.5% of the pool, which is significantly higher than the YTD 2020 and 2019 averages of 35.4% and 34.2%, respectively. However, the pool includes only three loans (3.9% of pool) secured by retail properties and no loans secured by hotel properties. Additionally, loans secured by properties in California account for 37.4% of the pool while loans secured by properties in New York account for 15.3% of the pool. Large concentrations by property type and geographic region increase correlation risk, which increases the frequency of high loss scenarios in Fitch's multiborrower model. Investment-Grade Credit Opinion Loans: Six loans, representing 23.2% of the pool, received investment-grade credit opinions. This is below the YTD 2020 average of 27.7% but greater than the 2019 average of 14.2%. 1633 Broadway (7.9% of pool), BX Industrial Portfolio (5.1% of pool), Chase Center Towers I & II (combined 4.6% of the pool), City National Plaza (2.7% of pool) and Moffett Towers Buildings A, B and C (2.7% of pool) each received a stand-alone credit opinion of 'BBB-sf*'. Concentrated Pool: The top 10 loans constitute 59.0% of the pool (including the crossed loans Chase Center Towers I and II as one loan), which is greater than the YTD 2020 average of 52.7% and the 2019 average of 51.0%. The loan concentration index of 459 is greater than the YTD 2020 and 2019 averages of 393 and 379, respectively. Additionally, the sponsor concentration index of 467 indicates no material sponsor concentration. RATING SENSITIVITIES This section provides insight into the sensitivity of ratings when one assumption is modified, while holding others equal. For U.S. CMBS, the sensitivity reflects the impact of changes to property net cash flow in up- and down-environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Factors that Could, Individually or Collectively, Lead to a Negative Rating Action/Downgrade: Declining cash flow decreases property value and capacity to meet its debt service obligations. The table indicates the model implied rating sensitivity to changes in one variable, Fitch NCF: Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf' / 'BBsf' / 'B+sf' 10% NCF Decline: 'A+sf' / 'A-sf' / 'BBB-sf' / 'BB+sf'/ 'BB-sf' / 'CCCsf' / 'CCCsf' 20% NCF Decline: 'A-sf' / 'BBBsf' / 'BB+sf' / 'BB-sf'/ 'CCCsf' / 'CCCsf' / 'CCCsf' 30% NCF Decline: 'BBBsf' / 'BBB-sf' / 'BB-sf' / 'CCCsf'/ 'CCCsf' / 'CCCsf' / 'CCCsf' Factors that Could, Individually or Collectively, Lead to a Positive Rating Action/Upgrade: Similarly, improvement in cash flow increases property value and capacity to meet its debt service obligations. The table indicates the model implied rating sensitivity to changes to the same one variable, Fitch NCF: Original Rating: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf'/ 'BBB-sf' / 'BBsf' / 'B+sf' 20% NCF Increase: 'AAAsf' / 'AAAsf' / 'AA+sf' / 'A+sf' / 'A-sf' / 'BBBsf' / 'BBB-sf' BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by Ernst & Young. The third-party due diligence described in Form 15E focused on a comparison and re-computation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on its analysis or conclusions. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). LB-UBS COMMERCIAL 2005-C5: Fitch Hikes Rating on Cl. J Certs to BB ------------------------------------------------------------------ Fitch Ratings has upgraded one and affirmed four classes of LB-UBS Commercial Mortgage Trust commercial mortgage pass-through certificates series 2005-C5. LB-UBS Commercial Mortgage Trust 2005-C5 - Class J 52108H7J7; LT BBsf; Upgrade - Class K 52108H7K4; LT Dsf; Affirmed - Class L 52108H7L2; LT Dsf; Affirmed - Class M 52108H7M0; LT Dsf; Affirmed - Class N 52108H7N8; LT Dsf; Affirmed KEY RATING DRIVERS Increased Credit Enhancement; Improved Loss Expectations: The upgrade of class J reflects increased credit enhancement since Fitch's last rating action due to the full repayment of four loans (63.6% of the last rating action pool balance) at or ahead of their scheduled maturity dates, which was better than previously expected. As of the June 2020 remittance reporting, the pool's aggregate balance has been reduced by 99.3% to $15.8 million from $2.3 billion at issuance. Interest shortfalls totaling $10.1 million are currently affecting classes K through T. Concentrated Pool; Coronavirus Exposure: The pool is highly concentrated with only two loans remaining, both of which are secured by retail properties located in secondary and tertiary markets. The largest non-specially serviced loan, Cipriano Square (56.5% of the pool), is secured by a 35,793-sf retail center located in Greenbelt, MD. The loan, which remains current, did not pay off at its anticipated repayment date in June 2020; the final loan maturity is in June 2030. The property was 100% occupied at year-end 2019. Major tenants include Beauty Club Plus (15.9% of NRA; lease expiry in August 2023), Five Guys Burgers & Fries (8.8%; March 2022), African Restaurant (6.9%; December 2029), Dunkin Donuts (6.3%; May 2028) and T-Mobile (6.2%; August 2022). The servicer-reported NOI DSCR was 1.50x at YE 2019. The other retail loan, Kiln Creek (43.5% of the pool), transferred to special servicing in April 2020 after failing to pay off at its April 11, 2020 maturity date. The loan is secured by a 45,300-sf retail center located in Yorktown, VA. The property is shadow-anchored by a non-collateral Kroger. Per the special servicer, the borrower is working to refinance the loan, while the servicer dual tracks foreclosure. Occupancy as of May 2020 was 95.9%, with the largest tenant being Riverside Primary Care Center (23.9% of NRA; lease expiry in August 2024). Rating Cap; Alternative Loss Consideration: Due to the concentrated nature of the pool, Fitch performed a look-through analysis that considers the likelihood of repayment and expected losses on the remaining loans in the pool. While Fitch expects a full recovery of class J, the rating was capped at 'BBsf' due to the collateral quality of the remaining pool and concerns surrounding the ultimate impact of the coronavirus pandemic on the performance and refinanceability of the retail loans. RATING SENSITIVITIES The Stable Outlook on class J reflects the class' high credit enhancement and expected continued paydown. Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: Further upgrade to class J is not expected as the rating is capped due to the high pool concentration and quality of the remaining collateral. Classes rated 'Dsf' have already incurred principal losses and will not be upgraded. Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: Sensitivity factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. A downgrade of class J is not expected unless performance of the two remaining retail properties, which is vulnerable to the coronavirus, declines significantly and losses exceed Fitch's expectations. In addition to its baseline scenario related to the coronavirus, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects negative rating actions, including downgrades or Negative Rating Outlook revisions. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). LEGACY MORTGAGE 2017-RPL2: Fitch Rates Class B2 Debt 'B-sf' ----------------------------------------------------------- Fitch Ratings has assigned ratings to Legacy Mortgage Asset Trust 2017-RPL2 as follows: LMAT 2017-RPL2 - Class A1; LT AAAsf New Rating - Class A2; LT Asf New Rating - Class A3; LT B-sf New Rating - Class B1; LT Asf New Rating - Class B2; LT B-sf New Rating - Class B3; LT NRsf New Rating - Class B4; LT NRsf New Rating - Class B5; LT NRsf New Rating - Class PT; LT NRsf New Rating - RISKRETEN; LT NRsf New Rating TRANSACTION SUMMARY LMAT 2017-RPL2 is supported by a pool of re-performing mortgage loans. The transaction was originally issued in 2017 and was not rated at deal close. In tandem with this rating assignment, the transaction is being modified to 1) allow principal collection to be redirected to cover any potential interest shortfalls on the class A-1, 2) using interest payment otherwise allocable to the class B-3 to fund an account that may be used for potential repurchases and 3) adding certain constraints on which institutions can act as an "Eligible Account". KEY RATING DRIVERS Coronavirus Impact Addressed (Negative): The coronavirus pandemic and resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Fitch's baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from the coronavirus, an Economic Risk Factor floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' rated bonds and below. Deferrals as Delinquencies (Negative): Close to 5% of the loans in the transaction are marked as current, but appear to be in a deferral plan. Under this approach the borrower does not make the payment but is marked as current as the servicer extends the next due date. Since the borrower is not cashflowing, they were treated as delinquent in Fitch's loss analysis. RPL Credit Quality (Mixed): The collateral consists of 30-year FRM and five-year ARM fully amortizing loans, seasoned approximately 161 months in aggregate. The borrowers in this pool have weaker credit profiles (686 FICO) and relatively high leverage (99.7% sLTV). In addition, the pool contains no particularly large loans. Only two loans are over $1 million and the largest is $1.14 million; 12% of the pool had a delinquency in the past 24 months. Geographic Concentration (Neutral): Approximately 30% of the pool is concentrated in California with relatively low MSA concentration. The largest MSA concentration is in Los Angeles MSA (9.6%) followed by the New York MSA (9.6%) and the Chicago MSA (7.7%). The top three MSAs account for 27% of the pool. As a result, there was no adjustment for geographic concentration Payment Forbearance Assumptions Due to Coronavirus (Negative): The outbreak of coronavirus and widespread containment efforts in the U.S. has resulted in higher unemployment and cash flow disruptions. To account for the cash flow disruptions and lack of advancing for borrower's forbearance plans, Fitch assumed at least 40% of the pool is delinquent for the first six months of the transaction at all rating categories, with a reversion to its standard delinquency and liquidation timing curve by month 10. This assumption is based on observations of legacy Alt-A delinquencies and past-due payments following Hurricane Maria in Puerto Rico. Transaction Structure (Positive): The transaction's cash flow is based on a sequential-pay structure whereby the subordinate classes do not receive principal until the senior classes are repaid in full. Losses are allocated in reverse-sequential order. Low Operational Risk (Neutral): Operational risk is well controlled for in this transaction. Goldman Sachs has an established operating history acquiring single-family residential loans and is assessed as an 'Average' aggregator by Fitch. Rushmore Loan Management Services, LLC is the named servicer for the transaction and is rated 'RPS2-'. Fitch did not adjust its expected loss at the 'AAAsf' rating category due to the counterparty assessments. Issuer retention of at least 5% of the bonds also helps ensure an alignment of interest between both the issuer and investor R&W's Have Knowledge Qualifiers and Sunset Period (Negative): The loan-level representations and warranties are consistent with a Tier 2 framework. The tier assessment is based primarily on the inclusion of knowledge qualifiers in the underlying reps as well as a breach reserve account that replaces the Sponsor's responsibility to cure any R&W breaches following the established sunset period. Fitch increased its loss expectations by 215 bps at the 'AAAsf' rating category to reflect both the limitations of the R&W framework as well as the non-investment-grade counterparty risk of the provider. Due Diligence Review Results (Negative): A third-party due diligence review was performed on 100% of the loans in the transaction pool. The review was performed by SitusAMC, which is assessed by Fitch as an 'Acceptable - Tier 1' TPR firm. The due diligence results indicate moderate operational risk with 16.5% of loans receiving a final grade of 'C' or 'D'. This concentration of material exceptions is high relative to other Fitch-rated RPL RMBS, and loss severity adjustments were applied to approximately 11% of loans that had missing or estimated final HUD-1 documents necessary for testing compliance with predatory lending regulations. These regulations are not subject to statute of limitations unlike the majority of compliance exceptions, which ultimately exposes the trust to added assignee liability risk. Fitch adjusted its loss expectation at the 'AAAsf' rating category by ~50 bps to account for this added risk. RATING SENSITIVITIES Fitch 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 that may be considered in the surveillance of the transaction. Sensitivity analyses was conducted at the state and national levels to assess the effect of higher MVDs for the subject pool as well as lower MVDs, illustrated by a gain in home prices. Factors that could, individually or collectively, lead to negative rating action/downgrade: This defined negative rating 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 40.5% at 'AAA'. The analysis indicates that there is some potential rating migration with higher MVDs for all rated classes, compared with the model projection. Specifically, a 10% additional decline in home prices would lower all rated classes by one full category. Factors that could, individually or collectively, lead to positive rating action/upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or in other words positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10.0%. Excluding the senior class, which is already rated 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. Specifically, a 10% gain in home prices would result in a full category upgrade for the rated class excluding those assigned 'AAAsf' ratings. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling process uses the modification of these variables to reflect asset performance in up- and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Fitch has added a Coronavirus Sensitivity Analysis that that includes a prolonged health crisis resulting in depressed consumer demand and a protracted period of below-trend economic activity that delays any meaningful recovery to beyond 2021. Under this severe scenario, Fitch expects the ratings to be impacted by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term impact arising from coronavirus disruptions on these economic inputs will likely affect both investment and speculative grade ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. CRITERIA VARIATION There are two variations to the U.S. RMBS Rating Criteria. The tax and title search were performed at the time of the initial transaction closing, which is outside of the six-month timeframe that Fitch looks to in criteria. This is mitigated by the relatively small number of outstanding amounts at the time the search was completed, the close proximity to the threshold Fitch has in place as well as the servicers responsibility in line with the transaction documents to advance these payments to maintain the trust's interest in the loans. As a result, there was no rating impact. The second variation relates to the outdated FICO scores for the transaction. The FICOs were updated at the time of the transaction close, which is more than the six-month window in which Fitch looks for updated values. The stale values have no impact on the levels as the performance has been fairly stable since they were pulled. Additionally, while outdated, the values better capture the borrower's credit after the modification and their initial default. To the extent the borrower has underperformed it will be reflected in the pay string, which would have a much more meaningful impact on the levels. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 A third-party due diligence review was completed on 100% of the loans in the transaction pool. The due diligence scope included a regulatory compliance review that covered applicable federal, state and local high-cost loan and/or anti-predatory laws, as well as the Truth in Lending Act and Real Estate Settlement Procedures Act. The scope was consistent with published Fitch criteria for due diligence on RPL RMBS. The regulatory compliance review indicated that 1,498 reviewed loans, or approximately 16.5% of the total pool, were found to have a material defect and therefore assigned a final grade of 'C' or 'D'. While the concentration of material grades in this transaction is high relative to prior Fitch rated transactions, which indicates that there may be higher levels of operational risk, the majority of exceptions are for missing specific documentation that does not prevent the TPR from effectively testing for compliance with lending regulations. 1,022 of reviewed loans, or approximately 11.2% of the total pool, received a final grade of 'D' as the loan file did not contain a final HUD-1. The absence of a final HUD-1 file does not allow the TPR firm to properly test for compliance surrounding predatory lending in which statute of limitations does not apply. These regulations may expose the trust to potential assignee liability in the future and create added risk for bond investors. Fitch increased the LS on these loans to account for missing final HUD-1. The remaining 276 loans, or approximately 3% of the total pool, with a final grade of 'C' or 'D' reflect missing final HUD-1 files that are not subject to predatory lending, missing state disclosures, and other missing documents related to compliance testing. Fitch notes that these exceptions are unlikely to add material risk to bondholders since the statute of limitations on these issues have expired. No adjustment to loss expectations were made for these 276 loans for compliance issues. Fitch also applied model adjustments on 291 loans with a broken chain of title and 21 loans that had missing modification agreements. These loans received a three-month foreclosure timeline extension to represent a delay in the event of liquidation as a result of these files not being present. Fitch adjusted its loss expectation at the 'AAAsf' by approximately 50 basis points to reflect both missing final HUD-1 files and modification agreements as well as broken chain of title. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). MADISON PARK XVI: Moody's Cuts Class E Notes to Caa2 ---------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by Madison Park Funding XVI, Ltd.: US$12,000,000 Class E Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Downgraded to Caa2 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade Moody's has also confirmed the rating on the following notes: US$30,250,000 Class D Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D and Class E Notes. The collateralized loan obligation, issued in March 2015, 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 April 2019. RATINGS RATIONALE The downgrade on the Class E Notes reflects the credit deterioration and par loss observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially and the credit enhancement available to the CLO notes has eroded, exposure to Caa-rated assets has increased significantly, and expected losses on certain notes have increased materially. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the risk posed to, and the expected losses on, the Class D Notes continue to be consistent with the current rating of the notes after taking into account the CLO's latest portfolio, its relevant structural features, its actual OC levels, and the level of credit enhancement available to it from cash flows that would be diverted as a result of coverage test failures. Consequently, Moody's has confirmed the rating on the Classes D Notes. Based on the June 2020 trustee report, the weighted average rating factor was 3665 as of June 2020, or 26% worse compared to a WARF of 2,916 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 3300 reported in the June 2020 trustee report [2] by 308 points. Moody's noted that approximately 33% of the CLO's par was from obligors assigned a negative outlook and 9% from obligors whose ratings are on review for downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 23% of the CLO par as of June 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $475.6 million, or $9.4 million less since the last rating action in April 2019, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class D Notes and Class E Notes as of June 2020 at 108.2% and 105.3%, respectively. 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 $472.6 million, defaulted par of $14.7 million, a weighted average default probability of 24.17% (implying a WARF of 3608), a weighted average recovery rate upon default of 47.58%, a diversity score of 57 and a weighted average spread of 3.29%. Moody's also analyzed the CLO by incorporating an approximately $11.1 million par haircut in calculating the OC ratios. Finally, Moody's also considered in its analysis the CLO manager's recent investment decisions and trading strategies. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of corporate assets. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. MF1 LTD 2020-FL3: DBRS Finalizes B(low) Rating on Class G Notes --------------------------------------------------------------- DBRS, Inc. finalized provisional ratings on the following classes of notes issued by MF1 2020-FL3, Ltd. (the Issuer): -- Class A at AAA (sf) -- Class A-S at AAA (sf) -- Class B at AA (low) (sf) -- Class C at A (low) (sf) -- Class D at BBB (sf) -- Class E at BBB (low) (sf) -- Class F at BB (low) (sf) -- Class G at B (low) (sf) All trends are Stable. Classes F and G will be privately placed. With regard to the Coronavirus Disease (COVID-19) pandemic, the magnitude and extent of performance stress posed to global structured finance transactions remain highly uncertain. This considers the fiscal and monetary policy measures and statutory law changes that have already been implemented or will be implemented to soften the impact of the crisis on global economies. Some regions, jurisdictions, and asset classes are, however, feeling more immediate effects. Accordingly, DBRS Morningstar may apply additional short-term stresses to its rating analysis. For example, DBRS Morningstar may front-load default expectations and/or assess the liquidity position of a structured finance transaction with more stressful operational risk and/or cash flow timing considerations. The Issuer provided coronavirus and business plan updates for all loans in the pool, confirming that all April and May 2020 debt service payments were received in full. Furthermore, no loans are in forbearance or other debt service relief and no loan modifications were requested, except for Peanut Factory (#23; 1.5% of the initial pool balance). In early April, the sponsor for the Peanut Factory submitted a formal request for forbearance, which the lender denied based on the adequacy of current cash flow. Since then, the April and May debt service payments for this loan were made in full, and the loan is current. The initial collateral consisted of 26 floating-rate mortgage loans secured by 51 transitional multifamily properties totaling $803.0 million (70.1% of the total fully funded balance), excluding $113.3 million of remaining future funding commitments and $171.4 million of pari passu debt. Of the 26 loans, there are two unclosed, delayed-close loans as of June 10, 2020, representing 5.9% of the initial pool balance: Avilla Prairie (#8) and Pennsylvania Place (#22). Additionally, two loans, SF Multifamily Portfolio I (#3) and New Orleans Portfolio (#12), have delayed-close mortgage assets, which are identified in the data tape and included in the DBRS Morningstar analysis. If a delayed-close loan or asset is not expected to close or fund prior to the purchase termination date, any amounts remaining in the unused proceeds account up to $5.0 million will be deposited into the replenishment account. Any funds in excess of $5.0 million will be transferred to the payment account and applied as principal proceeds in accordance with the priority of payments. Additionally, during a 90-day period following the closing date, the Issuer can bring an estimated $17.0 million of future funding participations into the pool, resulting in a target deal balance of $820.0 million. The loans are mostly secured by currently cash flowing assets, many of which are in a period of transition. The Issuer is planning to stabilize these assets and improve the asset value. Of these loans, 18 have remaining future funding participations totaling $113.3 million, which the Issuer may acquire in the future. Please see the chart below for participations that the Issuer will be allowed to acquire. Given the floating-rate nature of the loans, the index DBRS Morningstar used (one-month Libor) was the lower of DBRS Morningstar's stressed rates that corresponded to the remaining fully extended term of the loans and the strike price of the interest-rate cap with the respective contractual loan spread added to determine a stressed interest rate of the loan term. When measuring the cut-off date balances against the DBRS Morningstar As-Is Net Cash Flow (NCF), 20 loans, representing 75.1% of the cut-off date pool balance, had a DBRS Morningstar As-Is Debt Service Coverage Ratio (DSCR) of 1.00 times (x) or below, a threshold indicative of default risk. Additionally, the DBRS Morningstar Stabilized DSCR for 11 loans, comprising 48.9% of the initial pool balance, was 1.00x or below, which indicates elevated refinance risk. The properties are often transitioning with potential upside in cash flow; however, DBRS Morningstar does not give full credit to the stabilization if there are no holdbacks or if the other loan structural features are insufficient to support such treatment. Furthermore, even if the structure is acceptable, DBRS Morningstar generally does not assume the assets will stabilize above market levels. The transaction will have a sequential-pay structure. The loans were all sourced by an affiliate of the Issuer, which has strong origination practices and substantial experience in the multifamily industry. Classes F and G and the Preferred Shares (collectively representing 15.0% of the initial pool balance) will be purchased by a wholly owned subsidiary of MF1 REIT II LLC. All loans in the pool are secured by multifamily properties located across 17 states with no state representing more than 12.6% of the cut-off date pool balance. The pool's Herfindahl score of 23.1 is favorable for a commercial real estate collateralized loan obligation and indicates strong diversity. Multifamily properties benefit from staggered lease rollover and generally low expense ratios compared with other property types. While revenue is quick to decline in a downturn because of the short-term nature of the leases, it is also quick to respond when the market improves. Additionally, most loans are secured by traditional multifamily properties, such as garden-style communities or mid-rise/high-rise buildings, with only one loan secured by an age-restricted facility (#10, Overture Sugar Land). Seventeen loans, comprising 64.7% of the initial trust balance, represent acquisition financing wherein sponsors contributed significant cash equity as a source of funding in conjunction with the mortgage loan, resulting in a moderately high sponsor cost basis in the underlying collateral. The loans in the transaction benefit from experienced and financially stable borrowers, many of which are sourced through a strategic partnership with CBRE, the largest government-sponsored enterprise lender. Only one loan, representing 5.4% of the cut-off date pool balance, has a sponsor with negative credit history and/or limited financial wherewithal that DBRS Morningstar deemed to be Weak, effectively increasing the probability of default (POD) for this loan. DBRS Morningstar has analyzed the loans to a stabilized cash flow for the loans that are, in some instances, above the in-place cash flow. It is possible that the sponsors will not successfully execute their business plans and that the higher stabilized cash flow will not materialize during the loan term, particularly with the ongoing coronavirus pandemic and its impact on the overall economy. A sponsor's failure to execute the business plan could result in a term default or the inability to refinance the fully funded loan balance. Only two loans (14.4% of the pool) are secured by properties in markets with a DBRS Morningstar Market Rank of 7 or 8 (SF Multifamily Portfolio I and LA Multifamily Portfolio I), which are considered dense urban in nature and benefit from increased liquidity with consistently strong investor demand, even during times of economic stress. Furthermore, 16 loans, representing 68.0% of the initial trust balance, are secured by properties in markets with a DBRS Morningstar Market Rank of 3 or 4, which, although generally suburban in nature, have historically had higher PODs. The pool’s Weighted-Average DBRS Morningstar Market Rank of 4.02 indicates a high concentration of properties in less densely populated suburban areas. The properties comprising the loan collateral were built between 1929 and 2020 with an average year built of 1983. Given the older vintage of the assets, no loans are secured by properties that DBRS Morningstar deemed to be Above Average or Excellent in quality. Three loans, comprising 7.6% of the initial trust balance, are secured by properties with Average (-) quality: New Orleans Portfolio (#12), Grand Oaks (#16), and Ansley at Harts Road (#20). Lower-quality properties are less likely to retain existing tenants and may require additional capital expenditure, resulting in less-than-stable performance. Because the loans were originated prior to the onset of the coronavirus pandemic—and, as a result, the appraised values and cash flows do not reflect the full extent of the impact of the current environment—DBRS Morningstar believes that the transaction may be exposed to losses beyond the base-case pool loss captured within the CMBS Insight Model described in the North American CMBS Multi-Borrower Rating Methodology. DBRS Morningstar materially deviated from its North American CMBS Multi-Borrower Rating Methodology when determining the ratings assigned to Class G, which deviated from the higher ratings implied by the quantitative results. DBRS Morningstar typically expects a substantial likelihood that a reasonable investor or other user of the credit ratings would consider a three-notch or more deviation from the rating stresses implied by the predictive model to be a significant factor in DBRS Morningstar ratings. Notes: All figures are in U.S. dollars unless otherwise noted. MORGAN STANLEY 2016-C30: Fitch Affirms BB-sf Rating on 2 Tranches ----------------------------------------------------------------- Fitch Ratings has affirmed 15 classes of Morgan Stanley Bank of America Merrill Lynch Trust, commercial mortgage pass-through certificates, series 2016-C30 (MSBAM 2016-C30). Fitch has also revised the Rating Outlooks on two classes to Negative from Stable. RATING ACTIONS MSBAM 2016-C30 Class A-1 61766NAW5; LT AAAsf Affirmed; previously at AAAsf Class A-2 61766NAX3; LT AAAsf Affirmed; previously at AAAsf Class A-3 61766NAZ8; LT AAAsf Affirmed; previously at AAAsf Class A-4 61766NBA2; LT AAAsf Affirmed; previously at AAAsf Class A-5 61766NBB0; LT AAAsf Affirmed; previously at AAAsf Class A-S 61766NBE4; LT AAAsf Affirmed; previously at AAAsf Class A-SB 61766NAY1; LT AAAsf Affirmed; previously at AAAsf Class B 61766NBF1; LT AA-sf Affirmed; previously at AA-sf Class C 61766NBG9; LT A-sf Affirmed; previously at A-sf Class D 61766NAJ4; LT BBB-sf Affirmed; previously at BBB-sf Class E 61766NAL9; LT BB-sf Affirmed; previously at BB-sf Class X-A 61766NBC8; LT AAAsf Affirmed; previously at AAAsf Class X-B 61766NBD6; LT AA-sf Affirmed; previously at AA-sf Class X-D 61766NAA3; LT BBB-sf Affirmed; previously at BBB-sf Class X-E 61766NAC9; LT BB-sf Affirmed; previously at BB-sf KEY RATING DRIVERS Stable Overall Performance; Increased Loss Expectations Due to Coronavirus Pandemic Concerns: While overall pool performance remains stable, loss expectations have increased since Fitch's prior rating action primarily due to additional stresses applied to loans expected to be impacted in the near-term from the coronavirus pandemic. Sixteen loans (29.6% of pool), including one loan (0.5%) in special servicing, were designated Fitch Loans of Concern (FLOCs). Thirteen of these FLOCs (25.7%) were designated FLOCs primarily due to exposure to the coronavirus pandemic in the near term. Fitch Loans of Concern: The largest non-coronavirus specific FLOC, Simon Premium Outlets (2.7%) is secured by a 782,765-sf portfolio of three retail outlet centers in Massachusetts, South Carolina and Georgia. The loan was designated a FLOC due to portfolio occupancy declining to 78% as of March 2020 from 94% at issuance. Additionally, per the March 2020 rent roll, 18.2% NRA expires in 2020 and 18.9% NRA expires in 2021. At YE 2019, servicer-reported NOI debt service coverage ratio (DSCR) was 2.83x. Specially Serviced Loan: Tinley Pointe Center (0.5%), secured by a 18,214-sf retail property in Tinley Park, IL, transferred to special servicing in May 2019 for payment default. The collateral consists of the ground floor retail of a four-story condominium. The property has experienced cash flow declines since issuance due to delinquent lease payments from the second largest tenant (17.3% NRA), which was evicted in 2018. Per servicer updates, the Lender is dual tracking the foreclosure process while discussing workout alternatives with the borrower's representatives. Minimal Change to Credit Enhancement: There has been minimal change to credit enhancement (CE) since issuance. As of the June 2020 distribution date, the pool's aggregate balance has been paid down by 2.6% to $862.5 million from $885.2 million at issuance. All original 48 loans remain in the pool. Based on the loans' scheduled maturity balances, the pool is expected to amortize 9.9% during the term. Ten loans (37.7% of pool) are full-term, interest-only. Twenty-two loans (33.8%) had a partial-term, interest-only component at issuance of which 18 have begun amortizing. Four loans (2.1%) are fully defeased. Pool Concentration: The top 10 loans comprise 57.1% of the pool. Loan maturities are concentrated in 2026 (96.1%). Based on property type, the largest concentrations are retail at 41.2%, office at 32.6% and hotel at 13.6%. At issuance, four loans (22.3%), all in the top 15, Vertex Pharmaceuticals HQ (9.0%; BBB-), Easton Town Center (8.7%; A+), The Shops at Crystal (2.3%; BBB+) and International Square (2.3%; AA-) received stand-alone, investment-grade credit opinions. Exposure to Coronavirus Pandemic: Six loans (13.6%) are secured by hotel properties. The weighted average NOI DSCR for all the hotel loans is 2.74x. These hotel loans could sustain a weighted average (WA) decline in NOI of 64% before DSCR falls below 1.00x. Twenty loans (41.2%) are secured by retail properties. The weighted average NOI DSCR for all retail loans is 2.13%. These retail loans could sustain a WA decline in NOI of 54% before DSCR fall below 1.00x. Additional coronavirus specific base case stresses were applied to four hotel loans (8.2%), including Hamister Hotel Portfolio (3%) and Club Quarters - Washington D.C.(2.9%), nine retail loans (14.7%), including Coconut Point (6.8%) and Village at Main Street (2.2%) and Clemson Lofts Apartments (3.4%) due to its student housing property subtype. These additional stresses contributed to the Negative Outlooks on classes E and X-E. RATING SENSITIVITIES The Stable Outlooks on classes A-1 through D reflect the overall stable performance of the pool and expected continued amortization. The Negative Outlooks on classes E and X-E reflect concerns with the FLOCs, primarily loans expected to be impacted by exposure to the coronavirus pandemic in the near term. Factors that could, individually or collectively, lead to positive rating action/upgrade: Factors that lead to upgrades would include stable to improved asset performance coupled with paydown and/or defeasance. Upgrades of classes B and C would likely occur with significant improvement in CE and/or defeasance; however, increased concentrations, further underperformance of FLOCs and decline in performance of loans expected to be impacted by the coronavirus pandemic could cause this trend to reverse. An upgrade of class D is considered unlikely and 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. An upgrade of class E is not likely due to performance concerns with loans expected to be impacted by the coronavirus pandemic in the near term but could occur if performance of the FLOCs improves and/or if there is sufficient CE, which would likely occur if the non-rated classes are not eroded and the senior classes pay-off. Factors that could, individually or collectively, lead to negative rating action/downgrade: Factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. Downgrades of classes A-1 through C are not likely due to the position in the capital structure. Downgrades of classes D and E could occur if additional loans become FLOCs, with further underperformance of the FLOCs and decline in performance and lack of recovery of loans expected to be impacted by the coronavirus pandemic in the near term. In addition to its baseline scenario, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects that a greater percentage of classes may be assigned a Negative Outlook or those with Negative Outlooks will be downgraded one or more categories. MUSKOKA 2019-1: DBRS Lowers Tranche C Amount to Prov. BB(high) -------------------------------------------------------------- DBRS, Inc. placed its provisional rating of AAA (sf) on the Tranche A Amount issued by Manitoulin USD Ltd., Muskoka 2019-1 (Manitoulin) Under Review with Negative Implications as well as downgraded its provisional ratings on the Tranche B Amount and Tranche C Amount to A (low) (sf) and BB (high) (sf) from A (high) (sf) and BBB (sf), respectively, and placed the ratings Under Review with Negative Implications. Together, the Tranche A Amount, Tranche B Amount, and Tranche C Amount make up the rated Tranche Amounts of two unexecuted, unfunded financial guarantees (the Financial Guarantees) with respect to a portfolio of primarily U.S. and Canadian senior secured or senior unsecured loans originated or managed by Bank of Montreal (BMO; rated AA with a Stable trend by DBRS Morningstar) and issued by Manitoulin. The provisional ratings on the Tranche Amounts address the likelihood of a reduction to the respective Tranche Amounts caused by a Tranche Loss Balance on each respective tranche, resulting from defaults and losses within the guaranteed portfolio during the period from the Effective Date until the Scheduled Termination Date (as defined in the Financial Guarantees). DBRS Morningstar's ratings are expected to remain provisional until the underlying agreements are executed. BMO may have no intention of executing the Financial Guarantees. DBRS Morningstar will maintain and monitor the provisional ratings throughout the life of the transaction or while it continues to receive performance information. DBRS Morningstar also downgraded its ratings on the Muskoka Series 2019-1 Class B Guarantee Linked Notes (the Class B Notes) to A (low) (sf) from A (high) (sf), the Muskoka Series 2019-1 Class C Guarantee Linked Notes (the Class C Notes) to BB (high) (sf) from BBB (sf), and the Muskoka Series 2019-1 Class D Guarantee Linked Notes (together with the Class B Notes and Class C Notes, the Notes) to B (high) (sf) from BB (high) (sf). DBRS Morningstar also placed its ratings on the Notes Under Review with Negative Implications. Manitoulin issued the Notes referencing the executed Junior Loan Portfolio Financial Guarantee (the Junior Financial Guarantee) dated as of January 30, 2019, between Manitoulin as Guarantor and BMO as Beneficiary with respect to a portfolio of primarily U.S. and Canadian senior secured and senior unsecured loans. The ratings on the Notes address the timely payment of interest and ultimate payment of principal on or before the Scheduled Termination Date (as defined in the Junior Financial Guarantee). The payment of the interest due to the Notes is subject to the Beneficiary's ability to pay the Guarantee Fee Amount (as defined in the Junior Financial Guarantee). DBRS Morningstar took these rating actions as a result of the recent deterioration in the underlying portfolio's credit quality. In the last few months, DBRS Morningstar observed that the portfolio's weighted-average (WA) risk score has increased materially. DBRS Morningstar deems these actions appropriate amid the uncertainty of the Coronavirus Disease (COVID-19) pandemic and its continued impact on the underlying portfolio's credit quality and performance. To assess portfolio credit quality for each corporate obligor in the portfolio, DBRS Morningstar relies on its ratings and public ratings from other rating agencies or DBRS Morningstar may provide a credit estimate, internal assessment, or ratings mapping of the Beneficiary's internal ratings model. Credit estimates, internal assessments, and ratings mappings are not ratings; rather, they represent an abbreviated analysis, including model-driven or statistical components of default probability for each obligor used to assign a rating to the facility that is sufficient to assess portfolio credit quality. On the Effective Date, Manitoulin used the proceeds of the issuance of the Notes to make a deposit into the Cash Deposit Accounts with the Cash Deposit Bank (as defined in the Junior Financial Guarantee). DBRS Morningstar may review the ratings on the Notes if the Cash Deposit Bank is downgraded below certain thresholds as defined in the transaction documents. As the coronavirus spread around the world, certain countries imposed quarantines and lockdowns, including the United States, which accounts for over one-quarter of confirmed cases worldwide. The coronavirus pandemic has adversely affected not only the economies of the nations most afflicted with the coronavirus, but also the overall global economy with diminished demand for goods and services as well as disrupted supply chains. This may result in deteriorated financial conditions for many companies and obligors, some of which will experience the effects of such negative economic trends more than others. At the same time, governments and central banks in multiple regions, including the United States and Europe, have taken significant measures to mitigate the economic fallout from the coronavirus pandemic. In conjunction with DBRS Morningstar's commentary "Global Macroeconomic Scenarios: Implications for Credit Ratings" published on April 16, 2020, and updated in its "Global Macroeconomic Scenarios: June Update" commentary on June 1, 2020, DBRS Morningstar further considers additional adjustments to assumptions for the collateralized loan obligation (CLO) asset class that consider the moderate economic scenario outlined in the commentaries. The adjustments include a higher default assumption for the WA credit quality of the current collateral obligation portfolio. To derive the higher default assumption, DBRS Morningstar notches ratings for obligors in certain industries and obligors at various rating levels based on their perceived exposure to the adverse disruptions caused by the coronavirus. Considering a higher default assumption would result in losses that exceed the original default expectations for the affected classes of notes. DBRS Morningstar may adjust the default expectations further if the duration or severity of the adverse disruptions caused by the coronavirus change. DBRS Morningstar ran an additional higher default adjustment on the WA DBRS Morningstar Risk Score of the current collateral obligation pool with the maximum covenanted tenor, and this stressed modeling pool was run through the Monte Carlo simulation component of DBRS Morningstar's CLO Asset Model to generate a stressed default rate. DBRS Morningstar considered the results of this additional default adjustment for the above rating actions. Notes: All figures are in U.S. dollars unless otherwise noted. NASSAU LTD 2017-II: Moody's Cuts Rating on Class E Notes to B1 -------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Nassau 2017-II Ltd.: US$25,500,000 Class C Senior Secured Deferrable Floating Rate Notes Due January 15, 2030 (the "Class C Notes"), Downgraded to A3 (sf); previously on June 3, 2020 A2 (sf) Placed Under Review for Possible Downgrade US$28,000,000 Class D Senior Secured Deferrable Floating Rate Notes Due January 15, 2030 (the "Class D Notes"), Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$18,500,000 Class E Secured Deferrable Floating Rate Notes Due January 15, 2030 (the "Class E Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$52,000,000 Class B Senior Secured Floating Rate Notes Due January 15, 2030 (the "Class B Notes"), Confirmed at Aa2 (sf); previously on June 3, 2020 Aa2 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D Notes and E Notes and on June 3, 2020 on the Class B Notes and C Notes issued by the CLO. The CLO, issued in December 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 will end in January 2022. RATINGS RATIONALE The downgrades on the Class C Notes, Class D Notes, and Class E Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has eroded, and exposure to Caa-rated assets has increased significantly, and expected losses on certain notes have increased materially. Based on Moody's calculation, the weighted average rating factor was 3764 as of June 2020, or 25% worse compared to 3006 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 3022 reported in the June 2020 trustee report [2] by 742 points. Moody's noted that approximately 40% of the CLO's par was from obligors assigned a negative outlook and 7% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (after any adjustments for negative outlook and watchlist for possible downgrade) is approximately 30% as of June 2020. Furthermore, Moody's calculated total collateral par balance, including recoveries from defaulted securities, is at $442.0 million, or $8.0 million less than the deal's ramp-up target par balance. Moody's noted that the interest diversion test was recently failing, which if were to occur on the next payment date would result in a proportion of excess interest collections being diverted towards reinvestment in collateral. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class B Notes continue to be consistent with the current rating after taking into account the CLO's latest portfolio, its relevant structural features, its actual over-collateralization levels and the level of credit enhancement available to it from cash flows that would be diverted in case of coverage test failures. Consequently, Moody's has confirmed the rating on the Classes B Notes. Based on Moody's calculation, the Class A/B OC is currently 129.3%. Based on June 2020 trustee report [3], the Class A/B OC is reported at 125.8% after incorporating various haircuts, including excess Caa haircuts with a cushion of 3.2% to its trigger level of 122.6%. Additionally, Moody's has also taken into account manager's recent investment decisions and trading strategies where it has improved the WARF, and reduced the concentration of Caa assets. Based on the June 2020 trustee report [4], the WARF has improved by 105 points compared to 3901 reported on the trustee's May 2020 report [5]. Also, based on the June 2020 trustee report [6], the concentration of Caa assets is reported at 12.2% compared to 14.2% in the May 2020 trustee report [7]. 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 $437.7 million, defaulted par of $14.3 million, a weighted average default probability of 30.62% (implying a WARF of 3764), a weighted average recovery rate upon default of 47.35%, a diversity score of 81 and a weighted average spread of 3.90% (excluding Libor floor). Moody's also analyzed the CLO by incorporating an approximately $11.9 million par haircut in calculating the OC and interest diversion test ratios. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of corporate assets. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. OCTAGON INVESTMENT 25: Moody's Cuts Ratings on 2 Tranches to B3 --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Octagon Investment Partners 25, Ltd.: US$1,238,186 Class F-N Secured Deferrable Junior Floating Rate Notes Due 2026 (the "Class F-N Notes"), Downgraded to B3 (sf); previously on April 17, 2020 B1 (sf) Placed Under Review for Possible Downgrade US$10,000,000 Class F Secured Deferrable Junior Floating Rate Notes due 2026 (the "Class F Notes"), Downgraded to B3 (sf); previously on April 17, 2020 B1 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$40,000,000 Class D Secured Deferrable Mezzanine Floating Rate Notes due 2026 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$4,952,745 Class D-N Secured Deferrable Mezzanine Floating Rate Notes Due 2026 (the "Class D-N Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$20,000,000 Class E-1 Secured Deferrable Junior Floating Rate Notes due 2026 (the "Class E-1 Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$2,476,372 Class E-1-N Secured Deferrable Junior Floating Rate Notes Due 2026 (the "Class E-1-N Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$13,485,823 Class E-2-R Secured Deferrable Junior Floating Rate Notes Due 2026 (the "Class E-2-R Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D, Class D-N, Class E-1, Class E-1-N, Class E-2-R, Class F, and Class F-N notes. The CLO was issued in October 2015 and partially refinanced in February 2018 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 April 2020. RATINGS RATIONALE The downgrades on the Class F and Class F-N notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially and exposure to Caa-rated assets has increased significantly. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D, Class D-N, Class E-1, Class E-1-N, and Class E-2-R notes continue to be consistent with their current ratings after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the rating on the Class D, Class D-N, Class E-1, Class E-1-N, and Class E-2-R notes. Based on Moody's calculation, the weighted average rating factor is 3379 as of June 2020 compared to 2739 reported in the March 2020 trustee report [1]. Moody's also noted that currently approximately 28.40% and 5.0% of the CLO's par is from obligors assigned a negative outlook or whose ratings are on review for possible downgrade, respectively. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (after any adjustments for negative outlook and watchlist for possible downgrade) is approximately 19.5% as of June 2020. Furthermore, Moody's calculated total collateral par balance, including recoveries from defaulted securities, is at $889.17 million, or $16.83 million less than the deal's ramp-up target par balance. Nevertheless, based on Moody's calculation, the Class D and Class E OC, after incorporating various haircuts, including Caa haircut, is currently at 109.97% and 105.19%, respectively and have cushion of 1.37% and 0.49%, respectively, to its trigger level of 108.60% and 104.70%, respectively. 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 $886.92 million, defaulted par of $6.39 million, a weighted average default probability of 22.28% (implying a WARF of 3379), a weighted average recovery rate upon default of 48.22%, a diversity score of 64 and a weighted average spread of 3.28%. Moody's also analyzed the CLO by incorporating an approximately $16.22 million par haircut in calculating the OC and interest diversion test ratios. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of corporate assets. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes, secured notes, is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. OCTAGON INVESTMENT 46: S&P Assigns Prelim BB- Rating to E Notes --------------------------------------------------------------- S&P Global Ratings assigned its preliminary ratings to Octagon Investment Partners 46 Ltd./Octagon Investment Partners 46 LLC's floating-rate notes. The note issuance is a CLO securitization backed by primarily broadly syndicated speculative-grade (rated 'BB+' and lower) senior secured term loans that are governed by collateral quality tests. The preliminary ratings are based on information as of June 26, 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, which consists primarily of broadly syndicated speculative-grade (rated 'BB+' and lower) senior secured term loans that are governed by collateral quality tests. -- The credit enhancement provided through the subordination of cash flows, excess spread, and overcollateralization. -- The experience of the collateral manager's team, which can affect the performance of the rated notes through collateral selection, ongoing portfolio management, and trading. -- The transaction's legal structure, which is expected to be bankruptcy remote. S&P acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. "We are using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, we will update our assumptions and estimates accordingly," S&P said. PRELIMINARY RATINGS ASSIGNED Octagon Investment Partners 46 Ltd./Octagon Investment Partners 46 LLC Class Rating Amount (mil. $) A AAA (sf) 315.00 B AA (sf) 65.00 C A (sf) 30.00 D BBB- (sf) 25.00 E BB- (sf) 17.00 Subordinated notes NR 50.70 NR--Not rated. PARKLAND CORP: DBRS Assigns BB Rating on $400MM 6% Unsec. Notes --------------------------------------------------------------- DBRS Limited assigned a rating of BB with a Stable trend to Parkland Corporation's (Parkland or the Company; rated BB with a Stable trend by DBRS Morningstar) $400 million 6.00% Senior Unsecured Notes (the Notes) due in 2028, which closed on June 23, 2020. The rating being assigned is based upon the rating of an already-outstanding series of the above-mentioned debt instrument. The net proceeds from the Notes are intended to be used to redeem all of the outstanding $200 million aggregate principal amount of 5.50% senior notes with a final maturity date of May 28, 2021, and redeem, in whole or in part, a portion of the $200 million aggregate principal amount of 6.00% senior notes with a final maturity date of November 21, 2022. The Notes are direct senior unsecured obligations of Parkland, rank pari passu with all of the Company's existing and future senior unsecured indebtedness, and are senior in right of payment to any future subordinated indebtedness. The Notes are effectively subordinated to all secured indebtedness, which includes Parkland's credit facilities. Parkland has also decided to exercise the accordion option of its Canadian credit facility and increased the facility's limit by an additional $300 million, resulting in a Canadian facility limit of $700 million from $400 million previously. The existing U.S. credit facility limit will remain unchanged at USD 780 million. DBRS Morningstar notes that the increased credit facility, which ranks ahead of Parkland's Senior Unsecured Notes, does not change DBRS Morningstar's Recovery Rating on the notes of RR4, which corresponds to an anticipated recovery of 30% to 60%. Notes: All figures are in Canadian dollars unless otherwise noted. PIONEER AIRCRAFT: Fitch Affirms BBsf Rating on Series C Notes ------------------------------------------------------------- Fitch Ratings has affirmed the outstanding ratings of Pioneer Aircraft Finance Limited (Pioneer). The Rating Outlook on each series of notes issued remains Negative. RATING ACTIONS Pioneer Aircraft Finance Limited Series A 72353PAA4; LT Asf Affirmed; previously at Asf Series B 72353PAB2; LT BBBsf Affirmed; previously at BBBsf Series C 72353PAC0; LT BBsf Affirmed; previously at BBsf TRANSACTION SUMMARY The rating actions reflect ongoing deterioration of all airline lessee credits backing the leases in each transaction pool, downward pressure on certain aircraft values, Fitch's updated assumptions and stresses, and resulting impairments to modeled cash flows and coverage levels. Fitch maintained the Negative Rating Outlook (RON) for each tranche in Pioneer reflecting Fitch's base case expectation for the structure to withstand immediate and near-term stresses at the updated assumptions and stressed scenarios, commensurate with their respective ratings. On March 31, 2020, Fitch placed the all series of notes of Pioneer on RON, as a part of its aviation ABS portfolio review due to the ongoing impact of the coronavirus on the global macro and travel/airline sectors. This unprecedented worldwide pandemic continues to evolve rapidly and negatively affect airlines across the globe. To reflect the global recessionary environment and the impact on airlines backing these pools, Fitch updated rating assumptions for both rated and non-rated airlines with a vast majority of ratings moving lower, which was a key driver of the rating actions along with modeled cash flows. Furthermore, recessionary timing was brought forward to start immediately at this point in time. This scenario further stresses airline credits, asset values and lease rates immediately while incurring remarketing and repossession cost and downtime, at each relevant rating stress level. Previously, Fitch assumed that the first recession commenced six months from either the transaction closing date or date of subsequent reviews. Goshawk Management (Ireland) Limited (Goshawk, not rated by Fitch) and certain affiliates and third-parties are the sellers of the assets, and it acts as servicer for the transaction. Fitch deems the servicer to be adequate to service ABS based on its experience as a lessor, overall servicing capabilities and historical ABS performance to date. KEY RATING DRIVERS Deteriorating Airline Lessee Credit The credit profiles of the airline lessees in the pools have further deteriorated due to the impact of the coronavirus on all global airlines in 2020, resulting in lower lessee rating assumptions utilized for this review. The proportion of airline lessees in the Pioneer pool assumed to be at 'CCC' Issuer Default Ratings (IDR) or lower increased to 59.0% from 14.7% since close in June 2019. For this review, newly-assumed 'CCC' credit airlines include Go Airlines (India) Limited, GOL Linhas Aéreas S.A., Interglobe Aviation Limited (IndiGo), Jetstar Japan Co., Ltd., PT Lion Mentari (Lion Air) and Vietjet Aviation Joint Stock Company. Credits assumed to immediately default (consistent with 'D' IDR assumption) in this analysis include VB LeaseCo No 2 Pty Limited (Virgin Australia) and Aerovías Del Continente Americano S.A. Avianca (Avianca), given both airlines have recently filed for bankruptcy. All airline assumptions reflect their ongoing deteriorating credit profiles and fleet in the current operating environment, due to the impact of the coronavirus on the sector. For airlines in administration/bankruptcy and assumed to immediately default in Fitch's modeling, narrow body (NB) aircraft were assumed to remain on ground for three additional months to account for potential remarketing challenges in placing these aircraft with new lessees in the current distressed environment. Asset Quality and Appraised Pool Value As of the June servicer report, the pool consisted of young-to-mid-life aircraft with a weighted-average (WA) age of 6.5 years, and comprised mostly liquid NB aircraft. Pioneer also includes one regional jet (RJ; E190-100LR) aircraft (3.0% of the pool) leased to Air Astana and one widebody (WB; 787-8) aircraft (17.5%) on lease to Ethiopian Airlines. The E190-100 LR has worsening supply and demand dynamics given its high maintenance costs relative to its overall value and operators removing these aircraft from their fleets. Due to downward market value (MV) pressure for the RJ, Fitch applied an additional 10% haircut to the value of this aircraft. For this review, Fitch utilized the average excluding highest (AEH) of the three most current appraisal values (BV for both NB and RJ) provided for this transaction. However, for the 787-8, Fitch utilized the lowest of three appraisal values without taking any additional haircuts to reflect a degree of conservatism, and still taking into account the newer technology and expected MV resiliency compared with other WB aircraft in these pools. This approach resulted in a Fitch-modeled value of $522.5 million, which is 11% lower compared with $585.6 million as stated in the June 2020 servicer reports. IBA Group Ltd. (IBA) and Morten Beyer & Agnew Inc. (mba) and Collateral Verifications, LLC (CV) are the appraisers for this transaction. The values in the servicer reports are based on appraisals conducted in December 2019. Transaction Performance to Date Lease collections and transaction cash flows have trended down in the recent quarter. Pioneer received $3.1 million in rental payments in the May collection period, down notably $6.9 million in January. Cash flow for Pioneer was able to make partial payment to series A expected principal in the May collection period. The debt-service coverage ratios (DSCRs) fell below the cash trap trigger, but slightly above the early amortization event trigger. Nearly all lessees in this transaction have requested some form of payment relief/deferrals, consistent across peer aircraft ABS pools due to disruptions related to the coronavirus pandemic. Fitch assumed a standard deferral across all lessees in each pool, other than lessees known have been granted deferrals as specifically provided for Pioneer. For modeling purposes, Fitch assumed three-months of partial lease deferrals with contractual lease payments resuming thereafter, plus additional repayment of deferred amounts over a six-month period. Fitch Modeling Assumptions Nearly all servicer-driven Fitch assumptions for Goshawk are consistent with prior rating review at close. Leases for three aircraft are expected to end within the next 12 months. For these near-term maturities, Fitch assumed these NB aircraft will remain on ground for three additional months on top of lessor-specific remarketing downtime assumptions to account for potential remarketing challenges in placing this aircraft with a new lessee in the current distressed environment. With the grounding of global fleets and significant reduction in air travel, maintenance revenue and costs will be affected and are expected to decline due to airline lessee credit issues and grounded aircraft. Maintenance revenues were reduced by 50% over the next immediate 12 months for these reviews, and such missed payments were assumed to be recouped in the following 12 months thereafter. Maintenance costs over the immediate six months were assumed to be incurred as reported. Costs were reduced by 50% in the following month, and thereafter, such reduction decreases on a straight-line basis up to 0% over the subsequent 12-month period. Over the following 12 months, deferred costs in prior periods were assumed to be repaid every month in addition to the scheduled maintenance costs. RATING SENSITIVITIES The RON on all series of notes issued by Pioneer reflect the potential for further negative rating actions due to concerns over the ultimate impact of the coronavirus pandemic, the resulting concerns associated with airline performance and aircraft values, and other assumptions across the aviation industry due to the severe decline in travel and grounding of airlines. At close, Fitch conducted multiple rating sensitivity analyses to evaluate the impact of changes to a number of the variables in the analysis. The performance of aircraft operating lease securitizations is affected by various factors, which in turn, could have an impact on the assigned ratings. Due to the correlation between global economic conditions and the travel/airline industries, the ratings can be affected by the strength of the global macro-environment over the remaining term of this transaction. In the initial rating analysis, Fitch found the transactions to exhibit sensitivity to the timing and severity of assumed recessions. Fitch also found that greater default probability of the leases has a material impact on the ratings. Furthermore, the timing and degree of technological advancement in the commercial aviation space, and the resulting impact on aircraft values, lease rates and utilization would have a moderate impact on the ratings. Factors that Could, Individually or Collectively, Lead to a Positive Rating Action/Upgrade Up: Base Assumptions with Stronger Residual Value Realization: The aircraft ABS sector has a rating cap of 'Asf'. All subordinate tranches carry one category of ratings lower than the senior tranche and lower at close. However, if the assets in this pool experience stronger residual value (RV) realization than Fitch modeled, or if it experiences a stronger lease collection in flow than Fitch's stressed scenarios, the transactions could perform better than expected. At this point, future upgrades beyond current ratings would not be considered due to a combination of the sector rating cap, industry cyclicality, weaker lessee mix present in ABS pools and uncertainty around future lessee mix, along with the negative impact due to the coronavirus on the global travel/airline sectors and, ultimately, ABS transactions. In this "Up" scenario, RV recoveries at time of sale are assumed to be 70% of their depreciated MVs, higher than the base case scenario of 50% for certain aircraft. Net cash flow increases by approximately $26.7 million at the 'Asf' rating category. The series A, B and C notes are able to pay in full under the 'Asf', 'BBBsf' and 'BBsf' rating stress levels, respectively. Factors that Could, Individually or Collectively, Lead to a Negative Rating Action/Downgrade Down: Base Assumptions with 10% Weaker WB Values The pool contains a WB concentration of 17.5%. Further softening in these aircraft values beyond current expectation could lead to further downward rating action. Due to continuing MV pressure on WB aircraft and worsening supply and demand dynamics, Fitch explored the potential cash flow decline if WB values were reduced further by 10% of Fitch's modeled values. Net cash flow declines by approximately $6.8 million at the 'Asf' rating stress level, and the series A and B notes are able to pass at 'BBBsf', while series C notes are able to pass at 'BBsf'. Down: Base Assumptions with 10% Weaker WB Values and Default of Ethiopian Airlines Considering the high concentration of contracted cash flow coming from the 787-8 aircraft on lease to Ethiopian Airlines, Fitch ran a sensitivity scenario to assess the impact on the transaction should the airline default. This is layered on top of the described 10% WB value stress. Under this scenario, the airline was assumed to default immediately, and an additional six months of downtime was added. Net cash flow declines by $31.1 million at the 'Asf' rating category, and the series A, B and C notes are able to pass at 'BBBf', 'BBsf' and 'Bsf' rating stress levels, respectively. Down: Base Assumptions with Extended Downtime By Six Months During this coronavirus pandemic, parked aircraft, sharply reduced air travel demand and increased bankruptcies would lead to lessors facing significant challenges to place aircraft to new lessees or extending existing leases. As a result, downtimes can be longer during this recession. Fitch ran a sensitivity to extend downtime by six months for leases maturing within the next four years. Under this scenario, leases that mature during the first recession were assumed six months of additional jurisdictional downtime. Net cash flow declines by approximately $4.5 million at the 'Asf' rating category. The series A and B notes are able to pass under the 'BBBsf' rating stress level, and the series C notes are able to pass under the 'BBsf' level. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). PSMC TRUST 2020-2: Fitch Rates Class B-5 Debt 'Bsf' --------------------------------------------------- Fitch Ratings has assigned final ratings to American International Group, Inc.'s (AIG) PSMC 2020-2 Trust (PSMC 2020-2). RATING ACTIONS PSMC 2020-2 Class A-1; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-2; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-3; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-4; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-5; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-6; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-7; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-8; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-9; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-10; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-11; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-12; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-13; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-14; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-15; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-16; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-17; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-18; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-19; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-20; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-21; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-22; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-23; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-24; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-25; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-26; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X1; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X2; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X3; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X4; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X5; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X6; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X7; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X8; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X9; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X10; LT AAAsf New Rating; previously at AAA(EXP)sf Class A-X11; LT AAAsf New Rating; previously at AAA(EXP)sf Class B-1; LT AAsf New Rating; previously at AA(EXP)sf Class B-2; LT A+sf New Rating; previously at A+(EXP)sf Class B-3; LT BBB+sf New Rating; previously at BBB+(EXP)sf Class B-4; LT BB+sf New Rating; previously at BB+(EXP)sf Class B-5; LT Bsf New Rating; previously at B(EXP)sf Class B-6; LT NRsf New Rating; previously at NR(EXP)sf TRANSACTION SUMMARY The certificates are supported by 586 loans with a total balance of approximately $423.82 million as of the cutoff date. The pool consists of prime fixed-rate mortgages (FRMs) acquired by subsidiaries of American International Group, Inc. (AIG) from various mortgage originators. Distributions of principal and interest and loss allocations are based on a traditional senior-subordinate, shifting-interest structure. KEY RATING DRIVERS Revised GDP Due to Coronavirus (Negative): The coronavirus outbreak and the resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Fitch's baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from the coronavirus, an Economic Risk Factor (ERF) floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' ratings and below. Expected Payment Deferrals Related to Coronavirus (Negative): The outbreak of the coronavirus and widespread containment efforts in the U.S. will result in increased unemployment and cash flow disruptions. To account for the cash flow disruptions, Fitch assumed deferred payments on a minimum of 25% of the pool for the first six months of the transaction at all rating categories with a reversion to its standard delinquency and liquidation timing curve by month 10. This assumption is based on observations of legacy delinquencies and past-due payments following Hurricane Maria in Puerto Rico. Payment Forbearance (Mixed): As of the cutoff date, none of the borrowers in the pool are on a coronavirus forbearance plan. Additionally, any loan that enters a coronavirus forbearance plan between the cutoff date and the settlement date will be removed from the pool (at par) within 45 days of closing. For borrowers who enter a coronavirus forbearance plan post-closing, the principal and interest (P&I) advancing party will advance delinquent P&I during the forbearance period. If at the end of the forbearance period, the borrower begins making payments, the advancing party will be reimbursed from any catch-up payment amount. If the borrower does not resume making payments, the loan will likely become modified and the advancing party will be reimbursed from principal collections on the overall pool. This will likely result in writedowns to the most subordinate class, which will be written back up as subsequent recoveries are realized. Fitch increased its loss expectation to address the potential for writedowns due to reimbursement of servicer advances, which is based on its 25% payment deferral assumption over a three-month forbearance period. High-Quality Mortgage Pool (Positive): The pool consists of very high-quality 30- and 20-year fixed-rate fully amortizing Safe Harbor Qualified Mortgage (SHQM) loans to borrowers with strong credit profiles, relatively low leverage and large liquid reserves. The loans are seasoned an average of six months. The pool has a weighted average (WA) original FICO score of 777, which is indicative of very high credit-quality borrowers. Approximately 86.5% of the loans have a borrower with an original FICO score above 750. In addition, the original WA CLTV ratio of 69.7% represents substantial borrower equity in the property and reduced default risk. Low Operational Risk (Neutral): Operational risk is well controlled for in this transaction. AIG has strong operational practices and is an 'Above Average' aggregator. The aggregator has experienced senior management and staff, strong risk management and corporate governance controls, and a robust due diligence process. Primary and master servicing functions will be performed by Cenlar FSB and Wells Fargo Bank, N.A., rated 'RPS2'/Stable and 'RMS1-'/Stable, respectively. If the primary servicer does not advance delinquent P&I, Wells Fargo Bank, rated 'AA-/F1+', will be obligated to advance such amounts to the trust. Third-Party Due Diligence Results (Positive): Third-party due diligence was performed on 100% of loans in the transaction by AMC Diligence, LLC (AMC) and Edge Mortgage Advisory Company, LLC (EdgeMac), assessed as 'Acceptable - Tier 1' and 'Acceptable - Tier 3', respectively, by Fitch. The results of the review identified no material exceptions. Credit exceptions were supported by mitigating factors and compliance exceptions were primarily TRID-related and cured with subsequent documentation. Fitch applied a credit for the high percentage of loan level due diligence, which reduced the 'AAAsf' loss expectation by 19 bps. Top-Tier Representation and Warranty Framework (Positive): The loan-level representation, warranty and enforcement (RW&E) framework is consistent with Tier I quality. Fitch reduced its loss expectations by 17 bps at the 'AAAsf' rating category as a result of the Tier 1 framework and the 'A' Fitch-rated counterparty supporting the repurchase obligations of the RW&E providers. Straightforward Deal Structure (Mixed): 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. The lockout feature helps maintain subordination for a longer period should losses occur later in the life of the deal. The applicable credit support percentage feature redirects subordinate principal to classes of higher seniority if specified credit enhancement (CE) levels are not maintained. CE Floor (Positive): To mitigate tail risk, which arises as the pool seasons and fewer loans are outstanding, a subordination floor of 1.25% of the original balance will be maintained for the certificates. The floor is sufficient to protect against the 10 largest loans defaulting at Fitch's 'AAAsf' average loss severity of 47.74%. Additionally, the stepdown tests do not allow principal prepayments to subordinate bondholders in the first five years following deal closing. Geographic Concentration (Neutral): The pool is geographically diverse and, as a result, no geographic concentration penalty was applied. Approximately 35% of the pool is located in California, which is in line with other recent Fitch-rated transactions. The top three metropolitan statistical areas (MSAs) account for 25.6% of the pool. The largest MSA concentration is in the Los Angeles MSA (9.5%), followed by the San Francisco MSA (8.2%) and the Seattle MSA (7.9%). Extraordinary Expense Treatment (Neutral): The trust provides for expenses, including indemnification amounts and costs of arbitration, to be paid by the net WA coupon of the loans, which does not affect the contractual interest due on the certificates. Furthermore, the expenses to be paid from the trust are capped at $300,000 per annum, which can be carried over each year, subject to the cap until paid in full. RATING SENSITIVITIES Fitch 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 that may be considered in the surveillance of the transaction. Sensitivity analyses was conducted at the state and national levels to assess the effect of higher MVDs for the subject pool as well as lower MVDs, illustrated by a gain in home prices. Factors that could, individually or collectively, lead to a negative rating action/downgrade: This defined negative rating 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 40.3% at 'AAA'. The analysis indicates that there is some potential rating migration with higher MVDs for all rated classes, compared with the model projection. Specifically, a 10% additional decline in home prices would lower all rated classes by one full category. Factors that could, individually or collectively, lead to a positive rating action/upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or in other words positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10%. Excluding the senior class which is already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. Specifically, a 10% gain in home prices would result in a full category upgrade for the rated class excluding those being assigned ratings of 'AAAsf'. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling process uses the modification of these variables to reflect asset performance in up- and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Fitch has added a Coronavirus Sensitivity Analysis that that includes a prolonged health crisis resulting in depressed consumer demand and a protracted period of below-trend economic activity that delays any meaningful recovery to beyond 2021. Under this severe scenario, Fitch expects the ratings to be impacted by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term impact arising from coronavirus disruptions on these economic inputs will likely affect both investment and speculative grade ratings. ESG CONSIDERATIONS The transaction has an ESG Relevance Score of 4 for Transaction Parties & Operational Risk due to the operational risk that is well controlled for including strong R&W framework, transaction due diligence results, and 'Above Average' aggregator and 'Above Average' master servicer, which resulted in a reduction in the expected losses, and is relevant to the rating. 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(ies), either due to their nature or the way in which they are being managed by the entity(ies). RESIDENTIAL MORTGAGE 2020-2: DBRS Assigns BB Rating on B-1 Notes ---------------------------------------------------------------- DBRS, Inc. assigned the following provisional ratings to the Mortgage Pass-Through Notes, Series 2020-2 (the Notes) to be issued by Residential Mortgage Loan Trust 2020-2 (RMLT 2020-2): -- $246.2 million Class A-1 at AAA (sf) -- $17.5 million Class A-2 at AA (sf) -- $25.6 million Class A-3 at A (sf) -- $24.5 million Class M-1 at BBB (sf) -- $12.4 million Class B-1 at BB (sf) The AAA (sf) rating on the Class A-1 Notes reflect 30.25% of credit enhancement provided by subordinated notes in the pool. The AA (sf), A (sf), BBB (sf), and BB (sf) ratings reflect 25.30%, 18.05%, 11.10%, and 7.60% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. RMLT 2020-2 is a securitization of a portfolio of fixed- and adjustable-rate expanded prime and nonprime primarily first-lien residential mortgages funded by the issuance of the Notes. The Notes are backed by 793 mortgage loans with a total principal balance of $353,014,444 as of the Cut-Off Date (June 1, 2020). The originators for the mortgage pool are HomeXpress Mortgage Corp. (36.1%); Greenbox Loans, Inc. (22.5%); Excelerate (13.6%); and other originators, which comprise 27.8% of the mortgage loans. The Servicer of the loans is Servis One, Inc. doing business as BSI Financial Services. Although the mortgage loans were originated to satisfy the Consumer Financial Protection Bureau['s Qualified Mortgage (QM) and Ability-to-Repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government, or private-label nonagency prime jumbo products for various reasons. In accordance with the QM/ATR rules, 69.4% of the loans are designated as Non-QM, 1.6% as QM Safe Harbor, and 3.9% as QM Rebuttable Presumption. Approximately 25.1% of the loans are made to investors for business purposes and, hence, 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 Class XS Notes representing at least 5% of the Notes 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 payment date occurring in June 2023 or (2) the date when the aggregate stated principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Administrator, at the Issuer's option, may redeem all of the outstanding Notes at a price equal to the class balances of the related Notes plus accrued and unpaid interest, including any Cap Carryover Amounts. After such 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. The Servicer will fund advances of delinquent principal and interest on any mortgage until such loan becomes 90 days delinquent. The Servicer is also obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing of properties. UNIQUE TRANSACTION FEATURES Unlike most prior RMLT non-QM securitizations where the Servicer fund advances of delinquent principal and interest (P&I) on loans up to 180 days delinquent, for this transaction, the Servicer will only fund advances up to 90 days of delinquent P&I. The Servicer has no obligation to advance P&I on a mortgage approved for a forbearance plan during its related forbearance period. However, the Servicer will be required to make a P&I Advance at the end of the related forbearance period. The Servicer is obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing properties. The three-month advancing mechanism may increase the probability of periodic interest shortfalls in the current economic environment impacted by the Coronavirus Disease (COVID-19). As a large number of borrowers seek forbearance on their mortgages in the coming months, principal and interest collections may be reduced meaningfully. Unlike the prior RMLT non-QM (or traditional non-QM) securitizations which incorporate a pro rata feature among the senior tranches, this transaction employs a sequential-pay cash flow structure across the entire capital stack. Principal proceeds can be used to cover interest shortfalls on the A-1 and A-2 Notes sequentially. For more subordinated Notes, principal proceeds can be used to cover interest shortfalls as the more senior Notes are paid in full. Furthermore, excess spread can be used to cover realized losses and prior period bond writedown amounts first before being allocated to unpaid cap carryover amounts to Class A-1 down to Class B-2. CORONAVIRUS PANDEMIC IMPACT The coronavirus pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to rise in the coming months for many residential mortgage-backed securities (RMBS) asset classes, some meaningfully. The non-QM sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans that may fall outside of the Consumer Financial Protection Bureau's ATR rules, which became effective on January 10, 2014. Non-QM loans encompass the entire credit spectrum. They range from high-FICO, high-income borrowers who opt for interest-only or higher debt-to-income ratio mortgages, to near-prime debtors who have had certain derogatory pay histories but were cured more than two years ago, to nonprime borrowers whose credit events were only recently cleared, among others. In addition, some originators offer alternative documentation or bank statement underwriting to self-employed borrowers in lieu of verifying income with W-2s or tax returns. Finally, foreign nationals and real estate investor programs, while not necessarily non-QM in nature, are often included in non-QM pools. As a result of the coronavirus, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under its moderate scenario, (see "Global Macroeconomic Scenarios: June Update," published on June 1, 2020), for the non-QM asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the non-QM asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes loans originated to (1) borrowers with recent credit events, (2) self-employed borrowers, or (3) higher loan-to-value ratio (LTV) borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with prior credit events have exhibited difficulties in fulfilling payment obligations in the past and may revert to spotty payment patterns in the near term. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy. In addition, for this transaction, as permitted by the Coronavirus Aid, Relief, and Economic Security Act, signed into law on March 27, 10.2% (as of June 12, 2020) of the borrowers are on forbearance plans because the borrowers reported financial hardship related to coronavirus. These forbearance plans allow temporary payment holidays, followed by repayment once the forbearance period ends. For the loans, DBRS Morningstar applied additional assumptions to evaluate the impact of potential cash flow disruptions on the rated tranches, stemming from (1) lower principal and interest collections and (2) limited servicing advances on delinquent P&I. These assumptions include: Increasing delinquencies on the AAA (sf) and AA (sf) rating levels for the first 12 months. Increasing delinquencies on the A (sf) and below rating levels for the first nine months. Assuming no voluntary prepayments for the first 12 months for the AAA (sf) and AA (sf) rating levels. Assuming no liquidation recovery for the first 12 months for all rating levels. The ratings reflect transactional strengths that include the following: -- Robust loan attributes and pool composition; -- Satisfactory third-party due diligence review; -- Improved underwriting standards; and -- Compliance with the ATR rules. The transaction also includes the following challenges: -- Borrowers on forbearance plans; -- Three-month advance of delinquent P&I; -- Representations and warranties framework; -- Nonprime, Non-QM, and investor loans; and -- Servicer’s financial capability. Notes: All figures are in U.S. dollars unless otherwise noted. RMF BUYOUT 2020-2: DBRS Finalizes BB Rating on Class M4 Notes ------------------------------------------------------------- DBRS, Inc. finalized provisional ratings on the following Asset-Backed Notes issued by RMF Buyout Issuance Trust 2020-2: -- $269.3 million Class A at AAA (sf) -- $21.7 million Class M1 at AA (sf) -- $19.9 million Class M2 at A (sf) -- $17.5 million Class M3 at BBB (sf) -- $15.7 million Class M4 at BB (sf) The AAA (sf) rating reflects 27.42% of credit enhancement. The AA (sf), A (sf), BBB (sf), and BB (sf) ratings reflect 21.57%, 16.21%, 11.50%, and 7.27% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar did not rate any other classes in this transaction. Lenders typically offer reverse mortgage loans to people who are at least 62 years old. Through reverse mortgage loans, borrowers have access to home equity through a lump sum amount or a stream of payments without periodically repaying principal or interest, allowing the loan balance to accumulate over a period of time until a maturity event occurs. Loan repayment is required (i) if the borrower dies, (ii) if the borrower sells the related residence, (iii) if the borrower no longer occupies the related residence for a period (usually a year), (iv) if it is no longer the borrower's primary residence, (v) if a tax or insurance default occurs, or (vi) if the borrower fails to properly maintain the related residence. In addition, borrowers must be current on any homeowners association dues if applicable. Reverse mortgages are typically nonrecourse; borrowers don’t have to provide additional assets in cases where the outstanding loan amount exceeds the property's value (the crossover point). As a result, liquidation proceeds will fall below the loan amount in cases where the outstanding balance reaches the crossover point, contributing to higher loss severities for these loans. As of the April 30, 2020, cut-off date, the collateral has approximately $371.1 million in unpaid principal balance (UPB) from 1,464 nonperforming home equity conversion mortgage reverse mortgage loans secured by first liens typically on single-family residential properties, condominiums, multifamily (two- to four-family) properties, manufactured homes, and planned unit developments. The loans were originated between May 2005 and December 2019. Of the total loans, 743 have a fixed interest rate (57.3% of the balance), with a 5.3% weighted-average coupon (WAC). The remaining 721 loans have floating-rate interest (42.7% of the balance) with a 3.2% current WAC, bringing the entire collateral pool to a 4.4% WAC. All the loans in this transaction are nonperforming (i.e., inactive) loans. There are 624 loans that are referred for foreclosure (44.5% of the balance), 120 are in bankruptcy status (9.6%), 242 are called due following recent maturity (16.7%), 193 are real estate owned (12.4%), and the remaining 285 (16.8%) are in default. However, all these loans are insured by the United States Department of Housing and Urban Development (HUD), which mitigates losses vis-à-vis uninsured loans. Because the insurance supplements the home value, the industry metric for this collateral is not the loan-to-value ratio (LTV) but rather the weighted-average (WA) effective LTV adjusted for HUD insurance, which is 59.8% for these loans. To calculate the WA LTV, DBRS Morningstar divides the UPB by the maximum claim amount and the asset value. The transaction uses a sequential structure. No subordinate note shall receive any principal payments until the senior notes (Class A notes) have been reduced to zero. This structure provides credit enhancement in the form of subordinate classes and reduces the effect of realized losses. These features increase the likelihood that holders of the most senior class of notes will receive regular distributions of interest and/or principal. All note classes have available funds caps. Notes: All figures are in U.S. dollars unless otherwise noted. SEQUIOIA MORTGAGE 2020-MC1: Fitch Rates Class B-2 Certs 'Bsf' ------------------------------------------------------------- Fitch Ratings has assigned ratings to Sequoia Mortgage Trust 2020-MC1. Sequoia Mortgage Trust 2020-MC1 - Class A-1; LT AAAsf New Rating - Class A-2; LT AAsf New Rating - Class A-3; LT Asf New Rating - Class B-1; LT BBsf New Rating - Class B-2; LT Bsf New Rating - Class B-3; LT NRsf New Rating - Class M-1; LT BBBsf New Rating - Class X; LT NRsf New Rating TRANSACTION SUMMARY The certificates are supported by 368 loans with a total balance of approximately $274 million as of the cutoff date. The pool consists of a mix of seasoned and newly originated prime fixed and ARMs acquired by Redwood Residential Acquisition Corp. from various mortgage originators. Distributions of principal and interest and loss allocations are based on a sequential structure. The transaction also benefits from excess interest that can be used to repay current and prior realized losses as well as pay down the bonds sequentially. KEY RATING DRIVERS Coronavirus Impact Addressed (Negative): The coronavirus and the resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Fitch's baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from the coronavirus, an Economic Risk Factor floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' and below. Payment Forbearance (Mixed): 18% of the borrowers are currently on a coronavirus payment relief plan. The plans are generally granted up to a three-month period by the servicer and borrowers will be counted as delinquent to the extent they do not make their payment; the servicer or P&I advancing party will not make a distinction between borrowers on a forbearance plan and will continue to advance payments on each loan for up to 120 days. Of the 18% requesting a forbearance plan, roughly 51% continued to make monthly payment and are current on the mortgage. For the remaining 49% opting in a plan, Fitch treated the loans as delinquent based on their current contractual payment status. Mixed Collateral Composition (Mixed): The pool's composition is different from the traditional profile normally included in Redwood's 'Select' and 'Choice' loan programs. The current transaction has a weaker credit profile with an updated Fitch model FICO of 731 and a base case sLTV of 79.3. Roughly 19% of the pool is ARM collateral with just under 7% comprising of IO loans. The pool is seasoned less than three years in the aggregate and consists 18% of Non-Qualified Mortgages loans. More than 10% of the deal is currently delinquent and 9% of the pool is currently performing but has experienced a delinquency in the past two years. Sequential Pay Structure (Positive): Unlike the prior Sequoia transactions, SEMT 2020-MC1 uses a straight sequential payment structure as opposed to a shifting interest waterfall. Also this transaction does not reduce the amount of interest contractually due to the bonds reverse sequentially as seen in Redwood's 'Select' and 'Choice' programs, and the amount due is based entirely on the class balance and current interest rate. This is four months of advancing to help provide liquidity as well as the availability of principal collections to ensure timely interest to the A-1 and A-2 classes as well as to repay interest shortfalls to the most senior class outstanding. The deal also benefits from a material amount of excess interest which can be used to repay prior realized losses and to pay down the bonds sequentially. Low Operational Risk (Neutral): The operational risk is well controlled for in this transaction. Redwood is assessed as an 'Above Average' aggregator. The aggregator has a robust sourcing strategy, and maintains experienced senior management and staff, strong risk management and corporate governance controls, and a robust due diligence process. Primary and master servicing functions will be performed by entities rated 'RPS2-' and 'RMS2+', respectively. Third-Party Due Diligence Results (Positive): Third-party due diligence was performed on 86% of loans in the transaction. The percentage of reviewed loans is less than 100% due to the percentage of originators that the issuer instead performs a sample of diligence on; Redwood generally samples loans from these originators for due diligence as it is an established lender in the market and has a strong seller relationship with Redwood. However, the sampling methodology and due diligence review scope is consistent with Fitch criteria and the results are in line with prior RMBS issued by Redwood. Fitch applied a credit for the percentage of loan level due diligence, which reduced the 'AAAsf' loss expectation by 20 bps. Top Tier Representation and Warranty Framework (Neutral): The loan-level representation, warranty and enforcement (RW&E) framework is consistent with Fitch's Tier 1, the highest possible. Fitch applied a neutral treatment at the 'AAAsf' rating category as a result of the Tier 1 framework and the internal credit opinion supporting the repurchase obligations of the ultimate R&W backstop. Payment Forbearance Assumptions Due to Coronavirus (Negative): The outbreak of the coronavirus and widespread containment efforts in the U.S. has resulted in higher unemployment and cash flow disruptions. To account for the cash flow disruptions and lack of advancing for borrowers' forbearance plans, Fitch assumed at least 40% of the pool is delinquent for the first six months of the transaction with a reversion to its standard delinquency and liquidation timing curve by month 10. This assumption is based on observations of legacy Alt-A delinquencies and past-due payments following Hurricane Maria in Puerto Rico as well as the high percentage of borrowers currently on a forbearance plan and those having requested a plan. Despite this assumed minimum delinquency, the bonds are well protected due to both the limited advancing framework as well as the material amount of excess interest available to the bonds. RATING SENSITIVITIES Fitch incorporates a sensitivity analysis to demonstrate how the ratings would react to steeper market value declines 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 that may be considered in the surveillance of the transaction. Sensitivity analysis was conducted at the state and national levels to assess the effect of higher MVDs for the subject pool, as well as lower MVDs illustrated by a gain in home prices. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modeling process uses the modification of these variables to reflect asset performance in up and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Factors that Could, Individually or Collectively, Lead to a Positive Rating Action/Upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10%. Excluding the senior class, which is already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. Specifically, a 10% gain in home prices would result in a one notch upgrade for the rated class excluding those assigned 'AAAsf' ratings. Factors that Could, Individually or Collectively, Lead to a Negative Rating Action/Downgrade: This defined negative rating sensitivity analysis demonstrates how the ratings would react to steeper MVDs at the national level. The analysis assumes MVDs of 10%, 20% and 30% in addition to the model-projected 7.5%. The analysis indicates that there is some potential rating migration with higher MVDs for all rated classes, compared with the model projection. Specifically, a 10% additional decline in home prices could lower all rated classes by at least one full category. Fitch has added a coronavirus sensitivity analysis that includes a prolonged health crisis resulting in depressed consumer demand and a protracted period of below-trend economic activity that delays any meaningful recovery to beyond 2021. Under this severe scenario, Fitch expects the ratings to be affected by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term effects arising from coronavirus-related disruptions on these economic inputs will likely affect both investment- and speculative-grade ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Third-party due diligence was performed on 86% of the loans in the transaction. These loans are comprised of newly originated loans and seasoned loans greater than 24 months and received a full due diligence scope that consists of credit, regulatory compliance and property valuation. While Redwood generally performs 100% full due diligence review for each originator, the issuer elects to sample loans from two originators as both companies are established originators and have strong seller relationships. Approximately 99% of loans that were reviewed received a final due diligence grade of 'A' or 'B'. Loans that received a final compliance grade of 'B' were primarily driven by regulatory compliance exceptions related to TRID. These exceptions are not considered material based on guidance from the SFA, or they were corrected with subsequent post-closing documentation. The credit and property exceptions are considered nonmaterial due to the presence of strong compensating factors. Form 'ABS Due Diligence 15E' was received from each of the TPR firms. The 15E forms were reviewed and used as a part of the rating for this transaction. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). SLM PRIVATE: S&P Lowers Ratings on 8 Classes to 'B- (sf)' ---------------------------------------------------------- S&P Global Ratings lowered its ratings on 13 classes from three SLM Private Credit Student Loan Trusts issued in 2003 and removed them from CreditWatch, where the rating agency placed them with negative implications on March 31, 2020. The transactions are backed by pools of private student loans. These loans are not guaranteed or reinsured under the Federal Family Education Loan Program, any other federal student loan program, or private insurance provider. The loans were originated and underwritten under various loan programs administered or sponsored by Navient Solutions LLC or an affiliate of Navient Solutions LLC. The rating actions are based on S&P's review of the transactions' available credit enhancement, expected future trend in hard enhancement based on their recent collateral performance, structural features, and payment priorities, as well as its cash flow analysis. P said, "The downgrades reflect our view that the transactions are unlikely to repay the outstanding notes' full principal balances by their respective legal final maturity dates under our 'B' or higher rating stress scenarios due to mismatches between the weighted average life of the remaining collateral pools and the notes' maturity dates. These asset-liability mismatches are partly due to the rates of principal paydown and loss across loan types. In addition, the transactions contain auction-rate notes currently paying the applicable ratings-based rates, according to the transaction documents. Over time, due to the higher cost of funds and resulting negative excess spread, each transaction has utilized principal collections to make interest payments leading to the decline in the transactions' parity ratios. This situation has left the transactions with insufficient cash flow to pay the notes' by their respective legal final maturity dates in our standard rating stress scenarios." S&P Global Ratings acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. S&P is using this assumption in assessing the economic and credit implications associated with the pandemic. As the situation evolves, S&P will update its assumptions and estimates accordingly. S&P performed supplemental analysis to assess the effects of a temporary decrease in loan principal and interest payments over the next several months as a result of the COVID-19 pandemic and determined that each transaction has sufficient liquidity to make timely note interest payments over this time period. RATING ACTION RATIONALE All ratings are affected by the application of S&P's criteria for assigning 'CCC' and 'CC' ratings. The criteria states that: -- For a security to be assigned a rating above 'B-', it must have sufficient credit enhancement to withstand scenarios that are more stressful than the current conditions. -- To achieve a rating of 'B-', securities must have sufficient credit enhancement to withstand a steady-state scenario where the current level of stress shows little to no increase and collateral performance remains steady. -- A 'CCC' rating should be assigned if the securities are currently vulnerable to non-payment and the issuer is dependent upon favorable conditions to meet its financial commitment on such obligation. 'CCC' rated securities can be expected to continue to pay timely interest and not realize a default for multiple years under a steady-state, unstressed scenario, while ultimately at risk of a principal default at legal final maturity. -- A 'CC' rating should be assigned when S&P expects default is a virtual certainty, regardless of the time to default. As of the collection period ended May 2020, the cumulative default rate for these transactions ranged from approximately 16.0% to 19.0%. Based on S&P reviews of the current and projected performance for these loan pools, it expects a base-case remaining default rate of approximately 10.0%-11.0% of the current outstanding loan principal balance. S&P said, "We ran midstream cashflows for the transactions under various rating stress scenarios. The results indicated that the credit enhancement currently available for each transaction is insufficient to withstand our standard 'B' stress cash flow scenarios including our interest rate vectors. "Subsequently, we ran steady-state cash flow scenarios with expected case assumptions reflecting the collateral pool's actual characteristics, and forbearance and deferment levels as of the March 2020 distribution date. We assumed a continuation of the current interest rate environment. We also assumed a cumulative recovery rate of 17.5% over 10 years and a voluntary prepayment speed starting at 3.0% constant prepayment rates (CPR; an annualized prepayment speed stated as a percentage of the current loan balance) and ramping up 1.0% per year to maximum CPRs of 8.0%. These cash flow runs provided break-even percentages that represent the maximum amount of remaining cumulative net losses each transaction can absorb (as a percentage of the pool balance as of the cash flow cut-off date) before failing to pay full and timely interest and ultimate principal." Based on those cash flow results, S&P believes that: -- The classes assigned 'B- (sf)' ratings have sufficient credit enhancement to pay timely interest and principal. -- The classes assigned 'CCC (sf)' ratings have sufficient liquidity to pay timely interest payments but lack sufficient credit enhancement to make principal payments by the legal final maturity without favorable conditions leading to improved collateral performance. -- The classes assigned 'CC (sf)' ratings are virtually certain to default at some point in time beyond 12-months. Under even the most optimistic collateral performance scenario where all loans perform and there are no defaults, there remains insufficient collateral cash flow to repay these notes in full by legal final maturity. PAYMENT STRUCTURE/STRUCTURAL FEATURES All of the transactions have similar payment priorities. Each payment priority had a five-year lockout period during which principal was paid sequentially to the class A, B, and C notes. After the five-year lockout when the cumulative net loss trigger is not in effect, and the overcollateralization amount is at its target level (i.e., 15.0% of senior debt, 10.125% of mezzanine debt, 3.0% of overall debt, and 2.0% of the initial pool balance), the class B and C notes are entitled to receive principal payments from funds available in the principal distribution account after paying the class A and B noteholders' principal distribution amount. In addition, when the transaction is undercollateralized, the principal payment priority switches back to sequential. Currently, all the 2003 transactions are paying sequentially because each transaction's total parity is less than 100%. POOL PERFORMANCE For the quarterly period ended May 2020 (the June 2020 quarterly distribution date), the transactions' seasoning ranged from 67 to 69 quarters (approximately 17 years), with collateral pool factors (the principal balance remaining in the pool as a percent of the original pool balance) ranging from approximately 9.6% to 12.5%. The percentage of nonpaying loans, while generally stable, increased over the last several months as a result of the COVID-19 pandemic. Total parity levels for all three series continue to decrease as a result of the negative excess spread due to the higher cost of funds for the auction-rate notes. The transactions contain auction-rate notes currently paying the applicable ratings-based rates, according to the transaction documents. The elevated cost of funds in each transaction required principal collections to be used to cover interest expenses in prior periods and has led to the compression of excess spread, which in turn has caused total parity levels to decline. As a result, S&P expect transaction parity levels to continue to decline. Table 1 Pool Performance(i) Series Pool Cumulative 30-plus factor default Deferment Forbearance delinq. Repayment (%)(ii) to-date(%) (%)(iii) (%)(iii) (%)(iii) (%)(iv) 2003-A 9.6 16.0 1.9 16.6 2.4 79.0 2003-B 12.2 17.7 2.2 14.6 2.3 80.8 2003-C 12.5 18.8 1.6 15.3 2.4 80.7 (i)As of the May 2020 collection period. (ii)Current pool balance divided by the original pool balance. (iii)As a percentage of current collateral pool balance. (iv)Excluding 30-plus delinquencies and as a percentage of current collateral pool balance. Delinq.--Delinquencies. Table 2 Parity Levels(i) Current Current Current 12-months senior mezzanine total prior total parity parity parity parity Series (%)(ii) (%)(iii) (%)(iv) (v) 2003-A 129.9 126.3 90.6 92.5 2003-B 123.5 121.2 87.2 89.7 2003-C 122.6 119.9 85.0 88.0 (i)As of the May 2020 collection period. (ii)Total pool balance plus cash capitalization account plus reserve account over class A notes outstanding. (iii)Total pool balance plus cash capitalization account plus reserve account over class A and B notes outstanding. (iv)Total pool balance plus cash capitalization account plus reserve account over total notes outstanding. (v)Total pool balance plus cash capitalization account plus reserve account over total notes outstanding as of the May 2019 collection period. RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE SLM Private Credit Student Loan Trust Rating Series Class CUSIP To From 2003-A A-3 78443CAJ3 B- (sf) BBB (sf)/Watch Neg 2003-A A-4 78443CAK0 B- (sf) BBB (sf)/Watch Neg 2003-A B 78443CAG9 B- (sf) BB- (sf)/Watch Neg 2003-A C 78443CAH7 CC (sf) CCC- (sf)/Watch Neg 2003-B A-3 78443CAN4 B- (sf) BBB (sf)/Watch Neg 2003-B A-4 78443CAP9 B- (sf) BBB (sf)/Watch Neg 2003-B B 78443CAQ7 CCC (sf) B- (sf)/Watch Neg 2003-B C 78443CAR5 CC (sf) CCC- (sf)/Watch Neg 2003-C A-3 78443CBA1 B- (sf) BBB (sf)/Watch Neg 2003-C A-4 78443CBB9 B- (sf) BBB (sf)/Watch Neg 2003-C A-5 78443CBC7 B- (sf) BBB (sf)/Watch Neg 2003-C B 78443CBD5 CCC (sf) B- (sf)/Watch Neg 2003-C C 78443CBE3 CC (sf) CCC- (sf)/Watch Neg SLM STUDENT 2003-12: Fitch Affirms Class B Notes at BBsf -------------------------------------------------------- Fitch Ratings has affirmed the ratings of the class A-6 and class B notes of SLM Student Loan Trust 2003-12. Fitch's affirmation of the class A-6 notes at 'AAsf' with a Stable Outlook reflects the cross-currency swap in the transaction. The treatment of the swap constitutes a criteria variation. SLM Student Loan Trust 2003-12 - Class A-6 78442GKF2; LT AAsf; Affirmed - Class B 78442GKD7; LT BBsf; Affirmed KEY RATING DRIVERS U.S. Sovereign Risk: The trust collateral comprises 100% Federal Family Education Loan Program loans, with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education for at least 97% of principal and accrued interest. The U.S. sovereign rating is currently 'AAA'/Stable. Collateral Performance: Based on transaction-specific performance to date, Fitch assumes a cumulative default rate of 15.25% under the base case scenario and a 45.75% default rate under the 'AAA' credit stress scenario. Fitch is maintaining a sustainable constant default rate of 2.4% and revising its sustainable constant prepayment rate (sCPR; voluntary and involuntary) to 8.0% from 8.5% in cash flow modeling. The sCDR and sCPR take into account expected deterioration of asset performance over the life of the assets, including expected deterioration driven by the coronavirus pandemic. Fitch applies the standard default timing curve in its credit stress cash flow analysis. The claim reject rate is assumed to be 0.5% in the base case and 3.0% in the 'AAA' case. The trailing 12-month levels of deferment, forbearance and income-based repayment (IBR; prior to adjustment) are 3.06%, 11.35% and 18.85%, respectively, and are used as the starting point in cash flow modeling. Subsequent declines or increases are modeled as per criteria. The borrower benefit is assumed to be 0.18%, based on information provided by the sponsor. Basis and Interest Rate Risk: Basis risk for this transaction arises from any rate and reset frequency mismatch between interest rate indices for Special Allowance Payments and the securities. As of May 2020, approximately 87.06% of the student loans are indexed to LIBOR, and 12.94% are indexed to the 91-day T-Bill rate. The class B notes are indexed to three-month U.S. LIBOR, while the class A-6 notes are indexed to three-month GBP LIBOR swapped into U.S. LIBOR through a cross-currency swap. Fitch applies its standard basis and interest rate stresses to this transaction as per criteria. Payment Structure: Credit enhancement is provided by overcollateralization, excess spread and for the class A notes, subordination. As of May 2020, senior and total effective parity ratios (including the reserve) are 105.54% (5.25% CE) and 100.70% (0.70% CE), respectively. Liquidity support is provided by a reserve account currently sized at its floor of $3,759,518. The transaction will continue to release excess cash as long as 100.00% reported total parity is maintained. Operational Capabilities: Day-to-day servicing is provided by Navient Solutions, LLC. Fitch believes Navient to be an acceptable servicer, due to its extensive track record as the largest servicer of FFELP loans. Fitch also confirmed with the servicer the availability of a business continuity plan to minimize disruptions in the collection process during the coronavirus pandemic. Coronavirus Impact: Under the coronavirus baseline scenario, Fitch assumes a global recession in 1H20 driven by sharp economic contractions in major economies with a rapid spike in unemployment, followed by a recovery that begins in 3Q20, but personal incomes remain depressed through 2022. Fitch is revising the sCPR in cash flow modeling to reflect this scenario by assuming a decline in payment rates to previous recessionary levels for two years, and then a return to recent performance for the remainder of the life of the transaction. The risk of negative rating actions will increase under Fitch's coronavirus downside scenario, which reflects a more severe and prolonged period of stress with a halting recovery beginning in 2Q21. As a downside sensitivity reflecting this scenario, Fitch increased the default rate, IBR and remaining term assumptions by 50%. The results are provided in the Rating Sensitivities section below. RATING SENSITIVITIES 'AAAsf'-rated tranches of most FFELP securitizations will likely move in tandem with the U.S. sovereign rating given the strong linkage to the sovereign, by nature of the reinsurance provided by the Department of Education. Aside from the U.S. sovereign rating, defaults, basis risk and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. Fitch conducts credit and maturity stress sensitivity analysis by increasing or decreasing key assumptions by 25% and 50% over the base case. The credit stress sensitivity is viewed by stressing both the base case default rate and the basis spread. The maturity stress sensitivity is viewed by stressing remaining term, IBR usage and prepayments. The results below should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors and should not be used as an indicator of possible future performance. Current Model-Implied Ratings: Class A 'AAAsf'; class B 'BBBsf'. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: No upgrade credit or maturity stress sensitivity is provided for the class A notes, as they are already at their highest possible model-implied rating. Credit Stress Sensitivity: -- Default decrease 25%: class B 'BBBsf'; -- Basis spread decrease 0.25%: class B 'Asf'. Maturity Stress Sensitivity: -- CPR increase 25%: class B 'Asf'; -- IBR usage decrease 25%: class B 'BBBsf'; -- Remaining term decrease 25%: class B 'Asf'. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: Credit Stress Rating Sensitivity: -- Default increase 25%: class A 'AAAsf'; class B 'BBBsf'; -- Default increase 50%: class A 'AAAsf'; class B 'BBsf'; -- Basis spread increase 0.25%: class A 'AAAsf'; class B 'CCCsf'; -- Basis spread increase 0.50%: class A 'Asf; class B 'CCCsf'. Maturity Stress Rating Sensitivity: -- CPR decrease 25%: class A 'AAAsf'; class B 'BBBsf'; -- CPR decrease 50%: class A 'AAAsf'; class B 'BBBsf'; -- IBR usage increase 25%: class A 'AAAsf'; class B 'BBBsf'; -- IBR usage increase 50%: class A 'AAAsf; class B 'BBBsf'; -- Remaining term increase 25%: class A 'CCCsf'; class B 'CCCsf'; -- Remaining term increase 50%: class A 'CCCsf'; class B 'CCCsf'. For the downside coronavirus sensitivity scenario, Fitch assumed a 50% increase in defaults, IBR and remaining term for the credit and maturity stress, respectively. Under this scenario, the model-implied ratings were unchanged for the class A notes and 'BBsf' for the class B notes for the credit stress. The model-implied ratings were unchanged for both the class A and class B notes for the maturity stress under increased IBR, and 'CCCsf' for both the class A and class B notes for the maturity stress under increased remaining term. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. CRITERIA VARIATION The following criteria variation was approved in 2016: Swap documents for SLM 2003-12 do not contemplate any counterparty replacement, or the appointment of a guarantor, following downgrade of the swap counterparty below the minimum ratings expected by Fitch's counterparty criteria. In addition, collateralization criteria are broadly in line with Fitch's expectation, in spite of lower volatility cushions than expected and no adjustments for liquidity and FX risk in collateral valuation. Fitch assessed the materiality of the inconsistencies against the available mitigants, which included sufficient collateral posting, and concluded that contractual provisions can support ratings up to 'AAsf'; this represents a criteria variation from Fitch's counterparty criteria to take into account the partial compliance of the swap documents with Fitch's criteria. Had Fitch not applied this criteria variation, the rating of the A-6 notes would be capped at the rating of the swap counterparty. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). SLM STUDENT 2003-4: Fitch Affirms Bsf Rating on 6 Tranches ---------------------------------------------------------- Fitch Ratings has affirmed the ratings of all outstanding classes of SLM Student Loan Trust 2003-4 and 2003-7 and maintained their Rating Outlooks at Stable. SLM Student Loan Trust 2003-4 - Class A-5A 78442GGD2; LT Bsf; Affirmed - Class A-5B 78442GGE0; LT Bsf; Affirmed - Class A-5C 78442GGF7; LT Bsf; Affirmed - Class A-5D 78442GGG5; LT Bsf; Affirmed - Class A-5E 78442GGN0; LT Bsf; Affirmed - Class B 78442GGM2; LT Bsf; Affirmed SLM Student Loan Trust 2003-7 - Class A-5A 78442GHH2; LT Bsf; Affirmed - Class A-5B 78442GHJ8; LT Bsf; Affirmed - Class B 78442GHK5; LT Bsf; Affirmed The senior notes of each trust did not pass Fitch's base case stresses at Fitch's last reviews. All notes for the transactions are rated 'Bsf', supported by qualitative factors such as Navient's ability to call the notes upon reaching 10% pool factor and the revolving credit agreement established by Navient, which allows the servicer to purchase loans from the trusts. Because Navient has the option but not the obligation to lend to the trust, Fitch does not give quantitative credit to these agreements. However, these agreements provide qualitative comfort that Navient is committed to limiting investors' exposure to maturity risk. Navient Corporation is currently rated 'BB-' with a Negative Rating Outlook by Fitch. The notes' ratings are one category higher than their last model-implied ratings of 'CCCsf'. Although the class B notes of both transactions have legal final maturity dates beyond 2035, in an event of default caused by a senior class that is not paid in full by maturity, the subordinate classes will not receive principal or interest payments. KEY RATING DRIVERS U.S. Sovereign Risk: The trusts' collateral comprises 100% Federal Family Education Loan Program loans, with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education for at least 97% of principal and accrued interest. The U.S. sovereign rating is currently 'AAA'/Outlook Stable. Collateral Performance: Based on transaction-specific performance to date, Fitch assumes a cumulative default rate of 15.25% and 16.75% under the base case scenario and a default rate of 45.75% and 50.25% under the 'AAA' credit stress scenario for SLM 2003-4 and SLM 2003-7, respectively. Fitch is maintaining a sustainable constant default rate of 2.5% and 2.7% for SLM 2003-4 and SLM 2003-7, respectively, and a sustainable constant prepayment rate (sCPR; voluntary and involuntary) of 9.7% for both transactions. The claim reject rate is assumed to be 0.5% in the base case and 3.0% in the 'AAA' case. The trailing 12-month levels of deferment, forbearance and income-based repayment (IBR; prior to adjustment) are 3.42%, 11.54% and 23.87%, respectively, for SLM 2003-4 and 3.37%, 12.05% and 23.69%, respectively, for SLM 2003-7. The borrower benefits are assumed to be approximately 0.13% and 0.12% for SLM 2003-4 and SLM 2003-7, respectively, based on information provided by the sponsor. Basis and Interest Rate Risk: Basis risk for the transactions arises from any rate and reset frequency mismatch between interest rate indices for Special Allowance Payments and the securities. For SLM 2003-4, as of May 2020, approximately 86.26% of the student loans are indexed to LIBOR, and 13.74% are indexed to the 91-day T-Bill rate. For SLM 2003-7, as of May 2020, approximately 86.44% of the student loans are indexed to LIBOR, and 13.56% are indexed to the 91-day T-Bill rate. All the notes are currently indexed to three-month LIBOR with the exception of Class A5B of SLM 2003-7. For that class, there is a currency swap in place and the trust pays a spread over 3-month LIBOR. Payment Structure: Credit enhancement is provided by excess spread and, for the class A notes, subordination of the class B notes. As of May 2020, the total and senior parity ratios (including the reserve but excluding the yield supplement account) are 100.77% (0.77% CE) and 105.74% (5.43% CE) for SLM 2003-4. As of May 2020, the total and senior parity ratios (including the reserve) are 100.71% (0.70% CE) and 105.58% (5.29% CE) for SLM 2003-7. Liquidity support is provided by a reserve account currently sized at their floors of $3,384,496 and $3,761,650 for SLM 2003-4 and SLM 2003-7, respectively. The transactions will continue to release cash as long as 100% reported total parity (excluding the reserve and the yield supplement account) is maintained. Operational Capabilities: Day-to-day servicing is provided by Navient Solutions, LLC. Fitch believes Navient to be an acceptable servicer, due to its extensive track record as the largest servicer of FFELP loans. Fitch also confirmed with the servicer the availability of a business continuity plan to minimize disruptions in the collection process during the coronavirus pandemic. Coronavirus Impact: Under the coronavirus baseline scenario, Fitch assumes a global recession in 1H20 driven by sharp economic contractions in major economies with a rapid spike in unemployment, followed by a recovery that begins in 3Q20, but personal incomes remain depressed through 2022. Fitch evaluated the sCDR and sCPR under this scenario by analyzing a decline in payment rates and an increase in defaults to previous recessionary levels for two years and then a return to recent performance for the remainder of the life of the transaction. Fitch maintained the sCDR and sCPR assumptions, reflecting healthy cushions in terms of defaults and more than 12 years to the earliest legal final maturity. The risk of negative rating actions will increase under Fitch's coronavirus downside scenario, which contemplates a more severe and prolonged period of stress with a halting recovery beginning in 2Q21. As a downside sensitivity reflecting this scenario, Fitch increases the default rate, IBR and remaining term assumptions by 50%. For these transactions, this sensitivity was not run because it would not have an impact on ratings. RATING SENSITIVITIES Cashflow modeling was not conducted for these transactions, reflecting performance since last reviews and current ratings. In general, ratings for FFELP student loan transactions are sensitive to defaults, basis risk and loan extension risk. Factors that could, individually or collectively, lead to positive rating action/upgrade: The current ratings are most sensitive to Fitch's maturity risk scenario. Key factors that may lead to positive rating action are sustained increases in payment rate and a material reduction in weighted average remaining loan term. A material increases of credit enhancement from lower defaults and positive excess spread given favorable basis spread conditions is a secondary factor that may lead positive rating action. Factors that could, individually or collectively, lead to negative rating action/downgrade: The current ratings reflect the risk the senior notes miss their legal final maturity date under Fitch's base case maturity scenario. If the margin by which these classes miss their legal final maturity date increases, or does not improve as the maturity date nears, the ratings may be downgraded further. Additional defaults, increased basis spreads beyond Fitch's published stresses, lower-than-expected payment speed or loan term extension are factors that could lead to future rating downgrades. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). STEELE CREEK 2016-1: Moody's Cuts $6MM Class F-R Notes to Caa1 -------------------------------------------------------------- Moody's Investors Service downgraded the ratings on the following notes issued by Steele Creek CLO 2016-1, Ltd.: US$6,000,000 Class F-R Mezzanine Secured Deferrable Floating Rate Notes Due June 2031; Downgraded to Caa1 (sf); previously on April 17, 2020, B3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$16,750,000 Class D-R Mezzanine Secured Deferrable Floating Rate Notes Due June 2031, Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade U.S. $13,500,000 Class E-R Mezzanine Secured Deferrable Floating Rate Notes Due June 2031, Confirmed Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D-R, E-R and F-R notes. The CLO, issued in June 2016 and refinanced in June 2018 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 will end on June 2023. RATINGS RATIONALE The downgrade on the Class F-R notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially and the credit enhancement available to the CLO notes has eroded, exposure to Caa-rated assets has increased significantly, and expected losses (ELs) on certain notes have increased materially. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the risk posed to, and the expected losses on, the Class D-R and Class E-R notes continue to be consistent with the current rating of the notes after taking into account the CLO's latest portfolio, and its relevant structural features its actual over-collateralization (OC) levels, and the level of credit enhancement available to it from cash flows that would be diverted as a result of coverage test failures. Consequently, Moody's has confirmed the rating on the Classes D-R and Class E-R Notes. Based on Moody's calculation, the weighted average rating factor (WARF) was 3429 as of June 2020, or 17.6% worse compared to 2917 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2834 reported in the June 2020 trustee report [2] by 595 points. Moody's noted that approximately 37.1% of the CLO's par was from obligors assigned a negative outlook and 4.5% from obligors whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (after any adjustments for negative outlook and watchlist for possible downgrade) is approximately 26.4% as of June 2020. Furthermore, Moody's calculated total collateral par balance, including recoveries from defaulted securities, is at $299.3 million, or $0.7 million less than the deal's initial ramp-up target par balance. Notably, Moody's observes that the deal has outperformed other BSL CLOs in preserving collateral coverage. Moody's calculated the OC ratios (excluding haircuts) for the Class D, Class E, and Class F notes as of June 2020 at 113.1%, 107.6% and 105.3%, respectively. Moody's notes that currently the Class D OC test is passing, with the ratio of 113.1% exceeding the trigger level by 4.8%, and the Class E OC test is passing, with the ratio of 107.6% exceeding the trigger level by 3.3%. On the other hand, the interest diversion test was reported in the trustee's June 2020 report [3] as failing, with the ratio of 102.1% breaching the trigger level of 102.4%. If the failure were to occur on the next payment date it would result in a proportion of excess interest collections being diverted towards reinvestment in collateral. Finally, Moody's also considered manager's investment decisions and trading strategies. 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 $298.3 million, defaulted par of $1.8 million, a weighted average default probability of 28.77% (implying a WARF of 3429), a weighted average recovery rate upon default of 46.96%, a diversity score of 75 and a weighted average spread of 3.55%. Moody's also analyzed the CLO by incorporating an approximately $9 million par haircut in calculating the OC and interest diversion test ratios. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of corporate assets. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. TERWIN MORTGAGE 2004-13ALT: Moody's Cuts 2 Tranches Rating to Caa2 ------------------------------------------------------------------ Moody's Investors Service has downgraded the ratings of two tranches from Terwin Mortgage Trust 2004-13ALT, backed by Alt-A loans. The complete rating action is as follows: Issuer: Terwin Mortgage Trust 2004-13ALT Cl. 2-PA-1, Downgraded to Caa2 (sf); previously on Feb 29, 2016 Downgraded to B3 (sf) Cl. 2-P-X*, Downgraded to Caa2 (sf); previously on Oct 27, 2017 Confirmed at Caa1 (sf) * Reflects Interest Only Classes This list is an integral part of this Press Release and identifies each affected issuer.This link also contains the associated underlying collateral losses. RATINGS RATIONALE The rating downgrades are primarily due to a deterioration in collateral performance and decline in credit enhancement available to the bonds. The rating action also reflects the recent performance and Moody's updated loss expectations on the underlying pool. The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Moody's analysis has considered the effect on the performance of US RMBS from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around Moody's forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under Moody's ESG framework, given the substantial implications for public health and safety. The principal methodology used in rating all classes except interest-only classes 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. There is significant uncertainty around Moody's unemployment forecast and risks are firmly to an increasing unemployment rate during the short term. House prices are another key driver of US RMBS performance. 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. UBS COMMERCIAL 2017-C2: Fitch Affirms Class H-RR Certs at CCCsf --------------------------------------------------------------- Fitch Ratings has downgraded two classes and affirmed 12 classes of UBS Commercial Mortgage Trust 2017-C2 commercial mortgage pass-through certificates. UBS 2017-C2 - Class A-2 90276CAB7; LT AAAsf; Affirmed - Class A-3 90276CAD3; LT AAAsf; Affirmed - Class A-4 90276CAE1; LT AAAsf; Affirmed - Class A-S 90276CAH4; LT AAAsf; Affirmed - Class A-SB 90276CAC5; LT AAAsf; Affirmed - Class B 90276CAJ0; LT AA-sf; Affirmed - Class C 90276CAK7; LT A-sf; Affirmed - Class D-RR 90276CAL5; LT BBB+sf; Affirmed - Class E-RR 90276CAN1; LT BBBsf; Affirmed - Class F-RR 90276CAQ4; LT BBB-sf; Affirmed - Class G-RR 90276CAS0; LT Bsf; Affirmed - Class H-RR 90276CAU5; LT CCCsf; Affirmed - Class X-A 90276CAF8; LT AAAsf; Affirmed - Class X-B 90276CAG6; LT A-sf; Affirmed Class X-A and X-B are interest-only classes. KEY RATING DRIVERS Increased Loss Expectations: The downgrades and Negative Outlooks reflect the increased loss expectation on the pool related to the Fitch Loans of Concern and overall concerns over the impact of the coronavirus on the portfolio. The portfolio has a high concentration of loans secured by property types that Fitch expects to be significantly impacted by the pandemic with hotel properties securing 23.2% of the pool, retail at 21.4% and multifamily at 18.8%. Per the servicer reporting, six loans (13.6% of the pool) are currently 30+ days or more delinquent. Twenty-six loans (40.7% of the pool), including two specially serviced loans (3.5%), are considered FLOCs. The largest FLOC, the TZA Multifamily Portfolio (5.9%) loan, is secured by 14 cross-collateralized apartment properties (2,382 units) located throughout Florida. Per the servicer, the currently interest-only loan had a YE 2019 NOI DSCR of 2.05x with an overall occupancy of 91%. However, the loan is 30+ days delinquent with a lockbox activated in May 2020. Further, the portfolio has multiple deferred maintenance issues noted. The next three largest FLOCs are secured by hotel loans. The Starwood Capital Group Hotel Portfolio loan (4.4%) is secured by a portfolio of 65 hotels located in 17 states. The full-term interest-only loan had a YE 2019 DSCR of 2.73x. The AHIP Northeast Portfolio III loan (3.8%) is secured by four limited-service and extended stay hotels located in New York (1), New Jersey (1) and Maryland (2). After a request for coronavirus-related relief, the loan was modified to allow reserve funds to be applied toward debt service for 90 days. The currently interest-only loan had a YE 2019 DSCR of 2.21x. The Embassy Suites - San Luis Obispo loan (2.9%) is secured by a 195-room limited-service hotel located approximately two miles from the CBD of San Luis Obispo, CA. The loan, which began amortizing in mid-2019, had a TTM March 2020 NOI DSCR of 2.36x. The loan is 30+ days delinquent. The next largest FLOC is the Fillmore Philadelphia loan (2.9%), which is secured by a mixed-use entertainment venue located in the trendy Fishtown district of Philadelphia. The property suffered vacancy issues prior to the onset of the coronavirus pandemic. While much of the space has been re-leased, rental rates are significantly lower. Further, the bulk of the tenancy consists of music and restaurant venues that are temporarily closed. The loan is 30+ days delinquent. Two loans secured by interests in hotels are currently in special servicing. The IC Leased Fee Hotel Portfolio loan (2.8%) is secured by a leased fee interest in the land underneath seven full-service hotels (2,168 keys) located across seven states. The loan transferred to special servicing in June 2019 as a result of the borrower's failure to pay taxes; a protective advance was made and a notice of default issued. The borrower filed for Chapter 11 bankruptcy protection in July 2019. The leasehold control of six of the hotels has transitioned to the leasehold lenders and the seventh is in receivership. Per the servicer, three of the hotels closed permanently prior to the onset of the coronavirus pandemic while another closed recently. Bankruptcy proceedings are ongoing. The other specially serviced loan is secured by the Courtyard Tulsa loan (0.6%), which is secured by a 99-room limited service hotel located in Tulsa, OK. The loan transferred to the special servicer in June 2020 due to coronavirus-related issues. The loan is currently 60+ days delinquent. No other FLOC comprises more than 1.6% of the pool. Fitch will continue to monitor these loans going forward. Minimal Change to Credit Enhancement: As of June 2020, distribution date, the pool's aggregate principal balance had paid down by 5.2% to $852.2 million from $898.7 million at issuance. One loan (0.7%) has been defeased, 37.4% of the pool comprises full-term interest-only loans and 4.9% of the pool remains in their partial interest only periods. The majority of the pool matures in 2027 (90%) with three loans maturing in 2022 (9%) and one in 2026 (1.8%). Credit Opinion Loans: Five loans, representing 24.9% of the pool, were considered investment-grade credit opinions at issuance: General Motors Building (5.9% of the pool), Park West Village (5.9%), Del Amo Fashion Center (5.3%), 85 Broad Street (4%) and 245 Park Avenue (3.8%). Exposure to Coronavirus: Fitch expects significant economic impacts to certain hotels, retail and multifamily properties from the coronavirus pandemic due to the recent and sudden reductions in travel and tourism, temporary property closures and lack of clarity at this time on the potential duration of the impacts. The pandemic prompted the closure of several hotel properties in gateway cities, as well as malls, entertainment venues and individual stores. Hotel, retail and multifamily properties comprise 23.2%, 21.4% and 18.8% of the pool balance, respectively. Fitch's base case analysis applied additional stresses to eleven hotel loans, six retail loans and one multifamily loan due to their vulnerability to the coronavirus pandemic. Additional Considerations High Hotel Exposure: Loans secured by interests in hotel properties represent 23.2% of the pool by balance; loans secured by hotel properties have an above-average probability of default in Fitch's multi-borrower model. Pool Concentrations: The top 10 loans represent only 46.2% of the pool. The largest geographic concentrations are in New York (26.7%) and California (20.5%). RATING SENSITIVITIES The Negative Outlooks on classes A-S, B, C, D-RR, E-RR, F-RR, G-RR and interest-only X-B reflect concerns over the FLOCs, including two specially serviced loans/assets as well as the impact of the coronavirus pandemic on the loans in the pool. The Stable Outlooks on classes A-2, A-SB, A-3, and A-4 reflect the substantial credit enhancement to the classes and senior position in the capital stack. Factors that could, individually or collectively, lead to positive rating action/upgrade: Sensitivity factors that lead to upgrades would include stable to improved asset performance, particularly on the FLOCs, coupled with paydown and/or defeasance. Upgrades of the 'AAsf' and 'Asf' category would likely occur with significant improvement in credit enhancement and/or defeasance; however, adverse selection and increased concentrations or the underperformance of particular loan(s) could cause this trend to reverse. Upgrades to 'BBBsf' category are considered unlikely and would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if there is likelihood for interest shortfalls. The 'Bsf' and distressed classes are unlikely to be upgraded absent significant performance improvement and substantially higher recoveries than expected on the specially serviced loans/assets. Factors that could, individually or collectively, lead to negative rating action/downgrade: Sensitivity factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans/assets. Downgrades to classes A-2, A-SB, A-3 and A-4 are not expected given the position in the capital structure but may occur should interest shortfalls impact these classes. Downgrades to the classes on Negative Outlook are possible should performance of the FLOCs continue to decline and additional loans transfer to special servicing and/or further losses be realized. The distressed class could be further downgraded should losses increase or become more certain. In addition to its baseline scenario, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects that those classes with Negative Rating Outlooks may be downgraded by more than one category. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). UBS-BARCLAYS 2013-C6: Moody's Cuts Class F Certs to Caa1 -------------------------------------------------------- Moody's Investors Service has downgraded the ratings on four classes, confirmed the rating of one class and affirmed the ratings on eight classes UBS-Barclays Commercial Mortgage Trust 2013-C6, Commercial Mortgage Pass-Through Certificates, as follows: Cl. A-3, Affirmed Aaa (sf); previously on March 29, 2019 Affirmed Aaa (sf) Cl. A-3FL, Affirmed Aaa (sf); previously on March 29, 2019 Affirmed Aaa (sf) Cl. A-3FX, Affirmed Aaa (sf); previously on March 29, 2019 Affirmed Aaa (sf) Cl. A-4, Affirmed Aaa (sf); previously on March 29, 2019 Affirmed Aaa (sf) Cl. A-S, Affirmed Aaa (sf); previously on March 29, 2019 Affirmed Aaa (sf) Cl. A-SB, Affirmed Aaa (sf); previously on March 29, 2019 Affirmed Aaa (sf) Cl. B, Affirmed Aa3 (sf); previously on March 29, 2019 Affirmed Aa3 (sf) Cl. C, Downgraded to Baa1 (sf); previously on April 17, 2020 A3 (sf) Placed Under Review for Possible Downgrade Cl. D, Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. E, Downgraded to B1 (sf); previously on April 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to Caa1 (sf); previously on April 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade Cl. X-A*, Affirmed Aaa (sf); previously on March 29, 2019 Affirmed Aaa (sf) Cl. X-B*, Confirmed at A2 (sf); previously on April 17, 2020 A2 (sf) Placed Under Review for Possible Downgrade * Reflects interest-only classes RATINGS RATIONALE The ratings on the seven P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value ratio, Moody's stressed debt service coverage ratio and the transaction's Herfindahl Index, are within acceptable ranges. The ratings on four P&I classes, Class C, Class D, Class E and Class F, were downgraded due to a decline in pool performance and higher anticipated losses from specially serviced loans (5.6% of the pool) and troubled loans. The rating on the IO class, Class X-A, was affirmed based on the credit quality of the referenced classes. The rating on the IO Class, Class X-B, was confirmed based on the credit quality of the referenced classes. The actions conclude the review for downgrade initiated on April 17, 2020. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's rating action reflects a base expected loss of 4.5% of the current pooled balance, compared to 1.8% at Moody's last review. Moody's base expected loss plus realized losses is now 4.0% of the original pooled balance, compared to 1.6% 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 methodologies used in rating all classes except interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the June 10, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 12% to $1.145 billion from $1.295 million at securitization. The certificates are collateralized by 70 mortgage loans ranging in size from less than 1% to 14% of the pool, with the top ten loans (excluding defeasance) constituting 60% of the pool. One loan, constituting 11% of the pool, has an investment-grade structured credit assessment. Thirteen loans, constituting 13% of the pool, have defeased and are secured by US government securities. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 14, compared to 15 at Moody's last review. As of the June 2020 remittance report, loans representing 73% were current or within their grace period on their debt service payments, 14% were beyond their grace period but less than 30 days delinquent,10% were between 30 -- 59 days delinquent and 3% were greater than 60 days delinquent. Twenty-five loans, constituting 57% of the pool, are on the master servicer's watchlist, of which fifteen loans, representing 40% of the pool, indicate the borrower has requested relief in relation to coronavirus impact on the property. 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. No loans have been liquidated from the pool and four loans, constituting 6% of the pool, are currently in special servicing. Three of the specially serviced loans, representing 5% of the pool, have transferred to special servicing since March 2020. The largest specially serviced loan is the Broward Mall ($95.0 million -- 8.3% of the pool), which is secured by 326,000 square feet within a 1.042 million SF super-regional mall located in Plantation, Florida. The mall is currently anchored by Macy's, JC Penney and Dillard's, none of which are part of the collateral. Seritage closed the fourth anchor, Sears, in 2018. As of March 2020, the collateral was 92% leased, compared to 91% in September 2018. The ten-year loan is interest-only throughout the term. The loan transferred to special servicing in May 2020 due to imminent default as a result of the coronavirus outbreak. The second largest specially serviced loan is the Courtyard Marriott Santa Rosa ($11.2 million -- 1.0% of the pool), which is secured by a 138-room hotel, located in Santa Rosa, California, approximately 27 miles west of Napa Valley, California. The loan transferred to special servicing in April 2018 due to imminent default. The remaining two specially serviced loans are secured by a mix of property types. Moody's has also assumed a high default probability for one poorly performing loan, constituting 0.6% of the pool, and has estimated an aggregate loss of $23 million (a 21% expected loss on average) from these specially serviced and troubled loans. Moody's received full year 2019 operating results for 99% of the pool, and full or partial year 2020 operating results for 42% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 103%, compared to 95% 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 24% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.6%. Moody's actual and stressed conduit DSCRs are 1.63X and 1.06X, respectively, compared to 1.81X and 1.12X 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 loan with a structured credit assessment is the 575 Broadway Loan ($125.85 million -- 11.0% of the pool), which is secured by a 170,000 SF mixed use retail and office building located in Manhattan's SoHo submarket. The property is encumbered by a ground lease that is scheduled to expire in June 2060. As of December 2019, the property was 100% leased, unchanged from September 2018 and up from 93% at securitization. Moody's structured credit assessment and stressed DSCR are a1 (sca.pd) and 1.34X, respectively, compared to aa3 (sca.pd) and 1.38X at the last review. The top three conduit loans represent 26.6% of the pool balance. The largest loan is the Gateway Center Loan ($160 million -- 14.0% of the pool), which is secured by three cross-collateralized and cross-defaulted loans secured by 355,000 SF within a 639,000 SF class A anchored retail center in Brooklyn, New York. The property was constructed in 2002 by The Related Companies. The properties are shadow anchored by Target and Home Depot. Collateral tenants include BJ's Wholesale Club (lease expiration: September 2027) and Bed Bath & Beyond (lease expiration: January 2023). As of March 2020, the property was 100% leased, unchanged since September 2018, however the former Babies R US location has closed, representing 10.4% of the NRA. This ten-year loan is interest-only throughout the term. Moody's LTV and stressed DSCR are 122% and 0.73X, respectively, compared to 110% and 0.78X at the last review. The second largest loan is The Shoppes at River Crossing Loan ($74.2 million -- 6.5% of the pool), which is secured by 528,000 SF within a 728,000 SF lifestyle center located in Macon, Georgia. Non-collateral anchors include Dillard's and Belk. Collateral tenants include Dick's Sporting Goods, Barnes & Noble, Jo-Ann Fabric and Crafts, and DSW Shoe Warehouse. As of December 2019, the collateral was 95% leased, compared to 98% in September 2018 and 94% at securitization. Moody's LTV and stressed DSCR are 121% and 0.92X, respectively, compared to 106% and 0.99X at the last review. The third largest loan is the Santa Anita Mall Loan ($70.0 million -- 6.1% of the pool), which represents a pari-passu portion of a $285 million mortgage loan. The loan is secured by a 956,343 SF portion of a 1.47 million SF super-regional mall located in Arcadia, California. The mall is anchored by J.C. Penney, Macy's, and Nordstrom. All three anchor units are owned by their respective tenants and are not contributed as collateral for the loan. The mall was expanded in 2009 to include the promenade portion of the center, an additional 115,000 SF at a cost of $120 million. The property is adjacent to the Santa Anita Park, a thoroughbred racetrack, which is a demand driver for the mall. As of December 2019, the property was 94% leased compared to 98% in December 2018. For the same period, inline occupancy was 90% compared to 97% in December 2018, essentially unchanged from the prior review and compared to 97% for the total property and 93% for inline space at securitization. Occupancy will be negatively impacted by the departure of a large Forever 21 space (117,817 SF), which vacated in January 2020. However, the property's rental revenue has improved significantly since securitization and the reported 2019 NOI was over 30% higher than at securitization with an actual NOI DSCR of 3.85X. The loan is interest only for its entire term and Moody's LTV and stressed DSCR are 86% and 1.13X, respectively, compared to 84% and 1.13X at the last review. UBS-BARCLAYS COMMERCIAL 2012-C2: Moody's Cuts Class G Certs to C ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings on seven classes and downgraded the ratings on five classes in UBS-Barclays Commercial Mortgage Trust 2012-C2, Commercial Mortgage Pass-Through Certificates, Series 2012-C2. Cl. A-3, Affirmed Aaa (sf); previously on Aug 2, 2019 Affirmed Aaa (sf) Cl. A-4, Affirmed Aaa (sf); previously on Aug 2, 2019 Affirmed Aaa (sf) Cl. A-S-EC, Affirmed Aaa (sf); previously on Aug 2, 2019 Affirmed Aaa (sf) Cl. B-EC, Affirmed Aa2 (sf); previously on Aug 2, 2019 Affirmed Aa2 (sf) Cl. C-EC, Affirmed A2 (sf); previously on Aug 2, 2019 Affirmed A2 (sf) Cl. D, Downgraded to Ba2 (sf); previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. E, Downgraded to Caa1 (sf); previously on Apr 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to Caa3 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade Cl. G, Downgraded to C (sf); previously on Apr 17, 2020 Caa2 (sf) Placed Under Review for Possible Downgrade Cl. X-A*, Affirmed Aaa (sf); previously on Aug 2, 2019 Affirmed Aaa (sf) Cl. X-B*, Downgraded to Caa2 (sf); previously on Apr 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade Cl. EC**, Affirmed Aa3 (sf); previously on Aug 2, 2019 Affirmed Aa3 (sf) * Reflects interest-only classes ** Reflects exchangeable class RATINGS RATIONALE The ratings on five principal and interest (P&I) classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on four P&I classes, Cl. D, Cl. E, Cl. F and Cl. G, were downgraded due to higher anticipated losses as a result of the decline in pool performance, particularly in relation to three regional malls, Louis Joliet Mall (9.6% of the pool), Crystal Mall (9.6% of the pool) and Pierre Bossier Mall (4.7% of the pool). The transaction has a significant exposure to Class B regional malls with a total of five loans, representing 35% of the pooled loan balance, that mature within the next two years. The rating on the interest only (IO) class Cl. X-A was affirmed based on the credit quality of its referenced classes. The rating on the interest only (IO) class Cl. X-B was downgraded due to a decline in the credit quality of its referenced classes. The rating on the exchangeable class, Cl. EC, was affirmed due to credit quality of its exchangeable classes. The actions conclude the review for downgrade initiated on April 17, 2020. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained, and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's rating action reflects a base expected loss of 11.9% of the current pooled balance, compared to 8.1% at Moody's last review. Moody's base expected loss plus realized losses is now 8.7% of the original pooled balance, compared to 6.0% 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 methodologies used in rating all classes except exchangeable classes and interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the June 11, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 27% to $888.7 million from $1.22 billion at securitization. The certificates are collateralized by fifty-two mortgage loans ranging in size from less than 1% to just under 10% of the pool, with the top ten loans (excluding defeasance) constituting 62% of the pool. One loan, constituting 4.3% of the pool, has an investment-grade structured credit assessment. Fifteen loans, constituting 17.5% of the pool, have defeased and are secured by US government securities. The transaction has a high concentration to five Class B regional malls, representing approximately 35% of the pool balance. Class B malls in secondary and tertiary locations have historically exhibited higher cash flow volatility, loss severity and may face higher refinancing risk compared to other major property types. 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 15, compared to 16 at Moody's last review. As of the June 2020 remittance report, loans representing 73% were current or within their grace period on their debt service payments, 2% were less than one-month delinquent and 24% were delinquent at 60 days or more. Six loans, constituting 18.2% 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. No loans have been liquidated from the pool since securitization. There are currently three loans in special servicing, secured by two properties and constituting 10.4% of the balance. The largest specially serviced exposure is the Louis Joliet Mall Loan ($85.0 million -- 9.6% of the pool), which is secured by a 359,000 square foot (SF) portion of a 975,000 SF regional mall located in Joliet, Illinois. At securitization the mall was anchored by Macy's, Sears, JC Penney and Carson Pirie Scott & Co (all non-collateral). However, both Sears and Carson Pirie Scott & Co. closed their stores at this location in 2018. Two major collateral tenants, MC Sport and Toys R Us, also closed their stores in 2017 and 2018, respectively. As of December 2019, the total mall and the inline space was 73% and 96% occupied, respectively. Property performance has declined in recent years due to lower rental revenue. The 2019 NOI declined 11% from 2018 and was 19% below the NOI in 2012. The loan transferred to special servicing in May 2020 and is last paid through its March 2020 payment date. The mall re-opened in June 2020 after being temporary closed as a result of the coronavirus pandemic and the special servicer indicated they are working to determine a workout strategy. The loan is interest-only for the entire term and has maturity in July 2022. The other loan in special servicing is the Behringer Harvard Portfolio Loan ($7.2 million -- 0.8% of the pool), which originally consisted of two office properties located in Houston and Irving, TX. The office property in Irving was released in February 2016, leaving the 180,000 SF Houston property as the sole remaining collateral. The loan transferred to special servicing in March 2017 as a result of imminent default and the asset became REO in July 2017. The remaining property was only 38% occupied in May 2020. Moody's has also assumed a high default probability for two poorly performing regional mall loans, constituting 14.3% of the pool. One of regional mall loans is the Crystal Mall Loan ($85.0 million -- 9.6% of the pool), which is secured by a 518,500 SF portion of a 783,300 SF super-regional mall located in Waterford, Connecticut. At securitization the mall contained three anchors: Macy's, Sears, and JC Penney (Macy's and Sears were non-collateral anchors). Sears, owned by Seritage Growth Properties, closed its store at this location in 2018. The subject is the only regional mall within a 50-mile radius, but it faces significant competition from other retail centers including Waterford Commons and Tanger Outlets. Property performance has declined in recent years due to lower rental revenue and is significantly below underwritten levels. The 2019 NOI declined 12% from 2018 and was 40% below the NO in 2012. Furthermore, mall stores less than 10,000 SF reported sales of approximately $286 per square foot (PSF) in 2019, compared to $296 PSF in 2018. As of September 2019, the total mall and the inline space were 84% and 66% leased, respectively, compared to 87% and 72% in September 2018. The DSCR has continued to decline due to the declining occupancy and revenue. The loan sponsor, Simon Property Group, recently classified this mall under their "Other Properties." The loan is on the master servicer watchlist and is last paid through its March 2020 payment date. The other regional mall loan Moody's identified as a troubled loan is the Pierre Bossier Mall Loan ($41.8 million -- 4.7% of the pool), which is secured by a 265,400 SF portion of a 612,300 SF regional mall located in Bossier City, Louisiana. At securitization the mall contained four non-collateral anchors: Dillard's, Sears, JC Penney, and Virginia College. Both Sears and Virginia College closed at their locations in 2018. Property performance has declined in recent years due to lower rental revenue. The 2019 NOI declined 4% from 2018 and was 42% lower than the NOI in 2012. The 2019 DSCR declined below 1.00X. Furthermore, comparable inline stores less than 10,000 SF reported sales of approximately $305 PSF in 2019, compared to $343 PSF in 2018. As of December 2019, the total mall and the inline space were 77% and 62% leased, respectively, compared to 87% and 72% in September 2018. The mall also faces competition from several other retail centers within a 10-mile trade area, including a regional mall (Mall St. Vincent), an outdoor mall (Louisiana Boardwalk), a lifestyle center (Stirling Bossier Shopping Center), and two power centers (Regal Court and Shoppes at Bellemead). The loan is last paid through its March 2020 and was on the master servicer watchlist. The mall is sponsored by Brookfield Properties. Moody's received full or partial year 2019 operating results for 99% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 101%, compared to 91% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 24% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.0%. Moody's actual and stressed conduit DSCRs are 1.43X and 1.12X, respectively, compared to 1.57X and 1.21X 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 loan with a structured credit assessment is the 909 Third Avenue Net Lease Loan ($38.6 million -- 4.3% of the pool), which is secured by the fee interest in a parcel of land located beneath a 1.3 million SF office property located in Manhattan, New York. The collateral is leased to an affiliate of Vornado Realty Trust and the annual ground lease payments are $1.6 million. The loan is interest-only throughout the term prior to the anticipated repayment date (ARD) in May 2022. Moody's structured credit assessment is a1 (sca.pd). The top three performing conduit loans represent 22% of the pool balance. The largest loan is the Southland Center Mall Loan ($68.4 million -- 7.7% of the pool), which is secured by a 611,000 SF portion of a 903,500 SF super-regional mall located in Taylor, Michigan. The mall is currently anchored by Macy's (non-collateral) and JC Penney. Other major tenants include Best Buy and a 12-screen, all-digital, Cinemark multiplex theater. As of March 2020, the total mall and the inline space was 96% and 84% leased, respectively, compared to 97% and 93% as of March 2019. Property performance has significantly improved since securitization and the year-end 2019 NOI was 32% higher than in 2012. The loan is paid through its June 2020 payment date and has amortized 13% since securitization. The loan sponsor is Brookfield Properties. Moody's LTV and stressed DSCR are 99% and 1.12X. The second largest loan is the Two MetroTech Loan ($66.0 million -- 7.4% of the pool), which is secured by a 10-story, Class-A office building containing 511,920 SF of net rentable area located in Brooklyn, New York. The property is well located approximately five minutes from downtown Manhattan, and is accessible via 12 subway lines and the Long Island Rail Road. The improvements are situated on New York City owned land. The ground lease expires in 2087, and beginning in 2025, the ground rent will be adjusted to be 10% of the fair market value of the land, considered as unimproved and unencumbered by the ground lease. As of December 2019, the building was approximately 100% leased, unchanged since 2013. Moody's LTV and stressed DSCR are 92% and 1.06X. The third largest loan is the Trenton Office Portfolio Loan ($63.6 million -- 7.2% of the pool), which is secured by two Class-A mid-rise office buildings containing 473,658 SF in aggregate and are located in downtown Trenton, New Jersey. Performance has been stable. As of December 2019, the buildings were approximately 96% leased, unchanged since 2013. The loan has also amortized 13% since securitization and Moody's LTV and stressed DSCR are 88% and 1.24X. The other notable loan secured by a regional mall is the Westgate Mall ($32.2 million -- 3.6% of the pool), which is secured by a 453,544 SF portion of a regional mall. The mall anchors included Dillards; Belk (both non-collateral) and JC Penney. A former anchor, Sears (193,000 SF), vacated in September 2018. Major collateral tenants include an 8-screen Regal Cinema, Bed Bath & Beyond and Dick's Sporting Goods. The malls NOI has declined annually since 2016 due to lower rental revenue and the 2019 NOI was 19% lower than in 2012. However, the loan has amortized nearly 20% since securitization and the 2019 actual NOI DSCR was 1.71X. CBL & Associates Properties, Inc. ("CBL") is the sponsor and also manages the property. The loan is last paid through its May 2020 payment date and was still within its grace period for the June payment date. VENTURE 35: Moody's Lowers Rating on Class E Notes to B1 -------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Venture 35 CLO, Limited: US$40,500,000 Class C Mezzanine Secured Deferrable Floating Rate Notes Due 2031 (the "Class C Notes"), Downgraded to A3 (sf); previously on November 14, 2018 Definitive Rating Assigned A2 (sf) US$32,500,000 Class D Mezzanine Secured Deferrable Floating Rate Notes Due 2031 (the "Class D Notes"), Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$30,000,000 Class E Junior Secured Deferrable Floating Rate Notes Due 2031 (the "Class E Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D Notes and Class E Notes. The CLO, originally issued in November 2018, 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 will end in October 2023. RATINGS RATIONALE The downgrades on the Class C Notes, Class D Notes and Class E Notes reflect the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has eroded, exposure to Caa-rated assets has increased significantly, and expected losses on certain notes have increased materially. Based on Moody's calculation, the weighted average rating factor was 3123 as of June 2020, or 14% worse compared to 2739 reported in the March 2020 trustee report [1]. Moody's calculation showed that the WARF was failing the test level of 2846 reported in the May 2020 trustee report [2] by 277 points. Moody's noted that approximately 28.1% and 7.1% of the CLO's par is from obligors assigned a negative outlook or whose ratings are on review for possible downgrade. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (after any adjustments for negative outlook and watchlist for possible downgrade) was approximately 18.02%. Moody's calculated total collateral par balance, including recoveries from defaulted securities, is at $587.7 million, or $15.8 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class C, Class D, and the Class E notes as of June 2020 at 119.28%, 111.89%, and 105.85% respectively. 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 $580,826,081 million, defaulted par of $17,563,660 million , a weighted average default probability of 26.27% (implying a WARF of 3123), a weighted average recovery rate upon default of 47.01%, a diversity score of 108 and a weighted average spread of 3.64%. Finally, Moody's also considered in its analysis the CLO manager's recent investment decisions and trading strategies. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of corporate assets. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. VENTURE XXV: Moody's Lowers Rating on Class E Notes to B1 --------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by Venture XXV CLO, Limited: US$29,250,000 Class E Junior Secured Deferrable Floating Rate Notes Due 2029 (the "Class E Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$12,000,000 Class D-1 Mezzanine Secured Deferrable Floating Rate Notes Due 2029 (the "Class D-1 Notes"), Confirmed at Baa1 (sf); previously on April 17, 2020 Baa1 (sf) Placed Under Review for Possible Downgrade US$18,750,000 Class D-2 Mezzanine Secured Deferrable Floating Rate Notes Due 2029 (the "Class D-2 Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D-1 Notes, Class D-2 Notes and Class E Notes. The CLO, originally issued in December 2016 and partially refinanced in December 2019 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 will end in March 2021. RATINGS RATIONALE The downgrade on the Class E Notes reflects the risks posed by credit deterioration and loss of collateral coverage observed in the underlying CLO portfolio, which have been primarily prompted by economic shocks stemming from the coronavirus pandemic. Since the outbreak widened in March, the decline in corporate credit has resulted in a significant number of downgrades, other negative rating actions, or defaults on the assets collateralizing the CLO. Consequently, the default risk of the CLO portfolio has increased substantially, the credit enhancement available to the CLO notes has eroded, the exposure to Caa-rated assets has increased significantly, and expected loss (El) on the junior note has increased materially. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D-1 Notes and Class D-2 Notes continue to be consistent with the current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the rating on the Class D-1 and Class D-2 Notes. Based on Moody's calculation, the weighted average rating factor was 3032 as of June 2020, or 11% worse compared to a WARF of 2730 reported in the March 2020 trustee report [1]. Moody's calculation also showed that the WARF was failing the test level of 2639 reported in the May 2020 trustee report [2] by 393 points. Moody's noted that currently approximately 31.1% and 6.1% of the CLO's par is from obligors assigned a negative outlook or whose ratings are on review for possible downgrade respectively. Additionally, based on Moody's calculation, the proportion of obligors in the portfolio with Moody's corporate family or other equivalent ratings of Caa1 or lower (adjusted for negative outlook or watchlist for downgrade) was approximately 17.14%. Furthermore, Moody's calculated total collateral par balance, including recoveries from defaulted securities, at $581.3 million, or $18.7 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class D Notes and the Class E Notes as of June 2020 at 111.23% and, is 105.34% respectively. Moody's notes that currently the Class D OC and the Class E OC have 2.45% and 0.64% cushion respectively. 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 $573,896,147 million, defaulted par of $20,909,030 million, a weighted average default probability of 23.41% (implying a WARF of 3032), a weighted average recovery rate upon default of 46.87%, a diversity score of 110 and a weighted average spread of 3.65%. Finally, Moody's also considered in its analysis the CLO manager's recent investment decisions and trading strategies. In consideration of the current high uncertainties around the global economy and the ultimate performance of the CLO portfolio, Moody's conducted a number of additional sensitivity analyses representing a range of outcomes that could diverge, both to the downside and the upside, from its base case. Some of the additional scenarios that Moody's considered in its analysis of the transaction include, among others: additional near-term defaults of companies facing liquidity pressure; OC par haircuts to account for potential future downgrades and defaults resulting in an increased likelihood of cash flow diversion to senior notes; and some improvement in WARF as the US economy gradually recovers in the second half of the year and corporate credit conditions generally stabilize. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of corporate assets. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS: The performance of the rated notes is subject to uncertainty in the performance of the related CLO's underlying portfolio, which in turn depends on economic and credit conditions that may change. In particular, the length and severity of the economic and credit shock precipitated by the global coronavirus pandemic will have a significant impact on the performance of the securities. The CLO manager's investment decisions and management of the transaction will also affect the performance of the rated securities. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. VERUS SECURITIZATION 2020-3: DBRS Finalizes B Rating on B-2 Certs ----------------------------------------------------------------- DBRS, Inc. finalized its provisional ratings on the following Mortgage Pass-Through Certificates, Series 2020-3 (the Certificates) issued by Verus Securitization Trust 2020-3 (Verus 2020-3 or the Trust): -- $93.1 million Class A-1 at AAA (sf) -- $7.3 million Class A-2 at AA (sf) -- $5.9 million Class A-3 at A (sf) -- $7.7 million Class M-1 at BBB (low) (sf) -- $3.0 million Class B-1 at BB (sf) -- $3.5 million Class B-2 at B (sf) Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. The AAA (sf) rating on the Class A-1 Certificates reflects 26.40% of credit enhancement provided by subordinate certificates. The AA (sf), A (sf), BBB (low) (sf), BB (sf), and B (sf) ratings reflect 20.60%, 15.90%, 9.85%, 7.45%, and 4.70% of credit enhancement, respectively. This transaction is a securitization of a portfolio of fixed- and adjustable-rate, expanded prime and nonprime, first-lien residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 256 mortgage loans with a total principal balance of $126,465,372 as of the Cut-Off Date (June 1, 2020). The originators for the mortgage pool are Athas Capital Group, Inc. (39.0%); Sprout Mortgage Corporation (28.0%); Calculated Risk Analytics LLC doing business as Excelerate Capital (14.7%); and other originators, each comprising less than 10.0% of the mortgage loans. The Servicer of the loans is Shellpoint Mortgage Servicing. Although the mortgage loans were originated to satisfy the Consumer Financial Protection Bureau's Ability-to-Repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government, or private-label nonagency prime jumbo products for various reasons. In accordance with the Qualified Mortgage (QM)/ATR rules, 89.0% of the loans are designated as non-QM. Approximately 11.0% of the loans are made to investors for business purposes and, hence, are not subject to the QM/ATR rules. All of the loans not subject to the QM/ATR rules were underwritten using the borrower's debt-to-income (DTI) ratio. The sponsor, directly or indirectly through a majority-owned affiliate, will retain an eligible horizontal residual interest consisting of the Class B-3 and Class 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 occurring in December 2021 or (2) the date when the aggregate stated principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Administrator, at the Issuer's option, may redeem all of the outstanding Certificates at a price equal to the greater of (i) the class balances of the related Certificates plus accrued and unpaid interest, including any cap carryover amounts and (ii) the class balances of the related Certificates less than 90 days delinquent with accrued unpaid interest plus fair market value of the loans 90 days or more delinquent and real estate–owned properties. After such 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. The P&I Advancing Party will fund advances of delinquent principal and interest (P&I) on any mortgage until such loan becomes 90 days delinquent. The P&I Advancing Party has no obligation to advance P&I on a mortgage approved for a forbearance plan during its related forbearance period. The Servicer is also obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing of properties. In contrast to other non-QM transactions, which employ a fixed coupon for senior bonds (Classes A-1, A-2, and A-3), Verus 2020-3's senior bonds are subject to a rate update starting on the distribution date in January 2023. From this distribution date forward, the Class A-1, A-2, and A-3 bonds will be entitled to receive a coupon equal to the Net Weighted-Average Coupon Rate. UNIQUE TRANSACTION FEATURES Unlike most prior Verus non-QM securitizations where the Servicers and P&I Advancing Party fund advances of delinquent P&I on loans up to 180 days delinquent, for this transaction, the P&I Advancing Party will only fund advances up to 90 days of delinquent P&I. The P&I Advancing Party has no obligation to advance P&I on a mortgage approved for a forbearance plan during its related forbearance period. The Servicer, however, is obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred in the course of servicing and disposing properties. The three-month advancing mechanism may increase the probability of periodic interest shortfalls in the current economic environment impacted by the Coronavirus Disease (COVID-19). As a large number of borrowers seek forbearance on their mortgages in the coming months, P&I collections may be reduced meaningfully. Unlike the prior Verus non-QM (or traditional non-QM) securitizations that incorporate a pro rata feature among the senior tranches, this transaction employs a sequential-pay cash flow structure across the entire capital stack. Principal proceeds can be used to cover interest shortfalls on the Class A-1 and A-2 Certificates sequentially. For more subordinate Certificates, principal proceeds can be used to cover interest shortfalls as the more senior Certificates are paid in full. Furthermore, excess spread can be used to cover realized losses and prior-period bond writedown amounts first before being allocated to unpaid cap carryover amounts to Class A-1 down to Class B-2. CORONAVIRUS IMPACT The coronavirus pandemic and resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to rise in the coming months for many residential mortgage-backed security (RMBS) asset classes, some meaningfully. The non-QM sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans that may fall outside of the Consumer Financial Protection Bureau’s ATR rules, which became effective on January 10, 2014. Non-QM loans encompass the entire credit spectrum. They range from high-FICO, high-income borrowers who opt for interest-only or higher DTI ratio mortgages, to near-prime debtors who have had certain derogatory pay histories but were cured more than two years ago, to nonprime borrowers whose credit events were only recently cleared, among others. In addition, some originators offer alternative documentation or bank statement underwriting to self-employed borrowers in lieu of verifying income with W-2s or tax returns. Finally, foreign nationals and real estate investor programs, while not necessarily non-QM in nature, are often included in non-QM pools. As a result of the coronavirus, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under its moderate scenario (see "Global Macroeconomic Scenarios: June Update," published on June 1, 2020), for the non-QM asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the non-QM asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes loans originated to (1) borrowers with recent credit events, (2) self-employed borrowers, or (3) higher loan-to-value ratio (LTV) borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with prior credit events have exhibited difficulties in fulfilling payment obligations in the past and may revert to spotty payment patterns in the near term. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy. In addition, for this transaction, as permitted by the Coronavirus Aid, Relief, and Economic Security Act, signed into law on March 27, 9.1% (as of June 11, 2020) of the borrowers are on forbearance plans because of financial hardship related to the coronavirus. These forbearance plans allow temporary payment holidays, followed by repayment once the forbearance period ends. The Servicer, in collaboration with the Servicing Administrator, is generally offering borrowers a three-month payment forbearance plan. Beginning in month four, the borrower can repay all of the missed mortgage payments at once or opt for other loss mitigation options. Prior to the end of the applicable forbearance period, the Servicer will contact each related borrower to identify the options available to address related forborne payment amounts. As a result, the Servicer, in conjunction with or at the direction of the Servicing Administrator, may offer a repayment plan or other forms of payment relief, such as deferral of the unpaid P&I amounts or a loan modification, in addition to pursuing other loss mitigation options. For these loans, DBRS Morningstar applied additional assumptions to evaluate the impact of potential cash flow disruptions on the rated tranches, stemming from (1) lower P&I collections and (2) limited servicing advances on delinquent P&I. These assumptions include the following: (1) Increasing delinquencies on the AAA (sf) and AA (sf) rating levels for the first 12 months. (2) Increasing delinquencies on the A (sf) and below rating levels for the first nine months. (3) No voluntary prepayments for the first 12 months for the AAA (sf) and AA (sf) rating levels. (4) No liquidation recovery for the first 12 months for all rating levels. Notes: All figures are in U.S. dollars unless otherwise noted. VISTA POINT 2020-1: DBRS Finalizes B(low) Rating on Class B2 Certs ------------------------------------------------------------------ DBRS, Inc. finalized its provisional ratings on the following Mortgage Pass-Through Certificates, Series 2020-1 (the Certificates) issued by Vista Point Securitization Trust 2020-1 (the Trust): -- $274.7 million Class A-1 at AAA (sf) -- $32.7 million Class A-2 at AA (high) (sf) -- $46.1 million Class A-3 at A (sf) -- $21.7 million Class M-1 at BBB (sf) -- $23.1 million Class B-1 at BB (sf) -- $18.4 million Class B-2 at B (low) (sf) DBRS Morningstar also assigned new ratings to the following Certificates: -- $18.4 million Class B-2A at B (low) (sf) -- $18.4 million Class B-2AX at B (low) (sf) -- $18.4 million Class B-2B at B (low) (sf) -- $18.4 million Class B-2BX at B (low) (sf) -- $18.4 million Class B-2C at B (low) (sf) -- $18.4 million Class B-2CX at B (low) (sf) -- $18.4 million Class B-2D at B (low) (sf) -- $18.4 million Class B-2DX at B (low) (sf) -- $18.4 million Class B-2E at B (low) (sf) -- $18.4 million Class B-2EX at B (low) (sf) Classes B-2AX, B-2BX, B-2CX, B-2DX, and B2-EX are interest-only (IO) certificates. The class balances represent a notional amount. Classes B-2A, B-2AX, B-2B, B-2BX, B-2C, B-2CX, B-2D, B-2DX, B-2E, and B-2EX are exchangeable certificates. These classes can be exchanged for combinations of exchange certificates that are specified in the offering documents. The AAA (sf) rating on the Class A-1 certificates reflects 37.45% of credit enhancement provided by subordinate certificates. The AA (high) (sf), A (sf), BBB (sf), BB (sf), and B (low) (sf) ratings reflect 30.00%, 19.50%, 14.55%, 9.30%, and 5.10% 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 portfolio of fixed- and adjustable-rate, prime, expanded prime, and nonprime first-lien residential mortgages funded by the issuance of the Mortgage Pass-Through Certificates, Series 2020-1. The Certificates are backed by 902 mortgage loans with a total principal balance of $439,150,906 as of the Cut-Off Date (June 1, 2020). This is the first securitization by the aggregator Vista Point Mortgage, LLC (Vista Point). Vista Point acquired the mortgage loans from several mortgage originators, including Hometown Equity Mortgage, LLC doing business as theLender (39.8% by balance) and Oaktree Funding Corp (20.3%), and other originators each comprising less than 10.0% of the mortgage loans by balance. DBRS Morningstar conducted a review of Vista Point's residential mortgage platform and believes the company is an acceptable mortgage loan aggregator. DBRS Morningstar did not perform an operational risk review of the originators. However, DBRS Morningstar had a brief high-level conference call with the management team of theLender, the largest originator by balance, during which the team provided an overview of the origination practices. Although new in non-QM origination, the management team at theLender has been originating agency and other mortgage loans for more than 18 years. All acquired mortgage loans are underwritten and funded by the originators on a delegated basis pursuant to either Vista Point proprietary guidelines or approved originator underwriting guidelines. The mortgages were acquired pursuant to Vista Point’s PrimePoint (noninvestor) and InvestPoint (investor) programs as described in the report. Although the noninvestor mortgage loans were generally originated to satisfy the Consumer Financial Protection Bureau's (CFPB) Ability-to-Repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government, or private-label nonagency prime jumbo products for various reasons. In accordance with the QM/ATR rules, 51.0% of the loans are designated as non-QM. Approximately 49.0% of the loans are made to investors for business purposes including 46.3% of loans underwritten to property-level cash flows. The business-purpose loans are not subject to the QM/ATR rules. The pool has a concentrated geographic composition with California representing 66.6% of the pool. In addition, approximately 45.1% by balance are loans backed by properties located in the top three metropolitan statistical areas (MSAs), all of which are in Southern California. Vista Point is the Sponsor and the Servicing Administrator of the transaction. The Sponsor, Depositor, and Servicing Administrator are affiliates or the same entity. Specialized Loan Servicing LLC (SLS) will service all loans within the pool. Wells Fargo Bank, N.A. (rated AA with a Negative trend by DBRS Morningstar) will act as the Master Servicer. U.S. Bank National Association (rated AA (high) with a Negative trend by DBRS Morningstar) will serve as Trustee, Securities Administrator, Certificate Registrar, and Custodian. The Sponsor, directly or indirectly through a majority-owned affiliate, will retain an eligible horizontal residual interest in at least 5% of the Certificates (including the Class B-3 and XS Certificates) issued by the Trust 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 three-year anniversary of the Closing Date or (2) the date when the aggregate stated principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Controlling Holder has the option to purchase all outstanding certificates at a price equal to the outstanding class balance plus accrued and unpaid interest, including any cap carryover amounts (optional redemption). The Controlling Holder, as of the Closing Date, will be an affiliate of the Sponsor with at least 50% common ownership with the Sponsor. After such purchase, the Controlling Holder then has the option to 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. On any date following the date on which the aggregate stated principal balance of the mortgage loans is less than or equal to 10% of the Cut-Off Date balance, the Servicing Administrator will have the option to terminate the transaction by purchasing all of the mortgage loans and any real estate owned (REO) property from the issuer at a price equal to the sum of the aggregate stated principal balance of the mortgage loans (other than any REO property) plus accrued interest thereon, the lesser of the fair market value of any REO property and the stated principal balance of the related loan, and any outstanding and unreimbursed advances, accrued and unpaid fees, and expenses that are payable or reimbursable to the transaction parties (optional termination). An optional termination is conducted as a qualified liquidation. The Servicer will fund advances of delinquent principal and interest (P&I advances) on any mortgage until such loan becomes 90 days delinquent under the Mortgage Bankers Association (MBA) method. The Servicer is also obligated to make advances in respect of taxes, insurance premiums, and reasonable costs incurred during servicing and disposal of properties. However, the Servicer will not be required to make P&I advances for any mortgage loan under a forbearance plan during the related forbearance period. That said, the Servicer will continue to make P&I advances at the end of the forbearance period to the extent the related mortgagor fails to make required payments then due and remains less than 90 days delinquent. The Sponsor will also have the option, but not the obligation, to repurchase any mortgage loan that becomes 90 or more days MBA Delinquent or, if a loan is under forbearance plan related to the impact of the Coronavirus Disease (COVID-19), on any date from and after the date on which the loan becomes more than 90 days MBA Delinquent following the end of the forbearance period or any REO property acquired; provided that the aggregate principal balance of such mortgage loans and REO properties repurchased by the Sponsor may not exceed 10.0% of the total loan balance as of the Cut-Off Date. This transaction employs a sequential-pay cash flow structure across the entire capital stack. Each class does not receive principal payments until the more senior classes, if applicable, have been paid off. Also, for each class of certificates, the principal will be paid to the most senior bonds outstanding to pay any unpaid current interest or interest shortfalls before any payments are applied as principal on the bonds. Additionally, excess spread can be used to cover realized losses and prior period bond write down amounts first before being allocated to unpaid cap carryover amounts to Class A-1 down to Class B-2. The coronavirus pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may arise in the coming months for many residential mortgage-backed securities (RMBS) asset classes, some meaningfully. The non-QM sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans that may fall outside of the CFPB's ATR rules, which became effective on January 10, 2014. Non-QM loans encompass the entire credit spectrum. They range from high-FICO, high-income borrowers who opt for IO or higher debt-to-income ratio mortgages, to near-prime debtors who have had certain derogatory pay histories but were cured more than two years ago, to nonprime borrowers whose credit events were only recently cleared, among others. In addition, some originators offer alternative documentation or bank statement underwriting to self-employed borrowers in lieu of verifying income with W-2s or tax returns. Finally, foreign nationals and real estate investor programs, while not necessarily non-QM in nature, are often included in non-QM pools. As a result of the coronavirus, DBRS Morningstar expects increased delinquencies and loans on forbearance plans, slower voluntary prepayment rates, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers' ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under its moderate scenario, (see "Global Macroeconomic Scenarios: June Update," published on June 1, 2020), for the non-QM asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the non-QM asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes loans originated to (1) borrowers with recent credit events, (2) self-employed borrowers, or (3) higher loan-to-value (LTV) ratio borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Borrowers with prior credit events have exhibited difficulties in fulfilling payment obligations in the past and may revert to spotty payment patterns in the near term. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers, with lower equity in their properties, generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban MSAs may experience additional stress from extended lockdown periods and the slowdown of the economy. In addition, for this transaction, as permitted by the Coronavirus Aid, Relief, and Economic Security Act, signed into law on March 27, 2020, approximately 2.1% of the borrowers are on forbearance plans because the borrowers reported financial hardship related to coronavirus. These forbearance plans allow temporary payment holidays, followed by repayment once the forbearance period ends. SLS, in collaboration with Vista Point, is generally offering borrowers a three-month payment forbearance plan. Beginning in month four, the borrower can repay all of the missed mortgage payments at once or opt to go on a repayment plan to catch up on missed payments for several, typically six, months. During the repayment period, the borrower needs to make regular payments and additional amounts to catch up on the missed payments. DBRS Morningstar had a conference call with Vista Point regarding its approach to the forbearance loans and understood that Vista Point, in collaboration with the Servicer, developed and recently implemented a review process to evaluate borrowers' requests for payment relief. As a part of the review, a borrower must submit a completed mortgage assistance application, which includes detailed financial information, income documents, and hardship related documentation. The process helps to ensure borrowers who genuinely need payment relief may receive such relief and those who can make payments but use the payment relief to conserve cash may not. SLS would attempt to contact borrowers before the expiration of the forbearance period and evaluate their capacity to repay the missed amounts. As a result, SLS, in collaboration with Vista Point, may offer a repayment plan or other forms of payment relief, such as deferral of the unpaid P&I amounts or a loan modification, in addition to pursuing other loss mitigation options. For the loans, DBRS Morningstar applied additional assumptions to evaluate the impact of potential cash flow disruptions on the rated tranches, stemming from (1) lower P&I collections and (2) limited servicing advances on delinquent P&I. These assumptions include: (1) Increasing delinquencies on the AAA (sf) and AA (high) (sf) rating levels for the first 12 months, (2) Increasing delinquencies on the A (sf) and below rating levels for the first nine months, (3) Assuming no voluntary prepayments for the first 12 months for the AAA (sf) and AA (high) (sf) rating levels, and (4) Delaying the receipt of liquidation proceeds during the first 12 months for the AAA (sf) and AA (high) (sf) rating levels. Notes: All figures are in U.S. dollars unless otherwise noted. WACHOVIA BANK 2005-C21: Fitch Affirms CCCsf Rating on Cl. E Certs ----------------------------------------------------------------- Fitch Ratings has affirmed seven classes of Wachovia Bank Commercial Mortgage Trust commercial mortgage pass-through certificates series 2005-C21 (WBCMT 2005-C21). RATING ACTIONS Wachovia Bank Commercial Mortgage Trust 2005-C21 Class E 92976BAA0; LT CCCsf Affirmed; previously CCCsf Class F 92976BAB8; LT Dsf Affirmed; previously Dsf Class G 92976BAC6; LT Dsf Affirmed; previously Dsf Class H 92976BAD4; LT Dsf Affirmed; previously Dsf Class J 92976BAE2; LT Dsf Affirmed; previously Dsf Class K 92976BAF9; LT Dsf Affirmed; previously Dsf Class L 92976BAG7; LT Dsf Affirmed; previously Dsf KEY RATING DRIVERS Potential Losses; Binary Risk: The affirmation of class E reflects the binary risk and uncertainty regarding the ultimate recoveries to the class as the largest loan (56.4% of the pool) is a Fitch Loan of Concern. The Phillips Lighting loan is secured by a single tenant office property located in Franklin Township, NJ; the single tenant, Phillips Lighting, has an upcoming lease expiration at the end of December 2021, which is 14 years prior to the loan's final maturity in 2035. The loan is currently hyper-amortizing, as it was not repaid at its anticipated repayment date. Additionally, the affirmation also considers a greater certainty of loss associated with the real estate owned (REO) Taurus Pool asset (32.3%), where only one of the original six underlying properties remain, given an increase in the total exposure since Fitch's last rating action. Increased Credit Enhancement; Concentrated Pool: Although credit enhancement has improved from Fitch's last rating action due to continued amortization of the non-specially serviced loans and the disposition of one of the underlying properties in the REO NGP Rubicon GSA Pool asset, the pool is highly concentrated and adversely selected with only seven loans/assets remaining. REO assets comprise 32.3% of the pool. As of the June 2020 distribution date, the pool's aggregate principal balance has been reduced by 98.3% to $55 million from $3 billion at issuance. Realized losses since issuance total $204 million (6.3% of original pool balance). Cumulative interest shortfalls totaling $11.3 million are currently affecting classes F, K through N and class P. All loans in the pool are fully amortizing, two (0.6%) of which mature in October 2020, one (0.9%) in September 2025 and one (9.8%) in October 2030. Alternative Loss Consideration: Given the pool concentration, Fitch's analysis was based on a sensitivity analysis which analyzed the likely payoff of the remaining loans, as well as potential losses and recoveries. Losses on class E continue to be considered possible. Coronavirus Exposure: Two loans (10% of pool) are secured by retail properties and one loan (0.3%) is secured by a multifamily property. The Maywood Village loan is secured by a neighborhood retail center in Maywood, CA; the largest anchor tenant is Fitness 19 (18.5% of NRA; lease expiry in 2027). The Oak Park & Waters Hanley Pool loan is secured by two neighborhood retail centers in the Tampa MSA; the Water Hanley property in Tampa, FL is anchored by Save-A-Lot (29.6% of NRA; lease expiry in 2021) and the Oak Park property in Brandon, FL is anchored by Shapes Fitness (38.1% of NRA; lease expiry in 2029). The YE 2019 NOI DSCRs on these two retail loans were 1.42x and 1.34x, respectively. The Sagecrest Apartments loan is secured by a 206-unit multifamily property located in Elko, NV. Occupancy as of March 2020 was 87% and the servicer-reported NOI DSCR was 1.17x at YE 2019. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: Sensitivity factors that could lead to upgrades would include stable to improved asset performance coupled with additional paydown and/or defeasance. An upgrade of class E may occur if the single tenant extends its lease at the Phillips Lighting property, but may be limited by adverse selection and increasing pool concentration concerns. Classes would not be upgraded above 'Asf' if there is likelihood for interest shortfalls. No rating changes will occur on classes F through P as they have incurred a principal loss. Factors that could, individually or collectively, lead to negative rating action/downgrade: Sensitivity factors that lead to downgrades include an increase in pool level losses from underperforming or specially serviced assets. A downgrade of class E may occur if the Phillips Lighting lease is not renewed and if losses from the Taurus Pool asset exceed Fitch's expectations. WELLS FARGO 2018-C46: Fitch Affirms Class G-RR Certs at B-sf ------------------------------------------------------------ Fitch Ratings has affirmed 15 classes of Wells Fargo Commercial Mortgage Trust 2018-C46 commercial mortgage pass-through certificates. WFCM 2018-C46 - Class A-1 95001QAQ4; LT AAAsf; Affirmed - Class A-2 95001QAR2; LT AAAsf; Affirmed - Class A-3 95001QAT8; LT AAAsf; Affirmed - Class A-4 95001QAU5; LT AAAsf; Affirmed - Class A-S 95001QAX9; LT AAAsf; Affirmed - Class A-SB 95001QAS0; LT AAAsf; Affirmed - Class B 95001QAY7; LT AA-sf; Affirmed - Class C 95001QAZ4; LT A-sf; Affirmed - Class D 95001QAC5; LT BBBsf; Affirmed - Class E-RR 95001QAE1; LT BBB-sf; Affirmed - Class F-RR 95001QAG6; LT BBsf; Affirmed - Class G-RR 95001QAJ0; LT B-sf; Affirmed - Class X-A 95001QAV3; LT AAAsf; Affirmed - Class X-B 95001QAW1; LT AA-sf; Affirmed - Class X-D 95001QAA9; LT BBBsf; Affirmed KEY RATING DRIVERS Relatively Stable Performance; Increased Loss Expectations: While overall pool performance remains generally stable, loss expectations have increased since Fitch's last rating action due to additional stresses applied to loans expected to be impacted in the near-term from the coronavirus pandemic. Twelve loans (24.7% of pool) were designated as Fitch Loans of Concern. The largest FLOC, Town Center Aventura (5.8%), is secured by an 186,138-sf shopping center located in Aventura, FL anchored by Publix (25.7% NRA, lease expires Nov. 2023). Occupancy declined to 86.5% at YE 2019 from 100% at YE 2018 due to several smaller tenants vacating at lease expiration; the largest was Casual Male Big & Tall (3.5% NRA; 7% total base rent), which vacated at its February 2019 lease expiration date. The second largest FLOC, Showcase II (4.8%), is secured by a 41,407-sf retail property located in Las Vegas, NV. The property is located on Las Vegas Boulevard and is within walking distance of numerous hotel resorts, casinos and other demand drivers. Major tenants include American Eagle (26.5% NRA, lease expires Jan. 2028), Adidas (25% NRA, lease expires Sept. 2027) and T-Mobile (24.8% NRA, lease expires Jan. 2028). As of YE 2019, the property was 100% occupied and the loan reported a NOI DSCR of 1.70x. The third largest FLOC, Owasso Market (2.7%), is secured by 351,370-sf anchored shopping center located in Owasso, OK. Both of the collateral anchors, Lowe's (54.6% of NRA) and Kohl's (24.7%), have upcoming lease expirations in 2021. Fitch has requested a leasing update and is awaiting a response. The fourth largest FLOC, Florence Square (2.6%), is secured by 219,282-sf retail property located in Florence, AL. Major tenants at the property include Academy Sports (28.7% NRA, lease expires Feb. 2033 ), Essex Bargain Hunt (17.4% NRA, lease expires Dec. 2021) and TJ Maxx (10.9% NRA, lease expires Jan. 2024). Approximately 21.6% of the NRA is scheduled to roll in 2021. The remaining eight FLOCs (8.8%) outside the top 15 were flagged for performance concerns related to the coronavirus pandemic. Minimal Change in Credit Enhancement: As of the June 2020 distribution date, the pool's aggregate principal balance has paid down by $4.5 million (0.65% of the original pool balance) to $687.6 million from $692.1 million at issuance. No loans are defeased. Twenty loans, representing 48.5% of the pool, are full-term interest-only. Fifteen loans, representing 29.3% of the pool, were structured with a partial interest-only component; two of these loans (1.7%) have begun to amortize. Based on the scheduled balance at maturity, the pool will pay down by only 6%. Coronavirus Exposure: Sixteen loans (37% of pool) are secured by retail properties, nine loans (14.2%) are secured by multifamily and six loans (13.9) are secured by hotel properties. Fitch applied additional stresses to five retail loans (12.5%), five hotel loans (5.9%) and one multifamily loan (0.50%) to account for potential cash flow disruptions due to the coronavirus pandemic; these stresses contributed to the Negative Outlook on class G-RR. Investment-Grade Credit Opinion Loans: Two loans in the top 15 were assigned stand-alone investment-grade credit opinions at issuance. Fair Oaks Mall (5.7% of pool) and Moffett Towers II - Building 1 (2.9%) both received investment-grade stand-alone credit opinions of 'BBB-sf' at issuance. Pari Passu: Nine loans (32.3% of pool) are pari passu, including seven loans (28.5%) in the top 15. RATING SENSITIVITIES The Negative Outlook on class G-RR reflects performance concerns with hotel, multifamily and retail properties due to decline in travel and commerce as a result of the coronavirus pandemic. The Stable Outlooks on classes A-1 through F-RR reflect the increasing CE, defeasance, continued amortization and overall stable performance of the majority of the pool. Factors that could, individually or collectively, lead to positive rating action/upgrade: Factors that could lead to upgrades include stable to improved performance coupled with pay down and/or defeasance. Upgrades to classes B and C would likely occur with significant improvement in CE and/or defeasance. However, increased concentrations, further underperformance of the FLOCs or loans expected to be negatively affected by the coronavirus pandemic could cause this trend to reverse. An upgrade of class D would also take into account these factors, 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 classes E-RR, F-RR and G-RR are not likely until the later years of the transaction, and only if the performance of the remaining pool is stable and/or properties vulnerable to the coronavirus return to pre-pandemic levels, and there is sufficient credit enhancement to the class. Factors that could, individually or collectively, lead to negative rating action/downgrade: Factors that could lead to downgrades include an increase in pool level losses from underperforming or specially serviced loans. Downgrades to the senior A-1, A-2, A-3, AS-B, A-4 and A-S classes, along with class B, are not expected given their position in the capital structure, but may occur if these classes incur interest shortfalls. A downgrade to classes C and D may occur should several loans transfer to special servicing and/or as pool losses significantly increase. A downgrade to classes E-RR, F-RR and G-RR (class G-RR is currently on Outlook Negative) would occur as losses materialize or if property performance, specifically of the FLOCs, fails to stabilize in a prolonged economic slowdown. In addition to its baseline scenario related to the coronavirus, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects that a greater percentage of classes may be assigned a Negative Outlook or those with Negative Outlooks will be downgraded one or more categories. For more information on Fitch's original rating sensitivity on the transaction, please refer to the new issuance report. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). WELLS FARGO 2020-2: DBRS Finalizes B(low) Rating on Class B5 Certs ------------------------------------------------------------------ DBRS, Inc. finalized the following provisional ratings on the Mortgage Pass-Through Certificates, Series 2020-2 (the Certificates) issued by Wells Fargo Mortgage Backed Securities 2020-2 Trust (WFMBS 2020-2): -- $406.4 million Class A-1 at AAA (sf) -- $406.4 million Class A-2 at AAA (sf) -- $304.8 million Class A-3 at AAA (sf) -- $304.8 million Class A-4 at AAA (sf) -- $101.6 million Class A-5 at AAA (sf) -- $101.6 million Class A-6 at AAA (sf) -- $243.8 million Class A-7 at AAA (sf) -- $243.8 million Class A-8 at AAA (sf) -- $162.6 million Class A-9 at AAA (sf) -- $162.6 million Class A-10 at AAA (sf) -- $61.0 million Class A-11 at AAA (sf) -- $61.0 million Class A-12 at AAA (sf) -- $66.0 million Class A-13 at AAA (sf) -- $66.0 million Class A-14 at AAA (sf) -- $35.6 million Class A-15 at AAA (sf) -- $35.6 million Class A-16 at AAA (sf) -- $47.8 million Class A-17 at AAA (sf) -- $47.8 million Class A-18 at AAA (sf) -- $454.2 million Class A-19 at AAA (sf) -- $454.2 million Class A-20 at AAA (sf) -- $454.2 million Class A-IO1 at AAA (sf) -- $406.4 million Class A-IO2 at AAA (sf) -- $304.8 million Class A-IO3 at AAA (sf) -- $101.6 million Class A-IO4 at AAA (sf) -- $243.8 million Class A-IO5 at AAA (sf) -- $162.6 million Class A-IO6 at AAA (sf) -- $61.0 million Class A-IO7 at AAA (sf) -- $66.0 million Class A-IO8 at AAA (sf) -- $35.6 million Class A-IO9 at AAA (sf) -- $47.8 million Class A-IO10 at AAA (sf) -- $454.2 million Class A-IO11 at AAA (sf) -- $7.9 million Class B-1 at AA (sf) -- $9.1 million Class B-2 at A (low) (sf) -- $2.9 million Class B-3 at BBB (sf) -- $1.4 million Class B-4 at BB (sf) -- $717.0 thousand Class B-5 at B (low) (sf) Classes A-IO1, A-IO2, A-IO3, A-IO4, A-IO5, A-IO6, A-IO7, A-IO8, A-IO9, A-IO10, and A-IO11 are interest-only certificates. The class balances represent notional amounts. Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-9, A-10, A-11, A-13, A-15, A-17, A-19, A-20, A-IO2, A-IO3, A-IO4, A-IO6, and A-IO11 are exchangeable certificates. These classes can be exchanged for combinations of initial exchangeable certificates as specified in the offering documents. Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10, A-11, A-12, A-13, A-14, A-15, and A-16 are super-senior certificates. These classes benefit from additional protection from senior support certificates (Classes A-17 and A-18) with respect to loss allocation. The AAA (sf) ratings on the Certificates reflect 5.00% of credit enhancement provided by subordinated certificates. The AA (sf), A (low) (sf), BBB (sf), BB (sf), and B (low) (sf) ratings reflect 3.35%, 1.45%, 0.85%, 0.55%, and 0.40% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. WFMBS 2020-2 is a securitization of a portfolio of first-lien fixed-rate prime residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 556 loans with a total principal balance of $478,122,716 as of the Cut-Off Date (June 1, 2020). The pool consists of fully amortizing fixed-rate mortgages with original terms to maturity of primarily 30 years and a weighted-average (WA) loan age of six months. All of the mortgage loans were originated by Wells Fargo Bank, N.A. (Wells Fargo; rated AA/R-1 (high) with a Negative trend by DBRS Morningstar) or were acquired by Wells Fargo from its qualified correspondents. In addition, Wells Fargo is the Servicer of the mortgage loans, as well as the Mortgage Loan Seller and Sponsor of the transaction. Wells Fargo will also act as the Master Servicer, Securities Administrator, and Custodian. Wilmington Savings Fund Society, FSB will serve as Trustee. Opus Capital Markets Consultants, LLC will act as the Representation and Warranty (R&W) Reviewer. The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure. As of the Cut-Off Date, there are no loans that have entered a Coronavirus Disease (COVID-19)-related forbearance plan with the Servicer. Any loans that enter into a coronavirus-related forbearance plan after the Cut-Off Date and prior to or on the Closing Date will be repurchased within 45 days of the Closing Date. Loans that enter a coronavirus-related forbearance plan after the Closing Date will remain in the pool. CORONAVIRUS PANDEMIC IMPACT The coronavirus pandemic and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar anticipates that delinquencies may continue to rise in the coming months for many residential mortgage-backed security (RMBS) asset classes, some meaningfully. The prime mortgage sector is a traditional RMBS asset class that consists of securitizations backed by pools of residential home loans originated to borrowers with prime credit. Generally, these borrowers have decent FICO scores, reasonable equity, and robust income and liquid reserves. As a result of the coronavirus, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers’ ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans. In connection with the economic stress assumed under its moderate scenario (see "Global Macroeconomic Scenarios: June Update," published on June 1, 2020), for the prime asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecasted unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, for pools with loans on forbearance plans, DBRS Morningstar may assume higher loss expectations above and beyond the coronavirus assumptions. Such assumptions translate to higher expected losses on the collateral pool and correspondingly higher credit enhancement. In the prime asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes that this sector should have low intrinsic credit risk. Within the prime asset class, loans originated to (1) self-employed borrowers or (2) higher loan-to-value ratio (LTV) borrowers may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Self-employed borrowers are potentially exposed to more volatile income sources, which could lead to reduced cash flows generated from their businesses. Higher LTV borrowers with lower equity in their properties generally have fewer refinance opportunities and therefore slower prepayments. In addition, certain pools with elevated geographic concentrations in densely populated urban metropolitan statistical areas may experience additional stress from extended lockdown periods and the slowdown of the economy. The ratings reflect transactional strengths that include high-quality credit attributes, well-qualified borrowers, financial strength of the counterparties, satisfactory third-party due-diligence review, structural enhancements, and 100% current loans. This transaction employs an R&W framework that contains certain weaknesses, such as materiality factors, knowledge qualifiers, and sunset provisions that allow for certain R&Ws to expire within three to five years after the Closing Date. To capture the perceived weaknesses in the R&W framework, DBRS Morningstar reduced the originator scores in this pool. A lower originator score results in increased default and loss assumptions and provides additional cushions for the rated securities. Notes: All figures are in U.S. dollars unless otherwise noted. WELLS FARGO 2020-2: Fitch Rates Class B-5 Certs 'B+sf' ------------------------------------------------------ Fitch Ratings rates Wells Fargo Mortgage Backed Securities 2020-2 Trust. WFMBS 2020-2 - Class A-1 95002QAA8; LT AAAsf New Rating - Class A-2 95002QAB6; LT AAAsf New Rating - Class A-3 95002QAC4; LT AAAsf New Rating - Class A-4 95002QAD2; LT AAAsf New Rating - Class A-5 95002QAE0; LT AAAsf New Rating - Class A-6 95002QAF7; LT AAAsf New Rating - Class A-7 95002QAG5; LT AAAsf New Rating - Class A-8 95002QAH3; LT AAAsf New Rating - Class A-9 95002QAJ9; LT AAAsf New Rating - Class A-10 95002QAK6; LT AAAsf New Rating - Class A-11 95002QAL4; LT AAAsf New Rating - Class A-12 95002QAM2; LT AAAsf New Rating - Class A-13 95002QAN0; LT AAAsf New Rating - Class A-14 95002QAP5; LT AAAsf New Rating - Class A-15 95002QAQ3; LT AAAsf New Rating - Class A-16 95002QAR1; LT AAAsf New Rating - Class A-17 95002QAS9; LT AAAsf New Rating - Class A-18 95002QAT7; LT AAAsf New Rating - Class A-19 95002QAU4; LT AAAsf New Rating - Class A-20 95002QAV2; LT AAAsf New Rating - Class A-IO1 95002QAW0; LT AAAsf New Rating - Class A-IO2 95002QAX8; LT AAAsf New Rating - Class A-IO3 95002QAY6; LT AAAsf New Rating - Class A-IO4 95002QAZ3; LT AAAsf New Rating - Class A-IO5 95002QBA7; LT AAAsf New Rating - Class A-IO6 95002QBB5; LT AAAsf New Rating - Class A-IO7 95002QBC3; LT AAAsf New Rating - Class A-IO8 95002QBD1; LT AAAsf New Rating - Class A-IO9 95002QBE9; LT AAAsf New Rating - Class A-IO10 95002QBF6; LT AAAsf New Rating - Class A-IO11 95002QBG4; LT AAAsf New Rating - Class B-1 95002QBH2; LT AAsf New Rating - Class B-2 95002QBJ8; LT Asf New Rating - Class B-3 95002QBK5; LT BBBsf New Rating - Class B-4 95002QBL3; LT BBsf New Rating - Class B-5 95002QBM1 LT B+sf New Rating - Class B-6 95002QBN9; LT NRsf New Rating TRANSACTION SUMMARY The certificates are supported by 556 prime fixed-rate mortgage loans with a total balance of approximately $478 million as of the cutoff date. All of the loans were originated by Wells Fargo Bank, N.A or were acquired from its correspondents. This is the seventh post-crisis issuance from Wells Fargo. KEY RATING DRIVERS Revised GDP Due to COVID-19 (Negative): COVID-19 and the resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. Its baseline global economic outlook for U.S. GDP growth is currently a 5.6% decline for 2020, down from 1.7% for 2019. Fitch's downside scenario would see an even larger decline in output in 2020 and a weaker recovery in 2021. To account for declining macroeconomic conditions resulting from COVID-19, an Economic Risk Factor floor of 2.0 (the ERF is a default variable in the U.S. RMBS loan loss model) was applied to 'BBBsf' and below. Expected Payment Deferrals Related to COVID-19 (Negative): The outbreak of COVID-19 and widespread containment efforts in the U.S. will result in increased unemployment and cash flow disruptions. To account for the cash flow disruptions, Fitch assumed deferred payments on a minimum of 25% of the pool for the first six months of the transaction at all rating categories with a reversion to its standard delinquency and liquidation timing curve by month 10. This assumption is based on observations of legacy delinquencies and past-due payments following Hurricane Maria in Puerto Rico. Payment Forbearance (Mixed): As of the cutoff date, none of the borrowers in the pool are on a COVID-19 forbearance plan. Additionally, any loan that enters a COVID-19 forbearance plan between the cutoff date and prior to or on the closing date will be removed from the pool (at par) within 45 days of closing. For borrowers who enter a COVID-19 forbearance plan post-closing, the P&I advancing party will advance delinquent P&I during the forbearance period. If at the end of the forbearance period the borrower begins making payments, the advancing party will be reimbursed from any catch-up payment amount. If the borrower doesn't resume making payments, the loan will likely become modified and the advancing party will be reimbursed from available funds. Full Servicer Advancing (Neutral): The pool benefits from advances of delinquent principal and interest until the servicer, Wells Fargo, the primary servicer of the pool, deems them non-recoverable. Fitch's loss severities reflect reimbursement of amounts advanced by the servicer from liquidation proceeds based on its liquidation timelines assumed at each rating stress. In addition, the credit enhancement for the rated classes has some cushion for recovery of servicer advances for loans that are modified following a payment forbearance. Very High-Quality Mortgage Pool (Positive): The collateral attributes are among the strongest of post-crisis RMBS rated by Fitch. The pool consists primarily of 30-year fixed-rate fully amortizing loans to borrowers with strong credit profiles, low leverage and large liquid reserves. All loans are Safe Harbor Qualified Mortgages. The loans are seasoned an average of 7.6 months. The pool has a weighted average original FICO score of 774, which is indicative of very high credit-quality borrowers. Approximately 83% has original FICO scores at or above 750. In addition, the original WA CLTV ratio of 72.3% represents substantial borrower equity in the property. The pool's attributes, together with Wells Fargo's sound origination practices, support Fitch's very low default risk expectations. High Geographic Concentration (Negative): Approximately 50% of the pool is concentrated in California with relatively low MSA concentration. The largest MSA concentration is in San Francisco MSA (19.9%) followed by the Los Angeles MSA (11.4%) and the San Jose MSA (8.2%). The top three MSAs account for 39.5% of the pool. As a result, there was an additional penalty of approximately 3% was applied to the pool's lifetime default expectations. Low Operational Risk (Positive): Operational risk is very well controlled for in this transaction. Wells Fargo has an extensive operating history in residential mortgage originations and is assessed as an 'Above Average' originator by Fitch. The entity has a diversified sourcing strategy and utilizes an effective proprietary underwriting system for its retail originations. Wells Fargo will perform primary and master servicing for this transaction; these functions are rated 'RPS1-' and 'RMS1-', respectively, by Fitch. Each of these servicers were revised to Outlook Negative from Stable due to the change. Tier 2 R&W Framework (Neutral): While the loan-level representations and warranties for this transaction are substantially in conformity with Fitch criteria, the framework has been assessed as a Tier 2 due to the narrow testing construct which limits the breach reviewers ability to identify or respond to issues not fully anticipated at closing. The Tier 2 assessment and the strong financial condition of Wells Fargo as R&W provider resulted in a neutral impact to the CE. In response to COVID-19, and in an effort to focus breach reviews on loans that are more likely to contain origination defects that let to or contributed to the delinquency of the loan, Wells Fargo added additional carve-out language relating to the delinquency review trigger for certain Disaster Mortgage Loans that are modified or delinquent due to disaster related loss mitigation (including COVID-19). This is discussed further in the Asset Analysis section. Due Diligence Review Results (Positive): Third-party due diligence was performed on 100% of loans in the transaction pool. The review was performed by Clayton, which is assessed by Fitch as an 'Acceptable - Tier 1' TPR firm. 100% of the loans received a final grade of 'A' or 'B' which reflects strong origination practices. Loans with a final grade of 'B' were supported with sufficient compensating factors or were already accounted for in Fitch's loan loss model. Loans with due diligence receive a credit in the loss model; the aggregate adjustment reduced the 'AAAsf' expected losses by 13 bps. Straightforward Deal Structure (Positive): 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. The lockout feature helps maintain subordination for a longer period should losses occur later in the life of the deal. The applicable credit support percentage feature redirects subordinate principal to classes of higher seniority if specified CE levels are not maintained. To mitigate tail risk, which arises as the pool seasons and fewer loans are outstanding, a subordination floor of 1.00% of the original balance will be maintained for the senior certificates. Extraordinary Expense Treatment (Neutral): The trust provides for expenses, including indemnification amounts, reviewer fees and costs of arbitration, to be paid by the net WA coupon of the loans, which does not affect the contractual interest due on the certificates. Furthermore, the expenses to be paid from the trust are capped at $350,000 per annum, with the exception of independent reviewer breach review fee, which can be carried over each year, subject to the cap until paid in full. RATING SENSITIVITIES Fitch 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 that may be considered in the surveillance of the transaction. Sensitivity analyses were conducted at the state and national levels to assess the effect of higher MVDs for the subject pool as well as lower MVDs, illustrated by a gain in home prices. Factors that could, individually or collectively, lead to negative rating action/downgrade: This defined negative rating 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 36.7% at 'AAA'. The analysis indicates that there is some potential rating migration with higher MVDs for all rated classes, compared with the model projection. Specifically, a 10% additional decline in home prices would lower all rated classes by one full category. Factors that could, individually or collectively, lead to positive rating action/upgrade: This defined positive rating sensitivity analysis demonstrates how the ratings would react to negative MVDs at the national level, or in other words positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10%. Excluding the senior class which is already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. Specifically, a 10% gain in home prices would result in a full category upgrade for the rated class excluding those being assigned ratings of 'AAAsf'. This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modelling process uses the modification of these variables to reflect asset performance in up- and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. Fitch has added a Coronavirus Sensitivity Analysis that that includes a prolonged health crisis resulting in depressed consumer demand and a protracted period of below-trend economic activity that delays any meaningful recovery to beyond 2021. Under this severe scenario, Fitch expects the ratings to be impacted by changes in its sustainable home price model due to updates to the model's underlying economic data inputs. Any long-term impact arising from coronavirus disruptions on these economic inputs will likely affect both investment and speculative grade ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Fitch was provided with Form ABS Due Diligence-15E as prepared by Clayton Services LLC. The third-party due diligence described in Form 15E focused on a compliance review, credit review and valuation review. The due diligence company performed a review on 100% of the loans. Fitch believes the overall results of the review generally reflected strong underwriting control. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS WFMBS 2020-2 has an ESG Relevance Score of 4 for Transaction Parties & Operational Risk: Operational risk is well controlled for in WFMBS 2020-2 including strong R&W and transaction due diligence as well as a strong originator and servicer which resulted in a reduction in expected losses. Except for the matters discussed above, 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(ies), either due to their nature or the way in which they are being managed by the entity(ies). WELLS FARGO 2020-2: Moody's Rates Class B-5 Debt 'B1' ----------------------------------------------------- Moody's Investors Service has assigned definitive ratings to 25 classes of residential mortgage-backed securities issued by Wells Fargo Mortgage Backed Securities 2020-2 Trust. The ratings range from Aaa (sf) to B1 (sf). WFMBS 2020-2 is the second prime issuance by Wells Fargo Bank, N.A. (Wells Fargo Bank, the sponsor and mortgage loan seller) in 2020, consisting of 556 primarily 30-year, fixed rate, prime residential mortgage loans with an unpaid principal balance of $478,122,716. The pool has strong credit quality and consists of borrowers with high FICO scores, significant equity in their properties and liquid cash reserves. The pool has clean pay history and weighted average seasoning of approximately 5.54 months. The mortgage loans for this transaction are originated by Wells Fargo Bank, through its retail and correspondent channels, in accordance with its underwriting guidelines. In this transaction, all 556 loans are designated as qualified mortgages under the QM safe harbor rules. Wells Fargo Bank will service all the loans and will also be the master servicer for this transaction. The securitization has a shifting interest structure with a five-year lockout period that benefits from a senior floor and a subordinate floor. Moody's coded the cash flow to each of the certificate classes using Moody's proprietary cash flow tool. The complete rating actions are as follows: Issuer: Wells Fargo Mortgage Backed Securities 2020-2 Trust Cl. A-1, Assigned Aaa (sf) Cl. A-2, Assigned Aaa (sf) Cl. A-3, Assigned Aaa (sf) Cl. A-4, Assigned Aaa (sf) Cl. A-5, Assigned Aaa (sf) Cl. A-6, Assigned Aaa (sf) Cl. A-7, Assigned Aaa (sf) Cl. A-8, Assigned Aaa (sf) Cl. A-9, Assigned Aaa (sf) Cl. A-10, Assigned Aaa (sf) Cl. A-11, Assigned Aaa (sf) Cl. A-12, Assigned Aaa (sf) Cl. A-13, Assigned Aaa (sf) Cl. A-14, Assigned Aaa (sf) Cl. A-15, Assigned Aaa (sf) Cl. A-16, Assigned Aaa (sf) Cl. A-17, Assigned Aa1 (sf) Cl. A-18, Assigned Aa1 (sf) Cl. A-19, Assigned Aaa (sf) Cl. A-20, Assigned Aaa (sf) Cl. B-1, Assigned Aa3 (sf) Cl. B-2, Assigned A2 (sf) Cl. B-3, Assigned Baa3 (sf) Cl. B-4, Assigned Ba2 (sf) Cl. B-5, Assigned B1 (sf) RATINGS RATIONALE Summary Credit Analysis and Rating Rationale Moody's expected loss for this pool in a baseline scenario-mean is 0.25% and reaches 2.99% at a stress level consistent with its Aaa ratings. Its analysis has considered the effect of the COVID-19 outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of US RMBS. Specifically, for US RMBS, loan performance will weaken due to the unprecedented spike in the unemployment rate, which may limit borrowers' income and their ability to service debt. The softening of the housing market will reduce recoveries on defaulted loans, also a credit negative. Furthermore, borrower assistance programs, such as forbearance, may adversely impact scheduled cash flows to bondholders. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's expected loss for this pool in a baseline scenario-mean is 0.25%, in a baseline scenario-median is 0.11%, and reaches 2.99% at a stress level consistent with its Aaa ratings. These losses incorporate an additional stress of 9.37%, 15% and 5%, respectively, to account for the increased likelihood of deterioration in the performance of the underlying mortgage loans as a result of a slowdown in US economic activity in 2020 due to the coronavirus outbreak. Moody's regardsthe COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's bases its ratings on the certificates on the credit quality of the mortgage loans, the structural features of the transaction, its assessments of the origination quality and servicing arrangement, the strength of the third-party due diligence and the R&W framework of the transaction. Collateral Description The WFMBS 2020-2 transaction is a securitization of 556 first lien residential mortgage loans with an unpaid principal balance of $478,122,716. The loans in this transaction have strong borrower characteristics with a weighted average original FICO score of 781.3 and a weighted-average original loan-to-value ratio of 72.1%. In addition, 5.9% of the borrowers are self-employed and rate-and-term refinance and cash-out loans comprise approximately 43% of the aggregate pool (inclusive of construction to permanent loans). Of note, 10.6% (by loan balance) of the pool comprised of construction to permanent loans. The construction to permanent is a two-part loan where the first part is for the construction and then it becomes a permanent mortgage once the property is complete. For all the loans in the pool, the construction was complete and because the borrower cannot receive cash from the permanent loan proceeds or anything above the construction cost, Moody's treated these loans as a rate term refinance rather than a cash out refinance loan. The pool has a high geographic concentration with 49.6% of the aggregate pool located in California and 8.1% located in the New York-Newark-Jersey City MSA. The characteristics of the loans underlying the pool are slightly stronger than recent prime RMBS transactions backed by 30-year mortgage loans that Moody's has rated. Origination Quality Wells Fargo Bank (long term debt Aa2) is an indirect, wholly-owned subsidiary of Wells Fargo & Company (long term debt A2). Wells Fargo & Company is a U.S. bank holding company with approximately $1.98 trillion in assets and approximately 263,000 employees as of March 31, 2020, which provides banking, insurance, trust, mortgage and consumer finance services throughout the United States and internationally. Wells Fargo Bank has sponsored or has been engaged in the securitization of residential mortgage loans since 1988. Wells Fargo Home Lending is a key part of Wells Fargo & Company's diversified business model. The mortgage loans for this transaction are originated by WFHL, through its retail and correspondent channels, generally in accordance with its underwriting guidelines. The company uses a solid loan origination system which include embedded features such as a proprietary risk scoring model, role-based business rules and data edits that ensure the quality of loan production. After considering the company's origination practices, Moody's made no additional adjustments to its base case and Aaa loss expectations for origination. Third Party Review One independent third-party review firm, Clayton Services LLC, was engaged to conduct due diligence for the credit, regulatory compliance, property valuation, and data accuracy for all 556 loans in the initial population of this transaction (100% of the mortgage pool). The overall TPR results were in line with its expectations considering the clear underwriting guidelines and overall processes and procedures that Wells Fargo Bank has in place. Many of the grade B loans were underwritten using underwriter discretion. The due diligence firm noted that these exceptions are minor and/or provided an explanation of compensating factors. As a result, Moody's did not make any adjustment to its losses for TPR. Representation & Warranties Wells Fargo Bank, as the originator, makes the loan-level representation and warranties for the mortgage loans. The loan-level R&Ws are strong and, in general, either meet or exceed the baseline set of credit-neutral R&Ws Moody's has identified for US RMBS. Further, R&W breaches are evaluated by an independent third party using a set of objective criteria to determine whether any R&Ws were breached when loans become 120 days delinquent, the property is liquidated at a loss above a certain threshold, or the loan is modified by the servicer. Similar to J.P. Morgan Mortgage Trust transactions, the transaction contains a "prescriptive" R&W framework. These reviews are prescriptive in that the transaction documents set forth detailed tests for each R&W that the independent reviewer will perform. It should be noted that exceptions exist for certain excluded disaster mortgage loans that trip the delinquency trigger. These excluded disaster loans include COVID-19 forbearance loans or any other loan with respect to which (a) the related mortgaged property is located in an area that is subject to a major disaster declaration by either the federal or state government and (b) has either been modified or is being reported delinquent by the servicer as a result of a forbearance, deferral or other loss mitigation activity relating to the subject disaster. As excluded disaster mortgage loans may be subject to a review in future periods if certain conditions are satisfied. Overall, Moody's believes that Wells Fargo Bank's robust processes for verifying and reviewing the reasonableness of the information used in loan origination along with effectively no knowledge qualifiers mitigates any risks involved. Wells Fargo Bank has an anti-fraud software tools that are integrated with the loan origination system and utilized pre-closing for each loan. In addition, Wells Fargo Bank has a dedicated credit risk, compliance and legal teams oversee fraud risk in addition to compliance and operational risks. Moody's did not make any additional adjustment to its base case and Aaa loss expectations for R&Ws. Tail Risk and Subordination Floor The transaction cash flows follow a shifting interest structure that allows subordinated bonds to receive principal payments under certain defined scenarios. Because a shifting interest structure allows subordinated bonds to pay down over time as the loan pool shrinks, senior bonds are exposed to increased performance volatility, known as tail risk. The transaction provides for a senior subordination floor of 1.00% of the closing pool balance, which mitigates tail risk by protecting the senior bonds from eroding credit enhancement over time. Additionally, there is a subordination lock-out amount which is 1.00% of the closing pool balance. Moody's calculates the credit neutral floors for a given target rating as shown in its principal methodology. The senior subordination floor of 1.00% and subordinate floor of 1.00% are consistent with the credit neutral floors for the assigned ratings. Transaction Structure The securitization has a shifting interest structure that benefits from a senior floor and a subordinate floor. Funds collected, including principal, are first used to make interest payments and then principal payments to the senior bonds, and then interest and principal payments to each subordinate bond. As in all transactions with shifting interest structures, the senior bonds benefit from a cash flow waterfall that allocates all unscheduled principal collections to the senior bond for a specified period of time and increasing amounts of unscheduled principal collections to the subordinate bonds thereafter, but only if loan performance satisfies delinquency and loss tests. All certificates in this transaction are subject to a net WAC cap. Realized losses are allocated reverse sequentially among the subordinate and senior support certificates and on a pro-rata basis among the super senior certificates. Servicing Arrangement In WFMBS 2020-2, unlike other prime jumbo transactions, Wells Fargo Bank as servicer, master servicer, securities administrator and custodian of all of the mortgage loans for the deal. The servicer will be primarily responsible for funding certain servicing advances and delinquent scheduled interest and principal payments for the mortgage loans, unless the servicer determines that such amounts would not be recoverable. The master servicer and servicer will be entitled to be reimbursed for any such monthly advances from future payments and collections (including insurance and liquidation proceeds) with respect to those mortgage loans (see also COVID-19 impacted borrowers' section for additional information). In the case of the termination of the servicer, the master servicer must consent to the trustee's selection of a successor servicer, and the successor servicer must have a net worth of at least $15 million and be Fannie or Freddie approved. The master servicer shall fund any advances that would otherwise be required to be made by the terminated servicer (to the extent the terminated servicer has failed to fund such advances) until such time as a successor servicer is appointed. Additionally, in the case of the termination of the master servicer, the trustee will be required to select a successor master servicer in consultation with the depositor. The termination of the master servicer will not become effective until either the trustee or successor master servicer has assumed the responsibilities and obligations of the master servicer which also includes the advancing obligation. After considering Wells Fargo Bank's servicing practices, Moody's did not make any additional adjustment to its losses. COVID-19 Impacted Borrowers As of the cut-off date, no borrower under any mortgage loan has entered into a COVID-19 related forbearance plan with the servicer. The mortgage loan seller will covenant in the mortgage loan purchase agreement to repurchase at the repurchase price within 45 days of the closing date any mortgage loan with respect to which the related borrower requests or enters into a COVID-19 related forbearance plan after the cut-off date but on or prior to the closing date. In the event that after the closing date a borrower enters into or requests a COVID-19 related forbearance plan, such mortgage loan (and the risks associated with it) will remain in the mortgage pool. In the event the servicer enters into a forbearance plan with a COVID-19 impacted borrower of a mortgage loan, the servicer will report such mortgage loan as delinquent (to the extent payments are not actually received from the borrower) and the servicer will be required to make advances in respect of delinquent interest and principal (as well as servicing advances) on such loan during the forbearance period (unless the servicer determines any such advances would be a nonrecoverable advance). At the end of the forbearance period, if the borrower is able to make the current payment on such mortgage loan but is unable to make the previously forborne payments as a lump sum payment or as part of a repayment plan, the servicer anticipates it will modify such mortgage loan and any forborne amounts will be deferred as a non-interest bearing balloon payment that is due upon the maturity of such mortgage loan. At the end of the forbearance period, if the borrower repays the forborne payments via a lump sum or repayment plan, advances will be recovered via the borrower payment(s). In an event of modification, Wells Fargo Bank will recover advances made during the period of Covid-19 related forbearance from pool level collections. Any principal forbearance amount created in connection with any modification (whether as a result of a COVID-19 forbearance or otherwise) will result in the allocation of a realized loss and to the extent any such amount is later recovered, will result in the allocation of a subsequent recovery. Factors that would lead to an upgrade or downgrade of the ratings: Down Levels of credit protection that are insufficient to protect investors against current expectations of loss could drive the ratings down. Losses could rise above Moody's original expectations as a result of a higher number of obligor defaults or deterioration in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance and fraud. Up Levels of credit protection that are higher than necessary to protect investors against current expectations of loss could drive the ratings up. Losses could decline from Moody's original expectations as a result of a lower number of obligor defaults or appreciation in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market. Methodology The principal methodology used in these ratings was "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in April 2020. WESTLAKE AUTOMOBILE 2020-2: DBRS Finalizes BB Rating on E Notes --------------------------------------------------------------- DBRS, Inc. finalized its provisional ratings on the following classes of notes issued by Westlake Automobile Receivables Trust 2020-2 (Westlake 2020-2 or the Issuer): -- $192,000,000 Class A-1 Notes at R-1 (high) (sf) -- $460,480,000 Class A-2-A Notes at AAA (sf) -- $50,000,000 Class A-2-B Notes at AAA (sf) -- $98,640,000 Class B Notes at AA (sf) -- $122,550,000 Class C Notes at A (sf) -- $101,630,000 Class D Notes at BBB (sf) -- $74,700,000 Class E Notes at BB (sf) The ratings are based on DBRS Morningstar's review of the following analytical considerations: Transaction capital structure, ratings, and form and sufficiency of available credit enhancement. -- Credit enhancement is in the form of overcollateralization (OC), subordination, amounts held in the reserve fund, and excess spread. Credit enhancement levels are sufficient to support the DBRS Morningstar-projected cumulative net loss (CNL) assumption under various stress scenarios. -- DBRS Morningstar's projected CNL assumption includes an assessment of how collateral performance could deteriorate because of macroeconomic stresses related to the Coronavirus Disease (COVID-19) pandemic. -- The transaction assumptions include an increase to the expected loss. The transaction assumptions consider DBRS Morningstar's set of macroeconomic scenarios for select economies related to the coronavirus, available in its commentary "Global Macroeconomic Scenarios: June Update," published on June 1, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020. The scenarios were updated on June 1, 2020, and are reflected in DBRS Morningstar's rating analysis. The assumptions also take into consideration observed performance during the 2008–09 financial crisis and the possible impact of the stimulus from the Coronavirus Aid, Relief, and Economic Security Act, as well as other factors. -- The assumptions consider the moderate macroeconomic scenario outlined in the commentary (the moderate scenario serving as the primary anchor for current ratings). The moderate scenario assumes some success in containment of the coronavirus within Q2 2020 and a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020. The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the ratings address the timely payment of interest on a monthly basis and the payment of principal by the legal final maturity date. The consistent operational history of Westlake Services, LLC (Westlake or the Company) and the strength of the overall Company and its management team. -- The Westlake senior management team has considerable experience and a successful track record within the auto finance industry. The capabilities of Westlake with regard to originations, underwriting, and servicing. -- DBRS Morningstar performed an operational review of Westlake and considers the entity to be an acceptable originator and servicer of subprime automobile loan contracts with an acceptable backup servicer. DBRS Morningstar exclusively used the static pool approach because Westlake has enough data to generate a sufficient amount of static pool projected losses. -- DBRS Morningstar was conservative in the loss forecast analysis performed on the static pool data. The Company indicated that it may be subject to various consumer claims and litigation seeking damages and statutory penalties. Some litigation against Westlake could take the form of class action complaints by consumers; however, the Company indicated that there is no material pending or threatened litigation. The legal structure and presence of legal opinions that will address the true sale of the assets to the Issuer, the nonconsolidation of the special-purpose vehicle with Westlake, that the trust has a valid first-priority security interest in the assets, and the consistency with the DBRS Morningstar "Legal Criteria for U.S. Structured Finance." DISCONTINUATION OF LIBOR -- The Westlake 2020-2 transaction documents include provisions based on the recommended contractual fallback language for U.S.-dollar Libor-denominated securitizations published by the Federal Reserve’s Alternative Reference Rates Committee (ARRC) on May 31, 2019. -- In the event that the Libor-denominated Class A-2-B Notes are issued and Libor is discontinued, the Class A-2-B Notes will be allowed to transition to ARRC's recommended alternative reference rate (which is the Secured Overnight Financing Rate (SOFR)). -- DBRS Morningstar assumes that because the sum of the new benchmark replacement rate and the benchmark replacement adjustment (as further defined in the transaction documents) is intended to be a direct replacement for Libor, the contemplation of SOFR as a benchmark replacement rate is not a material deviation from the framework provided under the "Interest Rate Stresses for U.S. Structured Finance Transactions" and related methodologies. -- Document provisions will provide for prior notification to DBRS Morningstar of any subsequent change to the benchmark. The collateral securing the notes consists entirely of a pool of retail automobile contracts secured by predominantly used vehicles that typically have high mileage. The loans are primarily made to obligors who are categorized as subprime, largely because of their credit history and credit scores. Westlake is an independent full-service automotive financing and servicing company that provides (1) financing to borrowers who do not typically have access to prime credit-lending terms for the purchase of late-model vehicles and (2) refinancing of existing automotive financing. The ratings on the Class A-1, A-2-A, and A-2-B Notes reflect 42.75% of initial hard credit enhancement provided by subordinated notes in the pool (33.25%), the reserve account (1.50%), and OC (8.00%). The ratings on the Class B, Class C, Class D, and Class E Notes reflect 34.50%, 24.25%, 15.75%, and 9.50% of initial hard credit enhancement, respectively. Additional credit support may be provided from excess spread available in the structure. Notes: All figures are in in U.S. dollars unless otherwise noted. WFRBS COMMERCIAL 2011-C2: Fitch Affirms CCC Rating on F Certs ------------------------------------------------------------- Fitch Ratings has downgraded one class and affirmed six classes of WFRBS Commercial Mortgage Trust 2011-C2 Commercial Mortgage Pass-Through Certificates. WF-RBS Commercial Mortgage Trust 2011-C2 - Class A-4 92935JBC8; LT AAAsf; Affirmed - Class B 92935JAJ4; LT AAAsf; Affirmed - Class C 92935JAL9; LT Asf; Affirmed - Class D 92935JAN5; LT BBBsf; Affirmed - Class E 92935JAQ8; LT Bsf; Affirmed - Class F 92935JAS4; LT CCCsf; Affirmed - Class X-A 92935JAE5; LT AAAsf; Affirmed KEY RATING DRIVERS Increased Loss Expectations: The downgrade of class E reflects increased loss expectations for the remaining pool since Fitch's last rating action, driven primarily by the significant performance deterioration of the four Fitch Loans of Concern (FLOCs; 15.8% of the pool), which include three retail loans (14.4%) in the top 15, two (8.3%) of which are specially serviced and 30 days delinquent as of June 2020, and one office loan (1.4%). All three retail FLOCs mature between November 2020 and December 2020. Fitch Loans of Concern: The largest FLOC, Patton Creek (6.1%), is secured by a 484,706-sf retail power center located in Hoover, AL that has experienced occupancy declines. Occupancy has further decreased to 78.1% as of the March 2020 rent roll from 79.4% at YE 2019, 79.6% at YE 2018 and 90.3% at YE 2017. The servicer-reported NOI debt service coverage ratio was 1.55x as of YE 2019. The specially serviced Port Charlotte Town Center loan (5.2%), which is 30 days delinquent as of June 2020, is secured by a 489,695-sf regional mall located in Port Charlotte, FL that lost its collateral anchor Sears (17.8% of NRA) in March 2019. The remaining collateral anchors include JCPenney (17.4%; lease expiry in August 2024) and a 16-screen Regal Cinemas (13.2%; January 2025). Non-collateral anchors include Bealls, Macy's and Dillard's. The loan, which is sponsored by Washington Prime Group, transferred to special servicing in January 2020 after the borrower requested a maturity extension. Collateral occupancy decreased further to 72.7% as of the March 2020 rent roll from 76.4% at YE 2019 and 93.7% at YE 2018. The servicer-reported NOI DSCR was 1.63x as of YE 2019. In-line sales also declined to $334 psf in 2019 from $338 psf in 2018 and $363 psf in 2017. The specially serviced Aviation Mall loan (3.1%), which is 30 days delinquent as of June 2020, is secured by a 504,675-sf regional mall located in Queensbury, NY that lost two of its collateral anchors, Bon-Ton (13.4% of NRA) and Sears (18.4%), in April 2018 and November 2018, respectively. The loan transferred to special servicing in April 2020 due to imminent monetary default as a result of the coronavirus pandemic. Although slightly improved, collateral occupancy remains low at 52.5% as of March 2020 compared with 46.7% at YE 2018 and declined significantly from 80.2% at YE 2017 and 96.1% at issuance. The servicer-reported NOI DSCR was 1.25x as of YE 2019. The loan is sponsored by The Pyramid Companies. The smallest FLOC, Campus South & Oakbrook (1.4%), is secured by two office properties located in Reston, VA that experienced occupancy and cash flow decline after several tenants vacated at or prior to their lease expirations in 2017 and 2018. Increased Credit Enhancement; High Defeasance: As of the June 2020 distribution date, the pool's aggregate principal balance has paid down by 50.7% to $640.0 million from $1.3 billion at issuance. Eighteen loans (43.4% of the pool) are fully defeased, including five loans in the top 15 (30.2%). There have been no realized losses to date; however, the non-rated class G has accumulated $115,220 in interest shortfalls. All remaining loans are currently amortizing. The entire remaining pool matures between November 2020 and February 2021. Alternative Loss Considerations: Fitch performed an additional sensitivity scenario that assumed potential outsized losses of 50% and 100%, respectively, on the current balances of the Patton Creek and Aviation Mall loans, while also factoring in the expected paydown of the transaction from defeased loans. This additional sensitivity scenario contributed to maintaining the Negative Rating Outlooks on classes D and E. Coronavirus Exposure: Ten loans (37.1%) are secured by retail properties, including seven loans in the top 15 (34.9%). The WA NOI DSCR for the retail loans is 1.65x; these retail loans could sustain a decline in NOI of 38.1% before DSCR falls below 1.0x. There is one multifamily loan (0.3%) in the pool, which reported a NOI DSCR of 1.50x as of YE 2019 and could sustain a decline in NOI of 33.3% before DSCR falls below 1.0x. Fitch applied additional stresses to four retail loans to account for potential cash flow disruptions due to the coronavirus pandemic; these additional stresses contributed to maintaining the Negative Outlooks on classes D and E. The borrowers on the Port Charlotte Town Center and Aviation Mall loans have requested forbearance. Pool Concentrations: The pool is concentrated with only 36 of the original 50 loans remaining. The top 10 and 15 loans account for 66.3% and 79.8% of the pool, respectively. RATING SENSITIVITIES The Negative Rating Outlooks on classes D and E reflect the potential for a further downgrade due to concerns surrounding the ultimate impact of the coronavirus pandemic and the refinance risk associated with the Patton Creek, Port Charlotte Town Center and Aviation Mall loans. The Stable Rating Outlooks on classes A-4, B and C reflect the increasing CE, high defeasance and generally stable performance of the majority of the pool. Factors that Could, Individually or Collectively, Lead to a Positive Rating Action/Upgrade: Sensitivity factors that lead to upgrades would include stable to improved asset performance coupled with paydown and/or defeasance. An upgrade to the 'Asf' category would likely occur with significant improvement in CE and/or defeasance; however, adverse selection, increased concentrations and further underperformance of the FLOCs or loans expected to be negatively affected by the coronavirus pandemic could cause this trend to reverse. An upgrade to the 'BBBsf' category is considered unlikely and would be limited based on sensitivity to concentrations or the potential for future concentration. Classes would not be upgraded above 'Asf' if there were likelihood for interest shortfalls. Upgrades to the 'CCCsf' and 'Bsf' categories are not likely until the later years in a transaction and only if the performance of the remaining pool is stable and/or properties vulnerable to the coronavirus return to pre-pandemic levels, and there is sufficient CE to the classes. Factors that Could, Individually or Collectively, Lead to a Negative Rating Action/Downgrade: Sensitivity factors that lead to downgrades include an increase in pool-level losses from underperforming or specially serviced loans. Downgrades to the 'Asf' and 'AAAsf' categories are not likely due to the position in the capital structure, but may occur at the 'AAAsf' category should interest shortfalls occur. Downgrades to the 'Bsf' and 'BBBsf' categories, both of which currently have Negative Outlooks, would occur should loss expectations increase significantly, the FLOCs experience outsized losses and/or the loans vulnerable to the coronavirus pandemic do not stabilize. A downgrade to the distressed 'CCCsf'-rated class would occur with increased certainty of losses or as losses are realized. In addition to its baseline scenario related to the coronavirus, Fitch also envisions a downside scenario where the health crisis is prolonged beyond 2021; should this scenario play out, Fitch expects further negative rating actions, including downgrades or additional Negative Rating Outlook revisions. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. 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. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS This transaction has an ESG Relevance Score of 4 for Exposure to Social Impacts due to one retail power center and two regional malls that are underperforming as a result of changing consumer preferences to shopping, which has a negative impact on the credit profile, resulting in the downgrade of class E and contributing to maintaining the Negative Rating Outlooks on classes D and E. WFRBS COMMERCIAL 2011-C4: Moody's Cuts Class G Certs to Ca(sf) -------------------------------------------------------------- Moody's Investors Service affirmed the ratings on seven classes, confirmed the rating on one class, and downgraded the ratings on three classes in WFRBS Commercial Mortgage Trust 2011-C4, Commercial Mortgage Pass-Through Certificates, Series 2011-C4, as follows: Cl. A-4, Affirmed Aaa (sf); previously on Feb 12, 2020 Affirmed Aaa (sf) Cl. A-FX, Affirmed Aaa (sf); previously on Feb 12, 2020 Affirmed Aaa (sf) Cl. A-FL, Affirmed Aaa (sf); previously on Feb 12, 2020 Affirmed Aaa (sf) Cl. B, Affirmed Aa2 (sf); previously on Feb 12, 2020 Affirmed Aa2 (sf) Cl. C, Affirmed A2 (sf); previously on Feb 12, 2020 Affirmed A2 (sf) Cl. D, Affirmed Baa1 (sf); previously on Feb 12, 2020 Affirmed Baa1 (sf) Cl. E, Downgraded to B1 (sf); previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to Caa1 (sf); previously on Apr 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade Cl. G, Downgraded to Ca (sf); previously on Apr 17, 2020 Caa3 (sf) Placed Under Review for Possible Downgrade Cl. X-A*, Affirmed Aaa (sf); previously on Feb 12, 2020 Affirmed Aaa (sf) Cl. X-B*, Confirmed at Caa1 (sf); previously on Apr 17, 2020 Caa1 (sf) Placed Under Review for Possible Downgrade * Reflects interest-only classes RATINGS RATIONALE The ratings on six P&I classes were affirmed due the pool's share of defeasance and the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), being within acceptable ranges. The ratings on three P&I classes, Class E, Class F and Class G, were downgraded due to anticipated losses from specially serviced and troubled loans, as well as the decline in performance of the largest loan, Fox River Mall (13.9% of the pool). Additionally, the Fox River Mall loan faces upcoming refinance risk within the next 12 months and regional malls may face increased refinance risk due to the current retail environment. The rating on one interest only (IO) class, Class X-A, was affirmed based on the credit quality of its referenced classes. The rating on one interest only (IO) class, Class X-B, was confirmed based on the credit quality of its referenced classes. The actions conclude the review for downgrade initiated on April 17, 2020. Its analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to its forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Moody's rating action reflects a base expected loss of 4.1% of the current pooled balance, compared to 5.1% at Moody's last review. The decline in base expected loss is a result of recent loan liquidation contributing to a $15.6 million loss. Moody's base expected loss plus realized losses is now 3.8% of the original pooled balance, compared to 3.4% 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 methodologies used in rating all classes except interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020. DEAL PERFORMANCE As of the June 15, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 34% to $982 million from $1.48 billion at securitization. The certificates are collateralized by 54 mortgage loans ranging in size from less than 1% to 14.1% of the pool, with the top ten loans (excluding defeasance) constituting 41.5% of the pool. Twenty-one loans, constituting 42% 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 11, compared to 12 at Moody's last review. Three loans, constituting 2.4% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. One loan has been liquidated from the pool, resulting in an aggregate realized loss of $15.6 million (for a loss severity of 100%). Two loans, constituting 3.4% of the pool, are currently in special servicing. The largest specially serviced loan is the Eastgate Mall ($24.4 million -- 2.5% of the pool), which is secured by a 545,000 square foot (SF) portion of a 1.09 million SF regional mall. The property is located in Glen Este, Ohio, a suburb of Cincinnati, located twenty miles east of Cincinnati's central business district. CBL & Associates Properties, Inc. ("CBL") is the sponsor and also manages the property. The property is currently anchored by Dillard's, J.C. Penney and Kohl's, all of which are non-collateral. The property has several large vacant spaces including an anchor space previously occupied by Sears (141,000 SF) and the former Toys R' Us space (42,000 SF). As of March 2020, the property was 90% leased, compared to 88% as of September 2019. The property's net operating income (NOI) has declined annually since 2016 as a result of declining rental revenue. The loan has amortized 28% since securitization, however, the reported 2018 NOI was 7% lower than in 2011. The loan transferred to special servicing in April 2020 due to monetary default as a result of the Covid-19 pandemic and is last paid through its March 2020 payment date. The loan has a maturity date in May 2021 and CBL recently announced they are working with the servicer to return the property to the lender. Moody's anticipates a significant loss on this loan. The second largest specially serviced loan is the Park Place Student Housing Loan ($9.0 million -- 0.9% of the pool), which is secured by a 252-room student housing complex located in Fredonia, New York, approximately 50 miles south of Buffalo, New York. The property is situated adjacent to the State University of New York at Fredonia campus. The loan transferred to special servicing for imminent monetary default in November 2014. The borrower did not report financials in 2017 or 2018 but has remained current on debt service payments through May 2020. The property's 2019 financials suggest the property was 48% occupied. Moody's has also assumed a high default probability for one poorly performing loan secured by a mixed-use property and representing less than 0.5% of the pool. Moody's received full year 2018 operating results for 100% of the pool, and full or partial year 2019 operating results for 94% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 91%, compared to 86% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 19.0% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.6%. Moody's actual and stressed conduit DSCRs are 1.56X and 1.36X, respectively, compared to 1.62X and 1.40X 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 24.4% of the pool balance. The largest loan is the Fox River Mall Loan ($138.6 million -- 14.1% of the pool), which is secured by a 649,000 SF portion of a 1.2 million SF super-regional mall in Appleton, Wisconsin. The mall is currently anchored by Macy's, JC Penney, Target, and Scheel's. Scheel's is the only anchor that is part of the collateral. The mall has two vacant anchors; Younkers, which closed in May 2018, and Sears, which closed in March 2019. Several tenants have vacated the property over the past two years, however, H&M and Lululemon opened new spaces in 2019. The in-line space (including temporary tenants) was 90% leased as of March 2020, unchanged from September 2019 and compared to 92% leased as of September 2018. As of March 2020, the total mall was 75% leased. The property's NOI generally improved since securitization through 2018, however, the property's 2019 revenue dropped approximately 9% year over year causing a decline in NOI. The loan has amortized 14% since securitization and matures in November 2021. While the property currently benefits from a high in-place NOI DSCR of 1.82X, the combination of vacant anchors and recent declines in revenue may lead to increased refinance risks at its upcoming maturity date. The property benefits from a large trade area with its closest competition located approximately 30 miles away and is sponsored by Brookfield Properties. Moody's LTV and stressed DSCR are 130% and 1.12X, respectively, compared to 124% and 1.11X at the prior review. The second largest loan is the Cole Retail Portfolio Loan ($60.5 million -- 6.2% of the pool), which is secured by 13 single-tenant properties and one anchored multi-tenanted property located across 11 states. Tenants include CVS, Carmax, Tractor Supply and Advanced Auto. As of December 2019, the portfolio was 100% leased, compared to 99% leased as of December 2018. The loan is interest only for its entire term and Moody's LTV and stressed DSCR are 95% and 1.04X, respectively. The third largest loan is the Food 4 Less Portfolio Loan ($40.3 million -- 4.1% of the pool), which is secured by four Food 4 Less anchored retail centers and 1 stand-alone Food 4 Less grocery store located in Los Angeles County, California. As of September 2019, the portfolio was 99% leased, compared to 98% leased in November 2018. The loan has amortized 14% since securitization and Moody's LTV and stressed DSCR are 78% and 1.25X, respectively, compared to 79% and 1.23X at the last review. [*] DBRS Cuts Ratings on Five Preferred Shares of Split-Share Cos. ------------------------------------------------------------------ DBRS Limited, on June 25, 2020, downgraded five ratings of preferred shares issued by various split-share companies as follows: -- the Preferred Shares issued by Dividend Growth Split Corp. to Pfd-4 (high) from Pfd-3 -- the Preferred Shares issued by Brompton Lifeco Split Corp. to Pfd-4 (low) from Pfd-3 (low) -- the Preferred Shares issued by Life & Banc Split Corp to Pfd-3 (low) from Pfd-3 -- the Preferred Shares issued by Prime Dividend Corp to Pfd-3 from Pfd-3 (high) -- the Preferred Shares issued by S Split Corp. to Pfd-4 from Pfd-3 (collectively, the Preferred Shares) Each of these split-share companies invests in a portfolio of securities (the Portfolio) funded by issuing two classes of shares: dividend-yielding preferred shares or securities and capital shares or units (the Capital Shares). In such structure, preferred shares normally benefit from downside protection provided by the net asset value (NAV) of the Capital Shares. On March 24, 2020, DBRS Morningstar placed the Preferred Shares Under Review with Negative Implications. Each of the Preferred Shares has experienced a considerable reduction in downside protection since February 2020 as a result of the rapid decline in the net asset value (NAV) of the respective portfolios in response to the stock market sell-off, which was triggered by the worldwide spread of Coronavirus Disease (COVID-19) and various geopolitical events. DBRS Morningstar downgraded the ratings of the Preferred Shares based on longer-term trends being established for the NAVs of the affected split-share companies. Although the downside protection has experienced some recovery in all five Portfolios in the past three months, its current levels remain below the required levels for the corresponding ratings of the Preferred Shares, which they had had before they were placed Under Review with Negative Implications. Ratings assigned are also dependent on the credit quality and management of the Portfolios. For many of the split-share companies listed above, distributions to holders of the Capital Shares are now suspended due to the failure to pass the asset-coverage tests. This feature ensures greater excess income for the Company and decreases the reliance on other income-generating methods, such as option writing, when downside protection has been significantly reduced. CORONAVIRUS-RELATED ANALYTICAL CONSIDERATIONS Global macroeconomic forecasts have shifted dramatically amid the rapid spread of the coronavirus and associated responses from governments, corporations, and households. In the context of this highly uncertain environment, DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020. The scenarios were updated on June 1, 2020, and are reflecting the updated scenarios in DBRS Morningstar's rating analysis. Under the Moderate Scenario, DBRS Morningstar expects a significant economic contraction in Canada and the United States in 2020, which will be followed by a recovery in subsequent years. DBRS Morningstar analyzed the sensitivity of the current rating on the Preferred Shares to the impact of this scenario on the levels of downside protection and dividend coverage. Although DBRS Morningstar expects a significant negative impact in the short term, considering the remaining term to maturity, the Company is expected to have enough time to benefit from a stock market rebound as the economies recover. Notes: All figures are in Canadian dollars unless otherwise noted. [*] S&P Discontinues 'D (sf)' Ratings on Five U.S. CMBS Deals ------------------------------------------------------------- S&P Global Ratings discontinued its 'D (sf)' ratings on six classes of commercial mortgage pass-through certificates from five U.S. CMBS transactions. "We discontinued these ratings according to our surveillance and withdrawal policies. We previously lowered the ratings on these classes to 'D (sf)' because of principal losses and/or accumulated interest shortfalls that we believed would remain outstanding for an extended period of time. We view a subsequent upgrade to a rating higher than 'D (sf)' to be unlikely under the relevant criteria for the classes within this review," S&P said. RATINGS WITHDRAWN Rating Issuer Class To From Morgan Stanley Capital I Trust 2005-HQ7 F NR D (sf) LB-UBS Commercial Mortgage Trust 2006-C1 LB-UBS Commercial Mortgage Trust 2006-C1 D NR D (sf) Greenwich Capital Commercial Funding Corp. 2006-GG7 A-J NR D (sf) ML-CFC Commercial Mortgage Trust 2006-4 C NR D (sf) TIAA Seasoned Commercial Mortgage Trust 2007-C4 H NR D (sf) [*] S&P Takes Various Actions on 76 Classes From 17 U.S. RMBS Deals ------------------------------------------------------------------- S&P Global Ratings completed its review of 76 ratings from 17 U.S. RMBS transactions issued between 2003 and 2007. All of these transactions are backed by subprime collateral. The review yielded four upgrades, six downgrades, and 66 affirmations. ANALYTICAL CONSIDERATIONS S&P acknowledges a high degree of uncertainty about the evolution of the coronavirus pandemic. The consensus among health experts is that the pandemic may now be at, or near, its peak in some regions, but will remain a threat until a vaccine or effective treatment is widely available, which may not occur until the second half of 2021. "We are using this assumption in assessing the economic and credit implications associated with the pandemic. Our views also consider that the loans supporting the RMBS in the rating actions are significantly seasoned and are to borrowers that have weathered the Great Recession, a period of significant economic stress. As the situation evolves, we will update our assumptions and estimates accordingly," S&P said. S&P incorporates various considerations into its decisions to raise, lower, or affirm ratings when reviewing the indicative ratings suggested by its projected cash flows. These considerations are based on transaction-specific performance or structural characteristics (or both) and their potential effects on certain classes. Some of these considerations may include: -- Factors related to COVID-19; -- Collateral performance/delinquency trends; -- Historical interest shortfalls/missed interest payments; -- Available subordination and/or overcollateralization; -- Erosion of or increases in credit support; -- Payment priority; and -- Historical missed interest payments. RATING ACTIONS The rating changes reflect S&P's opinion regarding the associated transaction-specific collateral performance and/or structural characteristics, and/or reflect the application of specific criteria applicable to these classes. "The ratings affirmations reflect our opinion that our projected credit support and collateral performance on these classes has remained relatively consistent with our prior projections," S&P said. S&P lowered its rating on class M-1 from Popular ABS Mortgage Pass-Through Trust 2005-3 due to reduced interest payments resulting from loan modifications in the collateral loan pool, in accordance with the rating agency's loan modification guidance and imputed promises criteria. A meaningful portion of total loans in the respective pool have been modified, many with rate reductions. In turn, these credit events have resulted in lessened interest to class M-1. S&P lowered its rating on class M-4 from Soundview Home Equity Loan Trust 2005-OPT3 after assessing the impact of missed interest payments. This downgrade is based on the rating agency's cash flow projections used in determining the likelihood that the missed interest payments would be reimbursed under various scenarios because this class receives additional compensation for outstanding missed interest payments. A list of Affected Ratings can be viewed at: https://bit.ly/2NFD7kA ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. On Thursdays, the TCR delivers a list of recently filed Chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. The Sunday TCR delivers securitization rating news from the week then-ending. TCR subscribers have free access to our on-line news archive. Point your Web browser to http://TCRresources.bankrupt.com/and use the e-mail address to which your TCR is delivered to login. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Valerie Udtuhan, Howard C. Tolentino, Carmel Paderog, Meriam Fernandez, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Psyche A. Castillon, Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2020. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $975 for 6 months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. *** End of Transmission ***