/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/200809.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, August 9, 2020, Vol. 24, No. 221 Headlines AJAX MORTGAGE 2020-B: Fitch Rates Class B-2 Debt 'Bsf' ALLEGRO CLO VI: Moody's Confirms Ba3 Rating on Class E Notes AMSR TRUST 2019-SFR1: DBRS Assigns B(High) Rating on Class G Debt AMSR TRUST 2020-SFR3: DBRS Gives Prov. B(low) Rating on G Certs AMUR EQUIPMENT V 2018-1: DBRS Cuts Cl. F Notes Rating to CCC(high) APEX CREDIT 2015-II: Moody's Lowers Rating on Class E-R Notes to B1 ARES XLIV: Moodys' Lowers Rating on Class E Notes to Caa1 ARES XLVI: Moody's Confirms Ba3 Rating on Class E Notes ARES XXIX: Moody's Cuts Rating on Class E Notes to Caa2 ARES XXXVR CLO: Moody's Confirms Ba3 Rating on Class E Notes ASHFORD HOSPITALITY 2018-KEYS: Moody's Cuts Class F Certs to Caa2 BENCHMARK 2020-B18: Fitch Rates 3 Tranches 'B-sf' BX COMMERCIAL 2018-IND: DBRS Gives B(low) Rating on Class H Certs CBAM LTD 2017-2: Moody's Confirms Ba3 Rating on Class E Notes CBAM LTD 2017-3: Moody's Confirms Ba3 Rating on Class E-2 Notes CIFC FUNDING 2014-III: Moody's Cuts Class F-R2 Notes to Caa1 CIM TRUST 2020-J1: DBRS Finalizes B Rating on Class B-5 Certs CIM TRUST 2020-J1: Moody's Rates Class B-5 Debt 'B1' CITIGROUP COMMERCIAL 2013-GC17: Fitch Cuts Class F Certs to BB CITIGROUP COMMERCIAL 2015-GC35: Fitch Cuts Class F Certs to CCCsf COMM 2014-CCRE15: Moody's Lowers Rating on Class F Debt to B3 CSAIL MORTGAGE 2015-C4: Fitch Affirms B- Rating on Class X-G Certs CSMC TRUST 2020-SPT1: Fitch Gives Bsf Rating on Class B-2 Notes CSMC TRUST 2020-SPT1: Fitch to Rate Class B-2 Notes 'B(EXP)' ELEVATION CLO 2017-7: Moody's Confirms Ba3 Rating on Class E Notes ELLINGTON CLO IV: Moody's Lowers Rating on 2 Tranches to Caa2 FREED ABS 2020-3FP: DBRS Finalizes BB(low) Rating on Class C Notes GALLATIN CLO 2018-1: Moody's Confirms B3 Rating on Class F Notes GE COMMERCIAL 2007-C1: DBRS Cuts Ratings on 2 Classes to BB(low) GLS AUTO 2020-3: DBRS Gives Prov. BB(low) Rating on Class E Notes GOLUB CAPITAL 23(B)-R: Moody's Confirms Class E-R Notes at Ba3 GS MORTGAGE 2012-GCJ7: Moody's Lowers Rating on Class F Certs to C GS MORTGAGE-BACKED 2020-RPL1: Fitch Rates Class B-2 Debt 'Bsf' HALCYON LOAN 2015-1: Moody's Lowers Rating on Class F Notes to Ca HARBOURVIEW CLO VII-2: Moody's Lowers Rating on Cl. D Notes to Ba2 HOME PARTNERS 2019-2: DBRS Assigns BB Rating on Class F Trust IVY HILL IX: Fitch Lowers Rating on Class E-R Debt to B+sf JEFFERSON MILL: Moody's Lowers Class F-R Notes to Caa2 JP MORGAN 2018-MINN: Moody's Cuts Rating on Class F Certs to Caa2 JP MORGAN 2019-ICON: DBRS Assigns B(low) Rating on Class G Certs JP MORGAN 2020-5: DBRS Finalizes B Rating on 2 Tranches JP MORGAN 2020-5: Moody's Rates 2 Debt Classes 'B3' JP MORGAN 2020-ATR1: Fitch Rates 2 Tranches 'Bsf' JP MORGAN 2020-INV2: DBRS Finalizes B Rating on 2 Tranches JPMBB COMMERCIAL 2013-C12: Moody's Cuts Class F Debt Rating to B3 JPMBB COMMERCIAL 2014-C25: Fitch Cuts Rating on 2 Tranches to CCCsf KENTUCKY HIGHER 2013-1: Fitch Cuts Rating on Class A-1 Notes to Bsf KKR CLO 11: Moody's Lowers Rating on Class E-R Notes to B1 KKR CLO 9: Moody's Lowers Class E-R Notes to B1 LEHMAN BROTHERS 2007-2: Moody's Cuts Rating on 2 Tranches to Ba1 LIMEROCK CLO III: Moody's Confirms Class E Notes at Caa3 MAN GLG 2018-2: Moody's Lowers Class E-R Notes to Caa2 MIDOCEAN CREDIT VI: Moody's Lowers Class E-R Notes to B1 MONROE CAPITAL X: Moody's Gives (P)Ba3 Rating on Class E Notes MORGAN STANLEY 2013-C9: Moody's Cuts Class H Debt Rating to Caa3 MORGAN STANLEY 2014-150E: DBRS Assigns B Rating on Class F Certs MORGAN STANLEY 2014-C18: DBRS Hikes Class 300D Certs Rating to BB MORGAN STANLEY 2020-HR8: DBRS Finalizes B(low) on Class L-RR Debt MORGAN STANLEY 2020-HR8: Fitch Rates Class K-RR Certs 'B-sf' NATIXIS COMMERCIAL 2017-75B: DBRS Gives B(high) on 3 Tranches OAKTOWN RE IV: DBRS Finalizes B(low) Rating on Class M-2 Notes OBX TRUST 2020-EXP2: Fitch Rates Class B-F Debt 'Bsf' OCTAGON INVESTMENT 36: Moody's Confirms Class F Notes at B3 PIKES PEAK 2: Moody's Confirms Ba3 Rating on Class E Notes PROGRESS RESIDENTIAL: DBRS Assigns BB Rating on 4 Classes READY CAPITAL 2019-6: DBRS Confirms B(low) Rating on Class G Certs SARANAC CLO VI: Moody's Hikes Rating on Class E Notes to B2 SARATOGA INVESTMENT 2013-1: Moody's Cuts Class F-R-2 Notes to Caa1 SCF EQUIPMENT 2020-1: Moody's Gives (P)B3 Rating on Class F Notes SIERRA TIMESHARE 2020-2: Fitch to Rate Class D Debt 'BB(EXP)' SILVERMORE CLO: Moody's Cuts Rating on Class E Notes to Ca TESLA AUTO 2020-A: Moody's Gives Ba2 Rating on Class E Notes THARALDSON HOTEL 2018-THPT: Moody's Cuts Class D Certs to Ba2 TICP CLO I-2: Moody's Lowers Rating on Class E Notes to Caa3 TRINITAS CLO IX: Moody's Lowers Rating on Class F Notes to Caa2 UBS COMMERCIAL 2018-C12: Fitch Cuts Class G-RR Certs to CCCsf US AUTO 2020-1: Moody's Gives (P)B3 Rating on Class D Notes VENTURE XIV: Moody's Lowers Rating on Class E-R Notes to B1 VERUS SECURITIZATION 2020-4: DBRS Finalizes B Rating on B-2 Certs VIBRANT CLO III: Moody's Cuts Rating on Class D-RR Notes to B1 VIBRANT CLO IV: Moody's Cuts Rating on Class E-R Notes to B1 VIBRANT CLO V: Moody's Lowers Rating on Class E Notes to B1 VISIO 2020-1: S&P Assigns 'B (sf)' Rating to Class B-2 Notes VISTA POINT 2020-2: DBRS Gives Prov. BB Rating on Class B-1 Certs WELLS FARGO 2014-C22: Fitch Affirms CCC Ratings on 4 Tranches WELLS FARGO 2015-NXS4: Fitch Cuts Rating on 2 Tranches to CCCsf WELLS FARGO 2020-4: Fitch to Rate Class B-5 Debt 'B+(EXP)sf' WELLS FARGO 2020-4: Moody's Gives (P)Ba3 Rating on Class B-5 Debt ZAIS CLO 5: Moody's Lowers Rating on Class C Notes to Ba2 ZAIS CLO 7: Moody's Lowers Rating on Class E Notes to B1 [*] Fitch Affirms 35 Distressed Ratings in 4 US CMBS Deals [*] Fitch Takes Action on 46 Tranches From 5 US Preferred CDOs ********* AJAX MORTGAGE 2020-B: Fitch Rates Class B-2 Debt 'Bsf' ------------------------------------------------------ Fitch Ratings has assigned final ratings to Ajax Mortgage Loan Trust 2020-B. AJAXM 2020-B - Class A-1; LT AAAsf New Rating - Class A-2; 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 XS; LT NRsf New Rating TRANSACTION SUMMARY Fitch has assigned final ratings to the residential mortgage-backed notes issued by Ajax Mortgage Loan Trust 2020-B (AJAXM 2020-B). The transaction closed on Aug. 6, 2020. The notes are supported by one collateral group that consists of 764 seasoned re-performing loans with a total balance of approximately $156.5 million, which includes $8.3 million, or 5.3%, of the aggregate pool balance in non-interest-bearing deferred principal amounts, as of the statistical calculation date. The loans were acquired by Great Ajax Operating Partnership LP, a wholly owned subsidiary of Great Ajax Corp., and will be serviced by Gregory Funding, LLC. Distributions of principal and interest are based on a traditional sequential structure that prioritizes the payment of interest above principal. The notes will not be reduced by losses on the loans; however, under certain loss scenarios, there may not be enough interest and principal collections on the mortgage loans or liquidation proceeds to pay the notes all interest and principal amounts to which they are entitled. The servicer will not be advancing delinquent monthly payments of P&I. KEY RATING DRIVERS Revised GDP Due to the Coronavirus: The coronavirus pandemic 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% 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 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. Distressed Performance History (Negative): The collateral pool consists primarily of seasoned RPLs. Of the pool, approximately 20% was 30 days delinquent as of the cutoff date, and 50.7% of loans are current but have had recent delinquencies in the past 24 months (dirty current loans); 29.3% of the loans have been paying on time for the past 24 months or longer and 40.9% are contractually current for at least 12 months. Roughly 86% of the loans have been modified and 3.7% have experienced a prior credit event in the past seven years. Although 50.7% of the loans in the pool are dirty current loans, Fitch reviewed the monthly payments the borrowers have made and found that a majority of borrowers who missed a payment were able to make up the missed payment(s) plus the current payment due in the month(s) following the delinquency and become contractually current. In addition, it was observed that some borrowers were chronically late payers but were able to make their payment. Fitch did not take the cash flow velocity into account in its analysis and did not give credit for it in the analysis. Liquidity Stress for Payment Forbearance (Negative): The outbreak of the coronavirus pandemic 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 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. There is no advancing of delinquent P&I in this transaction and/or excess interest available to cover interest shortfalls. As a result, the lowest ranked classes may be vulnerable to temporary interest shortfalls to the extent not enough funds are available once the more senior bonds are paid. No P&I Servicer Advances (Mixed): The servicer will not make advances of delinquent P&I on any of the mortgage loans. As a result, the loss severity is lower; however, principal will need to be used to pay interest to the notes. As a result, more credit enhancement will be needed. Payment Forbearance (Mixed): As of the cutoff date, 2.4% of the pool opted into a coronavirus relief plan. Of the 2.4% that are on a coronavirus relief plan, 1.7% of the borrowers are delinquent, while 0.8% of the borrowers are still making payments and contractually current. In addition, 0.5% of the borrowers are under review for coronavirus-related relief and 11.5% of the borrowers have inquired about or requested coronavirus relief, but the servicer has not granted it yet due to the borrower not completing the standardized hardship questionnaire. Of the roughly 12%, 9.3% of the borrowers are continuing to make their payments, while 2.7% of the loans are delinquent. No borrower in the pool on a coronavirus relief plan or under review for coronavirus relief is more than 30 days delinquent. Fitch considered borrowers who are on a coronavirus relief plan that are cash flowing as current, while the borrowers who are not cash flowing were treated as delinquent. Gregory Funding is offering borrowers a three-month payment forbearance plan. At the end of the forbearance period, 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, Gregory Funding will find the optimal loss mitigation option for the borrower, which may include extending the forbearance period. To the extent special rules apply to a mortgagor because of the jurisdiction or type of the mortgage loan, the servicer will comply with those rules. Such rules may include restrictions on requesting proof of hardship, mandatory payment forbearance periods (and extensions) and mandatory loss mitigation options, among others. If the borrower does not resume making payments, the loan will likely become modified. Fitch ran additional analysis to see the impact a reduction in the net WAC would have on the notes. Fitch increased its loss expectations by 25bps at 'AAA', 'A', 'BBB' and 'BB' rating categories to address the potential increase in loss for loans that are under review for coronavirus relief. RPL Credit Quality (Mixed): The collateral consists of seasoned 30-year fixed-rate, step rate and adjustable-rate loans that are fully amortizing, and interest-only loans or balloon loans. The loans were seasoned approximately 163 (approximately 14 years) months in aggregate as of the cutoff date. The borrowers in this pool have weaker credit profiles (629 FICO as determined by Fitch) and relatively high leverage (77.4% sLTV as calculated by Fitch). In addition, the pool does not contain any particularly large loans. Only three loans are over $1 million and the largest is $1.97 million. While roughly 80% of the pool is current, approximately 71% of the pool had a delinquency in the past 24 months, 3.7% of the pool had a prior credit event and approximately 86% of the pool had been modified. Geographic Concentration (Neutral): Approximately 31% of the pool is concentrated in California with relatively low MSA concentration. The largest MSA concentration is in Los Angeles MSA (14.6%) followed by the New York MSA (11.4%) and the Chicago MSA (5.6%). The top three MSAs account for 31.7% of the pool. As a result, there was no adjustment for geographic concentration. The geographic concentration is based on Fitch's mapping of the MSAs. Sequential 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. In addition, the structure prioritizes interest payments over principal in the principal distribution waterfall. Subordination Floor (Neutral): Not applicable. The CE structure for this transaction reflects a sequential-pay structure that locks out principal to the subordinated notes until the most senior notes outstanding have been paid in full. Therefore, no subordination floor is needed to protect the senior noteholders as the subordinate tranches should be available to absorb losses from adverse selection or other risks that could affect the pool later in the life of the transaction. Low Operational Risk (Neutral): Operational risk is well controlled for this transaction. AJX has a disciplined loan acquisition strategy and is assessed as an 'Average' aggregator by Fitch. AJX leverages its affiliate servicing platform, Gregory Funding, rated 'RSS3' by Fitch, to service its loan portfolio. Loss expectations were not adjusted for at the 'AAAsf' rating category based on these counterparty assessments. As of the closing date, the sponsor or a majority-owned affiliate of the sponsor will hold an eligible horizontal residual interest in an amount equal to at least 5% of the aggregate fair value of the securities, thereby satisfying the U.S. credit risk retention rules. Non-Investment-Grade Rep Provider (Negative): Fitch considers the representation, warranty and enforcement mechanism construct for this transaction to generally be consistent with what it views as a Tier 1 framework. While the framework is considered strong, Fitch increased its loss expectations by 122bps at the 'AAAsf' rating category to reflect the non-investment-grade counterparty risk of the provider, Great Ajax Operating Partnership LP. Due Diligence Review Results (Negative): A third-party due diligence review was performed on 99.5% of the loans in the transaction pool. The review was performed by SitusAMC and Opus Capital Market Consultants, which are assessed by Fitch as 'Acceptable - Tier 1' and 'Acceptable - Tier 2' third-party review (TPR) firms. The due diligence results indicate 14.9% of loans receiving a final grade of 'C' or 'D'. However, adjustments were only applied to approximately 9% of these loans due to missing or estimated HUD-1 documents that are necessary for properly testing compliance with predatory lending regulations. These regulations are not subject to statute of limitations, which ultimately exposes the trust to added assignee liability risk. Separately, Fitch extended foreclosure timelines by three months to approximately 6% of the pool due to missing modification agreements, which may lead to a delay in the event of liquidation. Fitch adjusted its loss expectations at the 'AAAsf' rating category by 114bps to account for these added risks. Deferred Amounts (Negative): Non-interest-bearing principal forbearance totaling $8.3 million (5.3%) of the unpaid principal balance is outstanding. 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 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 that are already 'AAAsf', the analysis indicates there is potential positive rating migration for all of the rated classes. Factors that could, individually or collectively, lead to negative rating action/downgrade: This defined stress sensitivity analysis demonstrates how the ratings would react to steeper MVDs at the national level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the model-projected 39.2% at 'AAA'. The analysis indicates that there is some potential rating migration with higher MVDs, compared with the model projection. 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 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. CRITERIA VARIATION There are two variations to the "U.S. RMBS Rating Criteria": 1. Title report not provided for 100% of the loans (missing for 27 loans) and title reports likely outdated; and 2. pay history review not received on 100% of the loans (servicer gap report received on most loans). Per the "U.S. RMBS Rating Criteria," updated tax and title are supposed to be provided for all loans and a pay history review is supposed to be received for 100% of the loans. The first variation relates to the tax/title review. The tax/title review was not performed on all the loans or was outdated. Fitch was comfortable with this variation since 1) the number of loans that did not have a tax/title review performed or the review outdated was low; and 2) the servicer is monitoring the tax and title status as part of standard practice and will advance where deemed necessary to keep the first lien positon of each loan. This variation had no rating impact. The second variation relates to the pay history review. For RPL transactions, Fitch expects a pay history review to be completed on 100% of the loans and expects the review to reflect the past 24 months. The pay history review was not completed on 100% of the loans: however, a servicer gap report was provided on most loans. Fitch was comfortable with this variation due to the small number of loans not having a pay history review and the loans are seasoned approximately 14 years. For the loans where a pay history review was conducted, the results verified what was provided on the loan tape. Additionally, the pay strings provided on the loan tape were provided by the current servicer where applicable. This variation had no rating impact. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Fitch was provided with Form ABS Due Diligence-15E as prepared by Solidifi, SitusAMC and Opus Capital Market Consultants. The third-party due diligence described in Form 15E focused on Compliance/Data Integrity, Payhistory, and Updated Tax and Lien Search. Fitch considered this information in its analysis and, as a result, Fitch made the following adjustment(s) to its analysis: The regulatory compliance review indicated that 114 reviewed loans, or approximately 14.9% 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 transactions, which indicates that there may be higher levels of compliance risk, the majority of exceptions are for missing specific documentation that does not prevent the TPR from effectively testing for compliance with lending regulations. Of reviewed loans, 71, or approximately 9.3% 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. Fitch also applied model adjustments on 45 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. One loan received a final grade of 'C' due to a material exception to the TILA-RESPA Integrated Disclosure Rule. Fitch added $15,500 to the LS of the loan to account for the increased risk of statutory damages from violating the TRID Rule. These adjustment(s) resulted in an increase in 114bps to the loss expectations at the 'AAAsf' rating level to reflect missing final HUD-1 files and modification agreements as well as the violation to the TRID Rule. DATA ADEQUACY Fitch relied on an independent third-party due diligence reviews performed on the pool. Specifically, 99.5% of the pool by loan count had a compliance/data integrity review, 95.9% had a pay history review, 100% had a custodian review, 96.2% had an initial title and lien review, and 97.9% had an updated tax and lien search. The third-party due diligence was generally consistent with Fitch's "U.S. RMBS Rating Criteria." AMC Diligence, LLC, Opus Capital Markets Consultants LLC and Solidifi were engaged to perform the reviews. Loans reviewed under this engagement were given compliance grades. Minimal exceptions and waivers were noted in the due diligence reports. Refer to the Third-Party Due Diligence section for more details. 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). ALLEGRO CLO VI: Moody's Confirms Ba3 Rating on Class E Notes ------------------------------------------------------------ Moody's Investors Service has confirmed the ratings on the following notes issued by Allegro CLO VI, Ltd.: US$32,500,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2031 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$20,000,000 Class E Junior Secured Deferrable Floating Rate Notes due 2031 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes and Class E Notes are referred to herein, collectively, as the "Confirmed Notes." RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' 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 ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3175, compared to 2970 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2895 reported in the July 2020 trustee report [3]. 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 11.4% as of August 2020. Nevertheless, Moody's noted that the OC tests for the Class A/B, Class C, Class D, and Class E notes, as well as the interest diversion test were recently reported [4] as passing. 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." For modeling purposes, Moody's used the following base-case assumptions: Par amount and principal proceeds balance: $488,452,012 Defaulted Securities: $6,928,141 Diversity Score: 74 Weighted Average Rating Factor: 3156 Weighted Average Life (WAL): 5.9 years Weighted Average Spread (WAS): 3.54% Weighted Average Recovery Rate (WARR): 47.7% Par haircut in O/C tests and interest diversion test: 0.29% 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. 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. AMSR TRUST 2019-SFR1: DBRS Assigns B(High) Rating on Class G Debt ----------------------------------------------------------------- DBRS, Inc. assigned ratings to the following two transactions (the Covered Transactions) issued by AMSR trusts: AMSR 2019-SFR1 -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class C at AA (high) (sf) -- Class D at AA (sf) -- Class E at BBB (low) (sf) -- Class F at BB (sf) -- Class G at B (high) (sf) AMSR 2020-SFR1 -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class C at AA (high) (sf) -- Class D at AA (high) (sf) -- Class E at BBB (low) (sf) -- Class F at BB (sf) -- Class G at B (sf) These securities are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these securities Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 5, 2020. In accordance with MCR's engagement letter covering these securities, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. The Covered Transactions are single-family rental transactions. As stated in its May 28, 2020, press release, "DBRS and Morningstar Credit Ratings Confirm U.S. Single-Family Rental Asset Class Coverage," DBRS Morningstar applied MCR's "U.S. Single-Family Rental Securitization Ratings Methodology" to assign these ratings. DBRS Morningstar's ratings are based on the following analytical considerations: -- DBRS Morningstar reviewed MCR's rating analysis on the Covered Transactions on or prior to the closing dates, including the collateral pool, cash flow analysis, legal review, operational risk review, third-party due diligence, and representations and warranties (R&W) framework. -- DBRS Morningstar notes that MCR and/or its external counsel had performed a legal analysis, which included but was not limited to legal opinions and various transaction documents as part of its process of assigning ratings to the Covered Transactions on or prior to the closing dates. For the purpose of assigning new ratings to the Covered Transactions, DBRS Morningstar did not perform additional legal analysis unless otherwise indicated in this press release. -- DBRS Morningstar relied on MCR's operational risk assessments when assigning ratings to the Covered Transactions on or prior to the closing dates. DBRS Morningstar may have conducted additional operational risk reviews as applicable. -- DBRS Morningstar reviewed key transaction performance indicators, as applicable, since the closing dates as reflected in bond factors, loan-to-value (LTV) ratios or credit enhancements, vacancies, delinquencies, capital expenditures, and cumulative losses. RATING AND CASH FLOW ANALYSIS DBRS Morningstar reviewed MCR's rating analysis on the Covered Transactions, which used the Morningstar Single-Family Rental Subordination Model to generate property-level cash flows for the Covered Transactions. The analytics included calculating the debt service coverage ratio (DSCR) needed to adequately cover the monthly debt service in each period under a given rating stress and examining the sufficiency of the aggregate stressed property liquidation values to cover the unpaid balance at a given rating level in accordance with MCR's "U.S. Single-Family Rental Securitization Ratings Methodology." OPERATIONAL RISK REVIEW DBRS Morningstar relied on MCR's operational risk assessments when assigning ratings to the Covered Transactions on or prior to the closing dates. DBRS Morningstar may have conducted additional operational risk reviews as applicable. HISTORICAL PERFORMANCE DBRS Morningstar reviewed the historical performance of the Covered Transactions as reflected in bond factors, LTVs or credit enhancements, vacancies, delinquencies, capital expenditures, and cumulative losses and deemed the transactions' performances to be satisfactory. THIRD-PARTY DUE DILIGENCE Several third-party review firms (the TPR firms) performed due-diligence reviews of the Covered Transactions. DBRS Morningstar has not conducted reviews of the TPR firms. The scope of the due diligence generally comprised lease, valuation, title, and homeowners' association discrepancy reviews. DBRS Morningstar also relied on the written attestations the TPR firms provided to MCR on or prior to the closing dates. R&W FRAMEWORK DBRS Morningstar conducted reviews of the R&W frameworks for the Covered Transactions. The reviews covered key considerations, such as the R&W provider, breach discovery, enforcement mechanism, and remedy. CORONAVIRUS DISEASE (COVID-19) ANALYSIS To reflect the current concerns and conditions surrounding the coronavirus pandemic, DBRS Morningstar tested the following additional rating assumptions for single-family rental transactions to reflect the moderate macroeconomic scenario outlined in its commentary, "Global Macroeconomic Scenarios: July Update," published on July 22, 2020: -- Vacancy (higher vacancy rate assumptions to account for potential increases in single-family rental vacancies as a result of rising unemployment and further economic deterioration). -- Home prices (an additional property valuation haircut to account for the potential decline in broader asset markets). The ratings DBRS Morningstar assigned to the Covered Transactions were able to withstand the additional coronavirus assumptions with minimal to no rating volatilities. SUMMARY The ratings are a result of DBRS Morningstar's application of MCR's "U.S. Single-Family Rental Securitization Ratings Methodology" unless otherwise indicated in this press release. DBRS Morningstar's ratings address the timely payment of interest (other than payment-in-kind bonds) and full payment of principal by the rated final maturity date in accordance with the terms and conditions of the related securities. The ratings DBRS Morningstar assigned to certain securities may differ from the ratings implied by the quantitative model, but no such difference constitutes a material deviation. When assigning the ratings, DBRS Morningstar considered the rating analysis detailed in this press release and may have made qualitative adjustments for the analytical considerations that are not fully captured by the quantitative model. AMSR TRUST 2020-SFR3: DBRS Gives Prov. B(low) Rating on G Certs --------------------------------------------------------------- DBRS, Inc. assigned provisional ratings to the following Single-Family Rental Pass-Through Certificates (the Certificates) to be issued by AMSR 2020-SFR3 Trust (AMSR 2020-SFR3). -- $85.0 million Class A at AAA (sf) -- $33.7 million Class B at AAA (sf) -- $11.0 million Class C at AA (high) (sf) -- $15.4 million Class D at A (high) (sf) -- $23.4 million Class E1 at BBB (high) (sf) -- $27.1 million Class E2 at BBB (low) (sf) -- $25.6 million Class F at BB (low) (sf) -- $27.8 million Class G at B (low) (sf) The AAA (sf) ratings on the Class A and B Certificates reflect 70.71% and 59.09% of credit enhancement, respectively, provided by subordinated notes in the pool. The AA (high) (sf), A (high) (sf), BBB (high) (sf), BBB (low) (sf), BB (low) (sf), and B (low) (sf) ratings reflect 55.30%, 50.00%, 41.92%, 32.58%, 23.74%, and 14.14% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. The AMSR 2020-SFR3 Certificates are supported by the income streams and values from 1,337 single-family residential rental properties and six townhomes. The properties are distributed across 14 states and 38 metropolitan statistical areas (MSAs) in the United States. DBRS Morningstar maps an MSA based on the ZIP code provided in the data tape, which may result in different MSA stratifications than those provided in offering documents. As measured by broker price opinion (BPO) value, 73.6% of the portfolio is concentrated in three states: Florida (32.6%), Georgia (21.3%), and North Carolina (19.7%). The average postrenovation price per property that the securitization asset company paid to acquire the properties is $220,595, and the average value is $203,066. The average age of the properties is roughly 27 years. The majority of the properties have three or more bedrooms. The Certificates represent a beneficial ownership in an approximately five-year, fixed-rate, interest-only loan with an initial aggregate principal balance of approximately $290.1 million. The Sponsor intends to satisfy its risk-retention obligations under the U.S. Risk Retention Rules by holding at least 5.0% of the initial certificate balance of each Class of Certificates, either directly or through a majority-owned affiliate. DBRS Morningstar assigns provisional ratings for each class of certificates by performing a quantitative and qualitative collateral, structural, and legal analysis. This analysis uses DBRS Morningstar's single-family rental subordination model and is based on DBRS Morningstar's published criteria. DBRS Morningstar developed property-level stresses for the analysis of single-family rental assets. DBRS Morningstar assigns provisional ratings to each class based on the level of stresses each class can withstand and whether such stresses are commensurate with the applicable rating level. DBRS Morningstar's analysis includes estimated base-case net cash flows (NCFs) by evaluating the gross rent, concession, vacancy, operating expenses, and capital expenditure data. The DBRS Morningstar NCF analysis resulted in a minimum debt service coverage ratio of higher than 1.0 times (x). Notes: All figures are in U.S. dollars unless otherwise noted. AMUR EQUIPMENT V 2018-1: DBRS Cuts Cl. F Notes Rating to CCC(high) ------------------------------------------------------------------ DBRS, Inc. downgraded the ratings on the following classes of asset-backed securities (ABS) issued by Amur Equipment Finance Receivables V LLC (Series 2018-1) and Amur Equipment Finance Receivables VI LLC (Series 2018-2): -- Amur Equipment Finance Receivables V LLC, Series 2018-1, Class F Notes to B (low) (sf) from B (sf) -- Amur Equipment Finance Receivables VI LLC, Series 2018-2, Class D Notes to BBB (low) (sf) from BBB (sf) -- Amur Equipment Finance Receivables VI LLC, Series 2018-2, Class E Notes to B (high) (sf) from BB (sf) -- Amur Equipment Finance Receivables VI LLC, Series 2018-2, Class F Notes to CCC (high) (sf) from B (sf) These ratings remain Under Review with Negative Implications, where they were placed on May 13, 2020. DBRS Morningstar also maintained the Under Review with Negative Implications status on the following securities issued by Amur Equipment Finance Receivables VI LLC (Series 2018-2) and Amur Equipment Finance Receivables VII LLC (Series 2019-1): -- Amur Equipment Finance Receivables VI LLC, Series 2018-2, Class C Notes at A (sf) -- Amur Equipment Finance Receivables VII LLC, Series 2019-1, Class B Notes at AA (sf) -- Amur Equipment Finance Receivables VII LLC, Series 2019-1, Class C Notes at A (sf) -- Amur Equipment Finance Receivables VII LLC, Series 2019-1, Class D Notes at BBB (sf) -- Amur Equipment Finance Receivables VII LLC, Series 2019-1, Class E Notes at BB (sf) -- Amur Equipment Finance Receivables VII LLC, Series 2019-1, Class F Notes at B (sf) For more information on the May 13, 2020, rating actions, please refer to "DBRS Morningstar Places 10 Amur Equipment Finance Securities Under Review with Negative Implications" at https://www.dbrsmorningstar.com/research/360977/dbrs-morningstar-places-10-amur-equipment-finance-securities-under-review-with-negative-implications. In a commentary titled "DBRS Morningstar's Equipment Lease and Loan ABS Sector Outlook—Negative Amid Coronavirus" published on May 8, 2020, DBRS Morningstar discussed how the ongoing Coronavirus Disease (COVID-19) pandemic may adversely affect the equipment leasing ABS sector. DBRS Morningstar noted that the impact on each specific ABS transaction will vary depending on the relative strength of a specific originator's underwriting platform, the collateral mix by asset type and obligor industry, and the transactions' seasoning and available credit enhancement. Based on the widespread shutdown of economic activity throughout the U.S. caused by the coronavirus pandemic, DBRS Morningstar anticipates the stress on domestic businesses will likely continue during the next several months. Consequently, DBRS Morningstar expects the performance of collateral securing the notes listed above to be adversely affected. In addition to the expected stress from the coronavirus pandemic, DBRS Morningstar's rating actions take into account the respective transactions' performance to date (based on June 17, 2020, remittance reports), which has been negatively affected by the recessionary downturn in the trucking industry throughout 2019 that began in the fourth quarter of 2018. The rating actions by DBRS Morningstar are based on the following analytical considerations: -- The respective levels of multiple coverage of the expected cumulative net loss, updated and adjusted for the effect of coronavirus outbreak, which are afforded, in each transaction, to each class of notes by the available credit enhancement. -- DBRS Morningstar's assessment as to how collateral performance could deteriorate due to macroeconomic stresses brought about by the coronavirus pandemic. DBRS Morningstar updated a set of macroeconomic scenarios for select economies related to the coronavirus pandemic in its commentary "Global Macroeconomic Scenarios: July Update," published on July 22, 2020. The July 22, 2020, commentary updates DBRS Morningstar's macroeconomic scenarios initially published on April 16, 2020. -- The assumptions consider the moderate macroeconomic scenario outlined in the commentary. 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. This moderate scenario primarily considers two economic measures: declining GDP growth and increased unemployment levels for the year. The moderate and the adverse scenarios are being used in the context of DBRS Morningstar's rating analysis, with the moderate scenario serving as the primary anchor for current ratings. For commercial asset classes, the GDP growth rate is intended to provide the basis for measurement of performance expectations. -- Shorter expected duration of the coronavirus performance shock compared to the Great Recession of 2008–09, as projected in DBRS Morningstar's moderate scenario. -- The extent of impact from the recession in the transportation industry on non-investment grade classes of notes, because of the transaction's exposure to trucking industry and structural features such as subordination and sequential payment, even before the impact from coronavirus pandemic. -- Significant amount of unrealized hard collateral repossessed and held by Amur Equipment Finance, Inc. (AEF), which may result in higher recoveries and lower realized losses in the future. -- The level of deferred contracts and their influence on amortization profile and performance of each transaction. -- There have been material changes in AEF origination strategies, underwriting framework, financed asset mix, and access to liquidity since the Great Recession of 2008–09, which DBRS Morningstar considered in assessing the additional economic stress related to the coronavirus pandemic. -- The information provided to DBRS Morningstar by AEF with respect to the current market conditions and the impact of coronavirus outbreak on originations, underwriting, operations, and portfolio performance to date. The ratings remain Under Review with Negative Implications. When a rating is placed Under Review with Negative Implications, DBRS Morningstar seeks to complete its assessment and remove the rating from this status as soon as appropriate. Upon the resolution of the Under Review status, DBRS Morningstar may confirm or downgrade the ratings on the affected classes. Notes: The principal methodology is the DBRS Morningstar Master U.S. ABS Surveillance (May 27, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria. APEX CREDIT 2015-II: Moody's Lowers Rating on Class E-R Notes to B1 ------------------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by Apex Credit CLO 2015-II Ltd.: US$20,000,000 Class E-R Secured Deferrable Floating Rate Notes Due 2026 (current outstanding balance of $20,774,316.33) (the "Class E-R Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the rating on the following notes: US$22,000,000 Class D-R Secured Deferrable Floating Rate Notes Due 2026 (the "Class D-R Notes"), Confirmed at Baa2 (sf); previously on April 17, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D-R Notes and Class E-R Notes. The CLO, issued in October 2015 and refinanced in May 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 October 2019. RATINGS RATIONALE The downgrade on the Class E-R 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 and exposure to Caa-rated assets has increased significantly. The rating confirmations on the Class D-R Notes reflect the benefit of passing the end of the deal's reinvestment period in October 2019. In light of the reinvestment restrictions during the amortization period which limit the ability of the manager to effect significant changes to the current collateral pool, Moody's analyzed the deal assuming a higher likelihood that the collateral pool characteristics will continue to satisfy certain covenant requirements. Moody's analysis also considered the positive impact on the rated notes of the imminent reduction of leverage as notes begin to amortize. As a result, despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D-R 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 OC levels. Consequently, Moody's has confirmed the ratings on the Class D-R Notes. Based on Moody's calculation, the weighted average rating factor was 3834 as of July 2020, or approximately 22% worse compared to 3154 reported in the March 2020 trustee report [1]. Both the rate and the magnitude of the WARF deterioration are higher than the averages observed for other BSL CLOs. Moody's calculation also showed the WARF was failing the test level of 3145 reported in the July 2020 trustee report [2] by 689 points. Moody's noted that approximately 44% of the CLO's par was from obligors assigned a negative outlook and 1% 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 31% as of July 2020. Moody's also noted that interest payments were deferred on the Class E-R Notes, and collections were recently applied to repay the senior notes as a result of OC test failures on the July 2020 determination date. Moreover, the OC tests for the Class C-R, D-R and E-R notes were recently reported [3] as failing their respective triggers, which if were to occur on the next payment date would result in repayment of senior notes. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par of $344.1 million, defaulted par of $20.8 million, a weighted average default probability of 27.1% (implying a WARF of 3834), a weighted average recovery rate upon default of 46.4%, a diversity score of 77 and a weighted average spread of 3.89%. Moody's also analyzed the CLO by incorporating an approximately 21.1 million par haircuts in calculating the OC ratios. Finally, Moody's also considered in its analysis impending restrictions on trading resulting from the end of the reinvestment period and 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; - 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. 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. ARES XLIV: Moodys' Lowers Rating on Class E Notes to Caa1 --------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Ares XLIV CLO Ltd.: US$66,000,000 Class C Mezzanine Deferrable Floating Rate Notes due 2029 (the "Class C Notes"), Downgraded to Ba1 (sf); previously on June 3, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$55,000,000 Class D Mezzanine Deferrable Floating Rate Notes due 2029 (the "Class D Notes"), Downgraded to B1 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$8,500,000 Class E Mezzanine Deferrable Floating Rate Notes due 2029 (the "Class E Notes"), Downgraded to Caa1 (sf); previously on June 3, 2020 B3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on June 3, 2020 on the Class C notes, Class D notes, and Class E notes. The CLO, issued in August 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 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. Based on Moody's calculation, the weighted average rating factor was 3444 as of July 2020, or 13.0% worse compared to 3047 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2843 reported in the July 2020 trustee report[2] by 601 points. Moody's noted that approximately 32.7% of the CLO's par was from obligors assigned a negative outlook and 1.3% 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 17.3% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $1.08 billion, or $21.5 million less than the deal's ramp-up target par balance. 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 $1.07 billion, defaulted par of $15.7 million, a weighted average default probability of 28.23% (implying a WARF of 3444), a weighted average recovery rate upon default of 48.38%, a diversity score of 75 and a weighted average spread of 3.38%. Moody's also analyzed the CLO by incorporating an approximately $8.4 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. 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. ARES XLVI: Moody's Confirms Ba3 Rating on Class E Notes ------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by Ares XLVI CLO Ltd.: US$38,500,000 Class D Mezzanine Deferrable Floating Rate Notes due 2030 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on June 3, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$30,500,000 Class E Mezzanine Deferrable Floating Rate Notes due 2030 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on June 3, 2020 on the Class D notes and Class E notes. The CLO, issued in January 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 January 2023. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D and Class E 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 and Class E Notes. Based on Moody's calculation, the weighted average rating factor was 3424 as of July 2020, or 13.2% worse compared to 3024 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 3094 reported in the July 2020 trustee report [2] by 330 points. Moody's noted that approximately 32.4% of the CLO's par was from obligors assigned a negative outlook and 1.3% 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 17.1% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $590.3 million, or $9.7 million less than the deal's ramp-up target par balance. Nevertheless, Moody's noted that the Over-Collateralization tests for the Class A/B, Class C, Class D, and Class E notes were recently reported [3] at 130.88%, 120.38%, 111.54%, and 105.41%, respectively, and are passing their respective trigger levels of 124.20%, 115.50%, 108.40%, and 103.75%. 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 $586.4 million, defaulted par of $8.7 million, a weighted average default probability of 28.13 % (implying a WARF of 3424), a weighted average recovery rate upon default of 48.23%, a diversity score of 75 and a weighted average spread of 3.40%. Moody's also analyzed the CLO by incorporating an approximately $4.7 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. 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. ARES XXIX: Moody's Cuts Rating on Class E Notes to Caa2 ------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by Ares XXIX CLO Ltd.: US$4,750,000 Class E Mezzanine Deferrable Floating Rate Notes Due April 17, 2026, Downgraded to Caa2 (sf); previously on June 3, 2020 B2 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the rating on the following notes: US$29,400,000 Class D Mezzanine Deferrable Floating Rate Notes Due April 17, 2026, Confirmed at Ba3 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on June 3, 2020 on the Class D and Class E notes. The CLO, originally issued in April 2014 and partially refinanced in February 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 April 2018. 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, 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 expected losses on the Class D Notes continue to be consistent with the current rating after taking into account the CLO's latest portfolio, its relevant structural features and deleveraging of the senior notes and its improvement in over-collateralization ratios. Consequently, Moody's has confirmed the rating on the Classes D Notes. Based on Moody's calculation, the weighted average rating factor was 3901 as of July 2020, or 20.7% worse compared to 3233 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2584 reported in the July 2020 trustee report [2] by 1317 points. Moody's noted that approximately 41% of the CLO's par was from obligors assigned a negative outlook and 4% 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% as of July 2020. Nevertheless, the Over-Collateralization ratio for the Class D is reported at 107.07% based on July 2020 trustee report [2], and currently passing its trigger level of 104.50%. 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 of $168.1 million, defaulted par of $6.5 million, a weighted average default probability of 24.55% (implying a WARF of 3901), a weighted average recovery rate upon default of 48.51%, a diversity score of 44 and a weighted average spread of 3.21%. Moody's also analyzed the CLO by incorporating an approximately $5.3 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. 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. ARES XXXVR CLO: Moody's Confirms Ba3 Rating on Class E Notes ------------------------------------------------------------ Moody's Investors Service has confirmed the ratings on the following notes issued by Ares XXXVR CLO Ltd.: US$26,000,000 Class D Mezzanine Deferrable Floating Rate Notes due 2030, Confirmed at Baa3 (sf); previously on June 3, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$22,000,000 Class E Mezzanine Deferrable Floating Rate Notes due 2030, Confirmed at Ba3 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D notes and Class E notes are referred to herein, collectively, as the "Confirmed Notes". These actions conclude the review for downgrade initiated on June 3, 2020 on the Confirmed Notes issued by the CLO. The CLO, issued in July 2018, is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate. The transaction's reinvestment period will end in July 2023. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' 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 ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3426, compared to 3038 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 3096 reported in the July 2020 trustee report [3]. 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% as of July 2020. Nevertheless, Moody's noted that the OC tests for the Class D and Class E, as well as the interest diversion tests were recently reported as passing. 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." For modeling purposes, Moody's used the following base-case assumptions: Paramount and principal proceeds balance: $389,274,364 Defaulted Securites: $6,375,575 Diversity Score: 75 Weighted Average Rating Factor: 3394 Weighted Average Life (WAL): 5.75 years Weighted Average Spread (WAS): 3.37% Weighted Average Recovery Rate (WARR): 48.23% Par haircut in O/C tests and interest diversion test: $2,996,728 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. 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. ASHFORD HOSPITALITY 2018-KEYS: Moody's Cuts Class F Certs to Caa2 ----------------------------------------------------------------- Moody's Investors Service has downgraded two and affirmed four ratings on classes in Ashford Hospitality Trust 2018-KEYS, Commercial Mortgage Pass-Through Certificates, Series 2018-KEYS as follows: Cl. A, Affirmed Aaa (sf); previously on Aug 19, 2019 Affirmed Aaa (sf) Cl. B, Affirmed Aa3 (sf); previously on Aug 19, 2019 Affirmed Aa3 (sf) Cl. C, Affirmed A3 (sf); previously on Aug 19, 2019 Affirmed A3 (sf) Cl. D, Affirmed Baa3 (sf); previously on Aug 19, 2019 Affirmed Baa3 (sf) Cl. E, Downgraded to B1 (sf); previously on Aug 19, 2019 Affirmed Ba3 (sf) Cl. F, Downgraded to Caa2 (sf); previously on Aug 19, 2019 Affirmed B3 (sf) RATINGS RATIONALE The ratings on Cl. A, Cl. B, Cl. C, and Cl. D were affirmed because the transaction's key metrics, including Moody's loan-to-value ratio, are within acceptable ranges. The ratings on Cl. E, and Cl. F were downgraded due to an increase in Moody's LTV as a result of immediate decline in performance due to the coronavirus outbreak and the uncertainty of timing and extent of the recovery. Fitch has assumed a significant drop in net cash flow in 2020, followed by two years of improvement in pool performance, resulting in a lower than previously assumed Moody's NCF levels. 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 commercial real estate from the collapse in 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. Fitch regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. 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. 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 pool paydowns or amortization, an increase in 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 or increase in interest shortfalls. METHODOLOGY UNDERLYING THE RATING ACTION The principal methodology used in these ratings was "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020. DEAL PERFORMANCE As of the July 15, 2019 distribution date, the transaction's aggregate certificate balance remains unchanged at $982 million from securitization. The 7-year (including five one-year extensions), interest only, floating rate loans are secured by fee and leasehold interests in hotels totaling 7,270 guestrooms across 16 states. There is mezzanine debt of approximately $288 million held outside of the trust. The collateral under the mortgage loan is comprised of six pools of 34 hotel properties diversified across full-service (19 hotels), select-service (10 hotels) and extended-stay (5 hotels) segments. All but two properties (Lakeway Resort & Spa and One Ocean Resort & Spa) are affiliated with nationally recognized flags including Marriott International, Inc, Hilton Worldwide Holdings, Inc, and Hyatt Hotels Corporation. The portfolio's NCF 2019 was approximately $120 MM, down slightly from approximately $127 MM at securitization. This was not alarming as the US lodging sector neared its cyclical peak in 2018 and 2019. During this time US hotels experienced slowing RevPAR growth rates and some net cash flow erosions due to expenses increasing faster than revenues. For full year 2020 NCF, Fitch expects a significant drop due to coronavirus outbreak induced property closures and travel restrictions that were put into effect in the first half of the year and negative impact from those measures. In the foreseeable future, Fitch expects demand for lodging in leisure drive-to destinations to lead the recovery, followed by the return of corporate transient segment. Due to the length and the magnitude of the disruption, Fitch does not expect hotel performance to return to pre-COVID levels within the next 18 months on average, and the pace of recovery to vary depending on the property's primary market segment and location. The loan status is non-performing matured balloon as of the July distribution date and there are outstanding P&I advances totaling approximately $1.5 million. The first mortgage balance of $982 million represents a Moody's stabilized LTV of 142%. Moody's first mortgage stressed debt service coverage ratio is 1.02X. However, these metrics are based on return of travel demand for leisure and corporate travel and normalized operation after 24 months of stabilization period. The downgrade of ratings on Cl. E and Cl. F take into account volatility and uncertainty of the pool's near-term performance. There are outstanding interest shortfalls totaling $150,028 affecting Cl. F and Cl. VRR and no losses as of the current distribution date. BENCHMARK 2020-B18: Fitch Rates 3 Tranches 'B-sf' ------------------------------------------------- Fitch Ratings has assigned the following final ratings and Rating Outlooks to Benchmark 2020-B18 Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2020-B18: BMARK 2020-B18 -- 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-M; LT AAAsf New Rating -- Class A-SB; LT AAAsf New Rating -- Class AGN-D; LT BBB-sf New Rating -- Class AGN-E; LT BB-sf New Rating -- Class AGN-F; LT B-sf New Rating -- Class AGN-G; LT NRsf New Rating -- Class AGN-VRR Interest; LT NRsf New Rating -- Class AGN-X; LT B-sf 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-RR; LT B-sf New Rating -- Class H-RR; LT NRsf New Rating -- Class RR Certificates; LT NRsf New Rating -- Class RR Interest; LT NRsf New Rating -- Class X-A; LT AAAsf New Rating -- Class X-B; LT A-sf New Rating -- Class X-D; LT BBB-sf New Rating -- Class X-F; LT BB-sf New Rating -- $7,467,000 class A-1 'AAAsf'; Outlook Stable; -- $164,258,000b class A-2 'AAAsf'; Outlook Stable; -- $67,056,000 class A-3 'AAAsf'; Outlook Stable; -- $8,738,000 class A-SB 'AAAsf'; Outlook Stable; -- $119,000,000 class A-4 'AAAsf'; Outlook Stable; -- $260,095,000 class A-5 'AAAsf'; Outlook Stable; -- $106,300,000 class A-M 'AAAsf'; Outlook Stable; -- $33,569,000 class B 'AA-sf'; Outlook Stable; -- $34,687,000 class C 'A-sf'; Outlook Stable; -- $23,499,000b class D 'BBBsf'; Outlook Stable; -- $16,784,000b class E 'BBB-sf'; Outlook Stable; -- $15,665,000b class F 'BB-sf'; Outlook Stable; -- $8,952,000bd class G-RR 'B-sf'; Outlook Stable; -- $732,914,000a class X-A 'AAAsf'; Outlook Stable. -- $68,256,000ab class X-B 'A-sf'; Outlook Stable; -- $40,283,000ab class X-D 'BBB-sf'; Outlook Stable; -- $15,665,000ab class X-F 'BB-sf'; Outlook Stable; -- $121,775,000abe class AGN-X 'B-sf'; Outlook Stable; -- $27,900,000be class AGN-D 'BBB-sf'; Outlook Stable; -- $42,875,000be class AGN-E 'BB-sf'; Outlook Stable; -- $51,000,000be class AGN-F 'B-sf'; Outlook Stable; The following classes are not rated by Fitch: -- $29,093,108bd class H-RR; -- $29,723,796c class RR Certificates; -- $9,576,204c class RR Interest; -- $41,625,000be class AGN-G; -- $8,600,000bce class AGN-VRR Interest a) Notional amount and interest only. b) Privately placed and pursuant to Rule 144A. c) Vertical credit-risk retention interest. d) Horizontal credit-risk retention. e) The transaction includes six classes of non-offered, loan-specific certificates (non-pooled rake classes) related to the companion loan of the Agellan Portfolio. Since Fitch published its expected ratings on July 20, 2020, the following changes have occurred. The balances for classes A-4 and A-5 were finalized. At the time the expected ratings were published, the initial aggregate certificate balances of classes A-4 and A-5 was expected to be approximately $379,095,000, subject to a variance of plus or minus 5%. The final class balances for classes A-4 and A-5 are $119,000,000 and $260,095,000, respectively. Additionally, class X-B now also references class C in addition to class B. Fitch's rating on class X-B was updated to 'A-sf', reflecting the ratings of class C, 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. TRANSACTION SUMMARY The certificates represent the beneficial ownership interest in the trust, primary assets of which are 37 loans secured by 154 commercial properties having an aggregate principal balance of $934,463,108 as of the cut-off date. The loans were contributed to the trust by German American Capital Corporation, JPMorgan Chase Bank, National Association, Goldman Sachs Mortgage Company, and Citi Real Estate Funding Inc. KEY RATING DRIVERS Fitch Leverage Lower than Recent Transactions: The pool has lower leverage than other recent Fitch-rated multiborrower transactions. The pool's Fitch LTV of 89.9% is well below the 2019 and YTD averages of 103.0% and 98.5%, respectively. The pool's Fitch DSCR of 1.31x is above the 2019 average of 1.26x and in line with the YTD 2020 average of 1.31x. Credit Opinion Loans: The pool includes 10 loans, representing 46.8% of the deal that received investment-grade credit opinions. This is a significantly higher concentration than the YTD 2020 and 2019 averages of 28.5% and 14.2%, respectively. Agellan Portfolio (8.0% of pool) received a stand-alone credit opinion of 'A-sf*', Moffett Towers Buildings A, B & C (8.0% of pool), BX Industrial Portfolio (7.5% of pool), 1633 Broadway (6.7% of pool), Bellagio Hotel and Casino (2.3% of pool), Chase Center Tower I (1.9% of pool), Chase Center Tower II (1.7% of pool), and Kings Plaza (1.5% of pool ) all received a stand-alone credit opinion of 'BBB-sf*', MGM Grand & Mandalay Bay (7.0% of pool) received a stand-alone credit opinion of 'BBB+sf*', and Southcenter Mall (2.1% of pool) received a stand-alone credit opinion of 'AAAsf*'. Concentrated Pool: The top 10 loans comprise 62.2% of the pool, which is greater than the YTD 2020 average of 54.4% and the 2019 average of 51.0%. The loan concentration index of 493 is greater than the YTD 2020 and 2019 averages of 409 and 379, respectively. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: 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' / 'BB-sf' / 'B-sf'. 20% NCF Increase: 'AAAsf' / 'AAAsf' / 'AAAsf' / 'AAsf' / 'A+sf' / 'BBB+sf' / 'BBB+sf'. 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: 'AAAsf' / 'AA-sf' / 'A-sf' / 'BBBsf' / 'BBB-sf' / 'BB-sf' / 'B-sf'. 20% NCF Decline: 'AA-sf' / 'A-sf' / 'BBBsf' / 'BB+sf' / 'BB-sf' / 'CCCsf' / 'CCCsf'. 30% NCF Decline: 'Asf' / 'BBB+sf' / 'BB+sf' / 'B+sf'/ 'CCCsf' / 'CCCsf' / 'CCCsf'. 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 Ernst & Young 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 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). BX COMMERCIAL 2018-IND: DBRS Gives B(low) Rating on Class H Certs ----------------------------------------------------------------- DBRS, Inc. assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2018-IND issued by BX Commercial Mortgage Trust 2018-IND (the Issuer) as follows: -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class X-CP at AAA (sf) -- Class X-NCP at AAA (sf) -- Class C at AA (sf) -- Class D at A (high) (sf) -- Class E at A (low) (sf) -- Class F at BBB (low) (sf) -- Class G at BB (low) (sf) -- Class H at B (low) (sf) All trends are Stable. These certificates are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 14, 2020. In accordance with MCR's engagement letter covering these certificates, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. On March 1, 2020, DBRS Morningstar finalized its "North American Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the "North American CMBS Surveillance Methodology," as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis. At issuance, the collateral for the transaction was a $2.50 billion first-lien mortgage loan on 171 properties consisting of 46.4 million square feet of space in 22 states and 26 industrial markets. Since issuance, certain assets have been released from the subject trust and the mortgage-loan balance has been paid down pro rata to approximately $1.6 billion. The portfolio benefits from excellent geographic diversification, granular tenancy, a robust industrial climate, and below-market rental rates combined with significant investment-grade tenancy and strong sponsorship. As of July 30, 2018, the portfolio was 97.4% leased to 187 tenants. The Blackstone Group used the financing as part of its purchase of Gramercy Property Trust Inc. for $27.50 per share, representing a total acquisition valued at $7.5 billion, which was announced on May 6, 2018. Citi Real Estate Funding Inc. and the Bank of America Corporation (rated A (high) with a Stable trend by DBRS Morningstar) co-originated the five-year loan (two years plus three one-year extensions), which pays floating-rate interest based on one-month Libor plus 1.420% on an interest-only (IO) basis through the entire term. Citigroup Global Markets Realty Corp. and the Bank of America Corporation also originated a $500.0 million mezzanine loan, which is subordinate to and held outside the trust. The mezzanine loan comprises two tranches: the interest rate for Mezzanine Loan A is one-month Libor plus 4.000% and the interest rate for Mezzanine Loan B is one-month Libor plus 5.500%. The DBRS Morningstar net cash flow (NCF) derived at issuance was reanalyzed for the subject rating action to confirm its consistency with the "DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria." The resulting NCF figure was $123.1 million and a cap rate of 7.25% was applied, resulting in a DBRS Morningstar Value of $1.7 billion, a variance of -52.4% from the appraised value at issuance of $3.6 billion. The NCF and resulting value difference is skewed by the release of certain assets in the pool and the paydown of the existing whole-loan balance to just over $1.6 billion as of May 2020 from $2.5 billion at issuance. The DBRS Morningstar Value implies an adjusted LTV of 94.7% compared with the LTV of 45.1% on the appraised value at issuance. The cap rate DBRS Morningstar applied is at the lower end of the DBRS Morningstar Cap Rate Ranges for industrial properties, reflecting the underlying collateral's location and quality. In addition, the 7.25% cap rate DBRS Morningstar applied is above the implied cap rate of 5.62% based on the Issuer's underwritten NCF and appraised value. DBRS Morningstar made positive qualitative adjustments to the final LTV sizing benchmarks used for this rating analysis, totaling 4.5% to account for cash flow volatility, property quality, and market fundamentals. DBRS Morningstar also made other negative adjustments to account for certain debt stack penalties. Classes X-CP and X-NCP 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. CBAM LTD 2017-2: Moody's Confirms Ba3 Rating on Class E Notes ------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by CBAM 2017-2, Ltd.: US$88,920,000 Class D 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 US$67,080,000 Class E Deferrable Floating Rate Notes due 2029 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class D Notes and the Class E Notes are referred to herein, collectively, as the "Confirmed Notes." CBAM 2017-2, Ltd., issued in August 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 Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D and E notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Moody's also notes the recent improvements in the quality of the collateral assets over the past several months. Consequently, Moody's has confirmed the ratings on the Class D and E notes. Based on Moody's calculation, the weighted average rating factor was 3050 as of July 2020, or 8% worse compared to a WARF of 2832 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2785 reported in the July 2020 trustee report [2] by 265 points. Moody's noted that approximately 30% of the CLO's par was from obligors assigned a negative outlook, and 2% 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 13% of the CLO par as of July 2020. Moody's calculated the OC ratios (excluding haircuts) for the Class A/B, Class C, Class D and Class E notes as of July 2020 at 130.70%, 120.34%, 112.52%, and 107.26%, 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 $1,517 million, defaulted par of $39 million, a weighted average default probability of 24.18% (implying a WARF of 3050), a weighted average recovery rate upon default of 45.91%, a diversity score of 71 and a weighted average spread of 3.57%. The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analyzing. 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. 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 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. Methodology Used for the Rating Action The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty. The performance of the rated notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the rated notes. CBAM LTD 2017-3: Moody's Confirms Ba3 Rating on Class E-2 Notes --------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by CBAM 2017-3, Ltd.: US$78,000,000 Class D Deferrable Floating Rate Notes, Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$44,815,790 Class E-1 Deferrable Floating Rate Notes, Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$13,684,210 Class E-2 Deferrable Floating Rate 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 Notes, Class E-1 Notes, and the Class E-2 Notes. The Class D Notes, Class E-1 Notes, and the Class E-2 Notes are referred to herein, collectively, as the "Confirmed Notes." CBAM 2017-3, Ltd, issued in September 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 Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. The confirmations also reflect the notes' priority position in the CLO's capital structure and the level of credit enhancement available to it either from over-collateralization or from cash flows that would be diverted as a result of coverage test failures. Based on Moody's calculation, the weighted average rating factor was 3000 as of July 2020, or 6.9% worse compared to a WARF of 2806 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2747 reported in the July 2020 trustee report [2] by 253 points. Moody's noted that approximately 30% of the CLO's par was from obligors assigned a negative outlook, and 2% 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 12% of the CLO par as of July 2020. Moody's calculated the OC ratios (excluding haircuts) for the Class A/B, Class C, Class D and Class E notes as of July 2020 at 129.49%, 120.77%, 112.49%, and 107.00%, 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 $1,265 million, defaulted par of $31 million, a weighted average default probability of 24.03% (implying a WARF of 3000), a weighted average recovery rate upon default of 46.03%, a diversity score of 69 and a weighted average spread of 3.54%. The default probability derives from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The estimated average recovery rate on future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and a collateral manager's latitude to trade collateral are also relevant factors. Moody's incorporates these default and recovery characteristics of the collateral pool into its cash flow model analysis, subjecting them to stresses as a function of the target rating of each CLO liability it is analyzing. 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. 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 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. Fitch regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Methodology Used for the Rating Action The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. Factors that Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the rated notes is subject to uncertainty. The performance of the rated notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the rated notes. CIFC FUNDING 2014-III: Moody's Cuts Class F-R2 Notes to Caa1 ------------------------------------------------------------ Moody's Investors Service has downgraded the rating on the following notes issued by CIFC Funding 2014-III, Ltd.: US$14,000,000 Class F-R2 Junior Secured Deferrable Floating Rate Notes due 2031 (the "Class F-R2 Notes"), Downgraded to Caa1 (sf); previously on June 3, 2020 B3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the rating on the following notes: US$28,000,000 Class E-R2 Junior Secured Deferrable Floating Rate Notes due 2031 (the "Class E-R2 Notes"), Confirmed at Ba3 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on June 3, 2020 on the Class E-R2 Notes and the Class F-R2 Notes. The CLO, issued in July 2014 and refinanced in October 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 downgrade on the Class F-R2 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. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class E-R2 Notes continue to be consistent with the current rating after taking into account the CLO's latest portfolio, its relevant structural features, long reinevstent horizon left and its actual over-collateralization levels. Consequently, Moody's has confirmed the rating on the Class E-R2 Notes. Based on Moody's calculation, the weighted average rating factor was 3278 as of July 2020, or 12% worse compared to 2932 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 3059 reported in the July 2020 trustee report [2] by 219 points. Moody's noted that approximately 29% of the CLO's par was from obligors assigned a negative outlook and 1.5% 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 (adjusted for negative outlook or watchlist for downgrade) was approximately 20% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $689.9 million, or $10.1 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class E-R2 Notes and the Class F-R2 Notes as of July 2020 at 107.13%, and 104.85%, respectively. Nevertheless, Moody's noted that the all OC tests as well as the interest diversion test were recently reported [2] as passing. 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 or portfolio par of $ 687.9 million, defaulted par of $8.9 million, a weighted average default probability of 26.78% (implying a WARF of 3278), a weighted average recovery rate upon default of 47.54%, a diversity score of 80 and a weighted average spread of 3.41%. Moody's also analyzed the CLO by incorporating an approximately $6.5 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, trading strategies and portfolio information. 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. CIM TRUST 2020-J1: DBRS Finalizes B Rating on Class B-5 Certs ------------------------------------------------------------- DBRS, Inc. finalized the following provisional ratings on the Mortgage Pass-Through Certificates, Series 2020-J1 (the Certificates) to be issued by CIM Trust 2020-J1 (CIM 2020-J1): -- $307.5 million Class A-1 at AAA (sf) -- $307.5 million Class A-2 at AAA (sf) -- $230.6 million Class A-3 at AAA (sf) -- $230.6 million Class A-4 at AAA (sf) -- $76.9 million Class A-5 at AAA (sf) -- $76.9 million Class A-6 at AAA (sf) -- $246.0 million Class A-7 at AAA (sf) -- $246.0 million Class A-8 at AAA (sf) -- $61.5 million Class A-9 at AAA (sf) -- $61.5 million Class A-10 at AAA (sf) -- $15.4 million Class A-11 at AAA (sf) -- $15.4 million Class A-12 at AAA (sf) -- $37.3 million Class A-13 at AAA (sf) -- $37.3 million Class A-14 at AAA (sf) -- $344.8 million Class A-15 at AAA (sf) -- $344.8 million Class A-16 at AAA (sf) -- $344.8 million Class A-IO1 at AAA (sf) -- $307.5 million Class A-IO2 at AAA (sf) -- $230.6 million Class A-IO3 at AAA (sf) -- $76.9 million Class A-IO4 at AAA (sf) -- $246.0 million Class A-IO5 at AAA (sf) -- $61.5 million Class A-IO6 at AAA (sf) -- $15.4 million Class A-IO7 at AAA (sf) -- $37.3 million Class A-IO8 at AAA (sf) -- $344.8 million Class A-IO9 at AAA (sf) -- $4.5 million Class B-1A at AA (sf) -- $4.5 million Class B-IO1 at AA (sf) -- $4.5 million Class B-1 at AA (sf) -- $2.4 million Class B-2A at A (sf) -- $2.4 million Class B-IO2 at A (sf) -- $2.4 million Class B-2 at A (sf) -- $5.8 million Class B-3 at BBB (sf) -- $1.8 million Class B-4 at BB (sf) -- $905.0 thousand Class B-5 at B (sf) Classes A-IO1, A-IO2, A-IO3, A-IO4, A-IO5, A-IO6, A-IO7, A-IO8, and A-IO9 are interest-only certificates. The class balance represents notional amounts. Classes A-1, A-2, A-3, A-5, A-6, A-7, A-9, A-11, A-13, A-15, A-16, A-IO2, A-IO4, A-IO5, and A-IO9 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, and A-12 are super-senior certificates. These classes benefit from additional protection from senior support certificates (Classes A-13 and A-14) with respect to loss allocation. The AAA (sf) ratings on the Certificates reflect 4.70% of credit enhancement provided by subordinated certificates. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 3.45%, 2.80%, 1.20%, 0.70%, and 0.45% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. CIM Trust 2020-J1 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 494 loans with a total principal balance of $361,766,034 as of the Cut-Off Date (July 1, 2020). The originators for the aggregate mortgage pool are loanDepot.com, LLC (loanDepot; 25.0%);, Home Point Financial Corporation (Home Point; 15.8%); AmeriHome Mortgage Company, LLC (10.9%); United Shore Financial Services, LLC (9.6%); Guaranteed Rate, Inc. (Guaranteed Rate; 7.1%); NewRez, LLC (6.1%); JMAC Lending, Inc. (5.1%); and various other originators, each comprising no more than 5.0% of the pool by principal balance. On the Closing Date, the Seller, Fifth Avenue Trust, will acquire the mortgage loans from Bank of America, National Association (BANA). Through bulk purchases, BANA generally acquired the mortgage loans underwritten to: -- Its jumbo whole loan acquisition guidelines (50.8%), -- Fannie Mae or Freddie Mac's Automated Underwriting System (AUS; 31.9%), or -- The related originator's guidelines (17.4%). DBRS Morningstar conducted an operational risk assessment on BANA's aggregator platform, as well as certain originators, and deemed them acceptable. NewRez LLC doing business as (dba) Shellpoint Mortgage Servicing (SMS) will service 100% of the mortgage loans, directly or through subservicers. Wells Fargo Bank, N.A. (Wells Fargo; rated AA with a Negative trend by DBRS Morningstar) will act as Master Servicer, Securities Administrator, and Custodian. Wilmington Savings Fund Society, FSB will serve as Trustee. Chimera Funding TRS LLC (Chimera Funding) will serve as the Representations and Warranties (R&W) Provider. The holder of a majority of the most subordinate class of certificates outstanding (the Controlling Holder or CH) has the option to engage an asset manager to review the Servicer's actions regarding the mortgage loans, which includes determining whether the Servicer is making modifications or servicing the loans in accordance with the pooling and servicing agreement. The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure. As of July 20, 2020, no borrower within the pool has entered into a Coronavirus Disease (COVID-19)-related forbearance plan with the Servicer. After that date, loans that enter into a coronavirus-related forbearance plan 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 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 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. CIM TRUST 2020-J1: Moody's Rates Class B-5 Debt 'B1' ---------------------------------------------------- Moody's Investors Service has assigned definitive ratings to 34 classes of residential mortgage-backed securities issued by CIM Trust 2020-J1. The ratings range from Aaa (sf) to B1 (sf). CIM Trust 2020-J1 is a securitization of 30-year prime residential mortgages. This transaction represents the first non-investor prime jumbo issuance by Chimera Investment Corporation (the sponsor) in 2020. The transaction includes 494 fixed rate, first lien-mortgages. There are 198 GSE-eligible high balance (31.90% by balance) and 296 prime jumbos (68.10% by loan balance) mortgage loans in the pool. The mortgage loans for this transaction have been acquired by the affiliate of the sponsor, Fifth Avenue Trust (the Seller) from Bank of America, National Association. All of the loans are designated as qualified mortgages either under the QM safe harbor or the GSE temporary exemption under the Ability-to-Repay rules. Shellpoint Mortgage Servicing will service the loans and Wells Fargo Bank, N.A. (Aa2, long term debt) will be the master servicer. SMS will be the servicer and responsible for advancing principal and interest and servicing advances, with the master servicer backing up SMS' advancing obligations if SMS cannot fulfill them. Four third-party review firms verified the accuracy of the loan level information that Moody's received from the Sponsor. These firms conducted detailed credit, property valuation, data accuracy and compliance reviews on 100% of the mortgage loans in the collateral pool. The TPR results indicate that there are no material compliance, credit, or data issues and no appraisal defects. Moody's analyzed the underlying mortgage loans using Moody's Individual Loan Analysis model. Moody's also compared the collateral pool to other prime jumbo securitizations. In addition, Moody's adjusted its expected losses based on qualitative attributes, including the financial strength of the representation and warranties provider and TPR results. CIM 2020-J1 has a shifting interest structure with a five-year lockout period that benefits from a senior subordination floor and a subordinate floor. Moody's coded the cash flow to each of the certificate classes using Moody's proprietary cash flow tool. In its analysis of tail risk, Moody's considered the increased risk from borrowers with more than one mortgage in the pool. The complete rating actions are as follows: Issuer: CIM Trust 2020-J1 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 Aa1 (sf) Cl. A-14, Assigned Aa1 (sf) Cl. A-15, Assigned Aaa (sf) Cl. A-16, Assigned Aaa (sf) Cl. A-IO1*, Assigned Aaa (sf) Cl. A-IO2*, Assigned Aaa (sf) Cl. A-IO3*, Assigned Aaa (sf) Cl. A-IO4*, Assigned Aaa (sf) Cl. A-IO5*, Assigned Aaa (sf) Cl. A-IO6*, Assigned Aaa (sf) Cl. A-IO7*, Assigned Aaa (sf) Cl. A-IO8*, Assigned Aa1 (sf) Cl. A-IO9*, Assigned Aaa (sf) Cl. B-1, Assigned Aa3 (sf) Cl. B-IO1*, Assigned Aa3 (sf) Cl. B-1A, Assigned Aa3 (sf) Cl. B-2, Assigned A2 (sf) Cl. B-IO2*, Assigned A2 (sf) Cl. B-2A, Assigned A2 (sf) Cl. B-3, Assigned Baa2 (sf) Cl. B-4, Assigned Ba1 (sf) Cl. B-5, Assigned B1 (sf) * Reflects Interest Only Classes RATINGS RATIONALE Summary Credit Analysis and Rating Rationale Moody's expected loss for this pool in a baseline scenario is 0.32% at the mean and 0.15% at the median, and reaches 4.32% at a stress level consistent with its Aaa ratings. 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 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. The contraction in economic activity in the second quarter was 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 15% (approximately 10% 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 and the R&W framework of the transaction. Collateral Description Moody's assessed the collateral pool as of the cut-off date of July 1, 2020. CIM 2020-J1 is a securitization of 494 mortgage loans with an aggregate principal balance of $361,766,033.93. This transaction consists of fixed-rate fully amortizing loans, which will not expose the borrowers to any interest rate shock for the life of the loan or to refinance risk. All of the mortgage loans are secured by first liens on one- to four- family residential properties, condominiums, and planned unit developments. The loans have a weighted average seasoning of approximately six months. Overall, the credit quality of the mortgage loans backing this transaction is in line with recently issued prime jumbo transactions. The WA FICO of the aggregate pool is 771 (770 in CIM 2019-J2 and CIM 2019-J1) with a WA LTV of 66.6% (70.3% in CIM 2019-J2 and 65.9% in CIM 2019-J1) and WA CLTV of 66.9%. (70.3% in CIM 2019-J2 and CIM 66.1% in 2019-J1) Approximately 29.9% (by loan balance) of the pool has a LTV ratio greater than 75% compared to 42.8% in CIM 2019-J2 and 31.5% in CIM 2019-J1. Origination There are 17 originators in the transaction, some of which may have limited history of securitizing prime jumbo mortgages. The largest originators in the pool with more than 5% by balance are loanDepot.com, LLC (25.0%), Home Point Financial Corporation (15.8%), AmeriHome Mortgage Company LLC (10.9%), United Shore Financial Services, LLC (9.6%), Guaranteed Rate, Inc. (7.1%), NewRez, LLC (6.1%) and JMAC Lending Inc. (5.1%). Underwriting guidelines Approximately 68.20% of the loans by loan balance are prime jumbo loans, of which 50.7% were underwritten to Chimera's underwriting guidelines and 17.38% of the loans were underwritten to respective originator guidelines. 31.9% of the loans are conforming loans and were originated in conformance to GSE guidelines with no overlays. The GSE-eligible loans also do not include loans originated under the GSEs' affordability programs such as HomeReady and HomePossible. None of the GSE-eligible loans were originated under streamlined documentation programs such as DU Refi Plus. All of the loans are designated as qualified mortgages either under the QM safe harbor or the GSE temporary exemption under the Ability-to-Repay rules. Moody's increased its base case and Aaa loss expectations for all loans underwritten to Chimera's underwriting guidelines, as Moody's considers the underwriting guidelines to be slightly weaker. For loans that were not acquired under Chimera's guidelines, Moody's made adjustments based on the origination quality of such loans. While Moody's was neutral on all GSE-eligible loans, of note, regardless of the underwriting channel, Moody's increased its base case and Aaa loss expectations for conforming loans originated by HomePoint (3.71% of aggregate collateral balance). Of note, for 14 loans, the file was missing an appraisal because such loan was approved via a property inspection/appraisal waiver program. An appraisal waiver loan is a loan for which a traditional appraisal has been waived. Since the product was only introduced relatively recently, in a positive macro-economic environment, sufficient time has not passed to determine whether the loan level valuation risk related to a GSE loan with an appraisal waiver is the same as a GSE loan with a traditional appraisal due to lack of significant data. Thus, to account for the risk associated with this product, Moody's increased its base case and Aaa loss expectations for all such loans. Third Party Review Four third-party review firms, Clayton Services LLC, Digital Risk, LLC, Consolidated Analytics, Inc, and Opus Capital Markets Consultants, LLC, verified the accuracy of the loan level information that the sponsor gave us. These firms conducted detailed credit, property valuation, data accuracy and compliance reviews on 100% of the mortgage loans in the collateral pool. The TPR results indicate that the majority of reviewed loans were in compliance with respective originators' underwriting guidelines, no material compliance or data issues, and no appraisal defects. The overall property valuation review for this transaction is in line with most prime jumbo transactions Moody's has rated, which typically had third-party valuation products, such as collateral desk appraisal, field review and automated valuation model or a Collateral Underwriter risk score. However, in some circumstances, the deal is utilizing exclusively AVMs as a comparison to verify the original appraisals for some loans, which is weaker than if they had done so using CDAs for such loans and/or the entire pool. Moody's took this framework into consideration and did not apply 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, field review, and a CU risk score of equal to or less than 2.5 (in the case of GSE-eligible loans) were sufficient. Of note, for property valuation, of the 527 loans reviewed, 1 loan was graded level C and all other loans had level A and B property valuation grades. For the loan graded C, the appraised value from appraisal in file ($1,115,000) was not supported by a desk review (-10.31% variance percent). Similarly, to the desk review, the field review also supported the value of $1,000,000.00, therefore, this value was ultimately utilized when calculating the LTV/CLTV. Therefore, Moody's did not make any additional adjustment to its base case and Aaa loss expectations for TPR. Reps & Warranties All loans were aggregated by Bank of America National Association through its whole loan aggregation program. Each originator will provide comprehensive loan level reps and warranties for their respective loans. BANA will assign each originator's R&W to the seller, who will in turn assign to the depositor, which will assign to the trust. To mitigate the potential concerns regarding the originators' ability to meet their respective R&W obligations, the R&W provider will backstop the R&Ws for all originator's loans. The R&W provider's obligation to backstop third party R&Ws will terminate five years after the closing date, subject to certain performance conditions. The R&W provider will also provide the gap reps. The R&W framework is adequate in part because the results of the independent TPRs revealed a high level of compliance with underwriting guidelines and regulations, as well as overall adequate appraisal quality. These results give confidence that the loans do not systemically breach the R&Ws the originators have made and that the originators are unlikely to face material repurchase requests in the future. 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. Among other considerations, the R&Ws address property valuation, underwriting, fraud, data accuracy, regulatory compliance, the presence of title and hazard insurance, the absence of material property damage, and the enforceability of mortgage. In a continued effort to focus breach reviews on loans that are more likely to contain origination defects that led to or contributed to the delinquency of the loan, an additional carve out has been in recent transactions Moody's has rated from other issuers relating to the delinquency review trigger. Similarly, in this transaction, exceptions exist for certain excluded disaster mortgage loans that trip the delinquency trigger. These excluded disaster loans include COVID-19 forbearance loans. 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 1.10% 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 0.60% of the closing pool balance. Other Considerations In CIM 2020-J1, the controlling holder has the option to hire at its own expense the independent reviewer upon the occurrence of a review event. If there is no controlling holder (no single entity holds a majority of the Class Principal Amount of the most subordinate class of certificates outstanding), the trustee shall, upon receipt of a direction of the certificate holders of more than 25% of the aggregate voting interest of all certificates and upon receipt of the deposit, appoint an independent reviewer at the cost of the trust. However, if the controlling holder does not hire the independent reviewer, the holders of more than 50% of the aggregate voting interests of all outstanding certificates may direct (at their expense) the trustee to appoint an independent reviewer. In this transaction, the controlling holder can be the depositor or a seller (or an affiliate of these parties). If the controlling holder is affiliated with the depositor, seller or Sponsor, then the controlling holder may not be motivated to discover and enforce R&W breaches for which its affiliate is responsible. The servicer will not commence foreclosure proceedings on a mortgage loan unless the servicer has notified the controlling holder at least five business days in advance of the foreclosure and the controlling holder has not objected to such action. If the controlling holder objects, the servicer has to obtain three appraisals from the appraisal firms as listed in the pooling and servicing agreement. The cost of the appraisals are borne by the controlling holder. The controlling holder will be required to purchase such mortgage loan at a price equal to the highest of the three appraisals plus accrued and unpaid interest on such mortgage loan as of the purchase date. If the servicer cannot obtain three appraisals there are alternate methods for determining the purchase price. If the controlling holder fails to purchase the mortgage loan within the time frame, the controlling holder forfeits any foreclosure rights thereafter. Moody's considers this credit neutral because a) the appraiser is chosen by the servicer from the approved list of appraisers, b) the fair value of the property is decided by the servicer, based on third party appraisals, and c) the controlling holder will pay the fair price and accrued interest. Servicing Arrangement / COVID-19 Impacted Borrowers As of July 20, 2020, no borrower under any mortgage loan has entered into a Covid-19 related forbearance plan with the servicer. In the event that after the July 20, 2020 date a borrower enters into or requests a Covid-19 related forbearance plan, such mortgage loan will remain in the mortgage pool and the servicer will be required to make advances in respect of delinquent interest and principal (as well as servicing advances) on such mortgage loan during the forbearance period (to the extent such advances are deemed recoverable). Forbearances are being offered in accordance with applicable state and federal regulatory guidelines and the homeowner's individual circumstances. At the end of the forbearance period, as with any other modification, to the extent the related borrower is not able to make a lump sum payment of the forborne amount, the servicer may, subject to the servicing matrix, offer the borrower a repayment plan, enter into a modification with the borrower (including a modification to defer the forborne amounts) or utilize any other loss mitigation option permitted under the pooling and servicing agreement. As with any other modification, it is anticipated that the servicer will reimburse itself at the end of the forbearance period for any advances made by it with respect to such mortgage loan, whether that be from any lump sum payments made by the related borrower, from any increased payments received with respect to any repayment plan entered into by the borrower, or, if modified and capitalized in connection therewith, at the time of such modification as a reimbursement of such capitalized advances from principal collections on all of the mortgage loans. The servicer also has the right to reimburse itself for any advance from all collections on the mortgage loans it at any time it deems such advance to be non-recoverable. With respect to a mortgage loan that was the subject of a servicing modification, the amount of principal of the mortgage loan, if any, that has been deferred and that does not accrue interest will be treated as 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 rating all classes except interest-only classes was "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in April 2020. CITIGROUP COMMERCIAL 2013-GC17: Fitch Cuts Class F Certs to BB -------------------------------------------------------------- Fitch Ratings has downgraded one and affirmed 12 classes of Citigroup Commercial Mortgage Trust, commercial mortgage pass-through certificates series 2013-GC17. CGCMT 2013-GC17 - Class A-3 17321RAC0; LT AAAsf; Affirmed - Class A-4 17321RAD8; LT AAAsf; Affirmed - Class A-AB 17321RAE6; LT AAAsf; Affirmed - Class A-S 17321RAH9; LT AAAsf; Affirmed - Class B 17321RAJ5; LT AAsf; Affirmed - Class C 17321RAL0; LT Asf; Affirmed - Class D 17321RAM8; LT BBBsf; Affirmed - Class E 17321RAP1; LT BBsf; Affirmed - Class F 17321RAR7; LT CCCsf; Downgrade - Class PEZ 17321RAK2 LT Asf; Affirmed - Class X-A 17321RAF3; LT AAAsf; Affirmed - Class X-B 17321RAG1; LT AAsf; Affirmed - Class X-C 17321RAV8; LT BBsf; Affirmed KEY RATING DRIVERS Increased Loss Expectations: The downgrade of class F reflects increased loss expectations since Fitch's last rating action, driven primarily by the continued performance deterioration on a greater number of Fitch Loans of Concern and the slowdown in economic activity related to the coronavirus. Fitch has designated 11 loans (38.1% of pool) as FLOCs, which includes three specially serviced loans/assets (6.3%) in the top 15, two of which (4.4%) transferred in June 2020. Fitch Loans of Concern: The largest FLOC is the largest loan in the pool, Miracle Mile Shops (12%), which is secured by an approximately 450,000 sf regional mall located on the Las Vegas Strip adjacent to the Planet Hollywood Resort and Casino. The mall's tenancy, which was temporarily closed between mid-March and early June 2020 due to the ongoing coronavirus pandemic, includes a variety of retail shops, restaurants and entertainment venues. The largest two tenants are both theaters and remain closed. The mall had strong sales performance pre-pandemic, with comparable in-line sales of $835 psf as of the TTM February 2020 sales report. Approximately 12% of the NRA is scheduled to expire in 2020, including the second largest tenant Saxe Theater (5% of NRA). According to the servicer, Saxe Theater, which had a lease expiration at the end of June 2020, has postponed renewal discussions due to the ongoing pandemic. The sponsor has also reportedly requested coronavirus relief. As of July 2020, the mall has partially re-opened with stores, restaurants and bars operating with limited hours. The property was 96.7% occupied as of April 2020. The next largest FLOC, The Outlet Shoppes at Atlanta (11.6%), is secured by a retail outlet center located in Woodstock, GA, approximately 30 miles north of Atlanta. The loan is sponsored by a joint venture between Horizon Group Properties and CBL & Associates Properties, Inc. The largest tenants include Saks Fifth Avenue OFF 5th, Nike Factory Store, Polo Ralph Lauren and Columbia Sportswear. Property occupancy declined to 86.9% as of June 2020 from 94.9% in April 2019 due to 10 tenants totaling approximately 9% of the NRA vacating at or prior to their scheduled lease expirations, including Dress Barn (1.9%), Charlotte Russe (1.5%) and Bass (1.5%). According to the sponsor's 2019 annual report, in-line tenant sales were $450 psf in 2019, compared to $436 psf in 2018, $425 psf in 2017 and $422 psf in 2016. Saks reported lower sales of $144 psf in 2019, down from $169 psf in 2018, $167 psf in 2017 and $172 psf in 2016. The servicer-reported YE 2019 NOI DSCR was 1.81x, compared with 1.74x at YE 2018. The mall re-opened in early May 2020 after being closed since March due to the coronavirus. The loan is scheduled to mature in November 2023. The next largest FLOC, Kings Crossing (4.1%), which is secured by a retail center located in Shreveport, LA, faces the upcoming lease rollover of its largest tenant and is on the servicer's watchlist for delinquent taxes, although debt service payments remain current. According to the March 2020 rent roll, leases comprising 19.7% of the property's NRA are scheduled to expire in 2020, mostly concentrated in the August 2020 lease expiration of PetSmart (14.6%). The servicer had previously stated that PetSmart was required to provide renewal notice by March 2020, but Fitch's inquiry for an update on the lease remains outstanding. Additionally, the Pier 1 (8%) location is expected to soon close as liquidation sales began in May 2020. The property was 100% occupied as of March 2020; occupancy will drop to approximately 92% after the closure of Pier 1. The borrower has also notified the servicer of coronavirus related hardships. The servicer-reported YE 2019 NOI DSCR was 1.80x, compared with 1.75x at YE 2018. The next largest FLOC, The Center at Stockton (1.8%), is secured by a retail center located in Stockton, CA where the second largest tenant, Fitness Evolution (12.7% of NRA; 20% of total base rent), vacated in 2019, ahead of its scheduled July 2025 lease expiration, which brought occupancy down to 87.3% as of March 2020 from 100% in December 2018. The servicer-reported YE 2019 NOI DSCR was 1.52x, compared with 1.51x at YE 2018. The loan's sponsor, Bon Aviv Holdings LLC, is also the sponsor for the specially serviced Park Place Shopping Center loan. The other four FLOCs outside of the top 15 (combined 2.3%) were flagged for delinquent payments, occupancy and cash flow declines or upcoming lease rollover. Specially Serviced Loans/Assets: All three of the specially serviced loans/assets (6.3%) are top 15 loans. The seventh largest loan in the pool, Park Place Shopping Center (2.7%), transferred to special servicing in June 2020 for imminent monetary default and the loan became 60 days delinquent in July 2020. The loan is secured by a retail center in Vallejo, CA that was previously anchored by a Raley's Supermarket before the location closed in June 2017. According to the special servicer, the borrower stated they are no longer able to come out of pocket to cover shortfalls and wanted to cooperatively turn the property over to the lender. The lender has engaged counsel and will proceed with pursuing foreclosure. Additionally, the property's largest tenant, 24 Hour Fitness (14.6% of NRA; 27% of total base rents; lease expiry in July 2023), filed bankruptcy and rejected the lease at the property in June 2020. Property occupancy would drop to 37% from 51.8% as of June 2020 without 24 Hour Fitness. The servicer-reported YE 2019 NOI DSCR was 0.98x, compared with 1.08x at YE 2018. The SpringHill Suites - Willow Grove, PA asset (1.9%) is a 155-room limited-service hotel located in Willow Grove, PA. The loan was transferred to special servicing in April 2017 for payment default and the asset became REO in August 2019. According to the special servicer, there are no disposition plans at this time and the asset manager will look to market the property for sale once the effects of the coronavirus pass. Property-level net cash flow as of YE 2019 had declined over 50% from the issuer's underwritten amount, due primarily to lower rates and occupancy, as well as increased expenses. The Holiday Inn Columbia loan (1.7%), secured by a 311-room full-service hotel located in Columbia, MO, was transferred to special servicing in June 2020 for imminent monetary default due to the coronavirus and was over 90 days delinquent as of July 2020. Property-level cash flow has been declining since 2017, with YE 2019 NOI down 9% from YE 2018 and 22% from the issuer's underwritten NOI, mostly due to lower occupancy and departmental revenue. Prior to its transfer, the loan had briefly been on the servicer's watchlist for deferred maintenance. Increased Credit Enhancement: As of the July 2020 distribution date, the pool's aggregate principal balance has paid down by 29.6% to $610 million from $867 million at issuance. Six loans (6.5%) have been defeased. The majority of the pool (49 loans; 84.4% of pool) is currently amortizing and six loans (15.6%) are full-term, interest-only. Alternative Loss Considerations: Fitch's analysis included an additional sensitivity scenario that factored in the paydown from the defeased collateral and applied higher loss severities on both The Outlet Shoppes at Atlanta and Park Place Shopping Center loans to reflect the potential for outsized losses. In addition to modeling a base case loss, Fitch applied a 15% loss severity on the maturity balance of The Outlet Shoppes at Atlanta loan and 75% on the current balance of the Park Place Shopping Center loan; the Negative Outlook revision on classes E and X-C reflect this scenario. Coronavirus Exposure; High Retail Concentration: Loans secured by retail, hotel and multifamily properties represent 59.6% (27 loans), 8.6% (six loans) and 2.5% (three loans), respectively. The retail loans have a weighted average NOI DSCR of 1.51x and can withstand an average 34% decline to NOI before DSCR falls below 1.00x. The hotel loans have a WA NOI DSCR of 1.98x and can withstand an average 49.4% decline to NOI before DSCR falls below 1.00x. The multifamily loans have a WA NOI DSCR of 1.38x and can withstand an average 27.6% decline to NOI before DSCR falls below 1.00x. The multifamily exposure includes one loan (Sooner Crossing; 0.4%) secured by a student housing property. Fitch applied additional coronavirus-related stresses on 13 retail loans (32.2%), four hotel loans (5.9%) and one multifamily loan (0.4%); these additional stresses contributed to the downgrade of class F, and while not directly contributing to the Rating Outlook revisions, did have an impact on the Negative Outlooks on classes E and X-C. Upcoming Maturities: All of the 55 remaining loans in the pool are scheduled to mature in 2023. RATING SENSITIVITIES The Stable Rating Outlooks on classes A-3 through D, PEZ, X-A and X-B reflect the overall stable performance of the majority of the pool and expected continued amortization, as well as the increased credit enhancement to the classes and senior position in the capital stack. The Negative Rating Outlooks on classes E and X-C reflect the potential for downgrade due to the performance concerns associated with the FLOCs, primarily The Outlet Shoppes at Atlanta and Park Place Shopping Center loans, as well as the concerns surrounding the ultimate impact of the coronavirus pandemic. 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, particularly on the FLOCs, coupled with additional paydown and/or defeasance. Upgrades to classes B, C and PEZ would likely occur with significant improvement in CE and/or defeasance and/or the stabilization to the properties impacted from the coronavirus pandemic. Upgrades of classes D and E are considered unlikely and would be limited based on the sensitivity to concentrations or the potential for future concentrations. Classes would not be upgraded above 'Asf' if there is a likelihood of interest shortfalls. The distressed class F is unlikely to be upgraded absent significant performance improvement on the FLOCs 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-3 through A-S are not likely due to the position in the capital structure, but may occur should interest shortfalls impact these classes. Downgrades to classes B and C are not expected but could occur if performance of the FLOCs continues to decline, should additionally loans transfer to special servicing and/or should loans susceptible to the coronavirus pandemic not stabilize. Downgrades to classes D and E would occur should loss expectations increase due to a continued decline in the performance of the FLOCs, an increase in specially serviced loans/assets or the disposition of a specially serviced loan/asset at a high loss. The Negative Rating Outlooks on classes E and X-C may be revised back to Stable if performance of the FLOCs improves and/or properties vulnerable to the coronavirus pandemic eventually stabilize. Class F could be further downgraded should further losses become more certain or be 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, classes with Negative Rating 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). CITIGROUP COMMERCIAL 2015-GC35: Fitch Cuts Class F Certs to CCCsf ----------------------------------------------------------------- Fitch Ratings has downgraded two classes, revised the Outlook to Negative for four classes and affirmed 13 classes for Citigroup Commercial Mortgage Trust 2015-GC35 Mortgage Pass-Through Certificates Series 2015-GC35. CGCMT 2015-GC35 - Class A-1 17324KAL2; LT AAAsf; Affirmed - Class A-2 17324KAM0; LT AAAsf; Affirmed - Class A-3 17324KAN8; LT AAAsf; Affirmed - Class A-4 17324KAP3; LT AAAsf; Affirmed - Class A-AB 17324KAQ1; LT AAAsf; Affirmed - Class A-S 17324KAR9; LT AAAsf; Affirmed - Class B 17324KAS7; LT AA-sf; Affirmed - Class C 17324KAT5; LT A-sf; Affirmed - Class D 17324KAU2; LT BBB-sf; Affirmed - Class E 17324KAA6; LT Bsf; Downgrade - Class F 17324KAC2; LT CCCsf; Downgrade - Class PEZ 17324KAY4; LT A-sf; Affirmed - Class X-A 17324KAV0; LT AAAsf; Affirmed - Class X-B 17324KAW8; LT AA-sf; Affirmed - Class X-D 17324KAX6; LT BBB-sf; Affirmed KEY RATING DRIVERS Coronavirus Exposure: The rating actions can be attributed to the social and market disruption caused by the effects of the coronavirus pandemic and related containment measures. Of particular concern is the underlying pool's exposure to retail and hotel property types. Two regional malls and five hotels are secured in the top 15 loans alone. Fitch expects negative economic impact to certain hotels and retail properties due to the recent and sudden reductions in travel and tourism, temporary property closures and lack of clarity on the potential duration of the pandemic. The pandemic has prompted the closure of several hotel properties in gateway cities, as well as malls, entertainment venues and individual stores. Those that have since reopened are likely to experience limited operations and reduced foot traffic. Increased Loss Expectations; High Concentration of Fitch Loans of Concern: While the majority of the loans in the pool continue to exhibit stable performance, loss expectations have increased primarily due to the increasing number of Fitch Loans of Concern. Five loans (7.7% of the pool) have been transferred to special servicing. Outside of the specially serviced loans, Fitch has identified 23 loans (54.8% of the pool) as FLOCs. There are 11 loans that are considered FLOCs within the top 15, primarily due to higher stresses applied to hotel and retail loans under the property-specific coronavirus NOI debt service coverage ratio stresses. The downgrades to classes E, F and the Negative Outlooks are driven by a combination of the property specific coronavirus stresses and declining property performance. The pool has a high concentration of hotels and retail with 23.4% hotel, 28.9% retail and 9.5% multifamily. The retail portion is further exacerbated due to two large malls, together making up 20.7% of the pool. Two hotel loans (The Westin Boston Waterfront, 6.9% of the pool balance, and The Doubletree Jersey City, 5.6%), two regional malls (Paramus Park Mall 11.3%, and South Plains Mall 9.4%), a specially serviced Florida retail property (Cortez Plaza East 1.3%) and two office buildings (750 Lexington Avenue 4.3% and Wilshire Catalina 2.5%) are the biggest contributors to loss expectations. There are three hotels that have transferred to special servicing due to the impact of the coronavirus pandemic: the Hammons Hotel Portfolio (2.9%) transferred in June 2020, the JW Marriott Santa Monica La Merigot (2.7%) transferred in April 2020 and Comfort Inn - Salem (0.3%), transferred in March 2020. The JW Marriot Santa Monica la Merigot matures in November 2020. The largest and second largest specially-serviced loans are both secured by hotel loans suffering from hardships due to the coronavirus pandemic, the Hammons Hotel Portfolio and the JW Marriott Santa Monica La Merigot. The Hammons Hotel Portfolio (2.9%) was transferred back to special servicing in June 2020 and became 90+ days delinquent in July 2020. The loan is secured by the fee and leasehold interests in seven hotels totaling 1,869 keys under the Marriott or Hilton flags located across seven states. The borrower notified the master servicer of coronavirus-related hardships. The servicer-reported NOI DSCR was 2.03x for the TTM March 2020 period, compared with 2.09x at YE 2019 and 2.13x at YE 2018. The loan previously spent nearly two years in special servicing due to borrower bankruptcy before being returned to the master servicer in July 2019. The JW Marriott Santo Monica La Merigot (2.7%) is secured by a six-story, 175-room, full-service, luxury hotel located in Santa Monica, California one block east of the Pacific Ocean and just two blocks from the Santa Monica Pier, built in 1999 and renovated in 2014. The loan, which matures in November 2020, was transferred in April due to issues related to the coronavirus. Despite the pandemic-related drop in performance, the hotel has continued to outperform its competitive set as of its June YTD STR report. The third largest specially serviced loan, 79 Stirling (0.5% of the pool), is secured by an office property located in Somerset, New Jersey; the loan transferred to special servicing in March, 2020. The loan, which was scheduled to mature in August 2020, transferred to special servicing after many of the tenants were closed due to the coronavirus pandemic. The borrower is working to obtain refinancing proceeds. The fourth largest specially serviced loan, Cortez Plaza East (1.3%), transferred to special servicing in June 2018 due to payment default. The loan, which is scheduled to mature in November 2020, is secured by 176,164 sf retail property located in Bradenton, FL. The loan was accelerated in July 2018 after significant erosion occurred at the property. In July 2018, a receiver was put in place and the loan is in foreclosure. The special servicer is currently reviewing bids to remediate the erosion damage and is working to address an outstanding contractor claim. The most recent appraisal provided by the special servicer indicates that losses are likely. The fifth largest specially serviced loan, Comfort Inn Salem (0.3% of the pool), is secured by a 78-key hotel located in Salem, VA. The loan transferred in March 2020 due to hardships caused by the ongoing pandemic. The property has had a material drop in both occupancy and revenue since the pandemic began. The Special Servicer has approved consent for a PPP loan and is currently considering entering into a maximum 90-day forbearance agreement with the Borrower during which the Noteholder will forbear from pursuing remedies and from declaring a DSCR cash management trigger. The Borrower will be required to report and turn over all NOI, if applicable, during the forbearance period. The forbearance agreement will likely allow for operating shortfalls to be paid from reserves and either defer, pay from reserves or some combination of both, the scheduled debt service payments during the forbearance term. Outside of the specially serviced loans, the two largest FLOCs, the, Paramus Park Mall (11.3% of the deal) and South Plains Mall (9.4% of the deal), are both secured by regional indoor malls. The Paramus Park Mall is a regional mall located in Paramus, New Jersey, anchored by non-collateral Macys and Stew Leonards, which took over the vacant space previously occupied by Sears. Occupancy at the mall has dropped from 92% in March 2019 to 83% in March 2020. While the 2019 EGI dropped 9.2%, the 2019 increase in NOI was driven primarily by a $1.4 million decrease in TIs. The South Plains Mall is a regional Mall in Lubbock, Texas which is anchored by Dillards and JC Penney (not currently on JC Penney's closure list). The South Plains Mall also has a non-collateral Sears which went dark in 2018 and a movie theater. The sponsor is working on a redevelopment plan to re-tenant the Sears space. While both loans meet the property specific coronavirus NOI DSCR tolerance thresholds, additional stresses were applied to both malls due to performance concerns related to the ongoing pandemic. Additionally, a 25% sensitivity analysis was applied to both loans to address the potential for outsized losses which contributed to the Negative Outlook revisions of classes A-S, B, X-A and X-B. The Westin Boston Waterfront (6.9%) and the Doubletree Jersey City (5.6%) are the two largest hotel FLOCs and both loans failed to meet the DSCR hurdle required to avoid the coronavirus modeled stress. The Westin Boston Waterfront is a 793-room full-service hotel located in Boston's Seaport District, directly connected to the Boston Convention and Exhibition Center and approximately three miles from Logan International Airport. 2019 NOI DSCR of 1.93x was up slightly from the 2018 NOI DSCR of 1.71x. The Doubletree Jersey City is a 198-key, full-service hotel located in Jersey City, NJ developed by the sponsor in 1998. 2019 NOI DSCR of 1.67x was up slightly from the 2018 NOI DSCR of 1.51x. While property performance had improved, both loans failed to meet the property specific coronavirus tolerance thresholds; therefore, additional stresses were applied to both loans to address expected declines in performance. The fifth largest FLOC is 750 Lexington Avenue, a 382,256 sf Class A office and retail property located in Manhattan's Plaza District that has experienced significant cash flow declines since issuance and has exposure to WeWork as the largest tenant. The loan has been on the master servicer's watchlist since October 2016 due to declining occupancy and DSCR following the departure of the largest tenant, Locke Lord (33.3% of NRA), at its June 2016 lease expiration. Although a significant portion of the former Locke Lord space was re-leased to WeWork (23% of NRA) starting in March 2018, property occupancy continued to fluctuate. Occupancy declined to 82% as of July 2019 from 89% in June 2018 after several tenants vacated at their scheduled lease expirations between August 2018 and April 2019, which was partially offset by new leasing activity with smaller tenants and the expansion of an existing tenant. The WeWork lease includes two portions, both at below-market rents and expiring in March 2035, with the tenant receiving a total of 32 months of free rent spread over its lease term. The first portion of the lease (82,500 sf; 23% of NRA) commenced in March 2018, which helped to drive occupancy up to 89.2% in June 2018 from 66% in June 2017. The second portion of the lease, which includes an additional 30,775 sf (8.6% of NRA) on the 10th and 11th floors, was expected to commence in February 2020. According to servicer updates as of mid-June 2020, the borrower is in the process of delivering the space after demolition was halted as a result of coronavirus restrictions. Upon commencement of the second portion of the lease, WeWork will occupy a total of 113,275 sf (31.6% of NRA) at the property and property occupancy would improve to 87%. Fitch remains concerned with future property performance given the high coworking tenant exposure due to the impact of the coronavirus pandemic. The loan is expected to commence amortization in November 2020. The sixth largest FLOC is Wilshire Catalina (2.5%), a loan secured by an 226,165-sf office building in Los Angeles, CA which matures in November 2020. The property's occupancy had slightly improved to 61.1% as of March 2020 from 59.2% at YE 2018 but remains below 72.2% at YE 2016. The most recent NOI DSCR as of YE 2019 was 1.15x compared to 1.57x at YE 2018 (amortization began in 2018). Per the servicer provided rent roll, 11.8% of the NRA for the property's tenants have expired, including Chase Executive Suite, a borrower related tenant (7.5% of the NRA; 11/2019 expiry). The seventh largest FLOC, Chandler Forum (2.1% of the pool), is secured by a 149,863-sf office building located in Chandler, AZ. The property is fully leased to AmeriCredit Financial Services, which merged with General Motors Financial Company in 2010. The subject is one of four customer service centers where GM Financial conducts its loan servicing and collections programs. The subject location services the entire western US. Chandler Forum was built-to-suit for AmeriCredit Financial Services in 2003. AmeriCredit, now GM Financial (BBB-/Outlook Stable), leases 100% of the NRA with a lease expiration through February 2022. Cash sweep will be in place if not renewed by August 2020, if GM Financial credit rating falls two levels below rating as of closing (BBB-). The loan is considered a FLOC due to its single tenant exposure and lack of leasing updates. As part of Fitch's additional stresses were applied. The eighth largest FLOC, Commerce Center (2.0% of the pool), is secured by a 156,412-sf anchored retail center located in Brunswick, NJ. While property occupancy has continued to exhibit stable performance, the collateral is anchored by Regal Cinemas. The loan also failed to meet the property specific coronavirus NOI DSCR tolerance threshold; therefore, additional stresses were applied to address expected declines in performance. The remaining FLOCs are considered FLOCs due to either failing to meet the property specific coronavirus NOI DSCR tolerance thresholds, significant upcoming rollover concerns and/or declining performance. Limited Change to Credit Enhancement: As of the July 2020 remittance, the pool's aggregate balance had been reduced by 3.6% to $1.07 billion from $1.1 billion at issuance. Since Fitch's last rating action, one loan, which was previously defeased totaling $9.6 million, has paid off in full. Eight loans (4.6% of the pool) are defeased. Interest shortfalls totaling $145k are currently impacting the non-rated class H certificates. Eight loans (38.9% of the pool) are interest only for the full loan term, including five loans (37.6% of the pool) in the top 15. Twenty-two loans (34.9% of the pool) have partial IO payments, including six loans (20.0% of the pool) in the top 15. Approximately 15 of the 22 loans (13.8% of the pool) have exited their IO periods and are now amortizing. The remaining loans in the pool are amortizing. Based on the pool's scheduled balance at maturity, the pool is only expected to pay down by 7.7%. Coronavirus Exposure: Loans secured by retail, hotel and multifamily properties represent 28.9% (18 loans), 23.4% (eight loans) and 9.5% (eight loans). Fitch applied additional stresses related to the coronavirus to eight hotel loans (23.0%) and six retail properties (4.0%). Upcoming Maturities: Seven loans (9.4% of the pool) mature in 2020, including three in special servicing. RATING SENSITIVITIES The Outlooks on classes A-2 through A-AB remain Stable. The Outlook on classes A-S, B, X-A and X-B have been revised to Negative from Stable. The Outlooks on classes C through E and classes X-D and PEZ remain Negative. Factors that Could, Individually or Collectively, Lead to a Positive Rating Action/Upgrade: Sensitivity factors that could lead to upgrades include significantly improved performance, coupled with additional paydown and/or defeasance. An upgrade of classes B and C could occur with stabilization of the FLOCs, but would be limited as concentrations increase. Classes would not be upgraded above 'Asf' if there is likelihood for interest shortfalls. Upgrades of classes D and E would only occur with significant improvement in CE and stabilization of the FLOCs. An upgrade to class F is not likely unless the performance of the FLOCs improves, senior classes pay off and if performance of the remaining pool is stable. 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/assets. Downgrades to classes A-2 through A-AB are not likely due to defeasance and their position in the capital structure, but may occur if interest shortfalls occur. A downgrade to class A-S may occur if additional loans default or loss expectations increase. Downgrades to classes B and C may occur if loans in special servicing remain unresolved or if performance of the FLOCs continues to decline. Downgrades to classes D and E may occur if FLOC performance does not stabilize. Downgrades to the distressed classes are expected as losses are realized. In addition to its baseline scenario, Fitch envisions a downside scenario where the pandemic is prolonged beyond 2021. Should this scenario play out, classes 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. 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). COMM 2014-CCRE15: Moody's Lowers Rating on Class F Debt to B3 ------------------------------------------------------------- Moody's Investors Service has affirmed the ratings on twelve classes and downgraded the rating on one class in COMM 2014-CCRE15 Mortgage Trust as follows: Cl. A-2, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf) Cl. A-3, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf) Cl. A-4, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf) Cl. A-M, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf) Cl. A-SB, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf) Cl. B, Affirmed Aa3 (sf); previously on Nov 30, 2018 Affirmed Aa3 (sf) Cl. C, Affirmed A3 (sf); previously on Nov 30, 2018 Affirmed A3 (sf) Cl. D, Affirmed Baa3 (sf); previously on Nov 30, 2018 Affirmed Baa3 (sf) Cl. E, Affirmed Ba2 (sf); previously on Nov 30, 2018 Affirmed Ba2 (sf) Cl. F, Downgraded to B3 (sf); previously on Nov 30, 2018 Affirmed B2 (sf) Cl. PEZ**, Affirmed A1 (sf); previously on Nov 30, 2018 Affirmed A1 (sf) Cl. X-A*, Affirmed Aaa (sf); previously on Nov 30, 2018 Affirmed Aaa (sf) Cl. X-B*, Affirmed Baa1 (sf); previously on Nov 30, 2018 Affirmed Baa1 (sf) * Reflects interest-only classes ** Reflects exchangeable classes RATINGS RATIONALE The ratings on nine 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 rating on one P&I class was downgraded due to higher realized and anticipated losses from specially serviced and troubled loans. The ratings on two interest-only classes, Class X-A and Class X-B were affirmed based on the credit quality of the referenced classes. The rating on the exchangeable class, Class PEZ was affirmed due to the credit quality of the referenced exchangeable classes. 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 commercial real estate from the collapse in 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. 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. Moody's rating action reflects a base expected loss of 4.2% of the current pooled balance, compared to 2.2% at Moody's last review. Moody's base expected loss plus realized losses is now 4.4% of the original pooled balance, compared to 3.2% 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 exchangeable classes and interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020. DEAL PERFORMANCE As of the July 10, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 29% to $719.0 million from $1.0 billion at securitization. The certificates are collateralized by 34 mortgage loans ranging in size from less than 1% to 14.8% of the pool, with the top ten loans (excluding defeasance) constituting 69.7% of the pool. One loan, constituting 11.8% of the pool, has an investment-grade structured credit assessment. Six loans, constituting 10.0% 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, the same as at Moody's last review. As of the July 2020 remittance report, loans representing 89% were current or within their grace period on their debt service payments, 1% were beyond their grace period but less than 30 days delinquent, 6% were between 60 -- 89 days delinquent, and 4% were 90 days or more delinquent. Eleven loans, constituting 30% of the pool, are on the master servicer's watchlist, of which six loans, representing 13% 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, resulting in an aggregate realized loss of $13.5 million (for an average loss severity of 61%). Three loans, constituting 5% of the pool, are currently in special servicing. All of the specially serviced loans have transferred to special servicing since March 2020. The largest specially serviced loan is the River Falls Shopping Center Loan ($16.1 million -- 2.2% of the pool), which is secured by an approximately 288,000 square feet portion of an 873,000 SF retail center located in Clarksville, Indiana. The property was originally constructed in 1990 as an indoor regional mall, redeveloped into a power center in 2005, and was renovated in 2013. The three largest tenants are Old Time Pottery (30% of net rentable area (NRA)), Dick's Sporting Goods (17% of NRA), and Gordmans (17% of NRA). Old Time Pottery and Stage Stores (the parent company of Gordmans) have recently filed for Chapter 11 bankruptcy. As of March 2020, the property was 100% occupied. The borrower requested relief due to the coronavirus outbreak and the loan was transferred to special servicing in May 2020 for imminent monetary default at the borrower's request. The loan was last paid through its April 2020 payment. The second largest specially serviced loan is the Hilton Garden Inn Springfield OR Loan ($12.6 million -- 1.8% of the pool), which is secured by 149-room, five-story, select-service hotel located in Springfield, Oregon. The property is located at the intersection of Interstate 5 and Highway 569, and less than a mile from the PeaceHealth Sacred Heart Medical Center at Riverbend. The borrower requested relief due to the coronavirus outbreak in May 2020 and the loan was transferred to special servicing in June 2020 for imminent monetary default at the borrower's request. The loan was last paid through its March 2020 payment. The third largest specially serviced loan is the Wyndham Hotel Oklahoma City Loan ($7.3 million -- 1.0% of the pool), which is secured by a 244-room, two-story, select-service hotel located in Oklahoma City, Oklahoma, approximately five miles from downtown Oklahoma City and two miles from Will Rogers World Airport. The loan has been on the watchlist since November 2017 due to low DSCR. The NCF DSCR has been below 1.00X since 2016. The loan was transferred to special servicing in April 2020 for imminent monetary default and the borrower has indicated their intention of transitioning the property to the lender. The loan was last paid through its March 2020 payment and went into foreclosure status in May 2020. Moody's has also assumed a high default probability for two poorly performing loans, constituting 3.7% of the pool, and has estimated an aggregate loss of $13.3 million (a 27% expected loss on average) from these specially serviced and troubled loans. The largest troubled loan is the Best Western Plus Hawthorne Terrace Loan ($15.2 million -- 2.1% of the pool), which is secured by an 83-room, limited-service hotel located in Chicago, Illinois. The 2019 NOI declined approximately 28% from 2018 and was 23% lower than in 2014. The loan has been on the watchlist since May 2020 for borrower relief request and was last paid through its April 2020 payment. The second largest troubled loan is the Homewood Suites Lafayette LA Loan ($11.7 million -- 1.6% of the pool), which is secured by a 129-room, extended-stay hotel located in Lafayette, Louisiana. Property performance has been declining since 2014 as a result of decreased revenue. A mandated franchise renovation was completed in late 2019 which impacted occupancy in its duration. A cash trap was active in January 2020 due to the NCF DCSR dropping below 1.20X. The loan has been on the watchlist since June 2020 for borrower relief request and is current through its July 2020 payment. Moody's received full year 2019 operating results for 100% of the pool, and partial year 2020 operating results for 55% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 109%, compared to 106% 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 15% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.4%. Moody's actual and stressed conduit DSCRs are 1.29X and 0.96X, respectively, compared to 1.39X and 0.99X 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 625 Madison Avenue Loan ($84.9 million -- 11.8% of the pool), which represents a pari-passu portion of a $194.8 million mortgage loan. The property was also encumbered by a $195.0 million mezzanine debt at closing. The loan is secured by the fee interest in a 0.81-acre parcel of land located at 625 Madison Avenue between East 58th and East 59th Street in New York City, New York. The fee interest is subject to a ground lease pursuant to which the ground tenant constructed, developed and owns the improvements and the ground lease payment is expected to reset in June 2022. The non-collateral improvements consist of a 17-story, mixed-use building with approximately 38,000 SF of ground and second floor retail space and approximately 525,000 SF of office space. The loan was structured with an anticipated repayment date in December 2018 and has final maturity date in December 2026. Moody's structured credit assessment is aa2 (sca.pd). The top three conduit loans represent 36.0% of the pool balance. The largest loan is the Google and Amazon Office Portfolio Loan ($106.3 million -- 14.8% of the pool), which represents a pari-passu portion of a $436.9 million mortgage loan. The property was also encumbered by a $67.8 million mezzanine debt at closing. The loan is secured by an office portfolio totaling approximately 1.1 million SF located in Sunnyvale, California. The Google campus consists of four, four-story Class A office buildings (Technology Corners Property) totaling approximately 700,000 SF, with is a part of a larger 949,000 SF office campus known as Technology Corners. The A2Z Development (subsidiary of Amazon) leases an approximately 357,000 SF, eight-story, Class A office building (Moffett Towers Building D), is part of a larger 2.0 million SF campus known as the Moffett Towers. A2Z Development uses its space for design and product development for the Kindle e-reader. Both tenants have lease expirations in 2024. After an initial 48-month interest-only period, the loan has amortized 3.4% since securitization. Moody's LTV and stressed DSCR are 108% and 0.94X, respectively, compared to 111% and 0.92X at the last review. The second largest loan is the AMC Portfolio Pool I Loan ($84.1 million -- 11.7% of the pool), which is secured by seven manufactured housing communities across Texas and Michigan. The communities were built between 1968 and 1998 and contain 2,004 pads in total. Texas accounts for the largest concentration in the portfolio with three communities located in the Austin MSA and two in the Fort Worth MSA for a total of 1,637 pads. As of March 2020, the portfolio was 97% occupied compared to 92% in June 2018 and 94% at securitization. After an initial 47-month interest-only period, the loan has amortized 3.8% since securitization. Moody's LTV and stressed DSCR are 114% and 0.84X, respectively, compared to 117% and 0.82X at the last review. The third largest loan is the 25 West 45th Street Loan ($68.5 million -- 9.5% of the pool), which is secured by an approximately 185,000 SF, 17-story, Class-B, office building located on West 45th street between 5th Avenue and 6th Avenue in New York City, New York. The ground floor consists of approximately 16,500 SF of retail space. The largest tenant, WeWork (13% of NRA), sign two 15-year leases at the property in 2019 with rent commencing in the second quarter of 2020. The second largest tenant, Crossover Health Management (8% of NRA), has a lease expiration in 2029 with rent expected to commence in the second quarter of 2020. As of March 2020, the property was 87% occupied compared to 72% in 2018 and 95% at securitization. The loan has been on the watchlist since November 2019 for low DSCR and decrease in occupancy. In 2018, Tenants Broadway Video Group (5% of NRA) vacated at lease expiration and Turnaround for Children, downsized their presence at the building from 9% of NRA to 6% of NRA. After an initial 60-month interest-only period, the loan has amortized 2.2% since securitization. Moody's LTV and stressed DSCR are 137% and 0.71X, respectively, compared to 122% and 0.80X at the last review. CSAIL MORTGAGE 2015-C4: Fitch Affirms B- Rating on Class X-G Certs ------------------------------------------------------------------ Fitch Ratings has affirmed 16 classes of CSAIL 2015-C4 Commercial Mortgage Trust commercial mortgage pass-through certificates series 2015-C4. In addition, Fitch has maintained the Negative Rating Outlook on class G and revised the Outlook on class X-G to Negative from Stable. CSAIL 2015-C4 - Class A-2 12635RAV0; LT AAAsf; Affirmed - Class A-3 12635RAW8; LT AAAsf; Affirmed - Class A-4 12635RAX6; LT AAAsf; Affirmed - Class A-S 12635RBB3; LT AAAsf; Affirmed - Class A-SB 12635RAY4; LT AAAsf; Affirmed - Class B 12635RBC1; LT AA-sf; Affirmed - Class C 12635RBD9; LT A-sf; Affirmed - Class D 12635RBE7; LT BBBsf; Affirmed - Class E 12635RBF4; LT BBB-sf; Affirmed - Class F 12635RAL2; LT BB-sf; Affirmed - Class G 12635RAN8; LT B-sf; Affirmed - Class X-A 12635RAZ1; LT AAAsf; Affirmed - Class X-B 12635RBA5; LT AA-sf; Affirmed - Class X-D 12635RAA6; LT BBB-sf; Affirmed - Class X-F 12635RAE8; LT BB-sf; Affirmed - Class X-G 12635RAG3; LT B-sf; Affirmed 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. Thirty loans (30.9% of pool), including three loans (3.8%) in special servicing, were designated Fitch Loans of Concern. Twenty-two (25.3%) were designated FLOCs primarily due to exposure to the coronavirus pandemic in the near term. Specially Serviced Loans: The largest delinquent loan, 120 NE 39th Street Miami (1.9%), transferred to special servicing due to payment default in May 2020, again in July 2020 and is now 30 days delinquent. The loan is secured by a 5,607-sf single-tenant retail property in Miami, FL that is 100% leased (NNN) to Stefano Ricci (an Italian luxury menswear retailer with a concentrated presence in Europe and Asia), through February 2026. At YE 2019, servicer-reported NOI DSCR was 1.76x. Cheyenne Pointe (1.6%) is secured by a 93,901-sf grocery-anchored shopping center in North Las Vegas, NV. The grocery anchor, Marianna's, leases 32% NRA through October 2027. The loan is 30 days delinquent as of July 2020. The property has experienced cash flow declines due to low occupancy from tenant vacancies. At YE 2019, occupancy and servicer-reported NOI DSCR were 70% and 1.19x, respectively. Shoppes at Center Street (0.3%), secured by a 25,801-sf neighborhood retail center Beebe, AR (40 miles NE of Little Rock), transferred to special servicing in June 2019 for imminent default. Hibbert Sports (previously 18.0% NRA) exercised its early termination option due to failure to meet its sales threshold and vacated in March 2018. Funds in cash management account were used to bring loan current through April 2020. Lender engaged counsel. Judicial foreclosure has been filed, and a receiver was appointed in October 2019. The receiver has launched a leasing and marketing campaign, and purchase offers are being considered/negotiated. As of September 2019, occupancy was 82%, and as of the YTD September 2019, servicer-reported NOI DSCR was 1.08x. Minimal Change to Credit Enhancement: There has been minimal change to credit enhancement since issuance. As of the July 2020 distribution date, the pool's aggregate balance has been reduced by 4.7% to $895.5 million from $939.6 million at issuance. Eighty-six of the original 87 loans remain in the pool. One loan with a $5.3 million balance at disposition was prepaid with yield maintenance since Fitch's prior review. Eight loans (7.4%) are fully defeased. Four loans (16.4%) are full-term, interest-only, and 42 loans (52.4%) have a partial-term, interest-only component of which 35 have begun to amortize. Pool Concentration: The top 10 loans comprise 38.9% of the pool. Loan maturities are concentrated in 2025 (97.9%). Based on property type, the largest concentrations are retail at 31.9%, hotel at 22.2% and multifamily at 20.0%. The largest loan, Fairmont Orchid (12.6%), is secured by a 540 key full-service hotel on Hawaii's Big Island that is part of the Mauna Lani Resort. Hotel performance has improved since issuance, primarily due to an increase in RevPAR. As of the TTM ended March 2020, occupancy and servicer-reported NOI DSCR were 74% and 4.93x, respectively. Also, per STR and for the TTM ended March 2020, the hotel had a RevPAR penetration rate of 115.6%. The loan continues to remain current during the ongoing coronavirus pandemic. Exposure to Coronavirus Pandemic: Seven loans (22.2%) are secured by hotel properties. The weighted average NOI DSCR for all non-defeased hotel loans is 4.05x. These hotel loans could sustain a weighted average decline in NOI of 76% before DSCR falls below 1.00x. Thirty-two loans (31.9%) are secured by retail properties. The weighted average NOI DSCR for all non-defeased retail loans is 1.64x. These retail loans could sustain a weighted average decline in NOI of 40% before DSCR falls below 1.00x. Additional coronavirus specific base case stresses were applied to four hotel loans (4.2%) including Aloft Hotel - Downtown Denver (2.5%), 23 retail loans (24.1%) and two multifamily/student housing loans (2.0%). These additional stresses contributed to the Negative Outlooks on classes G and X-G. RATING SENSITIVITIES The Stable Outlooks on classes A-1 through F reflect the overall stable performance of the pool and expected continued amortization. The Negative Outlooks on classes G and X-G 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. Upgrades of classes D and E 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 a likelihood for interest shortfalls. Upgrades of classes F and G are 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 class is 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 through G 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 Negative Outlooks or those with Negative Outlooks would 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 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). CSMC TRUST 2020-SPT1: Fitch Gives Bsf Rating on Class B-2 Notes --------------------------------------------------------------- Fitch Ratings has assigned ratings to the residential mortgage-backed notes to be issued by CSMC 2020-SPT1 Trust. CSMC 2020-SPT1 - Class A-1; LT AAAsf New Rating - Class A-2; LT AAsf New Rating - Class A-3; LT Asf New Rating - Class AIOS; 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 - Class PT; LT NRsf New Rating - Class R; LT NRsf New Rating - Class XS; LT NRsf New Rating TRANSACTION SUMMARY The CSMC 2020-SPT1 mortgage pool consists of 1,679 mortgage loans. Of the mortgage loans, 1,668 are eligible to be included in the REMIC, and 11 are not eligible and will be held in a mortgage loan reserve account. The loans in the pool were originated by Sprout Mortgage, LLC and serviced by Select Portfolio Servicing, Inc. mortgage, while for the remaining 20% the Ability-to-Repay rule does not apply. 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 outlook for U.S. GDP is currently a 5.6% decline for 2020, down from 1.7% growth for 2019. Fitch's downside scenario expects 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' ratings and below. Non-Prime Credit Quality (Mixed): The pool was 100% originated by Sprout, which Fitch reviewed as an 'Average' originator of residential mortgages. The collateral consists of five-year ARM and 30-year FRM fully amortizing loans, seasoned approximately seven months in aggregate. The borrowers in this pool have strong credit profiles (730 FICO scores) and relatively low leverage (76.3% sLTV). A total of 208 loans are over $1 million, and the largest is $5.95 million. The pool consists of over 80% Non-QMs that do not meet Appendix Q standards. Documentation Standards (Negative): The pool consists of only 20.5% of borrowers underwritten to traditional tax returns, and almost 55% of the borrowers are underwritten to personal and business bank statements. Bank statement programs are not consistent with Appendix Q standards and Fitch's view of a full documentation program. These loans were applied a 1.4 multiple as a penalty to account for the higher default risk associated with non-full doc programs. In addition to the full doc and bank statement loans, the pool consists of other loan programs such as asset depletion, CPA letters, written verification of employment, No Ratio and investor property loans underwritten to a debt service coverage ratio. DSCR/No Ratio Loan Concentration (Negative): The collateral consists of a higher concentration of DSCR and No Ratio loans. The total concentration of DSCR (12.5%) and No Ratio (4.0%) loans is 16.5%. Due to the observed performance of standalone DSCR-backed RMBS through the pandemic, Fitch believes large concentrations of these loans add risk to the pool and assumed 100% loss for a portion of these loans. Geographic Concentration (Negative): Approximately 42% of the pool is concentrated in California with relatively low MSA concentration. The largest MSA concentration is in Los Angeles (26%) followed by New York (15.8%) and Miami (8.5%). The top three MSAs account for 50.3% of the pool. As a result, there was a 1.07x adjustment for geographic concentration. Increased Delinquencies Related to Coronavirus (Negative): Early in the pandemic, these loans were serviced by another servicer. The prior servicer provided deferrals to 35% of the borrowers. Through the pandemic, the mortgages were subsequently transferred to SPS. Either as a result of the servicer transfer or greater economic stability, 8% remain on a forbearance or deferral plan with SPS. Most of the borrowers previously deferred made their post-deferral scheduled payments (19%) and 8% are not on a deferral plan and are currently delinquent. Separately, 5% of borrowers are delinquent and never received a forbearance or deferral plan. For Fitch's analysis, all loans that are currently non-cash flowing by means of deferral or delinquency were treated as delinquent. In total, 22% or 302 loans are being treated as delinquent in Fitch's analysis. Early indications of July payment behavior show that 116 have already made their payments in July. Additionally, almost 60% of the loans have never been in forbearance or deferral and are current. Borrowers previously on a deferral plan, but now cash-flowing, were treated similarly to those with clean pay histories and did not receive a penalty for prior missed payments. Lastly, due to the timing of the servicing transfer, nine loans made their mortgage payment to their prior servicer but made their July payments to SPS; these loans were treated as current by Fitch. Non-REMIC Reserve Account (Positive): The mortgage loans consist of 1,688 eligible to be included in the REMIC, whereas 11 loans are not eligible and will be held in a mortgage loan reserve account. Due to REMIC implications related to delinquencies, the mortgage loans were separated out from the REMIC. The bonds are sized off only for the REMIC loans, and the other loans will serve as a form of credit enhancement from the reserve account. The extra enhancement only exists so long as the reserve account mortgage loans remain in the deal, which is subject to prepays, losses, or repurchases. Fitch assumed a 100% loss on these 11 loans, and, thus, no credit was given to the additional CE provided by these 11 loans. Sequential-Pay Structure (Positive): Unlike most non-prime or Non-QM transactions, 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 reallocate principal to pay interest on the 'AAAsf'- and 'AAsf'-rated notes prior to other principal distributions is highly supportive of timely interest payments to those classes. This structure is highly beneficial to the 'AAAsf'-rated notes due to the lack of leakage to more subordinate bonds, compared to modified-sequential structures. Payment Forbearance Assumptions Due to Coronavirus (Negative): The outbreak of coronavirus and widespread containment efforts in the U.S. have 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. Six-Month Servicer Advances (Mixed): Advances of delinquent principal and interest will be made on the REMIC mortgage loans for the first 180 days of delinquency to the extent such advances are deemed recoverable. To account for servicers recouping advances at liquidation, Fitch included advances in its loss severity analysis. However, to account for the risk of deferrals where the servicer moves the payment due date forward and does not advance on non-cash flowing borrowers, Fitch assumed no-advancing in its cash flow analysis for the life of the transaction. As P&I advances are intended to provide liquidity to the rated notes if borrowers are deferred, the lack of advancing during a deferral period could result in temporary interest shortfalls to the lowest ranked classes as principal can be used to pay interest to the A-1 and A-2 classes. There were no interest shortfalls to the most senior classes under this scenario. Excess Cash Flow (Positive): The transaction benefits from a material amount of excess cash flow that provides benefit to the rated notes before being paid out to class X. The excess is available to pay timely interest and protect against realized losses resulting in a CE amount less than Fitch's loss expectations. Fitch stressed the available excess cash flow with its payment forbearance assumptions of 40% delinquency for six months and no advancing scenario. To the extent that the collateral weighted average coupon and corresponding excess is reduced through a rate modification, Fitch would view the impact as credit neutral, as the modification would reduce the borrower's probability of default, resulting in a lower loss expectation. Low Operational Risk (Positive): Operational risk is well controlled for this transaction. Fitch has reviewed the Sprout Mortgage, LLC mortgage origination platform, which originated 100% of the loans in the transaction pool. Sprout has industry-standard risk controls and is assessed by Fitch as an 'Average' originator. Select Portfolio Servicing, Inc., rated by Fitch at 'RPS1-', is the named servicer for 100% of the transaction pool. Fitch decreased its loss expectations at the 'AAAsf' rating stress by 266bps to reflect the counterparties involved in the transaction. The issuer is also retaining at least 5% of each class of bonds to ensure an alignment of interest between the issuer and investors. Tier 2 R&W Framework (Negative): Sprout Mortgage, LLC and MFA Financial, Inc. are both 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 2 as it contains small variations to Fitch's loan-level R&Ws and does not have an automatic breach review trigger outside of a realized loss due specifically attributed to the ATR rule. In addition to the framework, Sprout and MFA are non-investment-grade counterparties, which may increase the risk of each R&W provider not being able to satisfy future repurchase obligations during times of financial stress. Fitch increased its loss expectations 170bps at the 'AAAsf' rating category to reflect the Tier 2 framework and non-investment-grade counterparty strength. Third-Party Due Diligence Review (Positive): Third-party due diligence was performed on 100% of loans in the transaction by SitusAMC and EdgeMac. SitusAMC is assessed by Fitch as 'Acceptable - Tier 1' and EdgeMac is assessed as 'Acceptable - Tier 3'. A total of 100% of the loans received a final grade of 'A' or 'B', which indicates strong origination processes with no presence of material defects. Approximately 66% 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 37bps. 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%. 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 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 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 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. 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 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 part of the rating process 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, assessed by Fitch as 'Acceptable - Tier 1' third-party review firm, 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." Fitch also used 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. 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). CSMC TRUST 2020-SPT1: Fitch to Rate Class B-2 Notes 'B(EXP)' ------------------------------------------------------------ Fitch Ratings expects to rate the residential mortgage-backed notes to be issued by CSMC 2020-SPT1 Trust. CSMC 2020-SPT1 - Class A-1; LT AAA(EXP)sf Expected Rating - Class A-2; LT AA(EXP)sf Expected Rating - Class A-3; LT A(EXP)sf Expected Rating - Class AIOS; LT NR(EXP)sf Expected Rating - Class B-1; LT BB(EXP)sf Expected Rating - Class B-2; LT B(EXP)sf Expected Rating - Class B-3; LT NR(EXP)sf Expected Rating - Class M-1; LT BBB(EXP)sf Expected Rating - Class PT; LT NR(EXP)sf Expected Rating - Class R; LT NR(EXP)sf Expected Rating - Class XS; LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY The CSMC 2020-SPT1 mortgage pool consists of 1,679 mortgage loans. Of the mortgage loans, 1,668 are eligible to be included in the REMIC, and 11 are not eligible and will be held in a mortgage loan reserve account. The loans in the pool were originated by Sprout Mortgage, LLC and serviced by Select Portfolio Servicing, Inc. Approximately 80% of the pool is designated as non-qualified mortgage, while for the remaining 20% the Ability-to-Repay rule does not apply. 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. Its baseline outlook for U.S. GDP is currently a 5.6% decline for 2020, down from 1.7% growth for 2019. Fitch's downside scenario expects 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' ratings and below. Non-Prime Credit Quality (Mixed): The pool was 100% originated by Sprout, which Fitch reviewed as an 'Average' originator of residential mortgages. The collateral consists of five-year ARM and 30-year FRM fully amortizing loans, seasoned approximately seven months in aggregate. The borrowers in this pool have strong credit profiles (730 FICO scores) and relatively low leverage (76.3% sLTV). 208 loans are over $1 million, and the largest is $5.95 million. The pool consists of over 80% Non-QMs that do not meet Appendix Q standards. Documentation Standards (Negative): The pool consists of only 20.5% of borrowers underwritten to traditional tax returns, and almost 55% of the borrowers are underwritten to personal and business bank statements. Bank statement programs are not consistent with Appendix Q standards and Fitch's view of a full documentation program. These loans were applied a 1.4 multiple as penalty to account for the higher default risk associated with non-full doc programs. In addition to the full doc and bank statement loans, the pool consists of other loan programs such as asset depletion, CPA letters, written verification of employment, No Ratio and investor property loans underwritten to a debt service coverage ratio. DSCR / No Ratio Loan Concentration (Negative): The collateral consists of a higher concentration of DSCR and No Ratio loans. The total concentration of DSCR (12.5%) and No Ratio (4.0%) loans is 16.5%. Due to the observed performance of standalone DSCR-backed RMBS through the pandemic, Fitch believes large concentrations of these loans add risk to the pool and assumed 100% loss for a portion of these loans. Geographic Concentration (Negative): Approximately 42% of the pool is concentrated in California with relatively low MSA concentration. The largest MSA concentration is in Los Angeles (26%) followed by New York (15.8%) and Miami (8.5%). The top three MSAs account for 50.3% of the pool. As a result, there was a 1.07x adjustment for geographic concentration. Increased Delinquencies Related to Coronavirus (Negative): Early in the pandemic, these loans were serviced by another servicer. The prior servicer provided deferrals to 35% of the borrowers. Through the pandemic, the mortgages were subsequently transferred to SPS. Either as a result of the servicer transfer or greater economic stability, 8% remain on a forbearance or deferral plan with SPS. Most of the borrowers previously deferred made their post-deferral scheduled payments (19%) and 8% are not on a deferral plan and are currently delinquent. Separately, 5% of borrowers are delinquent and never received a forbearance or deferral plan. For Fitch's analysis, all loans that are currently non-cash flowing by means of deferral or delinquency were treated as delinquent. In total, 22% or 302 loans are being treated as delinquent in Fitch's analysis. Early indications of July payment behavior show that 116 have already made their payments in July. Additionally, almost 60% of the loans have never been in forbearance or deferral and are current. Borrowers previously on a deferral plan, but now cash-flowing, were treated similarly to those with clean pay histories and did not receive a penalty for prior missed payments. Lastly, due to the timing of the servicing transfer, nine loans made their mortgage payment to their prior servicer but made their July payments to SPS; these loans were treated as current by Fitch. Non-REMIC Reserve Account (Positive): The mortgage loans consist of 1,688 eligible to be included in the REMIC, whereas 11 loans are not eligible and will be held in a mortgage loan reserve account. Due to REMIC implications related to delinquencies, the mortgage loans were separated out from the REMIC. The bonds are sized off only the REMIC loans, and the other loans will serve as a form of credit enhancement from the reserve account. The extra enhancement only exists so long as the reserve account mortgage loans remain in the deal, which is subject to prepays, losses, or repurchases. Fitch assumed a 100% loss on these 11 loans, and, thus, no credit was given to the additional CE provided by these 11 loans. Sequential-Pay Structure (Positive): Unlike most non-prime or Non-QM transactions, the transaction's cash flow is based on a sequential-pay structure whereby the subordinate classes do not receive principal until the senior classes are repaid in full. Losses are allocated in reverse-sequential order. Furthermore, the provision to re-allocate principal to pay interest on the 'AAAsf' and 'AAsf' rated notes prior to other principal distributions is highly supportive of timely interest payments to those classes. This structure is highly beneficial to the 'AAAsf' rated notes due to the lack of leakage to more subordinate bonds, compared to modified-sequential structures. Payment Forbearance Assumptions Due to Coronavirus (Negative): The outbreak of coronavirus and widespread containment efforts in the U.S. have 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. Six-Month Servicer Advances (Mixed): Advances of delinquent principal and interest (P&I) will be made on the REMIC mortgage loans for the first 180 days of delinquency to the extent such advances are deemed recoverable. To account for servicers recouping advances at liquidation, Fitch included advances in its loss severity analysis. However, to account for the risk of deferrals where the servicer moves the payment due date forward and does not advance on non-cash flowing borrowers, Fitch assumed no-advancing in its cash flow analysis for the life of the transaction. As P&I advances are intended to provide liquidity to the rated notes if borrowers are deferred, the lack of advancing during a deferral period could result in temporary interest shortfalls to the lowest ranked classes as principal can be used to pay interest to the A-1 and A-2 classes. There were no interest shortfalls to the most senior classes under this scenario. Excess Cash Flow (Positive): The transaction benefits from a material amount of excess cash flow that provides benefit to the rated notes before being paid out to class X. The excess is available to pay timely interest and protect against realized losses resulting in a CE amount less than Fitch's loss expectations. Fitch stressed the available excess cash flow with its payment forbearance assumptions of 40% delinquency for six months and no advancing scenario. To the extent that the collateral weighted average coupon and corresponding excess is reduced through a rate modification, Fitch would view the impact as credit neutral, as the modification would reduce the borrower's probability of default, resulting in a lower loss expectation. Low Operational Risk (Positive): Operational risk is well controlled for this transaction. Fitch has reviewed the Sprout Mortgage, LLC mortgage origination platform, which originated 100% of the loans in the transaction pool. Sprout has industry-standard risk controls and is assessed by Fitch as an 'Average' originator. Select Portfolio Servicing, Inc., rated by Fitch at 'RPS1-', is the named servicer for 100% of the transaction pool. Fitch decreased its loss expectations at the 'AAAsf' rating stress by 266bps to reflect the counterparties involved in the transaction. The issuer is also retaining at least 5% of each class of bonds to ensure an alignment of interest between the issuer and investors. Tier 2 R&W Framework (Negative): Sprout Mortgage, LLC and MFA Financial, Inc. are both 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 2 as it contains small variations to Fitch's loan-level R&Ws and does not have an automatic breach review trigger outside of a realized loss due specifically attributed to the ATR rule. In addition to the framework, Sprout and MFA are non-investment-grade counterparties, which may increase the risk of each R&W provider not being able to satisfy future repurchase obligations during times of financial stress. Fitch increased its loss expectations 170bps at the 'AAAsf' rating category to reflect the Tier 2 framework and non-investment-grade counterparty strength. Third-Party Due Diligence Review (Positive): Third-party due diligence was performed on 100% of loans in the transaction by SitusAMC and EdgeMac. SitusAMC is 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 defects. Approximately 66% 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 37bps. 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%. 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 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 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 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. 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 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 part of the rating process 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, assessed by Fitch as 'Acceptable - Tier 1' third-party review firm, 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." 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. 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). ELEVATION CLO 2017-7: Moody's Confirms Ba3 Rating on Class E Notes ------------------------------------------------------------------ Moody's Investors Service has confirmed the ratings on the following notes issued by Elevation CLO 2017-7, Ltd.: US$27,500,000 Class D Secured Deferrable Floating Rate Notes due 2030 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$20,000,000 Class E Secured Deferrable Floating Rate Notes due 2030 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D and Class E Notes. The collateralized loan obligation, originally 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 July 2022. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D and Class E Notes continue to be consistent with the notes' 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 Classes D and E Notes. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $436.1 million, defaulted par of $9.0 million, a weighted average default probability of 25.74% (implying a WARF of 3142), a weighted average recovery rate upon default of 46.80%, a diversity score of 83 and a weighted average spread of 3.45%. 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; - 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. 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. ELLINGTON CLO IV: Moody's Lowers Rating on 2 Tranches to Caa2 ------------------------------------------------------------- Moody's Investors Service, has downgraded the ratings on the following notes issued by Ellington CLO IV, Ltd.: US$6,975,000 Class F-1 Secured Deferrable Floating Rate Notes due 2029 (the "Class F-1 Notes"), current outstanding balance of $6,975,000, Downgraded to Caa2 (sf); previously on June 3, 2020 B3 (sf) Placed Under Review for Possible Downgrade US$150,000 Class F-2 Secured Deferrable Fixed Rate Notes due 2029 (the "Class F-2 Notes"), current outstanding balance of $150,000, Downgraded to Caa2 (sf); previously on June 3, 2020 B3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the ratings on the following notes: US$32,775,000 Class D-1 Secured Deferrable Floating Rate Notes due 2029 (the "Class D-1 Notes"), current outstanding balance of $32,775,000, Confirmed at Baa3 (sf); previously on June 3, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$5,700,000 Class D-2 Secured Deferrable Fixed Rate Notes due 2029 (the "Class D-2 Notes"), current outstanding balance of $5,700,000, Confirmed at Baa3 (sf); previously on June 3, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$44,450,000 Class E-1 Secured Deferrable Floating Rate Notes due 2029 (the "Class E-1 Notes"), current outstanding balance of $44,450,000, Confirmed at Ba3 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$3,050,000 Class E-2 Secured Deferrable Fixed Rate Notes due 2029 (the "Class E-2 Notes"), current outstanding balance of $3,050,000, Confirmed at Ba3 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on June 3, 2020 on the Class D-1 Notes, the Class D-2 Notes, the Class E-1 Notes, the Class E-2 Notes, the Class F-1 Notes, and the Class F-2 Notes. The CLO, issued in March 2019 is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate. The transaction's reinvestment period will end in April 2021. RATINGS RATIONALE The downgrades on the Class F-1 Notes and the Class F-2 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 expected losses on Class F-1 and Class F-2 notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D-1 Notes, the Class D-2 Notes, the Class E-1 Notes, and the Class E-2 Notes continue to be consistent with the 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 ratings on the Class D-1 Notes, the Class D-2 Notes, the Class E-1 Notes, and the Class E-2 Notes. The rating confirmation on these notes also reflects the level of credit enhancement. Based on Moody's calculation, the weighted average rating factor was 5040 as of July 2020, or 11% worse compared to 4550 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 4827 reported in the July 2020 trustee report [2] by 213 points. Moody's noted that approximately 54% of the CLO's par was from obligors assigned a negative outlook and 2.3% 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 61% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $451.9 million, or $23.1 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class A/B, Class C, Class D and Class E notes as of July 2020 at 159.89%, 144.91%, 129.00% and 113.60% 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 $451.9 million, defaulted par of $54.7 million, a weighted average default probability of 36.34% (implying a WARF of 5040), a weighted average recovery rate upon default of 45.69%, a diversity score of 44 and an actual spread vector for weighted average spread. Moody's also analyzed the CLO by incorporating an approximately $5.6 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. 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. FREED ABS 2020-3FP: DBRS Finalizes BB(low) Rating on Class C Notes ------------------------------------------------------------------ DBRS, Inc. finalized its provisional ratings on the following classes of notes (the Notes) issued by FREED ABS Trust 2020-3FP (FREED 2020-3FP): -- $114,720,000 Class A Notes at A (high) (sf) -- $44,680,000 Class B Notes at A (low) (sf) -- $38,650,000 Class C Notes at BB (low) (sf) The ratings are based on DBRS Morningstar's review of the following analytical considerations: (1) The transaction assumptions consider DBRS Morningstar's set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary "Global Macroeconomic Scenarios: July Update," published on July 22, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020. The scenarios were updated on July 22, 2020, and are reflected in DBRS Morningstar's rating analysis. (2) 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. -- DBRS Morningstar's projected losses include the assessment of the impact of the coronavirus. The DBRS Morningstar cumulative net loss assumption is 15.55% based on the expected Cut-Off Date pool composition. -- DBRS Morningstar incorporated in its analysis a hardship deferment stress as a result of an increase in utilization related to the impact of the coronavirus on borrowers. DBRS Morningstar stressed hardship deferments to test liquidity risk early in the life of the transaction's cash flows. (3) The transaction's form and sufficiency of available credit enhancement. -- Subordination, overcollateralization, amounts held in the Reserve Fund, and excess spread create credit enhancement levels that are commensurate with the proposed ratings. -- Transaction cash flows are sufficient to repay investors under all A (high) (sf), A (low) (sf), and BB (low) (sf) stress scenarios in accordance with the terms of the FREED 2020-3FP transaction documents. (4) Structural features of the transaction that require the Notes to enter into full turbo principal amortization if certain triggers are breached or if credit enhancement deteriorates. (5) The experience, sourcing, and servicing capabilities of Freedom Financial Asset Management, LLC (FFAM). (6) The experience, underwriting, and origination capabilities of Cross River Bank (CRB). (7) The ability of Wilmington Trust National Association (rated AA (low) with a Stable trend by DBRS Morningstar) to perform duties as a Backup Servicer and the ability of Vervent Inc. to perform duties as a Backup Servicer Subcontractor. (8) The annual percentage rate (APR) charged on the loans and CRB's status as the true lender. -- All loans included in FREED 2020-3FP are originated by CRB, a New Jersey state-chartered Federal Deposit Insurance Corporation-insured bank. -- Loans originated by CRB are all within the New Jersey state usury limit of 30.00%. -- The weighted-average APR of the loans in the pool is 21.50%. -- Loans may exceed individual state usury laws; however, CRB as the true lender is able to export rates that pre-empt state usury rate caps. -- Loans originated to borrowers in states with active litigation (Second Circuit (New York, Connecticut, and Vermont), Colorado, and West Virginia) are excluded from the pool. -- The FREED 2020-3FP loan pool includes loans originated to borrowers in Maryland, a state with active litigation. Assuming that loans to borrowers in Maryland with APRs above the state usury cap of 24% were subsequently reduced to the state usury cap results in minimal impact to transaction cash flows. -- Under the Loan Sale Agreement, FFAM is obligated to repurchase any loan if there is a breach of representation and warranty that materially and adversely affects the interests of the purchaser. (9) The legal structure and legal opinions that address the true sale of the personal loans, the nonconsolidation of the trust, that the trust has a valid perfected security interest in the assets, and consistency with DBRS Morningstar's "Legal Criteria for U.S. Structured Finance." Notes: All figures are in U.S dollars unless otherwise noted. GALLATIN CLO 2018-1: Moody's Confirms B3 Rating on Class F Notes ---------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by Gallatin CLO IX 2018-1, Ltd.: US$22,500,000 Class D-1 Deferrable Mezzanine Floating Rate Notes Due January 2028, Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$3,000,000 Class D-2 Deferrable Mezzanine Floating Rate Notes Due January 2028, Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$19,125,000 Class E Deferrable Mezzanine Floating Rate Notes Due January 2028, Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$8,500,000 Class F Deferrable Mezzanine Floating Rate Notes Due January 2028, Confirmed at B3 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade US$32,265,000 Secured Structured Notes Due January 2028 (current outstanding Secured Structured Note Balance of $27,625,128.14), Confirmed at A2 (sf); previously on April 17, 2020 A2 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on April 17, 2020 on the Class D-1, Class D-2, Class E, Class F and the Secured Structured Notes. The CLO, issued in August 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 January 2020. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D-1, Class D-2, Class E, Class F and the Secured Structured Notes continue to be consistent with the current rating after taking into account the CLO's latest portfolio and the capital structure reflecting deleveraging due to paydown of the senior notes, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the ratings on the Classes D-1, Class D-2, Class E, Class F and the Secured Structured Notes. The rating confirmation on the Class D-1, Class D-2, Class E, Class F and the Secured Structured Notes reflects the level of credit enhancement and protection provided by the OC tests, better than expected performance of collateral assets as well as benefit of deleveraging associated with paydown of the senior notes. The rating confirmation on the Secured Structured Notes also considered reduction in Structured Note Balance. Based on Moody's calculation, the weighted average rating factor is 3699 as of July 2020, or 24.3% worse compared to 2976 reported in the February 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 3031 reported in the July 2020 trustee report [2] by 668 points. Moody's noted that approximately 39.7% of the CLO's par was from obligors assigned a negative outlook and 1.8% 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 27.1% as of July 2020. Nevertheless, based on the July 2020 trustee report[3], the Class A/B, Class C, Class D, Class E OC ratios and the Interest Diversion Test which is equivalent to the Class F OC ratio are at 128.22%, 120.33%, 112.06%, 106.57% and 104.30% respectively and are passing their respective trigger levels of 120.72%, 115.70%, 109.29%, 104.70% and 102.88%. 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 of $414.8 million, defaulted par of $9.7 million, a weighted average default probability of 25.38% (implying a WARF of 3699), a weighted average recovery rate upon default of 48.03%, a diversity score of 49 and a weighted average spread of 3.53%. Moody's also analyzed the CLO by incorporating an approximately $10.7 million par haircut in calculating the OC 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. 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. Fitch 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. Although the CLO manager's latitude for investment decisions and management of the transaction has become more limited after the end of the reinvestment period, any such activities will nonetheless 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. GE COMMERCIAL 2007-C1: DBRS Cuts Ratings on 2 Classes to BB(low) ---------------------------------------------------------------- DBRS Limited downgraded the ratings of the following two classes of Commercial Mortgage Pass-Through Certificates, Series 2007-C1 issued by GE Commercial Mortgage Corporation, Series 2007-C1, as follows: -- Class A-M to C (sf) from BB (low) (sf) -- Class A-MFX to C (sf) from BB (low) (sf) DBRS Morningstar also removed the Under Review with Negative Implications for both Classes. DBRS Morningstar maintained the Interest in Arrears designation for Classes A-M and A-MFX, both of which have ratings that do not carry trends. The ratings downgrades are the result of the negative outlook and significant value decline of the collateral property behind the Wellpoint Office Tower loan (Prospectus ID#10), which represents 45.5% of the current pool balance. On February 13, 2020, DBRS Morningstar placed the ratings for both rated Classes in this transaction Under Review with Negative Implications after initially placing them Under Review with Developing implications in November 2019, following losses to the trust in the amount of $196.7 million with the November 2019 remittance. At that time, the Wellpoint Office Tower loan was a performing loan, but that status changed in February 2020 when the loan was transferred to special servicing for imminent maturity default. At the time of the February 2020 rating actions, DBRS Morningstar was awaiting an updated resolution strategy and appraisal value, which has been provided as of June 2020. According to the June 2020 appraisal, the collateral property's value declined to $39.1 million ($87 per square foot (sf)) compared with the issuance appraised value of $150.0 million ($335 per sf), suggesting an elevated loss severity in excess of 75% and supporting the ratings downgrade to C (sf) for the two remaining rated classes. The 450,000 sf former single-tenant office property is located in Woodland Hills, California, and was built in 1977. WellPoint Health Network Inc. (WellPoint Health), an affiliate of Anthem Health, was the sole tenant through year-end 2019; however, in July 2018, WellPoint Health announced that it would not renew its lease and would be moving to the nearby Warner Center. According to the July 2020 servicer commentary, the servicer is pursuing foreclosure following the special servicer's denial of the borrower's proposal for a discounted payoff. Including the current outstanding loan balance, all outstanding fees and advances, and a 1.0% special servicer resolution fee, the current exposure on the loan is $125.0 million. Since issuance, the transaction has experienced collateral reduction of 93.8%, but 17.4% of that is a result of realized losses, which totaled $643.3 million through February 2020. The only other remaining loan in the pool, JP Morgan Portfolio (Prospectus ID#7; 54.5% of the current pool balance), has been in special servicing since March 2017 and is likely to resolve with a loss severity near 100.0%. That loss is expected to combine with the loss at resolution for the Wellpoint Office Tower loan to take total trust losses up through the most senior remaining Class A-M, with the transaction having an overall outstanding balance of $246.7 million as of the July 2020 remittance. Notes: All figures are in U.S. dollars unless otherwise noted. GLS AUTO 2020-3: DBRS Gives Prov. BB(low) Rating on Class E Notes ----------------------------------------------------------------- DBRS, Inc. assigned provisional ratings to the following classes of notes to be issued by GLS Auto Receivables Issuer Trust 2020-3 (the Issuer): -- $159,740,000 Class A Notes at AAA (sf) -- $43,390,000 Class B Notes at AA (sf) -- $49,400,000 Class C Notes at A (low) (sf) -- $33,060,000 Class D Notes at BBB (low) (sf) -- $29,610,000 Class E Notes at BB (low) (sf) The provisional ratings are based on DBRS Morningstar's review of the following analytical considerations: (1) Transaction capital structure, proposed ratings, and form and sufficiency of available credit enhancement. -- Credit enhancement is in the form of OC, subordination, amounts held in the reserve account, and excess spread. Credit enhancement levels are sufficient to support the DBRS Morningstar-projected cumulative net loss (CNL) assumption under various stress scenarios. (2) DBRS Morningstar's projected losses include the assessment of the impact of the Coronavirus Disease (COVID-19) pandemic. -- While considerable uncertainty remains with respect to the intensity and duration of the shock, DBRS Morningstar-projected CNL includes an assessment of the expected impact on consumer behavior. The DBRS Morningstar CNL assumption is 21.75% based on the expected Cut-Off Date pool composition. (3) 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: July Update," published on July 22, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which were last updated on July 22, 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 (CARES Act). 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. (4) The consistent operational history of Global Lending Services LLC (GLS or the Company) and the strength of the overall Company and its management team. -- The GLS senior management team has considerable experience and a successful track record within the auto finance industry. (5) The capabilities of GLS with regard to originations, underwriting, and servicing. -- DBRS Morningstar performed an operational review of GLS and considers the entity to be an acceptable originator and servicer of subprime automobile loan contracts with an acceptable backup servicer. (6) DBRS Morningstar exclusively used the static pool approach because GLS 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. (7) The Company indicated that it may be subject to various consumer claims and litigation seeking damages and statutory penalties. Some litigation against GLS could take the form of class-action complaints by consumers; however, the Company indicated that there is no material pending or threatened litigation. (8) 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 GLS, 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." GLS 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 rating on the Class A Notes reflects 55.10% of initial hard credit enhancement provided by subordinated notes in the pool (45.15%), the reserve account (1.50%), and overcollateralization (8.45%). The ratings on the Class B, Class C, Class D, and Class E Notes reflect 42.50%, 28.15%, 18.55%, and 9.95% 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. GOLUB CAPITAL 23(B)-R: Moody's Confirms Class E-R Notes at Ba3 -------------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by Golub Capital Partners CLO 23(B)-R, Ltd.: US$38,750,000 Class C-R Secured Deferrable Floating Rate Notes Due 2031 (the "Class C-R Notes"), Confirmed at A2 (sf); previously on June 3, 2020 A2 (sf) Placed Under Review for Possible Downgrade US$38,000,000 Class D-R Secured Deferrable Floating Rate Notes Due 2031 (the "Class D-R Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$24,750,000 Class E-R Secured Deferrable Floating Rate Notes Due 2031 (the "Class E-R Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class C-R, Class D-R and Class E-R Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D-R and the Class E-R Notes and on June 3, 2020 on the Class C-R Notes issued by the CLO. The CLO, originally issued in May 2015 and refinanced 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 2023. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. The confirmations also reflect the notes' priority position in the CLO's capital structure and the level of credit enhancement available to it either from over-collateralization or from cash flows that would be diverted as a result of coverage test failures. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3562, compared to 3043 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2957 reported in the July 2020 trustee report [3]. 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 25.7% as of July 2020. Furthermore, Moody's noted that the OC tests for the Class C-R, Class D-R and Class E-R Notes, as well as the interest diversion test were recently reported [4] as passing. 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." For modeling purposes, Moody's used the following base-case assumptions: Par amount and principal proceeds balance: $592,272,493 Defaulted Securities: $6,272,439 Diversity Score: 64 Weighted Average Rating Factor: 3564 Weighted Average Life (WAL): 5.8 years Weighted Average Spread (WAS): 3.54% Weighted Average Recovery Rate (WARR): 47.7% Par haircut in O/C tests and interest diversion test: $17,910,050 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. 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. GS MORTGAGE 2012-GCJ7: Moody's Lowers Rating on Class F Certs to C ------------------------------------------------------------------ Moody's Investors Service has affirmed the ratings on five classes and downgraded the ratings on five classes in GS Mortgage Securities Trust 2012-GCJ7, Commercial Pass-Through Certificates, Series 2012-GCJ7 as follows: Cl. A-4, Affirmed Aaa (sf); previously on Jul 16, 2019 Affirmed Aaa (sf) Cl. A-AB, Affirmed Aaa (sf); previously on Jul 16, 2019 Affirmed Aaa (sf) Cl. A-S, Affirmed Aaa (sf); previously on Jul 16, 2019 Affirmed Aaa (sf) Cl. B, Affirmed Aa3 (sf); previously on Jul 16, 2019 Affirmed Aa3 (sf) Cl. C, Downgraded to Baa1 (sf); previously on Jul 16, 2019 Affirmed A3 (sf) Cl. D, Downgraded to B1 (sf); previously on Apr 17, 2020 Ba1 (sf) Placed Under Review for Possible Downgrade Cl. E, Downgraded to Caa2 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to C (sf); previously on Apr 17, 2020 Caa3 (sf) Placed Under Review for Possible Downgrade Cl. X-A*, Affirmed Aaa (sf); previously on Jul 16, 2019 Affirmed Aaa (sf) Cl. X-B*, Downgraded to Caa1 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade * Reflects interest-only classes RATINGS RATIONALE The ratings on four of the P&I classes were affirmed due to the pool's share of defeasance and 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, being within acceptable ranges. The ratings on four P&I classes were downgraded due to higher realized and anticipated losses from specially serviced and troubled loans. The rating on one IO class, Cl. X-A, was affirmed based on the credit quality of the referenced classes. The rating on one IO Class, Cl. X-B, was downgraded due to a decline in the credit quality of its referenced classes. Cl. X-B references all P&I classes including Class G, which is not rated by Moody's. The actions conclude the review for downgrade initiated on April 17, 2020. 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 commercial real estate from the collapse in 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. 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. Moody's rating action reflects a base expected loss of 7.0% of the current pooled balance, compared to 6.4% at Moody's last review. Moody's base expected loss plus realized losses is now 6.5% of the original pooled balance, compared to 4.7% 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 July 10, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 40% to $971.6 million from $1.6 billion at securitization. The certificates are collateralized by 58 mortgage loans ranging in size from less than 1% to 12% of the pool, with the top ten loans (excluding defeasance) constituting 61% of the pool. Nineteen loans, constituting 16.9% 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 15, compared to 19 at Moody's last review. As of the July 2020 remittance report, loans representing 93% were current or within their grace period on their debt service payments, 1% were beyond their grace period but less than 30 days delinquent, 4% were 60 days delinquent and 1% were 90+ days delinquent. Nine loans, constituting 10% of the pool, are on the master servicer's watchlist, of which four loans, representing 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. Three loans have been liquidated from the pool, resulting in an aggregate realized loss of $36.5 million (for an average loss severity of 52.6%). Five loans, constituting 5.5% of the pool, are currently in special servicing. The largest specially serviced loan is the Shoppes on Main loan ($32.3 million -- 3.3% of the pool), which is secured by the leasehold interest of a retail property in White Plains, NY. The ground lease for the property expires in July 2051. Additionally, the property is encumbered by $9.0 million of mezzanine debt. At securitization, the property was leased to Walmart (68% of net rentable area) and Burlington Coat Factory (31% of NRA) with leases expiring in July 2021 and January 2019, respectively. In August 2018, Walmart vacated the property prior to lease expiration, but continues to pay rent through lease expiration. Burlington Coat Factory vacated in January 2019 and the property has remained fully vacant since. The borrower failed to make the debt service payment for January 2020 and had accrued substantial operating payables, including a ground lease payment and utility expenses. The loan transferred to special servicing in January 2020 due to imminent monetary default and is currently in foreclosure. A default letter was issued in February 2020 and the special servicer is currently evaluating alternatives. The second largest specially serviced loan is the Anchorage Hotel Portfolio loan ($11.7 million -- 1.2% of the pool), which is secured by three cross-collateralized and cross-defaulted limited service hotels comprised of a 65-room Motel 6, a 100-room Comfort Inn and a 79-room Microtel Inn totaling 100-rooms. The hotels are all located in Anchorage, AK. The properties were built between 1997 and 2004 and two of the hotels, the Motel 6 and the Comfort Inn, are subject to ground leases expiring in 2039 (35-year extension option) and 2067, respectively. Property performance has declined since securitization. The loan transferred to special servicing in June 2020 for payment default in relation to the coronavirus outbreak and is 60 days delinquent. The third largest specially serviced loan is the State Street Market loan ($9.0 million -- 0.9% of the pool), which is secured by a 193,657 square foot anchored neighborhood retail center located in Rockford, IL. The property was built in 1996 and is anchored by Burlington Coat Factory (37.5% of NRA), Dicks Sporting Goods (31% of NRA) and PetSmart (14% of NRA). The loan transferred to special servicing in June 2020 for imminent monetary default in relation to the coronavirus outbreak and is 90+ days delinquent. Moody's has also assumed a high default probability for one poorly performing loan, constituting 1.1% of the pool, and has estimated an aggregate loss of $34.2 million (a 63% expected loss on average) from the specially serviced and troubled loans. As of the July 10, 2020 remittance statement cumulative interest shortfalls were $3.4 million. Moody's anticipates interest shortfalls will continue because of the exposure to specially serviced loans and/or modified loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal entitlement reductions, loan modifications and extraordinary trust expenses. Moody's received full year 2018 operating results for 97% of the pool, and full or partial year 2019 operating results for 96% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 88%, 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 22% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.9%. Moody's actual and stressed conduit DSCRs are 1.56X and 1.35X, respectively, compared to 1.58X and 1.36X 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 1155 F Street Loan ($116.6 million -- 12% of the pool), which is secured by a Class A office property located in downtown Washington, DC. The property is also encumbered with $19.9 million in mezzanine debt. As of March 2020, the property was 88% leased, the same as year-end 2019, compared to 100% leased in 2018. Property performance has deteriorated and the reported 2019 has declined 15% since 2018, primarily due to a decline in revenue as the second largest tenant, Shook Hardy & Bacon LLP, vacated the property at lease expiration in April 2019. The loan has amortized over 10% since securitization. Moody's LTV and stressed DSCR are 102% and 1.01X, respectively, compared to 91% and 1.07X at the last review. The second largest loan is the Bellis Fair Mall Loan ($80.1 million -- 8.2% of the pool), which is secured by a 538,000 SF component of a regional mall located in Bellingham, Washington. The mall anchors are Macy's, Target, Kohl's, JC Penney and Dick's Sporting Goods. Macy's is the only anchor whose space is included in the loan collateral and recently extended their lease term for an additional 10 years in January 2019. The Dick's Sporting Goods lease commenced in 2017 and it occupies a portion of a former vacant anchor space along with Ashley Homestore which opened in late 2018. As of December 2019, the inline space was 79% leased, compared to 77% as of December 2018. The entire mall was 92% leased as of December 2019, compared to 90% as of December 2018. Property performance has deteriorated and the reported 2019 NOI has declined 24% since 2015. In-line sales were up slightly as of March 2020 at $392 PSF compared to $383 PSF in December 2019 and $379 PSF as of December 2018. The loan has amortized nearly 14% since securitization and has an actual NOI DSCR of 1.30X. The loan matures in February 2022. Moody's LTV and stressed DSCR are 120% and 0.97X, respectively, compared to 118% and 0.96X at the last review. The third largest loan is the Columbia Business Center Loan ($76.4 million -- 7.9% of the pool), which is secured by the fee and leasehold interests in an industrial park consisting of 26 buildings and totaling 4.7 million SF. The property is located along the Columbia River in Vancouver, Washington. Approximately 9% of the NRA is allocated to office use with the remainder used for warehouse and manufacturing purposes. The property was 98% leased as of March 2020, compared to 99% in December 2019 and 92% at securitization. The loan has amortized approximately 23% since securitization and Moody's LTV and stressed DSCR are 81% and 1.55X, respectively, compared to 85% and 1.47X at the last review. GS MORTGAGE-BACKED 2020-RPL1: Fitch Rates Class B-2 Debt 'Bsf' -------------------------------------------------------------- Fitch Ratings has assigned ratings to GS Mortgage-Backed Securities Trust 2020-RPL1. GS Mortgage-Backed Securities Trust 2020-RPL1 - Class A-1; LT AAAsf New Rating - Class A-2; LT AAsf New Rating - Class M-1; LT Asf New Rating - Class M-2; LT BBBsf New Rating - Class B-1; LT BBsf New Rating - Class B-2; LT Bsf New Rating - Class B-3; LT NRsf New Rating - Class B-4; LT NRsf New Rating - Class B-5; LT NRsf New Rating - Class A-3; LT AAsf New Rating - Class A-4; LT Asf New Rating - Class A-5; LT BBBsf New Rating - Class AIOS; LT NRsf New Rating - Class PT; LT NRsf New Rating - Class R; LT NRsf New Rating - Trust; LT NRsf New Rating TRANSACTION SUMMARY The notes are supported by one collateral group that consists of 2,042 seasoned performing loans and re-performing loans with a total balance of approximately $290.89 million, which includes $23.1 million, or 8%, of the aggregate pool balance in non-interest-bearing deferred principal amounts, as of the cutoff 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): The 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% growth for 2019. Fitch's downside scenario forecasts 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' ratings and below. RPL Credit Quality (Mixed): The collateral consists of 30-year FRM and step rate fully amortizing loans, seasoned approximately 163 months in aggregate. The borrowers in this pool have weaker credit profiles (669 FICO) and relatively high leverage (72.2% sLTV). In addition, the pool contains no loans of particularly large size. 29% of the pool had a delinquency in the past 24 months or was treated as delinquent as part of this analysis. Payment Deferrals (Negative): As of the cutoff date, approximately 5.4% (by UPB) of the loans in the pool received, and are still on, coronavirus deferral relief. To account for potential permanent hardship and default risk as these borrowers are not cash flowing, 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 150bps. 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 (Positive): Operational risk is well controlled for in this transaction. Goldman Sachs has an established operating history acquiring RPL single-family residential loans and is assessed as an 'Average' aggregator by Fitch. Rushmore Loan Management Services and Select Portfolio Servicing are the named servicers for the transaction and are rated by Fitch as 'RPS2' and 'RPS1-', respectively, both with on Rating Outlook Negative. Due to the benefit given for SPS as a servicer, the 'AAA' expected loss was decreased by 139bps. Stressed Servicing Fee (Negative): Fitch determined that the stated servicing fee (including the excess servicing fee strip) of approximately 25bps is insufficient to attract subsequent servicers, even under a period of poor performance and high delinquencies. To address this concern, Fitch assumed a servicing fee of 45bps, which reduced the interest available to the transaction. Due Diligence Review Results (Negative): A third-party due diligence review was performed on 91.7% of the loans in the transaction pool. The review was performed by multiple third-party review firms; SitusAMC (which is assessed by Fitch as an Acceptable - Tier 1 TPR firm) reviewed the largest portion of loans (78.6%). The due diligence results indicate moderate operational risk with 16.7% of loans receiving a final grade of 'C' or 'D'. While this concentration of material exceptions is similar to that of other Fitch-rated RPL RMBS, adjustments were applied only to loans missing final HUD-1 documents that are subject to testing for compliance with predatory lending regulations. These regulations are not subject to statute of limitations like most compliance findings, which ultimately exposes the trust to added assignee liability risk. Fitch adjusted its loss expectation at the 'AAAsf' rating category by ~50bps to account for this added risk as well as outstanding taxes. Representation Framework (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 171bps 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. 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. 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 39.1% 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 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 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. 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 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 A third-party due diligence review was performed on 91.7% of the loans in the transaction pool. The review was performed by multiple TPR firms; SitusAMC (assessed by Fitch as an Acceptable - Tier 1 TPR firm) reviewed the largest portion of loans (78.6%). The due diligence results indicate moderate operational risk with 16.7% of loans receiving a final grade of 'C' or 'D'. While this concentration of material exceptions is similar to that of other Fitch-rated RPL RMBS, adjustments were applied only to loans missing final HUD-1 documents that are subject to testing for compliance with predatory lending regulations. These regulations are not subject to statute of limitations like most compliance findings, which ultimately exposes the trust to added assignee liability risk. Fitch adjusted its loss expectation at the 'AAAsf' rating category by ~50bps to account for this added risk as well as outstanding taxes. The remaining 'C' and 'D' grades 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). HALCYON LOAN 2015-1: Moody's Lowers Rating on Class F Notes to Ca ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Halcyon Loan Advisors Funding 2015-1 Ltd.: US$30,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes Due 2027, Downgraded to Ba1 (sf); previously on June 3, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade US$25,000,000 Class E Junior Secured Deferrable Floating Rate Notes due April 2027 (current outstanding balance of $25,903,617), Downgraded to Caa1 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$10,000,000 Class F Junior Secured Deferrable Floating Rate Notes Due 2027 (current outstanding balance of $10,426,546), Downgraded to Ca (sf); previously on June 3, 2020 Caa3 (sf) Placed Under Review for Possible Downgrade Halcyon Loan Advisors Funding 2015-1 Ltd., issued in April 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. These actions conclude the reviews for downgrade initiated on June 3, 2020 on the Class D, E, and F Notes. The CLO, issued in April 2015 and partially refinanced in October 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 April 2019. RATINGS RATIONALE The downgrades on the Class D, E, and F 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, the credit enhancement available to the CLO notes has declined significantly, exposure to Caa-rated assets has increased, and expected losses on certain notes have increased materially. Based on Moody's calculation, the weighted average rating factor was 3419 as of July 2020, or 4.8% worse compared to 3263 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2698 reported in the July 2020 trustee report [2] by 721 points. The recent WARF, and the extent of the CLO's failure of the WARF test, are worse than the averages Moody's has observed for other BSL CLOs. Moody's noted that approximately 38.7% of the CLO's par was from obligors assigned a negative outlook and 0.6% 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 22.7% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $299.4 million, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class D, Class E, and Class F notes as of July 2020 at 111.24%, 101.48%, and 98.01%, respectively. Moody's noted that the OC tests for the Class D and E notes were recently reported in the July 2020 trustee report [2] as failing, and that as a result, interest payments were deferred on the Class E and F notes, and senior notes were repaid. If these failures occur on the next payment date, repayment of senior notes or deferral of current interest payments on the junior notes could result. 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 of $285.2 million, defaulted par of $41.5 million, a weighted average default probability of 22.22% (implying a WARF of 3419), a weighted average recovery rate upon default of 46.88%, a diversity score of 56 and a weighted average spread of 3.55%. Moody's also analyzed the CLO by incorporating an approximately $8.2 million par haircut in calculating the OC 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. 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. HARBOURVIEW CLO VII-2: Moody's Lowers Rating on Cl. D Notes to Ba2 ------------------------------------------------------------------ Moody's Investors Service has downgraded the ratings on the following notes issued by HarbourView CLO VII-R, Ltd.: US$21,920,000 Class C Secured Deferrable Floating Rate Notes due 2031, Downgraded to A3 (sf); previously on September 21, 2018 Affirmed A2 (sf) US$24,020,000 Class D Secured Deferrable Floating Rate Notes due 2031, Downgraded to Ba2 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$17,910,000 Class E Secured Deferrable Floating Rate Notes due 2031 (current outstanding balance of $18,237,558), Downgraded to Caa1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$8,000,000 Class F Secured Deferrable Floating Rate Notes due 2031 (current outstanding balance of $8,396,775), Downgraded to Caa3 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade The Class C Notes, the Class D Notes, Class E Notes, and the Class F Notes are referred to herein, collectively, as the "Downgraded Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D, E, and F Notes. The CLO, issued 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 in July 2023. RATINGS RATIONALE The downgrades on the Downgraded 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 2020, 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, the credit enhancement available to the CLO notes has declined, and expected losses on certain notes have increased. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 2985, compared to 2731 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2694 reported in the July 2020 trustee report [1]. 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 11.1% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including principal proceeds and recoveries from defaulted securities, at $369.0 million, or $28.1 million less than the deal's ramp-up target par balance. Moody's noted that the OC tests for the Class C, D, and E Notes, as well as the interest diversion test was recently reported in the July 2020 trustee report [1] as failing, which could result in repayment of senior notes at the next payment date should the failures continue. 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." For modeling purposes, Moody's used the following base-case assumptions: Per amount and principal proceeds balance: $361,854,147 Defaulted Securities: $23,785,197 Diversity Score: 75 Weighted Average Rating Factor: 2848 Weighted Average Life (WAL): 5.84 years Weighted Average Spread (WAS): 3.28% Weighted Average Recovery Rate (WARR): 48.02% 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. 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. HOME PARTNERS 2019-2: DBRS Assigns BB Rating on Class F Trust ------------------------------------------------------------- DBRS, Inc. assigned ratings to the following four transactions (the Covered Transactions) issued by Home Partners of America (HPA) trusts: HPA 2017-1 -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class C at AA (low) (sf) -- Class D at BBB (high) (sf) -- Class E at BBB (low) (sf) HPA 2018-1 -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class C at AA (high) (sf) -- Class D at AA (low) (sf) -- Class E at BBB (sf) HPA 2019-1 -- Class A at AAA (sf) -- Class B at AA (high) (sf) -- Class C at AA (low) (sf) -- Class D at A (low) (sf) -- Class E at BBB (sf) -- Class F at BBB (low) (sf) HPA 2019-2 -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class C at AA (sf) -- Class D at A (low) (sf) -- Class E at BBB (low) (sf) -- Class F at BB (sf) These securities are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these securities Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 5, 2020. In accordance with MCR's engagement letter covering these securities, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. The Covered Transactions are single-family rental transactions. As stated in its May 28, 2020, press release, "DBRS and Morningstar Credit Ratings Confirm U.S. Single-Family Rental Asset Class Coverage," DBRS Morningstar applied MCR's "U.S. Single-Family Rental Securitization Ratings Methodology" to assign these ratings. DBRS Morningstar's ratings are based on the following analytical considerations: -- DBRS Morningstar reviewed MCR's rating analysis on the Covered Transactions on or prior to the closing dates, including the collateral pool, cash flow analysis, legal review, operational risk review, third-party due diligence, and representations and warranties (R&W) framework. -- DBRS Morningstar notes that MCR and/or its external counsel had performed a legal analysis, which included but was not limited to legal opinions and various transaction documents as part of its process of assigning ratings to the Covered Transactions on or prior to the closing dates. For the purpose of assigning new ratings to the Covered Transactions, DBRS Morningstar did not perform additional legal analysis unless otherwise indicated in this press release. -- DBRS Morningstar relied on MCR's operational risk assessments when assigning ratings to the Covered Transactions on or prior to the closing dates. DBRS Morningstar may have conducted additional operational risk reviews as applicable. -- DBRS Morningstar reviewed key transaction performance indicators, as applicable, since the closing dates as reflected in bond factors, loan-to-value (LTV) ratios or credit enhancements, vacancies, delinquencies, capital expenditures, and cumulative losses. RATING AND CASH FLOW ANALYSIS DBRS Morningstar reviewed MCR's rating analysis on the Covered Transactions, which used the Morningstar Single-Family Rental Subordination Model to generate property-level cash flows for the Covered Transactions. The analytics included calculating the debt service coverage ratio (DSCR) needed to adequately cover the monthly debt service in each period under a given rating stress and examining the sufficiency of the aggregate stressed property liquidation values to cover the unpaid balance at a given rating level in accordance with MCR's "U.S. Single-Family Rental Securitization Ratings Methodology." OPERATIONAL RISK REVIEW DBRS Morningstar relied on MCR's operational risk assessments when assigning ratings to the Covered Transactions on or prior to the closing dates. DBRS Morningstar may have conducted additional operational risk reviews as applicable. HISTORICAL PERFORMANCE DBRS Morningstar reviewed the historical performance of the Covered Transactions as reflected in bond factors, LTVs or credit enhancements, vacancies, delinquencies, capital expenditures, and cumulative losses and deemed the transactions' performances to be satisfactory. THIRD-PARTY DUE DILIGENCE Several third-party review firms (the TPR firms) performed due-diligence reviews of the Covered Transactions. DBRS Morningstar has not conducted reviews of the TPR firms. The scope of the due diligence generally comprised lease, valuation, title, and homeowners' association discrepancy reviews. DBRS Morningstar also relied on the written attestations the TPR firms provided to MCR on or prior to the closing dates. R&W FRAMEWORK DBRS Morningstar conducted reviews of the R&W frameworks for the Covered Transactions. The reviews covered key considerations, such as the R&W provider, breach discovery, enforcement mechanism, and remedy. CORONAVIRUS DISEASE (COVID-19) ANALYSIS To reflect the current concerns and conditions surrounding the coronavirus pandemic, DBRS Morningstar tested the following additional rating assumptions for single-family rental transactions to reflect the moderate macroeconomic scenario outlined in its commentary, "Global Macroeconomic Scenarios: July Update," published on July 22, 2020: -- Vacancy (higher vacancy rate assumptions to account for potential increases in single-family rental vacancies as a result of rising unemployment and further economic deterioration). -- Home prices (an additional property valuation haircut to account for the potential decline in broader asset markets). The ratings DBRS Morningstar assigned to the Covered Transactions were able to withstand the additional coronavirus assumptions with minimal to no rating volatilities. SUMMARY The ratings are a result of DBRS Morningstar's application of MCR's "U.S. Single-Family Rental Securitization Ratings Methodology" unless otherwise indicated in this press release. DBRS Morningstar's ratings address the timely payment of interest (other than payment-in-kind bonds) and full payment of principal by the rated final maturity date in accordance with the terms and conditions of the related securities. The ratings DBRS Morningstar assigned to certain securities may differ from the ratings implied by the quantitative model, but no such difference constitutes a material deviation. When assigning the ratings, DBRS Morningstar considered the rating analysis detailed in this press release and may have made qualitative adjustments for the analytical considerations that are not fully captured by the quantitative model. IVY HILL IX: Fitch Lowers Rating on Class E-R Debt to B+sf ---------------------------------------------------------- Fitch Ratings has taken multiple rating actions on three middle market U.S. collateralized loan obligations managed by Ivy Hill Asset Management, L.P., including downgrading three tranches, previously placed on Rating Watch Negative, and assigning them a Stable Rating Outlook, as well as affirming five additional tranches. Ivy Hill Middle Market Credit Fund IX, Ltd. - Class A-R 46603BAN9; LT AAAsf; Affirmed - Class B-R 46603BAQ2; LT AAsf; Affirmed - Class C-R 46603BAS8; LT BBB+sf; Downgrade - Class D-R 46603BAU3; LT BB+sf; Downgrade - Class E-R 46603GAE8; LT B+sf; Downgrade Ivy Hill Middle Market Credit Fund X - Class A-1a-R 46603LAN7; LT AAAsf; Affirmed - Class A-1b-R 46603LAQ0; LT AAAsf; Affirmed Ivy Hill Middle Market Credit Fund XIV, Ltd - Class A-1 46603VAA3; LT AAAsf; Affirmed TRANSACTION SUMMARY Ivy Hill Middle Market Credit Fund IX, Ltd., Ivy Hill X, and Ivy Hill XIV are MM CLOs mostly comprising senior secured obligations. All the transactions are within their reinvestment period, and are actively managed by Ivy Hill Asset Management, L.P. KEY RATING DRIVERS Asset Credit Quality The one-notch downgrades for the class C-R, D-R and E-R notes in Ivy Hill Middle Market Credit Fund IX, Ltd. are driven by the deterioration in the portfolio as a result of the negative rating migration of the underlying assets in light of the coronavirus pandemic. Since Fitch's last rating actions, 28.6% of the Ivy Hill IX portfolio (excluding principal cash) has been downgraded, while Ivy Hill X and Ivy Hill XIV experienced downgrades of 11.7% and 28.2%, respectively. Fitch-derived 'CCC+' and lower rating exposure (excluding non-rated assets) increased to 26.3% from 16.4% for Ivy Hill IX, to 24.9% from 24.2% for Ivy Hill X and to 17.7% from 9.6% for Ivy Hill XIV, compared to last review dates, on March 27, May 4, and Jan. 30, respectively. All three CLOs are failing Fitch Weighted Average Rating Factor, Fitch's 'CCC' limitation, and Fitch Weighted Average Recovery Rating test, per the July trustee reports. Ivy Hill IX is also breaching the minimum weighted average spread test. Since last review, Fitch-calculated WARF increased to levels of 44.4 and 42.5 in Ivy Hill IX and Ivy Hill XIV, respectively and remained unchanged at 44.6 in Ivy Hill X. Cash Flow Analysis Due to the negative collateral quality migration, Ivy Hill IX's mezzanine and junior notes' rating loss rates exceed the loss rates from Fitch Stressed Portfolio at the initial rating analysis. As a result, this transaction was cash flow modelled. Fitch used a proprietary cash flow model to replicate the principal and interest waterfalls and the impact of various structural features of the transaction and analyzed modeling output under the stable, down, and rising interest-rate scenarios and the front-, mid- and back-loaded default timing scenarios as outlined in Fitch's criteria. When conducting its cash flow analysis, Fitch's model first projects the portfolio scheduled amortization proceeds and any prepayments for each reporting period of the transaction life assuming no defaults (and no voluntary terminations, when applicable). In each rating stress scenario, such scheduled amortization proceeds and prepayments are then reduced by a scale factor equivalent to the overall percentage of loans that are not assumed to default (or to be voluntary terminated, when applicable). This adjustment avoids running out of performing collateral due to amortization and ensures all of the defaults projected to occur in each rating stress are realized in a manner consistent with Fitch's published default timing curve. The three downgraded classes of notes in Ivy Hill IX have shortfalls in at least six of the nine CFM scenarios run based on the current portfolio. The model-implied rating for the class B-R notes in Ivy Hill IX is one notch higher than the current rating based on the current portfolio analyses, but was not upgraded in light of the ongoing economic disruption. Asset Security, Portfolio Management and Portfolio Composition: The current portfolios consist of 98.3% of first lien senior secured loans on average. The Fitch WARR of the current portfolios ranged from 69% to 75%. Portfolios remained fairly diversified, with obligor count ranging from 144 to 155. Exposure to the top 10 obligors ranged from 16.0% to 19.4% and no obligor represents more than 3.0% of the portfolio balance. All overcollateralization and interest coverage tests are passing for each CLO. Coronavirus Baseline Scenario Impact Fitch evaluated these CLOs under a coronavirus baseline sensitivity scenario to estimate the resilience of the notes' ratings to potential further deterioration. The coronavirus sensitivity analysis was only based on the stable interest rate scenario including all default timing scenarios. The coronavirus baseline sensitivity analysis applied for this review included notching down the ratings for all assets with corporate issuers with a Negative Outlook regardless of sector by one notch, with a floor of 'CCC-'. Assets with a Fitch-derived rating with a Negative Outlook currently make up between 16.0% and 22.5% of the portfolios' balance in the three Ivy Hill CLOs. The Stable Outlooks on all Fitch-rated classes are supported by the modeling results in this scenario. RATING SENSITIVITIES 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. Factors that could, individually or collectively, lead to positive rating action/upgrade: A 25% reduction of the mean default rate across all ratings, and a 25% increase of the recovery rate at all rating levels, would lead to an upgrade of up to three notches for the rated notes in Ivy Hill IX, based on model-implied ratings, except for the class A-R notes as the ratings are at the highest level on Fitch's scale and cannot be upgraded. At closing, Fitch uses a stress portfolio (Fitch's Stressed Portfolio) that is customized to the specific portfolio limits for the transaction as specified in the transaction documents. Even if the actual portfolio shows lower defaults and losses (at all rating levels) than Fitch's Stressed Portfolio assumed at closing, an upgrade of the notes during the reinvestment period is unlikely, given the portfolio credit quality may still deteriorate, not only by natural credit migration, but also by reinvestments. After the end of the reinvestment period, upgrades may occur in the event of a better-than-expected portfolio credit quality and deal performance, leading to higher notes' credit enhancement and excess spread available to cover for losses on the remaining portfolio. For more information on Fitch's Stress Portfolio and the initial model-implied rating sensitivities, see the presale/new issue reports for each of the CLO transaction included in this review. Factors that could, individually or collectively, lead to negative rating action/downgrade: A 25% increase of the mean default rate across all ratings, and a 25% decrease of the recovery rate at all rating levels, would lead to a downgrade of up to six notches for the rated notes, based on model-implied ratings. Downgrades may occur if realized and projected losses of the portfolio are higher than what was assumed at closing in the Fitch Stressed Portfolio and the notes' CE does not compensate for the worse loss expectation than initially expected. As the disruptions to supply and demand due to the coronavirus disruption become apparent for other vulnerable sectors, loan ratings in those sectors would also come under pressure. Fitch will update the sensitivity scenarios in line with the views of its Leveraged Finance team. Coronavirus Downside Scenario Impact: In addition to the baseline scenario described earlier in this commentary, Fitch conducted a sensitivity analysis that contemplates a more severe and prolonged economic stress caused by a re-emergence of infections in the major economies, before a halting recovery begins in 2Q21. The downside sensitivity incorporates the following stresses: Applying a one-notch downgrade to all Fitch-derived ratings in the 'B' rating category; applying a 70% recovery rate multiplier to all assets from issuers in the eight industries identified as being most exposed to negative performance resulting from business disruptions from the coronavirus (Group 1 countries only); and applying a 85% recovery rate multiplier to all other assets. The model-implied ratings for the affected tranches under this sensitivity test are below the current 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 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. JEFFERSON MILL: Moody's Lowers Class F-R Notes to Caa2 ------------------------------------------------------ Moody's Investors Service has downgraded the ratings on the following notes issued by Jefferson Mill CLO Ltd.: US$18,500,000 Class E-R Deferrable Mezzanine Floating Rate Notes Due October 2031, Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$7,400,000 Class F-R Deferrable Mezzanine Floating Rate Notes Due October 2031, Downgraded to Caa2 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the rating on the following notes: US$24,100,000 Class D-R Deferrable Mezzanine Floating Rate Notes Due October 2031, Confirmed 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-R, Class E-R and Class F-R notes. The CLO, issued in July 2015 and refinanced in September 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 October 2023. RATINGS RATIONALE The downgrade rating actions on the Class E-R and 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, the credit enhancement available to the CLO notes has eroded and expected losses on certain notes have increased materially. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D-R 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 Classes D-R notes. The rating confirmation on the Class D-R notes reflects the level of credit enhancement and protection provided by the Class D OC test as well as better than expected performance of the collateral assets. Based on Moody's calculation, the weighted average rating factor is 3189 as of July 2020, or 7.7% worse compared to 2961 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2820 reported in the July 2020 trustee report [2] by 369 points. Moody's noted that approximately 29.5% of the CLO's par was from obligors assigned a negative outlook and 1.3% 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 17.1% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $388.2 million, or $11.8 million less than the deal's original ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class A/B, Class C, Class D, Class E and Class F notes as of July 2020 is at 128.02%, 119.95%, 111.64%, 106.00% and 103.90% respectively. Moody's noted that the OC test for the Class F notes as well as the interest diversion test were recently reported in the July 2020 trustee report [3] as 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. 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 of $380.6 million, defaulted par of $17.3 million, a weighted average default probability of 26.15% (implying a WARF of 3189), a weighted average recovery rate upon default of 47.68%, a diversity score of 80 and a weighted average spread of 3.30%. Moody's also analyzed the CLO by incorporating an approximately $3.9 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. 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. 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. JP MORGAN 2018-MINN: Moody's Cuts Rating on Class F Certs to Caa2 ----------------------------------------------------------------- Moody's Investors Service has affirmed one and downgraded ratings on five classes in J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-MINN, Commercial Mortgage Pass-Through Certificates, Series 2018-MINN as follows: Cl. A, Affirmed Aaa (sf); previously on Dec 12, 2018 Definitive Rating Assigned Aaa (sf) Cl. B, Downgraded to A1 (sf); previously on Dec 12, 2018 Definitive Rating Assigned Aa3 (sf) Cl. C, Downgraded to Baa2 (sf); previously on Dec 12, 2018 Definitive Rating Assigned A3 (sf) Cl. D, Downgraded to Ba2 (sf); previously on Dec 12, 2018 Definitive Rating Assigned Baa3 (sf) Cl. E, Downgraded to B2 (sf); previously on Dec 12, 2018 Definitive Rating Assigned Ba3 (sf) Cl. F, Downgraded to Caa2 (sf); previously on Dec 12, 2018 Definitive Rating Assigned B3 (sf) RATINGS RATIONALE The rating on Cl. A was affirmed because the transaction's key metrics, including Moody's loan-to-value ratio, are within acceptable ranges. The ratings on Cl. B, Cl. C, Cl. D., Cl. E, and Cl. F were downgraded due to an increase in Moody's LTV as a result of immediate decline in performance due to the coronavirus outbreak and the uncertainty on the timing of and extent to the recovery. Moody's has assumed a significant drop in net cash flow in 2020, followed by two or more years of improvement in the loan performance, resulting in a lower than previously assumed Moody's NCF levels. The subject property's heavy reliance on group segment (69%) will delay the recovery timing compared to those that cater to leisure and individual corporate traveler. 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 commercial real estate from the collapse in 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. 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. 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 pool paydowns or amortization, an increase in defeasance or an improvement in loan performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the loan or increase in interest shortfalls. METHODOLOGY UNDERLYING THE RATING ACTION The principal methodology used in these ratings was "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020. DEAL PERFORMANCE As of the July 15, 2020 distribution date, the transaction's aggregate certificate balance remains unchanged at $180 million from securitization. The 5-year (including three one-year extensions), interest only, floating rate loan is secured by leasehold interests in the Hilton Minneapolis. The property is an AAA Four Diamond rated full-service hotel with approximately 60,500 SF of meeting and event space with a 24,780 SF grand ballroom, the largest ballroom in the state of Minnesota. It's also the largest hotel in the Minneapolis-St. Paul area in terms of room count (821 guestrooms) and meeting space. The hotel caters to large groups as well as accommodate spillover needs and room demand for the Minneapolis Convention Center located three blocks away. The property was constructed in 1992 and is subject to a 100- year ground lease with the City of Minneapolis expiring in October 2091. However, starting 2019, the property was not obligated to pay any ground rent for the duration of the ground lease. The property's 2019 NCF was approximately $16.8 MM, up from $14.3 MM in 2018 mostly due to expiration of payment-in-lieu of taxes (PILOT). In January 2019 and thereafter, the sponsor is obligated to make normal real estate tax payments based on the assessed value as there is no ground rent liability. Since 1993, the subject property has made a consolidated PILOT to the City of Minneapolis that covers both the scheduled ground lease payment and the subject's real estate tax liability. However, for full year 2020 NCF, Moody's expects a significant drop due to coronavirus outbreak induced property closures and travel restrictions as well as cancellation of groups that will more than outweigh any gains in cash-flows from the expiration of the PILOT. Due to the length and the magnitude of the disruption, Moody's does not expect large hotels that cater to group demand and convention business to return to pre-COVID levels within the next 24 to 36 months, and the pace of recovery to vary depending on the property's market segment and location. The loan status is 90+ days delinquent as of the July distribution date and there are outstanding cumulative advances of approximately $5.0 million. The first mortgage balance of $180 million represents a Moody's stabilized LTV of 177%. Moody's first mortgage stressed debt service coverage ratio is 0.66X. However, these metrics are based on return of group demand which would lag segments such as leisure and individual corporate transient travel. The downgrades take into account volatility and uncertainty of the loan's performance and the longer recovery anticipated of large group demand. There are outstanding interest shortfalls totaling $88,751 affecting Cl. HRR and no losses as of the current distribution date. JP MORGAN 2019-ICON: DBRS Assigns B(low) Rating on Class G Certs ---------------------------------------------------------------- DBRS, Inc. assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2019-ICON issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2019-ICON (the Issuer) as follows: -- Class A at AAA (sf) -- Class X-A at AAA (sf) -- Class B at AA (high) (sf) -- Class C at A (high) (sf) -- Class X-B at BBB (high) (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. These certificates are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 14, 2020. In accordance with MCR's engagement letter covering these certificates, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. On March 1, 2020, DBRS Morningstar finalized its "North American Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the "North American CMBS Surveillance Methodology," as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis. The collateral for the transaction includes 18 separate nonrecourse, first-lien mortgage loans totaling $174.7 million on 10 multifamily and eight mixed-use properties with 352 residential and 17 commercial units in Manhattan and Brooklyn. The mortgages are not cross-collateralized or cross-defaulted. Each borrower is a special-purpose entity sponsored by Icon Realty Management LLC (Icon). JPMorgan Chase Bank, N.A. (rated AA with a Stable trend by DBRS Morningstar) originated the mortgage loans, which have five-year terms and pay interest only (IO). The loans have a weighted-average interest rate of 5.25437%. Each loan in this transaction is part of a split-loan structure consisting of the related trust loans totaling $144.7 million (the Trust Loans) and separate individual five-year, fixed-rate, IO companion loans totaling $30.0 million (the Companion Loans), which will not be trust assets. Of the Trust Loans, $60.7 million will be Trust A Notes (which will be pari passu with the Companion Loans) and $83.9 million will be Trust B Notes (subordinate in payment to the Companion Loans). The mortgage loans are backed by the borrower's fee simple interest in 18 multifamily properties, eight of which also have a retail component. The retail space generates 15.4% of total rent and is 100.0% leased to restaurant and consumer-service tenants. Icon, the portfolio sponsor, acquired the 18 properties over a 12-year period since issuance based on each building's future upgrade potential as permissible under New York City's apartment rent restrictions, which originally intended to prevent dramatic rent increases following World War II. Icon plans to invest additional capital into the properties to modernize common areas and upgrade formerly rent-stabilized or rent-controlled apartments as they become vacant. By year-end 2018, the sponsor invested an additional $55.6 million to renovate 16 rent-stabilized units, capturing those apartments as the previous tenants vacated either naturally or through acceptance of a buyout offer. The DBRS Morningstar net cash flow (NCF) derived at issuance was reanalyzed for the subject rating action to confirm its consistency with the "DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria. The resulting NCF figure was $10.8 million and a cap rate of 6.25% was applied, resulting in a DBRS Morningstar Value of $172.8 million, a variance of 40.9% from the appraised value at issuance of $292.1 million. The DBRS Morningstar Value implies an LTV of 101.1% compared with the LTV of 59.8% on the appraised value at issuance. The NCF figure applied as part of the analysis represents a 5.1% variance from the Issuer's NCF, primarily driven by concessions, real estate taxes, and commercial leasing costs. As of the most recent reported annualized figures, the servicer reported a NCF figure of $11.4 million, a +0.1% variance from the DBRS Morningstar NCF figure. The cap rate DBRS Morningstar applied is at the lower end of the DBRS Morningstar Cap Rate Ranges for multifamily properties, reflecting the property locations, types, and qualities. In addition, the 6.25% cap rate DBRS Morningstar applied is substantially above the implied cap rate of 3.9% based on the Issuer's underwritten NCF and appraised value. DBRS Morningstar made positive qualitative adjustments to the final LTV sizing benchmarks used for this rating analysis, totaling 4.5% to account for cash flow volatility, property quality, and market fundamentals. DBRS Morningstar also made other negative adjustments to account for certain loan leverage. Classes X-A and X-B 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. JP MORGAN 2020-5: DBRS Finalizes B Rating on 2 Tranches ------------------------------------------------------- DBRS, Inc. finalized the following provisional ratings on the Mortgage Pass-Through Certificates, Series 2020-5 (the Certificates) issued by J.P. Morgan Mortgage Trust 2020-5: -- $704.9 million Class A-1 at AAA (sf) -- $659.9 million Class A-2 at AAA (sf) -- $556.2 million Class A-3 at AAA (sf) -- $556.2 million Class A-3-A at AAA (sf) -- $556.2 million Class A-3-X at AAA (sf) -- $417.1 million Class A-4 at AAA (sf) -- $417.1 million Class A-4-A at AAA (sf) -- $417.1 million Class A-4-X at AAA (sf) -- $139.0 million Class A-5 at AAA (sf) -- $139.0 million Class A-5-A at AAA (sf) -- $139.0 million Class A-5-X at AAA (sf) -- $331.7 million Class A-6 at AAA (sf) -- $331.7 million Class A-6-A at AAA (sf) -- $331.7 million Class A-6-X at AAA (sf) -- $224.5 million Class A-7 at AAA (sf) -- $224.5 million Class A-7-A at AAA (sf) -- $224.5 million Class A-7-X at AAA (sf) -- $85.4 million Class A-8 at AAA (sf) -- $85.4 million Class A-8-A at AAA (sf) -- $85.4 million Class A-8-X at AAA (sf) -- $41.7 million Class A-9 at AAA (sf) -- $41.7 million Class A-9-A at AAA (sf) -- $41.7 million Class A-9-X at AAA (sf) -- $97.3 million Class A-10 at AAA (sf) -- $97.3 million Class A-10-A at AAA (sf) -- $97.3 million Class A-10-X at AAA (sf) -- $103.7 million Class A-11 at AAA (sf) -- $103.7 million Class A-11-X at AAA (sf) -- $103.7 million Class A-11-A at AAA (sf) -- $103.7 million Class A-11-AI at AAA (sf) -- $103.7 million Class A-11-B at AAA (sf) -- $103.7 million Class A-11-BI at AAA (sf) -- $103.7 million Class A-12 at AAA (sf) -- $103.7 million Class A-13 at AAA (sf) -- $45.0 million Class A-14 at AAA (sf) -- $45.0 million Class A-15 at AAA (sf) -- $594.1 million Class A-16 at AAA (sf) -- $110.8 million Class A-17 at AAA (sf) -- $704.9 million Class A-X-1 at AAA (sf) -- $704.9 million Class A-X-2 at AAA (sf) -- $103.7 million Class A-X-3 at AAA (sf) -- $45.0 million Class A-X-4 at AAA (sf) -- $14.2 million Class B-1 at AA (sf) -- $14.2 million Class B-1-A at AA (sf) -- $14.2 million Class B-1-X at AA (sf) -- $12.7 million Class B-2 at A (sf) -- $12.7 million Class B-2-A at A (sf) -- $12.7 million Class B-2-X at A (sf) -- $8.2 million Class B-3 at BBB (sf) -- $8.2 million Class B-3-A at BBB (sf) -- $8.2 million Class B-3-X at BBB (sf) -- $3.8 million Class B-4 at BB (sf) -- $1.9 million Class B-5 at B (sf) -- $35.2 million Class B-X at BBB (sf) -- $1.9 million Class B-5-Y at B (sf) Classes A-3-X, A-4-X, A-5-X, A-6-X, A-7-X, A-8-X, A-9-X, A-10-X, A-11-X, A-11-AI, A-11-BI, A-X-1, A-X-2, A-X-3, A-X-4, B-1-X, B-2-X, B-3-X, and B-X are interest-only certificates. The class balances represent notional amounts. Classes A-1, A-2, A-3, A-3-A, A-3-X, A-4, A-4-A, A-4-X, A-5, A-5-A, A-5-X, A-6, A-7, A-7-A, A-7-X, A-8, A-9, A-10, A-11-A, A-11-AI, A-11-B, A-11-BI, A-12, A-13, A-14, A-16, A-17, A-X-2, A-X-3, B-1, B-2, B-3, B-X, B-5-Y, B-6-Y, and B-6-Z are exchangeable certificates. These classes can be exchanged for combinations of base depositable certificates as specified in the offering documents. Classes A-2, A-3, A-3-A, A-4, A-4-A, A-5, A-5-A, A-6, A-6-A, A-7, A-7-A, A-8, A-8-A, A-9, A-9-A, A-10, A-10-A, A-11, A-11-A, A-11-B, A-12, and A-13 are super-senior certificates. These classes benefit from additional protection from the senior support certificates (Classes A-14 and A-15) with respect to loss allocation. The AAA (sf) ratings on the Certificates reflect 6.00% of credit enhancement provided by subordinated certificates. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 4.10%, 2.40%, 1.30%, 0.80%, and 0.55% 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 first-lien fixed-rate prime residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 944 loans with a total principal balance of $749,907,343 as of the Cut-Off Date (July 1, 2020). The pool consists of fully amortizing fixed-rate mortgages with original terms to maturity of up to 30 years. Approximately 20.0% of the loans in the pool are conforming mortgage loans predominantly originated by United Shore Financial Services, LLC doing business as (dba) United Wholesale Mortgage and Shore Mortgage (USFS), loanDepot.com, LLC (loanDepot), and Quicken Loans, LLC (Quicken), which were eligible for purchase by Fannie Mae or Freddie Mac. Details on the underwriting of conforming loans can be found in the Key Probability of Default Drivers section of the presale. The originators for the aggregate mortgage pool are USFS (53.0%), loanDepot (8.7%), and Quicken (8.6%). Also, approximately 6.5% of the loans by balance were acquired by the Seller from MaxEx Clearing LLC. The mortgage loans will be serviced or subserviced by Cenlar FSB (Cenlar; 59.4%), Shellpoint Mortgage Servicing (29.0%), Quicken (8.6%), Johnson Bank (1.6%), and Nationstar Mortgage LLC dba Mr. Cooper (Nationstar; 1.4%). For Cenlar-subserviced loans, the Servicers include loanDepot and USFS. For Nationstar subserviced mortgage loans, the Servicer is United Services Automobile Association. For this transaction, the servicing fee payable for mortgage loans serviced by USFS, JPMorgan Chase Bank, National Association, and loanDepot is composed of three separate components: the aggregate base servicing fee, the aggregate delinquent servicing fee, and the aggregate additional servicing fee. These fees vary based on the delinquency status of the related loan and will be paid from interest collections before distribution to the securities. Nationstar will act as the Master Servicer. Citibank, N.A. (rated AA (low) with a Stable trend by DBRS Morningstar) will act as Securities Administrator and Delaware Trustee. Wells Fargo Bank, N.A. (rated AA with a Negative trend by DBRS Morningstar) will act as Custodian. Pentalpha Surveillance LLC will serve as the representations and warranties (R&W) Reviewer. The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure. As of the Cut-Off Date, no borrower within the pool has entered into a Coronavirus Disease (COVID-19)-related forbearance plan with a servicer. In the event a borrower requests or enters into a coronavirus-related forbearance plan after the Cut-Off Date but prior to the Closing Date, the Mortgage Loan Seller will remove such loan from the mortgage pool and remit the related Closing Date substitution amount. 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: July Update, published on July 22, 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 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 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 (LTV) ratio 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, a satisfactory third-party due-diligence review, structural enhancements, and 100% current loans. The ratings reflect transactional challenges that include weaknesses in the R&W framework, entities lacking financial strength or securitization history, and servicers' financial capabilities. Notes: All figures are in U.S. dollars unless otherwise noted. JP MORGAN 2020-5: Moody's Rates 2 Debt Classes 'B3' --------------------------------------------------- Moody's Investors Service has assigned definitive ratings to 55 classes of residential mortgage-backed securities issued by J.P. Morgan Mortgage Trust 2020-5. The ratings range from Aaa (sf) to B3 (sf). The certificates are backed by 944 fully-amortizing fixed-rate mortgage loans with a total balance of $749,907,343 as of the July 1, 2020 cut-off date. The loans have original terms to maturity of up to 30 years. Similar to prior JPMMT transactions, JPMMT 2020-5 includes agency-eligible mortgage loans (approximately 20.0% 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 and aggregators. United Shore Financial Services, LLC dba United Wholesale Mortgage and Shore Mortgage originated approximately 53.0% of the mortgage loans (by balance) in the pool. 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 51.8% (subserviced by Cenlar, FSB), Quicken Loans Inc. will service about 8.6%, loanDepot.com, LLC will service about 7.7% (subserviced by Cenlar, FSB), Johnson Bank will service about 1.6% and USAA Federal Savings Bank will service about 1.4% (subserviced by Nationstar). NewRez LLC f/k/a New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing (Shellpoint) will service about 28.3% of the mortgage loans on behalf of JPMorgan Chase Bank, N.A. Shellpoint will act as interim servicer for the JPMCB mortgage loans from the closing date until the servicing transfer date, which is expected to occur on or about September 1, 2020 (but which may occur after such date). After the servicing transfer date, these mortgage loans will be serviced by JPMCB. In addition, NewRez LLC f/k/a New Penn Financial, LLC, will service approximately 0.7% of the mortgage loans for which it will own the servicing rights. The servicing fee for loans serviced by JPMCB (and Shellpoint, until the servicing transfer date), loanDepot and United Shore will be based on a step-up incentive fee structure and additional fees for servicing delinquent and defaulted loans. Johnson Bank, NewRez, Quicken, and USAA 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 2020-5 Cl. A-1, Definitive Rating Assigned Aaa (sf) Cl. A-2, Definitive Rating Assigned Aaa (sf) Cl. A-3, Definitive Rating Assigned Aaa (sf) Cl. A-3-A, Definitive Rating Assigned Aaa (sf) Cl. A-3-X*, Definitive Rating Assigned Aaa (sf) Cl. A-4, Definitive Rating Assigned Aaa (sf) Cl. A-4-A, Definitive Rating Assigned Aaa (sf) Cl. A-4-X*, Definitive Rating Assigned Aaa (sf) Cl. A-5, Definitive Rating Assigned Aaa (sf) Cl. A-5-A, Definitive Rating Assigned Aaa (sf) Cl. A-5-X*, Definitive Rating Assigned Aaa (sf) Cl. A-6, Definitive Rating Assigned Aaa (sf) Cl. A-6-A, Definitive Rating Assigned Aaa (sf) Cl. A-6-X*, Definitive Rating Assigned Aaa (sf) Cl. A-7, Definitive Rating Assigned Aaa (sf) Cl. A-7-A, Definitive Rating Assigned Aaa (sf) Cl. A-7-X*, Definitive Rating Assigned Aaa (sf) Cl. A-8, Definitive Rating Assigned Aaa (sf) Cl. A-8-A, Definitive Rating Assigned Aaa (sf) Cl. A-8-X*, Definitive Rating Assigned Aaa (sf) Cl. A-9, Definitive Rating Assigned Aaa (sf) Cl. A-9-A, Definitive Rating Assigned Aaa (sf) Cl. A-9-X*, Definitive Rating Assigned Aaa (sf) Cl. A-10, Definitive Rating Assigned Aaa (sf) Cl. A-10-A, Definitive Rating Assigned Aaa (sf) Cl. A-10-X*, Definitive Rating Assigned Aaa (sf) Cl. A-11, Definitive Rating Assigned Aaa (sf) Cl. A-11-X*, Definitive Rating Assigned Aaa (sf) Cl. A-11-A, Definitive Rating Assigned Aaa (sf) Cl. A-11-AI, Definitive Rating Assigned Aaa (sf) Cl. A-11-B, Definitive Rating Assigned Aaa (sf) Cl. A-11-BI, Definitive Rating Assigned Aaa (sf) Cl. A-12, Definitive Rating Assigned Aaa (sf) Cl. A-13, Definitive Rating Assigned Aaa (sf) Cl. A-14, Definitive Rating Assigned Aa1 (sf) Cl. A-15, Definitive Rating Assigned Aa1 (sf) Cl. A-16, Definitive Rating Assigned Aaa (sf) Cl. A-17, Definitive Rating Assigned Aaa (sf) Cl. A-X-1*, Definitive Rating Assigned Aaa (sf) Cl. A-X-2*, Definitive Rating Assigned Aaa (sf) Cl. A-X-3*, Definitive Rating Assigned Aaa (sf) Cl. A-X-4*, Definitive Rating Assigned Aa1 (sf) Cl. B-1, Definitive Rating Assigned Aa3 (sf) Cl. B-1-A, Definitive Rating Assigned Aa3 (sf) Cl. B-1-X*, Definitive Rating Assigned Aa3 (sf) Cl. B-2, Definitive Rating Assigned A3 (sf) Cl. B-2-A, Definitive Rating Assigned A3 (sf) Cl. B-2-X*, Definitive Rating Assigned A3 (sf) Cl. B-3, Definitive Rating Assigned Baa3 (sf) Cl. B-3-A, Definitive Rating Assigned Baa3 (sf) Cl. B-3-X*, Definitive Rating Assigned Baa3 (sf) Cl. B-4, Definitive Rating Assigned Ba3 (sf) Cl. B-5, Definitive Rating Assigned B3 (sf) Cl. B-5-Y, Definitive Rating Assigned B3 (sf) Cl. B-X*, Definitive 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 0.48% and reaches 5.56% at a stress level consistent with its Aaa ratings. 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 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. The contraction in economic activity in the second quarter was 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. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's increased its median expected losses by 15% (10.5% 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 coronavirus outbreak. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Servicing practices, including tracking coronavirus-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 2020-5 is a securitization of a pool of 944 fully-amortizing fixed-rate mortgage loans with a total balance of $749,907,343 as of the cut-off date, with a weighted average remaining term to maturity of 356 months, and a WA seasoning of 4 months. The WA current FICO score is 767 and the WA original combined loan-to-value ratio is 69.1%. 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 did not make an adjustment for GSE-eligible loans, since those loans were underwritten in accordance with GSE guidelines. Moody's increased its base case and Aaa loss expectations for certain originators of non-conforming loans where Moody's does not have clear insight into the underwriting practices, quality control and credit risk management. In addition, Moody's reviewed the loan performance for some of these originators. Moody's viewed the loan performance as comparable to the GSE loans due to consistently low delinquencies, early payment defaults and repurchase requests. 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 53.0% of the mortgage loans by pool balance (59.0% for non-conforming loans and 29.0% for conforming loans). 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. 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 JPMCB (and Shellpoint, until the servicing transfer date), loanDepot and United Shore will be based on a step-up incentive fee structure with a monthly base fee of $40 per loan and additional fees for delinquent or defaulted loans. Johnson Bank, NewRez, Quicken, and USAA will be paid a monthly flat servicing fee equal to one-twelfth of 0.25% of the remaining principal balance of the mortgage loans. 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, Inglet Blair 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. In terms of valuation, there are three loans that have property inspection waiver, of which original valuation reference to AVM or other alternative valuations, instead of appraisal or sales price. These PIW loans are all GSE-eligible refinance loans, underwritten through AUS. Moody's assessed the PIW process and criteria, and considered it less robust than traditional appraisal, and tested the pool loss sensitivity on the property valuation volatilities of these three loans. However, potential impact is de minimis due to the low percentage of PIW loans in pool. R&W Framework JPMMT 2020-5'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. For loans that JPMMAC acquired via the MAXEX Clearing LLC platform, MaxEx under the assignment, assumption and recognition agreement with JPMMAC, will make the R&Ws. The R&Ws provided by MaxEx to JPMMAC and assigned to the trust are in line with the R&Ws found in other JPMMT transactions, hence Moody's applied the same adjustment as other loans in the pool. 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 0.70% 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 $4,914,711. The senior subordination floor of 0.70% 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, Class A-11-A, Class A-11-B 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, Class A-11-A, Class A-11-B 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. JP MORGAN 2020-ATR1: Fitch Rates 2 Tranches 'Bsf' ------------------------------------------------- Fitch Ratings has assigned final ratings to JP Morgan Wealth Management Mortgage Trust 2020-ATR1. JPMWM 2020-ATR1 -- Class A-1; LT AAAsf New Rating -- Class A-10; LT AAAsf New Rating -- Class A-10-A; LT AAAsf New Rating -- Class A-10-X; LT AAAsf New Rating -- Class A-11; LT AAAsf New Rating -- Class A-11-A; LT AAAsf New Rating -- Class A-11-AI; LT AAAsf New Rating -- Class A-11-B; LT AAAsf New Rating -- Class A-11-BI; LT AAAsf New Rating -- Class A-11-X; LT AAAsf New Rating -- Class A-12; LT AAAsf New Rating -- Class A-13; LT AAAsf New Rating -- Class A-14; LT AAAsf New Rating -- Class A-15; LT AAAsf New Rating -- Class A-16; LT AAAsf New Rating -- Class A-17; LT AAAsf New Rating -- Class A-2; LT AAAsf New Rating -- Class A-3; LT AAAsf New Rating -- Class A-3-A; LT AAAsf New Rating -- Class A-3-X; LT AAAsf New Rating -- Class A-4; LT AAAsf New Rating -- Class A-4-A; LT AAAsf New Rating -- Class A-4-X; LT AAAsf New Rating -- Class A-5; LT AAAsf New Rating -- Class A-5-A; LT AAAsf New Rating -- Class A-5-X; LT AAAsf New Rating -- Class A-6; LT AAAsf New Rating -- Class A-6-A; LT AAAsf New Rating -- Class A-6-X; LT AAAsf New Rating -- Class A-7; LT AAAsf New Rating -- Class A-7-A; LT AAAsf New Rating -- Class A-7-X; LT AAAsf New Rating -- Class A-8; LT AAAsf New Rating -- Class A-8-A; LT AAAsf New Rating -- Class A-8-X; LT AAAsf New Rating -- Class A-9; LT AAAsf New Rating -- Class A-9-A; LT AAAsf New Rating -- Class A-9-X; LT AAAsf New Rating -- Class A-X-1; LT AAAsf New Rating -- Class A-X-2; LT AAAsf New Rating -- Class A-X-3; LT AAAsf New Rating -- Class A-X-4; 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-4; LT BBsf New Rating -- Class B-5; LT Bsf New Rating -- Class B-5-Y; 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 TRANSACTION SUMMARY This is the inaugural transaction off the JP Morgan Wealth Management Mortgage Trust shelf and JP Morgan's first transaction securitized exclusively by loans originated by JP Morgan's Wealth Management division. JP Morgan Chase Bank will be the servicer. The certificates are supported by 402 prime fixed rate mortgage loans with a total balance of approximately $391.1 million as of the cutoff date. All of the loans satisfy the Ability to Repay Rule; however, none of the loans are Qualified Mortgages, since Appendix Q was not tested. KEY RATING DRIVERS Revised GDP Due to Coronavirus (Negative): The coronavirus pandemic and the resulting containment efforts have resulted in revisions to Fitch's GDP estimates for 2020. The agency'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 pandemic, 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 Coronavirus (Negative): The outbreak of the coronavirus pandemic 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 Alt-A delinquencies and past-due payments following Hurricane Maria in Puerto Rico. Payment Forbearance (Neutral): There are no loans in the pool that are currently on or have requested a coronavirus forbearance or deferral plan as of the cut-off date. If a borrower seeks pandemic-related relief after the cut-off date but prior to the closing date, the loan will be removed from the pool. If a borrower seeks pandemic-related relief after the closing date, it is up to the servicer, JPMCB, to determine what type of coronavirus relief plan will work best for the borrower. The forbearance plans generally offered are three months of forbearance (which can be extended up to 12 months) with the following repayment options: repayment in full after the term of the forbearance plan ends, repayment plan, deferral (where missed payments are added to the unpaid principal balance and are non-interest-bearing) or other loss mitigation options. In the event of a deferment, the servicer will recoup P&I advances at the time of deferment. Loans on pandemic relief plans will be counted as delinquent and JPMCB will still be obligated to advance on delinquent loans even if they are on a pandemic relief plan. Servicer advancing helps to provide liquidity to the trust, but may create losses if the servicer reimburses itself for advances all at once. Very High-Quality Mortgage Pool (Positive): The collateral attributes are among the strongest of post-2008 financial crisis RMBS rated by Fitch. The pool consists of fixed-rate loans with a 30-year original term to maturity that are fully amortizing and made to high net worth borrowers with strong credit profiles, low leverage and large liquid reserves. There are 148 loans that have a balance over $1.0 million with the largest loan being $2.78 million. Only 22.8% of the loans are to self-employed borrowers and there are two non-permanent residents in the pool. The pool has a Fitch-calculated weighted average model FICO score of 776, which is indicative of very high credit-quality borrowers. Approximately 86.3% of the loans have current FICO scores at or above 750. In addition, the original WA CLTV ratio of 69.9% represents substantial borrower equity in the property. The loans are seasoned an average of 44 months. The pool's attributes, together with JP Morgan Wealth Management's sound origination practices, support Fitch's very low default risk expectations. All the loans in the pool were underwritten to ATR only and were not tested for QM status. As a result, 100% of the pool is designated as Non-Qualified Mortgage (NQM) loans. Geographic Diversification (Negative): The pool's primary concentration is in California, representing 66.7% of the pool. Approximately 54% of the pool is located in the top three MSAs (Los Angeles, San Francisco, and San Jose), with 24.4% of the pool located in the Los Angeles MSA. The pool's regional concentration added 0.22% to Fitch's 'AAAsf' loss expectations. Non-Qualified Mortgage (Negative): All of the loans in this transaction were underwritten to guidelines that satisfy the ATR Rule, but do not qualify for QM status since Appendix Q was not tested for. Fitch's 'AAAsf' loss was increased by 10 bps to account for the potential risk of foreclosure challenges under the ATR Rule. Low Operational Risk (Positive): Operational risk is very well controlled for in this transaction. JP Morgan Wealth Management is assessed as an 'Above Average' originator by Fitch due to its effective sourcing and acquisition strategy, robust underwriting process and strong risk management framework. JPMCB is the servicer of this transaction and is rated 'RPS1-' by Fitch. Loan origination and servicer quality have an impact on performance, and Fitch lowers its loss expectations for highly rated originators and servicers (rated '1-' or higher) due to their strong practices and higher expected recoveries. Fitch reduced its 'AAAsf' loss expectations, by approximately 50bps, to account for the low operational risk associated with this pool. Representation and Warranty Framework (Neutral): The representation and warranty construct is viewed by Fitch as a Tier 2 framework due to 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. The R&Ws are being provided by JP Morgan Chase Bank, rated 'AA'/'F1+'/Negative by Fitch. There was no adjustment to the loss expectation due to the R&W framework and financial strength of JP Morgan Chase Bank as R&W provider. Due Diligence Review Results (Positive): Third-party due diligence was performed on 100% of loans in the transaction by Clayton Services, assessed as 'Acceptable — Tier 1' by Fitch. The results of the review identified no material exceptions and confirmed sound operational quality with no incidence of material defects. The non-material credit exceptions are supported by strong mitigating factors. Fitch applied a credit for the high percentage of loan level due diligence, which reduced the 'AAAsf' loss expectations by 13bps. Underwriting Guideline Exceptions (Neutral): Some of the loans had underwriting exceptions that were approved prior to the loan being originated. Most of these exceptions had to do with the liquidity or leverage ratios (the leverage ratios had the most exceptions). All exceptions had mitigating factors. All loans in the pool meet the industry accepted standards for full documentation and were confirmed by the third-party due diligence review firm as having income, assets and employment fully verified and consistent with full documentation. In addition, all loans meet the ATR standard. Shifting Interest 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 levels are not maintained. Subordination Floor (Positive): A CE or senior subordination floor of 1.25% has been considered to mitigate potential tail-end risk and loss exposure for senior tranches as pool size declines and performance volatility increases due to adverse loan selection and small loan count concentration. A junior subordination floor of 0.90% has been considered to mitigate potential tail-end risk and loss exposure for subordinate tranches as pool size declines and performance volatility increases due to adverse loan selection and small loan count concentration. Full Servicer Advancing (Mixed): JP Morgan Chase Bank (AA/F1+/Negative/RPS1-/Negative) will provide full advancing for the life of the transaction. Although full P&I advancing will provide liquidity to the certificates, it will also increase the loan-level loss severity since the servicer looks to recoup P&I advances from liquidation proceeds, which results in less recoveries. There is no master servicer in this transaction to advance on loans if JP Morgan Chase Bank is not able to. Fitch applied a 2.0 ERF floor for the 'BBB' rating stress and below in the asset analysis, which resulted in an increase in the straight model output expected loss. However, due to the extremely strong collateral attributes of the pool, the straight model output was below Fitch's 30-year loss floors. As a result, Fitch applied the 30-year loss floors to the 'AAA' to 'BBB' rating categories. For the 'B' rating category, Fitch increased the 'B' expected loss from 0.20% (30-year loss floor for B rating stress) to 0.30% and increased the 'BB' expected loss from 0.40% (30-year loss floor for BB rating stress) to 0.50%. Fitch also increased the raw model loss of 0.10% to 0.20% for the Base Case. Fitch increased the Base Case, 'B', and 'BB' expected losses due to the uncertainty of the current economic environment due to coronavirus and to account for servicer reimbursement of advances. No other adjustments were made. 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 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. Factors that could, individually or collectively, lead to negative rating action/downgrade: The defined stress sensitivity analysis above 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 5.3%. As shown in the preceding table, the analysis indicates there is some potential rating migration with higher MVDs compared to the model projection. 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 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 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. CRITERIA VARIATION JPMCB was not able to provide a tax, title, and lien report and a custodial report. Per Fitch's "US RMBS Rating Criteria," a tax, title and lien report and a custodial report are requested for loans seasoned 24 months or more. Fitch was comfortable not receiving these reports since all the loans were originated by JP Morgan Wealth Management ('Above Average' originator) and serviced by JPMCB (RPS1- servicer rating); the loans have stayed with JPMCB since origination and have not changed hands; the servicer is monitoring for tax, title and lien issues; the custodian already reviewed the custodial files for missing documents and all missing documents that are needed to foreclose would need to be acquired at this point; and JPMCB (an investment-grade counterparty) is providing the representations that include clean tax, title and liens and complete custodial files. A criteria variation was applied for these missing reports; however, no adjustment was made due to the mitigating factors. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Third-party due diligence was performed on 100% of the loans in the transaction by Clayton Services and is assessed as an 'Acceptable — Tier 1' TPR. The review scope includes review of credit, compliance and property valuation for each loan and is consistent with Fitch criteria. The results indicate high quality loan origination practices that are consistent with non-agency prime RMBS. Fitch did not apply any loss adjustments. Fitch received certifications indicating that the loan-level due diligence was conducted in accordance with its published standards for reviewing loans and in accordance with the independence standards outlined in its criteria. 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 consistent with Fitch's "U.S. RMBS Rating Criteria." Clayton Services LLC was 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. 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 JPMWM 2020-ATR1 has an ESG Relevance Score of '4' for Transaction Parties and Operational Risk. Operational risk is well controlled for in JPMWM 2020-ATR1, including strong transaction due diligence as well as an originator assessed as 'Above Average' by Fitch and an 'RPS1-' Fitch-rated servicer, which resulted in a reduction in 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). JP MORGAN 2020-INV2: DBRS Finalizes B Rating on 2 Tranches ---------------------------------------------------------- DBRS, Inc. finalized the following provisional ratings on the Mortgage Pass-Through Certificates, Series 2020-INV2 (the Certificates) issued by J.P. Morgan Mortgage Trust 2020-INV2 (the Issuing Entity): -- $300.8 million Class A-1 at AAA (sf) -- $273.5 million Class A-2 at AAA (sf) -- $191.4 million Class A-3 at AAA (sf) -- $191.4 million Class A-3-A at AAA (sf) -- $191.4 million Class A-3-X at AAA (sf) -- $143.6 million Class A-4 at AAA (sf) -- $143.6 million Class A-4-A at AAA (sf) -- $143.6 million Class A-4-X at AAA (sf) -- $47.9 million Class A-5 at AAA (sf) -- $47.9 million Class A-5-A at AAA (sf) -- $47.9 million Class A-5-X at AAA (sf) -- $120.2 million Class A-6 at AAA (sf) -- $120.2 million Class A-6-A at AAA (sf) -- $120.2 million Class A-6-X at AAA (sf) -- $71.2 million Class A-7 at AAA (sf) -- $71.2 million Class A-7-A at AAA (sf) -- $71.2 million Class A-7-X at AAA (sf) -- $23.3 million Class A-8 at AAA (sf) -- $23.3 million Class A-8-A at AAA (sf) -- $23.3 million Class A-8-X at AAA (sf) -- $14.8 million Class A-9 at AAA (sf) -- $14.8 million Class A-9-A at AAA (sf) -- $14.8 million Class A-9-X at AAA (sf) -- $33.0 million Class A-10 at AAA (sf) -- $33.0 million Class A-10-A at AAA (sf) -- $33.0 million Class A-10-X at AAA (sf) -- $82.0 million Class A-11 at AAA (sf) -- $82.0 million Class A-11-A at AAA (sf) -- $82.0 million Class A-11-AI at AAA (sf) -- $82.0 million Class A-11-B at AAA (sf) -- $82.0 million Class A-11-BI at AAA (sf) -- $82.0 million Class A-11-X at AAA (sf) -- $82.0 million Class A-12 at AAA (sf) -- $82.0 million Class A-13 at AAA (sf) -- $27.4 million Class A-14 at AAA (sf) -- $27.4 million Class A-15 at AAA (sf) -- $210.6 million Class A-16 at AAA (sf) -- $90.3 million Class A-17 at AAA (sf) -- $300.8 million Class A-X-1 at AAA (sf) -- $300.8 million Class A-X-2 at AAA (sf) -- $82.0 million Class A-X-3 at AAA (sf) -- $27.4 million Class A-X-4 at AAA (sf) -- $11.5 million Class B-1 at AA (sf) -- $11.5 million Class B-1-A at AA (sf) -- $11.5 million Class B-1-X at AA (sf) -- $9.2 million Class B-2 at A (sf) -- $9.2 million Class B-2-A at A (sf) -- $9.2 million Class B-2-X at A (sf) -- $8.0 million Class B-3 at BBB (sf) -- $8.0 million Class B-3-A at BBB (sf) -- $8.0 million Class B-3-X at BBB (sf) -- $5.6 million Class B-4 at BB (sf) -- $3.6 million Class B-5 at B (sf) -- $28.7 million Class B-X at BBB (sf) -- $3.6 million Class B-5-Y at B (sf) Classes A-3-X, A-4-X, A-5-X, A-6-X, A-7-X, A-8-X, A-9-X, A-10-X, A-11-X, A-11-AI, A-11-BI, A-X-1, A-X-2, A-X-3, A-X-4, B-1-X, B-2-X, B-3-X, and B-X are interest-only (IO) certificates. The class balances represent notional amounts. Classes A-1, A-2, A-3, A-3-A, A-3-X, A-4, A-4-A, A-4-X, A-5, A-5-A, A-5-X, A-6, A-7, A-7-A, A-7-X, A-8, A-9, A-10, A-11-A, A-11-AI, A-11-B, A-11-BI, A-12, A-13, A-14, A-16, A-17, A-X-2, A-X-3, B-1, B-2, B-3, B-X, and B-5-Y are exchangeable certificates. These classes can be exchanged for combinations of exchange certificates as specified in the offering documents. Classes A-2, A-3, A-3-A, A-4, A-4-A, A-5, A-5-A, A-6, A-6-A, A-7, A-7-A, A-8, A-8-A, A-9, A-9-A, A-10, A-10-A, A-11, A-11-A, A-11-B, A-12, and A-13 are super-senior certificates. These classes benefit from additional protection from the senior support certificates (Classes A-14 and Class A-15) with respect to loss allocation. The AAA (sf) rating on the Certificates reflects 12.00% of credit enhancement provided by subordinated notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 8.65%, 5.95%, 3.60%, 1.95%, and 0.90% 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 first-lien, fixed-rate investment-property residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 1,014 loans with a total principal balance of $341,864,600 as of the Cut-Off Date (July 1, 2020). The entire pool, except for a single loan with IO features, consists of fully amortizing fixed-rate mortgages with original terms to maturity of up to 30 years. Of the loans, 100.0% were made to investors. Consequently, most loans in the pool (66.7% by balance) are not subject to the Qualified Mortgage and Ability-to-Repay rules because the loans were made for business or commercial purposes. In addition, 20 borrowers have multiple mortgages (41 loans in total) included in the securitized portfolio. About 94.5% of the mortgage loans in the portfolio were eligible for purchase by Fannie Mae or Freddie Mac (conforming mortgages). Details on the underwriting of loans can be found in the Key Probability of Default Drivers section of the related rating report. The originators for the aggregate mortgage pool are United Shore Financial Services, LLC doing business as (d/b/a) United Wholesale Mortgage and Shore Mortgage (USFS; 40.1%), Quicken Loans, LLC (Quicken; 25.9%), and various other originators, each comprising less than 15% of the mortgage loans. Prior to the servicing transfer date (September 1, 2020, or a later date), the mortgage loans will be serviced by USFS (subserviced by Cenlar FSB (Cenlar), 40.1%), Quicken (25.9%); NewRez LLC d/b/a Shellpoint Mortgage Servicing (SMS, 17.7%); Amerihome Mortgage Company, LLC (Amerihome; subserviced by Cenlar, 12.1%); and JPMorgan Chase Bank, N.A. (JPMCB, 4.2%; rated AA with a Stable trend by DBRS Morningstar). Servicing will be transferred to JPMCB from SMS on the servicing transfer date as determined by the Issuing Entity and JPMCB. Following the servicing transfer date, USFS and Amerihome (subserviced by Cenlar, 52.2%), Quicken (25.9%), JPMCB (19.8%), and SMS (2.0%) will service the mortgage loans. For this transaction, the servicing fee payable for mortgage loans serviced by USFS, JPMCB, and SMS (for loans that JPMCB will subsequently service) is composed of three separate components: the aggregate base servicing fee, the aggregate delinquent servicing fee, and the aggregate additional servicing fee. These fees vary based on the delinquency status of the related loan and will be paid from interest collections before distribution to the securities. Nationstar Mortgage LLC will act as the Master Servicer. Citibank, N.A. (rated AA (low) with a Stable trend by DBRS Morningstar) will act as Securities Administrator and Delaware Trustee. JPMCB and Wells Fargo Bank, N.A. (rated AA with a Negative trend by DBRS Morningstar) will act as Custodians. Pentalpha Surveillance LLC will serve as the Representations and Warranties (R&W) Reviewer. J.P. Morgan Mortgage Acquisition Corp. (the Seller) intends to retain (directly or through a majority-owned affiliate) a vertical interest in 5% of the principal amount or notional amount of all the senior and subordinate certificates to satisfy the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder. 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, no borrower within the pool has entered into a Coronavirus Disease (COVID-19)-related forbearance plan with a servicer. In the event a borrower requests or enters into a coronavirus-related forbearance plan after the Cut-Off Date but prior to the Closing Date, the Seller will remove such loan from the mortgage pool and remit the related Closing Date substitution amount. 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: July Update," published on July 22, 2020), for the prime asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than it previously used. DBRS Morningstar derives such MVD assumptions through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the 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 (LTV) ratio 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, a satisfactory third-party due-diligence review, structural enhancements, and 100%-current loans. The ratings reflect transactional challenges that include 100% investor properties and multiple loans from the same borrower in the securitized pool as well as a R&W framework that contains certain weaknesses, such as materiality factors, knowledge qualifiers, and some R&W providers that may experience financial stress that could result in the inability to fulfill repurchase obligations. DBRS Morningstar perceives the framework as more limiting than traditional lifetime R&W standards in certain DBRS Morningstar-rated securitizations. To capture the perceived weaknesses in the R&W framework, DBRS Morningstar reduced certain 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. JPMBB COMMERCIAL 2013-C12: Moody's Cuts Class F Debt Rating to B3 ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on two classes, confirmed the rating on one class and affirmed the rating on seven classes in JPMBB Commercial Mortgage Securities Trust 2013-C12 as follows: Cl. A-4, Affirmed Aaa (sf); previously on Oct 17, 2019 Affirmed Aaa (sf) Cl. A-5, Affirmed Aaa (sf); previously on Oct 17, 2019 Affirmed Aaa (sf) Cl. A-S, Affirmed Aaa (sf); previously on Oct 17, 2019 Affirmed Aaa (sf) Cl. A-SB, Affirmed Aaa (sf); previously on Oct 17, 2019 Affirmed Aaa (sf) Cl. B, Affirmed Aa3 (sf); previously on Oct 17, 2019 Affirmed Aa3 (sf) Cl. C, Affirmed A3 (sf); previously on Oct 17, 2019 Affirmed A3 (sf) Cl. D, Confirmed at Baa3 (sf); previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. E, Downgraded to Ba3 (sf); previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. F, 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 Oct 17, 2019 Affirmed Aaa (sf) * Reflects interest-only classes RATINGS RATIONALE The ratings on six P&I classes were affirmed and the rating on one P&I class was confirmed due to the pool's share of defeasance and 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, being within acceptable ranges. The rating on two P&I classes, Cl. E and Cl. F, were downgraded due to anticipated losses from specially serviced and troubled loans. The rating on the IO class, Cl. X-A, was affirmed based on the credit quality of the referenced classes. The actions conclude the review for downgrade initiated on April 17, 2020. 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 commercial real estate from the collapse in 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. 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. Moody's rating action reflects a base expected loss of 4.6% of the current pooled balance, compared to 3.9% at Moody's last review. Moody's base expected loss plus realized losses is now 3.2% of the original pooled balance, compared to 2.8% 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 July 17, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 30% to $937.2 million from $1.3 billion at securitization. The certificates are collateralized by 65 mortgage loans ranging in size from less than 1% to 12.3% of the pool, with the top ten loans (excluding defeasance) constituting 53% of the pool. One loan, constituting 9.5% of the pool, has an investment-grade structured credit assessment. Thirteen loans, constituting 10% 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 18, compared to 19 at Moody's last review. As of the July 2020 remittance report, loans representing 88% were current or within their grace period on their debt service payments, 4% were between 30 -- 59 days delinquent and 7% were 60+ days delinquent. Fourteen loans, constituting 35% of the pool, are on the master servicer's watchlist, of which eight loans, representing 17% 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. Three loans, constituting 9% of the pool, are currently in special servicing. Two of the specially serviced loans, representing 8% of the pool, have transferred to special servicing since March 2020. The largest specially serviced loan is the Southridge Mall loan ($45.2 million -- 4.8% of the pool), which represents a pari-passu portion of a $113.2 million mortgage loan. The loan is secured by a 560,000 square feet portion of a 1.2 million SF regional mall in Greendale, Wisconsin, a suburb of Milwaukee. At securitization, the mall was anchored by non-collateral anchors Boston Store, Sears, J.C. Penney, and collateral anchors, Macy's and Kohl's. Sears and Boston Store vacated the property in 2017 and 2018, respectively. Subsequently Kohl's moved their store to a new retail development in late 2018. The former Sears space was partially backfilled by a Dick's Sporting Goods/Golf Galaxy, Round1 Bowling and Amusement, and T.J. Maxx, all of which opened for business between 2018 and 2019. As of March 2020, the collateral was 69% occupied and in-line occupancy was 76%. The mall has reopened since May 20, 2020 after a temporary closure due to the coronavirus outbreak. The loan transferred to special servicing in July 2020 due to imminent default in relation to the coronavirus outbreak. The loan is last paid through the April 2020 payment and has declined in performance since 2018. The loan has amortized 10% since securitization. The second largest specially serviced loan is the Liberty Tree Mall & Strip Center ($29.7 million -- 3.2% of the pool), which is secured by a 452,000 SF enclosed retail property in Danvers, MA, approximately 20 miles northeast of Boston. The property is anchored by non-collateral anchors Target, and Kohl's, and collateral anchors, Marshall's and a 20-screen AMC/IMAX Theatre. As of December 2019, the collateral was 95% occupied and in-line occupancy was 77%. The mall has reopened since March 19, 2020 after a temporary closure due to the coronavirus outbreak. The loan transferred to special servicing in July 2020, and the borrower has requested relief in relation to the coronavirus outbreak. The loan is last paid through its May 2020 payment. The loan has amortized 15% since securitization. The third largest specially serviced loan is the Park 50 Loan ($11.9 million -- 1.3% of the pool), which is secured by 13 flex/office and flex/industrial buildings located approximately 16 miles northeast of downtown Cincinnati, Ohio. The loan transferred to special servicing in August 2017 for delinquent payments and the REO title date was in October 2018. Moody's has also assumed a high default probability for one poorly performing loan, constituting 1.1% of the pool, and has estimated an aggregate loss of $17.9 million (a 26% expected loss on average) from the specially serviced and troubled loans. Moody's received full year 2018 operating results for 100% of the pool, and 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 96%, 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 reflects a weighted average haircut of 21% 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 1.59X and 1.14X, respectively, compared to 1.66X and 1.16X 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 Americold Cold Storage Portfolio ($88.7 million -- 9.5% of the pool), which represents a pari-passu portion of a $177.5 million mortgage loan. The loan is secured by a portfolio of 15 cold storage facilities located across nine U.S. states, with a total storage capacity of 3.6 million SF. The loan sponsor is Americold Realty Trust, the largest US operator of cold storage facilities. The property is also encumbered by $102 million of mezzanine debt. The loan benefits from amortization and Moody's structured credit assessment and stressed DSCR are a2 (sca.pd) and 1.98X, respectively. The top three conduit loans represent 25% of the pool balance. The largest loan is the Legacy Place Loan ($115.5 million -- 12.3% of the pool), which represents a pari-passu portion of a $184.8 million mortgage loan. The loan is secured by a 484,000 SF lifestyle retail center in Dedham, Massachusetts, a suburb of Boston. The property was developed in 2009 and consists of six buildings and parking for approximately 2,800 vehicles. The property is anchored by a Whole Foods, Citizen's Bank, L.L. Bean and Kings Bowling Alley. Both Whole Food and L.L. Bean recently extended their lease terms in January of 2020 for an additional 10 years and 7 years, respectively. The property was 93% leased as of March 2020, essentially unchanged from the same period last year. Moody's LTV and stressed DSCR are 95% and 0.94X, respectively, compared to 96% and 0.93X at the last review. The second largest loan is the IDS Center Loan ($81.3 million -- 8.7% of the pool), which represents a pari-passu portion of a $162.7 million mortgage loan. The loan is secured by a 1.4 million SF mixed-use property located in downtown Minneapolis, Minnesota. The collateral consists of a 57-story skyscraper office tower, an eight-story annex building, a 100,000 SF retail center, and an underground garage. As of March 2020, the property was 80% leased, the same as year-end 2019. Moody's LTV and stressed DSCR are 113% and 0.89X, respectively, compared to 99% and 1.01X at the last review. The third largest loan is the 408-416 Fulton Street Loan ($35.0 million -- 3.7% of the pool), which is secured by a 55,287 SF retail property located in Brooklyn, NY. The property was originally built 1937 and renovated in 2013. The occupancy declined to 35% in June 2019 due to largest tenant, Apogee (87% of NRA) terminating their lease early. Shortly after, Zwanger Pesiri, a radiology chain, leased out 12,000 SF (22% of NRA) of the vacant Apogee space. Moody's LTV and stressed DSCR are 129% and 0.69X, respectively, compared to 125% and 0.71X at the last review. JPMBB COMMERCIAL 2014-C25: Fitch Cuts Rating on 2 Tranches to CCCsf ------------------------------------------------------------------- Fitch Ratings has downgraded two and affirmed 15 classes of JPMBB Commercial Mortgage Securities Trust Commercial Mortgage Pass-Through Certificates, series 2014-C25. JPMBB 2014-C25 - Class A-3 46643PBC3; LT AAAsf; Affirmed - Class A-4A1 46643PBD1; LT AAAsf; Affirmed - Class A-4A2 46643PAA8; LT AAAsf; Affirmed - Class A-5 46643PBE9; LT AAAsf; Affirmed - Class A-S 46643PBJ8; LT AAAsf; Affirmed - Class A-SB 46643PBF6; LT AAAsf; Affirmed - Class B 46643PBK5; LT AA-sf; Affirmed - Class C 46643PBL3; LT A-sf; Affirmed - Class D 46643PAN0; LT BBB-sf; Affirmed - Class E 46643PAQ3; LT BB-sf; Affirmed - Class EC 46643PBM1; LT A-sf; Affirmed - Class F 46643PAS9; LT CCCsf; Downgrade - Class X-A 46643PBG4; LT AAAsf; Affirmed - Class X-B 46643PBH2; LT AA-sf; Affirmed - Class X-D 46643PAE0; LT BBB-sf; Affirmed - Class X-E 46643PAG5; LT BB-sf; Affirmed - Class X-F 46643PAJ9; LT CCCsf; Downgrade KEY RATING DRIVERS Increased Loss Expectations: The downgrades reflect increased loss expectations since Fitch's last rating action, primarily due to the declining performance of the 14 Fitch Loans of Concern (FLOCs; 23.0% of pool), which include five loans in the top 15 (17.2%). Specially serviced loans consist of 10 loans comprising 11.8% of the pool, including seven which are at least 60 days delinquent. FLOC: The largest FLOC, The Mall at Barnes Crossing and Market Center Tupelo (6.3%), is secured by a 629,757-sf collateral portion of a 732,386-sf regional mall and strip shopping center located in the tertiary market of Tupelo, MS. The mall lost its collateral anchor Sears (13.1% of NRA) in February 2019. Collateral occupancy has decreased to 81.1% as of the March 2020 rent roll from 96.1% at YE 2018 and 97.4% at YE 2017. While collateral anchor JCPenney (14.4% of NRA) renewed its lease through March 2025, Belk Home & Men's (14.9%) has an upcoming lease expiration in October 2020. Tenants occupying less than 10,000 sf reported lower sales of $353 psf as of TTM March 2020 from $398 psf as of TTM June 2019 and $379 psf at issuance. The servicer-reported NOI DSCR was 1.84x as of YE 2019 and YE 2018, compared with 2.22x at YE 2017. The loan began amortizing in October 2017. Fitch's request for lease renewal updates for Belk Home & Men's and cotenancy details remains outstanding. The second largest FLOC, the specially serviced Hilton Houston Post Oak (4.2%), is secured by the leasehold interest in a 15-story, 448-key full-service hotel located in downtown Houston, TX. The loan transferred to special servicing in May 2020 at the borrower's request due to economic hardship sustained from the coronavirus pandemic. The loan is 90 days delinquent as of the July 2020 remittance. The property previously experienced performance decline related to the slumping Houston energy sector and the softened lodging market since Hurricane Harvey. Occupancy, ADR and RevPAR as of TTM December 2019 decreased to 73.5%, $147 and $108, respectively, from 83.5%, $157 and $131 at issuance. The servicer-reported NOI DSCR decreased to 1.39x as of YE 2019 from 1.48x at YE 2018 and 1.81x at YE 2017. The loan began amortizing in November 2017. The third largest FLOC, the specially serviced Southport Plaza (2.5%), is secured by a 192,080-sf mixed-use office and industrial property located in Staten Island, NY. The loan transferred to special servicing in June 2020 at the borrower's request due to economic hardship sustained from the coronavirus pandemic. The loan is 90 days delinquent as of the July 2020 remittance. Occupancy decreased to 82.2% after the third largest tenant First Data Corporation (17.8% of NRA) vacated upon its lease expiration in May 2019; First Data previously contributed approximately 21% of rental income as of the June 2019 rent roll. The property was previously 100% occupied since 2016. In addition, the second largest tenant Xerox (30.7% of NRA) has a lease expiration in October 2020. Xerox contributed approximately 43% of gross rent as of the March 2020 rent roll. Fitch's request for leasing renewal updates remains outstanding. The servicer-reported NOI DSCR decreased to 3.40x as of YE 2019 from 4.44x at YE 2018 and 4.26x at YE 2017. The two other FLOCs in the top 15 include Hershey Square Shopping Center (2.1%), a retail center in Hummelstown, PA that lost its anchor tenant Kmart in March 2019, and Park Place (2.1%), a suburban office property located in Greenwood Village, CO that has experienced cash flow decline following several tenant departures and downsizings. The remaining FLOCs outside of the top 15 are secured by two hotels in the Corpus Christi, TX area (0.8%) that experienced performance decline due to heavy damage sustained from Hurricane Harvey and the softened energy sector and eight specially serviced loans/assets (5.1%), which include four hotel properties (2.5%) that transferred due to concerns over the coronavirus, performance decline related to the softened Houston energy sector or flag-related issues; three retail properties (1.8%) that have experienced cash flow decline due to tenant departures; and one office property located in Baton Rouge, LA (0.8%) that has low occupancy after losing its largest tenant. Increased Credit Enhancement: As of the July 2020 distribution date, the pool's aggregate principal balance has been reduced by 14.3% to $1.015 billion from $1.184 billion at issuance. Five loans (7.3% of current pool) are fully defeased, including two loans in the top 15 (5.5%). Two loans/assets have paid off or been disposed since the last rating action. Realized losses to date total $3.2 million, stemming from the disposition of the REO Holiday Inn Express Kirksville loan in December 2019. Cumulative interest shortfalls totaling $1.1 million are affecting class NR. Five loans (17.8%), including three loans in the top 15, are full-term IO, and all loans that had partial IO periods at issuance are currently amortizing. Loan maturities are concentrated in 2024 (97.3%), with 1.5% in 2021 and 1.3% in 2025. Alternative Loss Considerations: Fitch performed an additional sensitivity scenario that assumed a potential outsized loss of 50% on the maturity balance of the Mall at Barnes Crossing and Market Center Tupelo loan, 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, E, X-D and X-E. Coronavirus Exposure: 10 loans (10.7%) are secured by hotel properties. The weighted average NOI DSCR for the hotel loans is 1.31x; these hotel loans could sustain a decline in NOI of 52.9% before NOI DSCR falls below 1.0x. Eighteen loans (30.8%) are secured by retail properties, including four loans in the top 15 (18.7%). The WA NOI DSCR for the retail loans is 2.27x; these retail loans could sustain a decline in NOI of 62.4% before DSCR falls below 1.0x. Six loans (5.5%) are secured by multifamily properties. The WA NOI DSCR for the multifamily loans is 1.82x; these multifamily loans could sustain a decline in NOI of 43.8% before DSCR falls below 1.0x. Fitch applied additional stresses to seven hotel loans, four retail loans and the Atlanta Decorative Arts Center loan (3.6%), which is secured by a 427,036-sf showroom facility for luxury home furnishings located in Atlanta, GA, to account for potential cash flow disruptions due to the coronavirus pandemic; these additional stresses contributed to maintaining the Negative Rating Outlooks on classes D, E, X-D and X-E. RATING SENSITIVITIES The Negative Rating Outlooks on classes D, E, X-D and X-E reflect the potential for a further downgrade due to concerns surrounding the ultimate impact of the coronavirus pandemic and the performance concerns associated with the FLOCs and specially serviced loans. The Stable Rating Outlooks on classes A-3 through C and the exchangeable class EC reflect the increasing CE, continued amortization and relatively 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 pay down and/or defeasance. Upgrades of the 'Asf' and 'AAsf' categories 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 is likelihood for interest shortfalls. Upgrades to the 'CCCsf' 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 credit enhancement 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 of the 'AAsf' and 'AAAsf' rating categories are not considered likely due to the position in the capital structure, but may occur should interest shortfalls affect these classes. Downgrades to the 'Asf' category could occur if performance of the FLOCs continues to decline, additional loans transfer to special servicing and/or loans susceptible to the coronavirus pandemic do not stabilize. Downgrades to the 'BBsf' and 'BBBsf' categories, both of which currently have Negative Outlooks, would occur should loss expectations increase significantly, the Mall at Barnes Crossing and Market Center Tupelo experience an outsized loss and/or the loans vulnerable to the coronavirus pandemic do not stabilize. Further downgrades to the distressed 'CCCsf'-rated classes 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 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 This transaction has an ESG Relevance Score of 4 for Exposure to Social Impacts due to a regional mall that is underperforming as a result of changing consumer preferences to shopping, which has a negative impact on the credit profile, contributing to maintaining the Negative Rating Outlooks on classes D, E, X-D and X-E. KENTUCKY HIGHER 2013-1: Fitch Cuts Rating on Class A-1 Notes to Bsf ------------------------------------------------------------------- Fitch has affirmed the ratings of the outstanding classes of 2010-1 and 2015-1, and has downgraded the outstanding classes on 2013-1. The The Rating Outlooks on all the 2010-1 and 2015 notes remain Negative. For 2013-1, the Outlooks for the class A notes have been revised to Stable from Negative. For 2013-1, cash flow modelling shows failure at 'Bsf' credit and maturity rating cases. However, according to Fitch's FFELP criteria, when note ratings fail Fitch's 'Bsf' cash flow scenarios, and there is evidence for a sponsor's support to the securitization — albeit not in a contractually binding manner — Fitch may rate the notes 'Bsf' since such uncommitted support could provide a limited margin of safety. Kentucky Higher Education Student Loan Corporation, Series 2010-1 - Class A-2 49130NCC1; LT BBsf; Affirmed Kentucky Higher Education Student Loan Corporation, Series 2013-1 - Class A-1 49130NCG2; LT Bsf; Downgrade Kentucky Higher Education Student Loan Corporation, Series 2015-1 - Class A-1 49130NCX5; LT Asf; Affirmed 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. For the 2015-1 trust, 43.5% of the loans are rehabilitated FFELP loans. The U.S. sovereign rating is 'AAA'/Outlook Stable. Collateral Performance: Fitch assumes a base case default rate of 19.0%, 35.8%, and 39.5% for KHESLC 2010-1, 2013-1, and 2015-1, respectively. For 2010-1, under the 'BBsf' credit stress scenario a default rate of 24.1% was used. For 2013-1, under the 'Bsf' credit stress scenario, a default rate of 37% was used. For 2015-1, under the 'Asf' credit stress scenario, a default rate of 82.5% was used. The base case default rate assumptions imply a constant default rate of 3.0%, 6.9%, and 7.0% for KHESLC 2010-1, 2013-1, and 2015-1, respectively. In addition, Fitch has maintained a sustainable constant prepayment rate (CPR, voluntary & involuntary) of 8.5% and 10% for KHESLC 2010-1 and 2015-1, respectively, and has revised the sustainable CPR to 10.0% for 2013-1 from 12%. As of March 2020, the TTM level of deferment for KHESLC 2010-1 is 3.46%, and as of February 2020, the TTM levels of deferment are 9.07% and 8.58% for KHESLC 2013-1 and 2015-1, respectively. At the same reporting dates, the TTM levels of forbearance are 4.26%, 6.41% and 6.34% for KHESLC 2010-1, 2013-1 and 2015-1, respectively. The TTM levels of income-based repayment (prior to adjustment) are 20.37%, 37.46 and 30.87% for KHESLC 2010-1, 2013-1 and 2015-1, respectively. For all the transactions, the assumed claim reject rate is 0.25% in the base case and 2.0% in the 'AAA' case. The borrower benefits are 0.49%, 0.08% and 0.18% for KHESLC 2010-1, 2013-1 and 2015-1, respectively based on information provided by the servicer. Basis and Interest Rate Risk: Basis risk for this transaction arises from any rate and reset frequency mismatch between interest rate indices for SAP and the securities. As of March 31, 2020, all notes in 2010-1 are indexed to three-month LIBOR, and as of February 2020, all notes in 2013-1 and 2015-1 are indexed to one-month LIBOR. For 2010-1, 97.0% of the trust student loans are indexed to one-month LIBOR, and the rest are indexed to 91-day T-Bill. For 2013-1, 99.5% of the trust student loans are indexed to one-month LIBOR and the rest are indexed to 91-day T-Bill. For 2015-1, 96.7% of the trust student loans are indexed to one-month LIBOR, and the rest are indexed to 91 Day T-Bill. Payment Structure: Credit enhancement is provided by excess spread and a reserve account. As of March 2020, total reported parity is 112.32% for 2010-1, and as of February 2020 124.38%, 110.02% for 2013-1 and 2015-1, respectively. Liquidity support is provided by a reserve, which is currently sized at its floor of $350,000, $845,700, and $250,000 for 2010-1, 2013-1 and 2015-1, respectively. 2010-1 releases cash as long as it maintains its 110% parity, or until it meets the earlier of the 10% pool factor or the May 2020 payment date. The 2013-1 and 2015-1 transactions have a turbo structure and will not release cash until the notes are paid in full. Operational Capabilities: Day-to-day servicing is provided by KHESLC and Nelnet Servicing LLC is the back-up servicer. Fitch considers both acceptable servicers of FFELP student loans. 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 revised the sCDR and sCPR in cash flow modeling to reflect this scenario by assuming 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 transactions. 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%. 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 U.S. 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 transactions are exposed to multiple dynamic risk factors and should not be used as an indicator of possible future performance. KHESLC 2010-1 Current Model-Implied Rating: class A 'BBBsf' (Maturity Stress) Factors that could, individually or collectively, lead to positive rating action/upgrade: Credit Stress Rating Sensitivity -- Default decrease 25%: class A 'AAAsf'; -- Basis Spread decrease 0.25%: class A 'AAAsf'. Maturity Stress Rating Sensitivity -- CPR increase 25%: class A 'Asf'. -- IBR Usage decrease 25%: class A 'Asf' -- Remaining Term decrease 25% class A 'AAA' For the upside coronavirus sensitivity scenario, Fitch assumed a 25% decrease in defaults and basis risk, a 25% decrease in IBR and remaining term and a 25% increase in CPR. Under the 25% decrease in defaults scenario, the model-implied ratings were unchanged at 'AAAsf' for the class A notes. For the 25% decreases in IBR and remaining term the modelled implied ratings were 'Asf' and 'AAAsf' respectively. For the 25% increase in CPR the model-implied ratined was 'Asf'. Factors that could, individually or collectively, lead to negative rating action/downgrade: Credit Stress Rating Sensitivity -- Default increase 25%: class A 'AAAsf'; -- Default increase 50%: class A 'AAAsf'; -- Basis Spread increase 0.25%: class A 'CCCsf'; -- Basis Spread increase 0.5%: class A 'CCCsf'. Maturity Stress Rating Sensitivity -- CPR decrease 25%: class A 'CCCsf'; -- CPR decrease 50%: class A 'CCCsf'; -- IBR Usage increase 25%: class A 'BBsf'; -- IBR Usage increase 50%: class A 'Bsf'. -- Remaining Term increase 25%: class A 'CCCsf'; -- Remaining Term increase 50%: class A 'CCCsf'. For the downside coronavirus sensitivity scenario, Fitch assumed a 50% increase in defaults, IBR and remaining term for the credit and maturity stresses, respectively. Under the 50% increase in defaults scenario, the model-implied ratings were unchanged at 'AAAsf' for the class A notes. For the maturity stress under increased IBR and remaining term, the model-implied ratings were 'CCCsf'. KHESLC 2013-1 Current Model-Implied Ratings: class A 'CCCsf' (Credit and Maturity Stress); Factors that could, individually or collectively, lead to positive rating action/upgrade: Credit Stress Rating Sensitivity -- Default decrease 25%: class A 'CCCsf'; -- Basis Spread decrease 0.25%: class A 'CCCsf'. Maturity Stress Rating Sensitivity -- CPR increase 25%: class A 'CCCsf'. -- IBR Usage decrease 25%: class A 'CCCsf' -- Remaining Term decrease 25% class A 'CCCsf' For the upside coronavirus sensitivity scenario, Fitch assumed a 25% decrease in defaults and basis risk, a 25% decrease in IBR and remaining term and a 25% increase in CPR. There were no model-implied rating changes under these scenarios. Factors that could, individually or collectively, lead to negative rating action/downgrade: Credit Stress Rating Sensitivity -- Default increase 25%: class A 'CCCsf'; -- Default increase 50%: class A 'CCCsf'; -- Basis Spread increase 0.25%: class A 'CCCsf'; -- Basis Spread increase 0.5%: class A 'CCCsf'. Maturity Stress Rating Sensitivity -- CPR decrease 25%: class A 'CCCsf'; -- CPR decrease 50%: class A 'CCCsf'; -- IBR Usage increase 25%: class A 'CCCsf'; -- IBR Usage increase 50%: class A 'CCCsf'. -- Remaining Term increase 25%: class A 'CCCsf'; -- Remaining Term increase 50%: class A 'CCCsf'. For the downside coronavirus sensitivity scenario, Fitch assumed a 50% increase in defaults, IBR and remaining term for the credit and maturity stresses, respectively. Under these scenarios, there were no changes to the model-implied ratings. KHESLC 2015-1 Current Model-Implied Ratings: class A 'Asf' (Maturity Stress); Factors that could, individually or collectively, lead to positive rating action/upgrade: Credit Stress Rating Sensitivity -- Default decrease 25%: class A 'AAAsf'; -- Basis Spread decrease 0.25%: class A 'AAAsf'. Maturity Stress Rating Sensitivity -- CPR increase 25%: class A 'AAsf'. -- IBR Usage decrease 25%: class A 'AAsf' -- Remaining Term decrease 25% class A 'AAA' Factors that could, individually or collectively, lead to negative rating action/downgrade: Default increase 25%: class A 'AAAsf'; -- Default increase 50%: class A 'AAAsf'; -- Basis Spread increase 0.25%: class A 'AAAsf'; -- Basis Spread increase 0.5%: class A 'AAAsf'. For the upside coronavirus sensitivity scenario, Fitch assumed a 25% decrease in defaults and basis risk, a 25% decrease in IBR and remaining term and a 25% increase in CPR. Under the 25% decrease in defaults scenario, the model-implied ratings were unchanged at 'AAAsf' for the class A notes. For the 25% decreases in IBR and remaining term the modelled implied ratings were 'AAsf' and 'AAAsf' respectively. For the 25% increase in CPR the model-implied rating was 'AAsf'. Maturity Stress Rating Sensitivity -- CPR decrease 25%: class A 'Bsf'; -- CPR decrease 50%: class A 'CCCsf'; -- IBR Usage increase 25%: class A 'Bsf'; -- IBR Usage increase 50%: class A 'CCCsf'. -- Remaining Term increase 25%: class A 'CCCsf'; -- Remaining Term increase 50%: class A 'CCCsf'. For the downside coronavirus sensitivity scenario, Fitch assumed a 50% increase in defaults, IBR and remaining term for the credit and maturity stresses, respectively. Under the 50% increase in defaults scenario, the model-implied ratings were unchanged at 'AAAsf' for the class A notes. For the maturity stress under increased IBR and remaining term, the model-implied ratings were 'CCCsf'. 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). KKR CLO 11: Moody's Lowers Rating on Class E-R Notes to B1 ---------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by KKR CLO 11 Ltd.: US$27,500,000 Class E-R Senior Secured Deferrable Floating Rate Notes Due 2031 (the "Class E-R 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$30,250,000 Class C-R Senior Secured Deferrable Floating Rate Notes Due 2031, Confirmed at A2 (sf); previously on June 3, 2020, A2 (sf) Placed Under Review for Possible Downgrade US$14,617,300 Class D-1-R Senior Secured Deferrable Floating Rate Notes Due 2031, Confirmed at Baa3 (sf); previously on April 17, 2020, Baa3 (sf) Placed Under Review for Possible Downgrade US$19,782,700 Class D-2-R Senior Secured Deferrable Floating Rate Notes Due 2031, 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-R Notes, D-2-R Notes and Class E-R Notes and on June 3, 2020 for the Class C-R Notes. The CLO, originally issued in May 2015 and refinanced 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 2023. RATINGS RATIONALE The downgrade on the Class E-R 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, 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 C-R Notes, Class D-1-R Notes and Class D-2-R 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 Class C-R Notes, Class D-1-R Notes and Class D-2-R Notes. Based on June 2020 trustee report [1], the weighted average rating factor was reported at 3588, or 23% worse compared to 2908 reported in the February 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 3017 reported in the June 2020 trustee report [3] by 571 points. Moody's noted that approximately 39.8% of the CLO's par was from obligors assigned a negative outlook and 2.0% 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 26.1% as of June 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $541.5 million, or $8.5 million less than the deal's ramp-up target par balance. Moody's noted that the interest diversion test were reported as failing as of the June 2020 trustee report [4] and resulted in a proportion of excess interest collections being diverted towards reinvestment in collateral on the July 2020 payment date [5]. 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 $537.0 million, defaulted par of $8.0 million, a weighted average default probability of 29.59% (implying a WARF of 3572), a weighted average recovery rate upon default of 48.41%, a diversity score of 72 and a weighted average spread of 3.46%. Moody's also analyzed the CLO by incorporating an approximately $12.1 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. 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. KKR CLO 9: Moody's Lowers Class E-R Notes to B1 ----------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by KKR CLO 9 Ltd.: US$33,000,000 Class D-R Senior Secured Deferrable Floating Rate Notes Due 2030 (the "Class D-R Notes"), Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$27,900,000 Class E-R Senior Secured Deferrable Floating Rate Notes Due 2030 (the "Class E-R 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-R Notes and Class E-R Notes. The CLO, originally issued in September 2014 and refinanced 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 July 2022. RATINGS RATIONALE The downgrades on the Class D-R and E-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, 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 3648 as of June 2020, or 19% worse compared to 3076 reported in the February 2020 trustee report [1]. Both the rate and the magnitude of the WARF deterioration are higher than the averages observed for other BSL CLOs. Moody's calculation also showed the WARF was failing the test level of 3002 reported in the June 2020 trustee report [2] by 674 points. Moody's noted that approximately 38.2% of the CLO's par was from obligors assigned a negative outlook and 2.1% 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 27.75% as of June 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $488.1 million, or $11.9 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class A-R/B-R, Class C-R, Class D-R and Class E-R Notes as of June 2020 at 130.4%, 121.8%, 112.5%, and 105.7%, respectively. Moody's noted that the OC tests for the Class Class D-R and Class E-R Notes, as well as the interest diversion test were reported as failing as of the June 2020 trustee report[3] and resulted in $1.3 million of repayment to the senior notes from interest proceeds on the July 2020 payment date[4]. 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 $483.6 million, defaulted par of $8.5 million, a weighted average default probability of 29.49% (implying a WARF of 3648), a weighted average recovery rate upon default of 48.54%, a diversity score of 71 and a weighted average spread of 3.48%. Moody's also analyzed the CLO by incorporating an approximately $11.610.2 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. 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. LEHMAN BROTHERS 2007-2: Moody's Cuts Rating on 2 Tranches to Ba1 ---------------------------------------------------------------- Moody's Investors Service has downgraded ratings of five classes issued by Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates, Series 2007-2 and Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates, Series 2007-3. The deal is a securitization of small balance commercial real estate loans and is serviced by PHH Mortgage Corporation, a wholly-owned operating subsidiary of Ocwen Financial Corporation. The complete rating actions are as follow: Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates, Series 2007-2 Cl. 1A3, Downgraded to Ba1 (sf); previously on May 5, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 1A4, Downgraded to Ba1 (sf); previously on May 5, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates, Series 2007-3 Cl. AJ, Downgraded to B2 (sf); previously on Dec 2, 2015 Downgraded to B1 (sf) Cl. M1, Downgraded to Caa2 (sf); previously on Dec 2, 2015 Downgraded to Caa1 (sf) Cl. M2, Downgraded to Caa3 (sf); previously on Dec 2, 2015 Downgraded to Caa2 (sf) RATINGS RATIONALE The downgrade rating actions on Cl. 1A3 and Cl. 1A4 in the Lehman 2007-2 transaction and Cl. AJ and Cl. M-1 in the Lehman 2007-3 transaction reflect the unpaid credit-related basis risk interest shortfalls caused by the continued accrual of interest on the outstanding shortfalls. The interest accrued on the credit-related basis risk shortfall on Cl. AJ and Cl. M-1 in Lehman 2007-3 transaction is expected to continue to accrue at a high rate due to the coupons on these bonds. For both the 2007-2 and the 2007-3 transactions, the credit-related basis risk shortfalls are unlikely to be reimbursed because both transactions are currently undercollateralized, the reserve accounts are empty and a large portion of their respective pool balances is severely delinquent, in foreclosure or in REO status. Further, interest shortfalls owed on bonds are paid from the excess interest only after the reserve has built to a pre-specified target amount. The risk of future credit-related interest shortfalls is now significantly elevated in the current environment. The downgrade rating action on Cl. M-2 in Lehman 2007-3 transaction reflects continued deterioration of the pool performance. In July, 22.6% of the pool balance is severely delinquent, in foreclosure, or in REO status as compared with 11.6% as of April. Further, the undercollateralization in this transaction increased to -45.6% in July from -40.1% in April. In the current environment, the risk of further undercollaterization deterioration is heightened, affecting the recovery on this bond. 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 small businesses from the collapse in 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. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was "Moody's Global Approach to Rating SME Balance Sheet Securitizations" published in May 2020. Factors that would lead to an upgrade or downgrade of the ratings: Up Better than expected pool performance and levels of credit enhancement that are higher than necessary to protect investors against current expectations of loss could drive the ratings up. Losses could decline below Moody's expectations as a result of a decrease in seriously delinquent loans, lower loss severities than expected on liquidated loans, or fewer defaults than expected. Changes in servicer practices leading to reimbursement or increased likelihood of reimbursement of credit-related basis risk shortfalls could lead to rating upgrades. Down Levels of credit protection that are insufficient to protect investors against expected losses could drive the ratings down. Moody's expectation of pool losses could increase as a result of an increase in seriously delinquent loans and higher severities than expected on liquidated loans. Further occurrence of credit-related basis risk shortfalls or changes in servicer practices leading to higher likelihood of credit-related basis risk shortfalls could lead to rating downgrades. LIMEROCK CLO III: Moody's Confirms Class E Notes at Caa3 -------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Limerock CLO III, Ltd.: US$25,000,000 Class B-R Deferrable Mezzanine Secured Floating Rate Notes due October 20, 2026 (the "Class B-R Notes"), Upgraded to Aaa (sf); previously on September 10, 2019 Upgraded to Aa2 (sf) US$33,000,000 Class C Deferrable Mezzanine Secured Floating Rate Notes due October 20, 2026 (the "Class C Notes"), Upgraded to A2 (sf); previously on April 09, 2018 Affirmed Baa2 (sf) The Class B-R Notes and Class C Notes are referred to herein, collectively, as the "Upgraded Notes." Moody's also confirmed the ratings on the following notes: US$31,500,000 Class D Deferrable Junior Secured Floating Rate Notes due October 20, 2026 (the "Class D Notes"), Confirmed at Ba3 (sf); previously on June 03, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$12,500,000 Class E Deferrable Junior Secured Floating Rate Notes due October 20, 2026 (current outstanding balance of 12,720,715) (the "Class E Notes"), Confirmed at Caa3 (sf); previously on June 03, 2020 Caa3 (sf) Placed Under Review for Possible Downgrade The Class D Notes and Class E Notes are referred to herein, collectively, as the "Confirmed Notes." These actions conclude the review for downgrade initiated on June 03, 2020 on the Class D and Class E notes. The CLO, originally issued in November 2014 and partially refinanced in February 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 October 2018. RATINGS RATIONALE The upgrade rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over-collateralization ratios since September 2019. The Class A-1-R notes have been paid down by approximately 65.1% or $165.5 million since that time. Based Moody's calculation, the OC ratios for the Class A-2-R, Class B-R, and Class C are currently 176.41%, 150.37%, and 125.84%, respectively, versus 135.00%, 124.92%, and 113.71% in September 2019, respectively. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' current rating after taking into account the CLO's latest portfolio, its relevant structural features, its actual over-collateralization levels, and benefit of deleveraging of senior notes. Consequently, Moody's has confirmed the ratings on the Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3295, compared to 2867 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2730 reported in the July 2020 trustee report [3]. 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 17.2% as of July 2020. Moody's noted that all the OC tests, as well as the interest diversion test were recently reported [4] as passing. 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." For modeling purposes, Moody's used the following base-case assumptions: Par amount and principal proceeds balance: $253,004,825 Defaulted Securites: $5,798,495 Diversity Score: 62 Weighted Average Rating Factor: 3287 Weighted Average Life (WAL): 3.7 years Weighted Average Spread (WAS): 3.18% Weighted Average Recovery Rate (WARR): 48.94% Par haircut in O/C tests and interest diversion test: $2.5 million 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. 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. MAN GLG 2018-2: Moody's Lowers Class E-R Notes to Caa2 ------------------------------------------------------ Moody's Investors Service has downgraded the ratings on the following notes issued by Man GLG US CLO 2018-2 Ltd.: US$30,000,000 Class D-R Senior Secured Deferrable Floating Rate Notes due 2028 (the "Class D-R Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$6,000,000 Class E-R Senior Secured Deferrable Floating Rate Notes due 2028 (the "Class E-R Notes"), Downgraded to Caa2 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade The Class D-R Notes and the Class E-R Notes are referred to herein, collectively, as the "Downgraded Notes." Moody's also confirmed the ratings on the following notes: U.S. $37,000,000 Class C-R Senior Secured Deferrable Floating Rate Notes Due 2028 (the "Class C-R Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade The Class C-R Notes are referred to herein as the "Confirmed Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class C-R, D-R, and E-R Notes issued by the CLO. The CLO, originally issued in September 2014 refinanced 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 on October 2020. RATINGS RATIONALE The downgrades on the Downgraded 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 2020, 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, and expected losses on certain notes have increased. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' 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 Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 2960, compared to 2727 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2776 reported in the July 2020 trustee report [1]. Based on Moody's calculation, the portion 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 12.12% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $625.6 million, or $24.4 million less than the deal's ramp-up target par balance. Nevertheless, Moody's noted that the OC tests for the Class C-R Notes, as well as the interest diversion test were recently reported [1] as passing. 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." For modeling purposes, Moody's used the following base-case assumptions: Paramount and principal proceeds balance: $614,311,499 Defaulted Securities: $28,896,319 Diversity Score: 78 Weighted Average Rating Factor: 2832 Weighted Average Life (WAL): 4.8 years Weighted Average Spread (WAS): 3.26% Weighted Average Recovery Rate (WARR): 46.9% 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. 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. MIDOCEAN CREDIT VI: Moody's Lowers Class E-R Notes to B1 -------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by MidOcean Credit CLO VI: US$20,000,000 Class E-R Deferrable Floating Rate Notes due 2029 (the "Class E-R Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class E-R Notes are referred to herein as the "Downgraded Notes." Moody's also confirmed the rating on the following notes: US$22,000,000 Class D-R Deferrable Floating Rate Notes due 2029 (the "Class D-R Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade The Class D-R are referred to herein as the "Confirmed Notes." These actions conclude the review for downgrade initiated on April 17, 2020 on the Class E-R and D-R Notes issued by the CLO. The CLO, originally issued in December 2016 refinanced in May 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 on April 2021. RATINGS RATIONALE The downgrade on the Downgraded 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 2020, 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, the credit enhancement available to the CLO notes has declined. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Confirmed Notes continue to be consistent with the notes' 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 Confirmed Notes. According to the July 2020 trustee report [1], the weighted average rating factor was reported at 3533, compared to 2937 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 3007 reported in the July 2020 trustee report [3]. 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 25% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $396.5 million, or $3.5 million less than the deal's ramp-up target par balance. Nevertheless, Moody's noted that the OC tests and interest diversion test were recently reported [4]as passing. 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." For modeling purposes, Moody's used the following base-case assumptions: Par amount and principal proceeds balance: $395,789,036 Defaulted Securites: $1,114,471 Diversity Score: 65 Weighted Average Rating Factor: 3536 Weighted Average Life (WAL): 4.4 years Weighted Average Spread (WAS): 3.32% Weighted Average Recovery Rate (WARR): 48.29% Par haircut in O/C tests and interest diversion test: $8.5 million Finally, Moody's notes that it also considered the information provided by the manager which became available prior to the release of this announcement. 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. 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. MONROE CAPITAL X: Moody's Gives (P)Ba3 Rating on Class E Notes -------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to five classes of notes to be issued by Monroe Capital MML CLO X, Ltd. Moody's rating action is as follows: US$212,000,000 Class A Senior Floating Rate Notes due 2031 (the "Class A Notes"), Assigned (P)Aaa (sf) US$38,000,000 Class B Floating Rate Notes due 2031 (the "Class B Notes"), Assigned (P)Aa2 (sf) US$29,600,000 Class C Deferrable Mezzanine Floating Rate Notes due 2031 (the "Class C Notes"), Assigned (P)A2 (sf) US$26,400,000 Class D Deferrable Mezzanine Floating Rate Notes due 2031 (the "Class D Notes"), Assigned (P)Baa3 (sf) US$22,000,000 Class E Deferrable Mezzanine Floating Rate Notes due 2031 (the "Class E Notes"), Assigned (P)Ba3 (sf) The Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are referred to herein, collectively, 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 CLO's portfolio and structure. Monroe Capital MML CLO X, Ltd. is a managed cash flow CLO. The issued notes will be collateralized primarily by middle market loans. At least 95.0% of the portfolio must consist of senior secured loans and eligible investments, and up to 5.0% of the portfolio may consist of second lien loans and unsecured loans. Moody's expects the portfolio to be approximately 60% ramped as of the closing date. Monroe Capital CLO Manager LLC will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's three year reinvestment period. Thereafter, the Manager may not reinvest in new assets and all principal proceeds, including sale proceeds, will be used to amortize the notes in accordance with the priority of payments. In addition to the Rated Notes, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in March 2019. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $400,000,000 Diversity Score: 42 Weighted Average Rating Factor: 3900 Weighted Average Spread (WAS): 4.50% Weighted Average Coupon (WAC): 7.50% Weighted Average Recovery Rate: 46.0% Weighted Average Life: 7.0 years 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 U.S. 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 Global Approach to Rating Collateralized Loan Obligations" published in March 2019. The CLO permits the manager to determine RiskCalc-derived rating factors, based on modifications to certain pre-qualifying conditions applicable to the use of RiskCalc, for obligors temporarily ineligible to receive Moody's credit estimates. Such determinations are limited to a small portion of the portfolio and permit certain modifications for a limited time. Its rating analysis included rating factor stress scenarios. Factors That Would Lead to an Upgrade or Downgrade of the Ratings: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. MORGAN STANLEY 2013-C9: Moody's Cuts Class H Debt Rating to Caa3 ---------------------------------------------------------------- Moody's Investors Service has affirmed the ratings on eleven classes and downgraded the ratings on five classes in Morgan Stanley Bank of America Merrill Lynch Trust 2013-C9, Morgan Stanley Bank of America Merrill Lynch Trust, Series 2013-C9 as follows: Cl. A-AB, Affirmed Aaa (sf); previously on Jun 10, 2019 Affirmed Aaa (sf) Cl. A-3, Affirmed Aaa (sf); previously on Jun 10, 2019 Affirmed Aaa (sf) Cl. A-3FL, Affirmed Aaa (sf); previously on Jun 10, 2019 Affirmed Aaa (sf) Cl. A-3FX, Affirmed Aaa (sf); previously on Jun 10, 2019 Affirmed Aaa (sf) Cl. A-4, Affirmed Aaa (sf); previously on Jun 10, 2019 Affirmed Aaa (sf) Cl. A-S, Affirmed Aaa (sf); previously on Jun 10, 2019 Affirmed Aaa (sf) Cl. B, Affirmed Aa3 (sf); previously on Jun 10, 2019 Affirmed Aa3 (sf) Cl. C, Affirmed A3 (sf); previously on Jun 10, 2019 Affirmed A3 (sf) Cl. D, Downgraded to Ba1 (sf); previously on Jun 10, 2019 Affirmed Baa3 (sf) Cl. E, Downgraded to Ba3 (sf); previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. F, Downgraded to B2 (sf); previously on Apr 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade Cl. G, Downgraded to B3 (sf); previously on Apr 17, 2020 B1 (sf) Placed Under Review for Possible Downgrade Cl. H, Downgraded to Caa3 (sf); previously on Apr 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade Cl. PST**, Affirmed Aa3 (sf); previously on Jun 10, 2019 Affirmed Aa3 (sf) Cl. X-A*, Affirmed Aaa (sf); previously on Jun 10, 2019 Affirmed Aaa (sf) Cl. X-B*, Affirmed A2 (sf); previously on Jun 10, 2019 Affirmed A2 (sf) * Reflects Interest Only Classes ** Reflects Exchangeable Classes RATINGS RATIONALE The ratings on eight 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 two IO classes were affirmed based on the credit quality of the referenced classes. The rating on the exchangeable class, Cl. PST, was affirmed due to the credit quality of the referenced exchangeable classes. The ratings on five P&I classes, Cl. D, Cl. E, Cl. F, Cl. G, and Cl. H were downgraded due to a decline in pool performance and higher anticipated losses due to an increase in the level of specially serviced and troubled loans in addition to the material exposure to retail and hotel properties. The actions conclude the review for downgrade initiated on April 17, 2020. 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 commercial real estate from the collapse in 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. 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. Moody's rating action reflects a base expected loss of 5.9% of the current pooled balance, compared to 2.4% at Moody's last review. Moody's base expected loss plus realized losses is now 4.4% 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 additional downgrades 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. MORGAN STANLEY 2014-150E: DBRS Assigns B Rating on Class F Certs ---------------------------------------------------------------- DBRS, Inc. assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2014-150E issued by Morgan Stanley Capital I Trust 2014-150E (the Issuer or the Trust) as follows: -- Class A at AAA (sf) -- Class A-S at AAA (sf) -- Class X-A at AAA (sf) -- Class X-B at AA (sf) -- Class B at AA (low) (sf) -- Class C at A (low) (sf) -- Class D at BB (high) (sf) -- Class E at BB (sf) -- Class F at B (sf) -- Class G at B (low) (sf) All trends are Stable. These certificates are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 14, 2020. In accordance with MCR's engagement letter covering these certificates, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. On March 1, 2020, DBRS Morningstar finalized its "North American Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the "North American CMBS Surveillance Methodology," as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis. The Trust is a $525 million single-borrower transaction secured primarily by a ground leasehold interest and subleasehold interest in a Class A office tower along with a pledge by the borrowers of their 100% beneficial interest in 150 HG Venture, LLC. The loan is nonrecourse with a 10-year term and is structured with interest-only (IO) payments during the entire loan term. The collateral, 150 East 42nd Street, is a 42-story, approximately 1.71 million-square foot (sf), Class A office property located directly across the street from Grand Central Terminal in New York. The tower occupies the entire block bounded by Lexington Avenue, East 42nd Street, Third Avenue, and East 41st Street. Previously serving as the global headquarters for Mobile Oil Corporation from 1956 to 1987, the property is currently anchored by investment-grade tenants Wells Fargo (437,088 sf; 25.5% of net rentable area (NRA); expiring in 2028) and Mount Sinai Hospital (448,819 sf; 26.2% of NRA; expiring in 2046), which occupy a combined 51.7% of the property's NRA. Given the seasoning of the transaction, DBRS Morningstar used the servicer's preceding net cash flow (NCF) for YE2019. The resulting NCF figure was $40.3 million and a cap rate of 8.0% was applied, resulting in a DBRS Morningstar Value of $506.3 million, a variance of -43.8% from the appraised value at issuance of $900.0 million. The DBRS Morningstar Value implies an LTV of 103.7%, as compared with the LTV on the issuance appraised value of 58.3%. The NCF figure applied as part of the analysis represents a -20.0% variance from the Issuer's NCF, primarily driven by ground rent, insurance, operating expenses, and leasing costs. The cap rate applied is at the middle end of the range of DBRS Morningstar Cap Rate Ranges for office properties, reflective of the collateral's location and the collateralized leasehold interest. In addition, the 8.0% cap rate applied is substantially above the implied cap rate of 5.6% based on the Issuer's underwritten NCF and appraised value. DBRS Morningstar made positive qualitative adjustments to the final LTV sizing benchmarks used for this rating analysis, totaling 3.75% to account for cash flow volatility, property quality, and market fundamentals. DBRS Morningstar also made other negative adjustments to account for certain debt stack penalties including a -1.5% total secured debt LTV penalty, a -0.5% mezzanine debt penalty, and a -0.5% all-in LTV penalty. The DBRS Morningstar rating for Class A-S is four notches higher than the final LTV sizing benchmark and the DBRS Morningstar rating for Class B is three notches higher than the final LTV sizing benchmark. Both adjustments were deemed acceptable to account for the collateral's generally stable operating performance, rent upside potential, and favorable location in Manhattan, New York. Classes X-A and X-B 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. MORGAN STANLEY 2014-C18: DBRS Hikes Class 300D Certs Rating to BB ----------------------------------------------------------------- DBRS, Inc. upgraded the ratings on two classes and confirmed the ratings on the remaining classes of nonpooled rake bonds of the Commercial Mortgage Pass-Through Certificates, Series 2014-C18 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2014-C18 (the Issuer), which are backed by the $244.4 million subordinate B note of the Class 300 Certificates, as follows: -- Class 300A confirmed at AA (high) (sf) -- Class 300B confirmed at A (sf) -- Class 300C confirmed at BBB (sf) -- Class 300D upgraded to BB (sf) from BB (low) (sf) -- Class 300E upgraded to B (high) (sf) from B (sf) All trends are Stable. The ratings have been removed from Under Review with Developing Implications, where they were placed on December 10, 2019. On March 1, 2020, DBRS Morningstar finalized its "North American Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. Prior to the finalization of the NA SASB Methodology, the DBRS Morningstar ratings for the subject transaction and all other DBRS Morningstar-rated transactions subject to the methodology in question were previously placed Under Review with Developing Implications, as the proposed methodology changes were material. The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the "North American CMBS Surveillance Methodology," as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis. The rake bonds are directly tied to 300 North LaSalle, which is a 1.3 million-square-foot (sf) Class A office building in Chicago's River North submarket. As of January 2020, the building was 95.8% leased with the largest tenants at the property including Kirkland & Ellis LLP (Kirkland) and the Boston Consulting Group (BCG). The $475 million original whole loan was split between three pari passu A notes with a combined original balance of $230.6 million ($100.0 million of which is in the conduit trust) and a $244.4 million B note (rake bond). The property has won several awards, including a National Association of Industrial and Office Properties (Chicago) Award (2010), Architectural Record Good Design is Good Business Awards (2011), and Urban Land Institute Award (2011). The property is LEED Platinum certified and has received an EnergyStar certificate as well as the Chicago Building Owners and Managers Association Earth Award (2014). The sponsor used loan proceeds, consisting of a $475.0 million mortgage loan along with $381.6 million of borrower equity, to finance the Irvine Company LLC's (Irvine) $850.0 million acquisition of the property and to fund closing costs and escrows. Originally constructed in 2009, 300 North LaSalle is a 60-story riverfront building with an extensive amenities package that includes an outdoor public plaza, conference center, onsite bank, cafe, fitness center, steakhouse restaurant, and subterranean valet parking garage that accommodates up to 233 vehicles. The property's largest tenant at issuance was the international law firm, Kirkland, which composes 52.8% of the net rentable area (NRA). Kirkland has headquartered its global operations at the subject property since 2009 and has a lease scheduled to expire in February 2029. Besides Kirkland, no tenant represents more than 10.0% of the NRA. The property resides on the banks of the Chicago River in the River North submarket of Chicago, east of Michigan Avenue on the northern edge of the Downtown Loop. Two transit stations, Ogilvie Transportation Center and Union Station, are located one mile south of the subject property, linking the downtown area with commuter trains to the suburbs. Additionally, there are numerous Chicago Transit Authority bus and train lines with stops close to the subject. During warmer months, Chicago Water Taxi operates a commuter boat on the Chicago River, which connects the subject to rail stations as well as North Michigan Avenue. The sponsor and guarantor for this loan is TILC Operating Properties LLC, an affiliate of Irvine. Established 150 years ago, Irvine is a privately held real estate investment and development company headquartered in Newport Beach, California. The company is one of the largest landowners in California and, throughout its century-long existence, has never defaulted on a loan. The property is managed by Hines, an international real estate firm with 57 years of experience. The DBRS Morningstar net cash flow (NCF) derived at issuance was reanalyzed for the subject rating action to confirm its consistency with the "DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria." The resulting NCF figure was $40.7 million and a cap rate of 7.25% was applied, resulting in a DBRS Morningstar Value of $562.0 million, a variance of -34.0% from the appraised value of $851.0 million. The DBRS Morningstar Value implies an LTV of 83.7% compared with the LTV of 55.3% on the appraised value at issuance. The NCF figure applied as part of the analysis represents a -11.6% variance from the Issuer's NCF, primarily driven by tenant improvements/leasing commissions (TI/LCs), vacancy, and straight-line rent credit. As of the trailing 12-month period ended June 30, 2019, the servicer reported a NCF figure of $44.3 million, a -8.7% variance from the DBRS Morningstar NCF figure, primarily a factor of TI/LCs. The cap rate DBRS Morningstar applied is in the middle of the DBRS Morningstar Cap Rate Ranges for office properties, reflecting the property's strong occupancy, superior quality, and favorable location within the market. In addition, the 7.25% cap rate DBRS Morningstar applied is above the implied cap rate of 5.4% based on the Issuer's underwritten NCF and appraised value. DBRS Morningstar made positive qualitative adjustments to the final LTV sizing benchmarks used for this rating analysis totaling 4.5% to account for cash flow volatility, property quality, and market fundamentals. DBRS Morningstar also made other positive adjustments to account for certain loan amortization. Notes: All figures are in U.S. dollars unless otherwise noted. MORGAN STANLEY 2020-HR8: DBRS Finalizes B(low) on Class L-RR Debt ----------------------------------------------------------------- DBRS, Inc. finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2020-HR8 issued by Morgan Stanley Capital I Trust 2020-HR8 (MSC 2020-HR8): -- Class A-1 at AAA (sf) -- Class A-SB at AAA (sf) -- Class A-3 at AAA (sf) -- Class A-4 at AAA (sf) -- Class X-A at AAA (sf) -- Class A-S at AAA (sf) -- Class B at AAA (sf) -- Class X-B at AA (low) (sf) -- Class X-D at AA (low) (sf) -- Class C at A (high) (sf) -- Class D at A (high) (sf) -- Class E-RR at A (low) (sf) -- Class F-RR at A (low) (sf) -- Class G-RR at BBB (sf) -- Class H-RR at BB (high) (sf) -- Class J-RR at BB (sf) -- Class K-RR at B (high) (sf) -- Class L-RR at B (low) (sf) All trends are Stable. The Class X-A, X-B, and X-D note balances are notional. 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. DBRS Morningstar continues to monitor the ongoing coronavirus pandemic and its impact 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. Despite the impact of the coronavirus, all 43 loans in the pool have received debt service payments for May and June. The transaction consists of 43 fixed-rate loans secured by 76 commercial and multifamily properties. The transaction is of a sequential-pay pass-through structure. Two loans, representing 11.4% of the pool, are shadow-rated investment grade by DBRS Morningstar. DBRS Morningstar analyzed the conduit pool to determine the 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 2.58 times (x). Five loans, accounting for 29.08% of the pool balance, had a DBRS Morningstar DSCR below 1.56x, a threshold indicative of a higher likelihood of midterm default. The pool additionally includes seven loans, composing a combined 23.4% of the pool balance, with a DBRS Morningstar loan-to-value (LTV) ratio exceeding 67.1%, a threshold generally indicative of above-average default frequency. The WA DBRS Morningstar LTV of the pool at issuance was 60.0%, and the pool is scheduled to amortize down to a DBRS Morningstar WA LTV of 57.3% at maturity. These credit metrics are based on A note balances. Seven loans, representing 33.6% of the pool, are in areas identified as DBRS Morningstar Market Ranks of either 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. Markets ranked seven or eight benefit from lower default frequencies than less dense suburban, tertiary, and rural markets. Urban markets represented in the deal include New York, District of Columbia, and San Francisco. Sixteen loans, representing a combined 30.8% of the pool by allocated loan balance, exhibit issuance LTVs of less than 59.3%, a threshold historically indicative of relatively low-leverage financing and generally associated with below-average default frequency. Two of the loans—525 Market Street and Bellagio Hotel and Casino—exhibit credit characteristics consistent with investment-grade shadow ratings. Combined, these loans represent 11.4% of the pool. The credit characteristics of 525 Market Street are consistent with an A (high) rating, and those of Bellagio Hotel and Casino are consistent with AAA. Term default risk is low, as indicated by a strong WA DBRS Morningstar DSCR of 2.58x. Even with the exclusion of the shadow-rated loans, which represent 11.4% of the pool, the deal exhibits a very favorable DBRS Morningstar DSCR of 2.09x. The pool is diverse by property type, with multifamily properties representing 38.3% and office properties representing 28.4% of the total pool balance. Compared with other property types, multifamily properties benefit from staggered lease rollover and generally low expense ratios. 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. While the pool demonstrates favorable loan metrics with WA DBRS Morningstar Issuance and Balloon LTVs of 60.0% and 57.3%, respectively, it also exhibits heavy leverage barbelling. Two loans, accounting for 11.4% of the pool, have investment-grade shadow ratings and a WA LTV of 38.1%. The pool also has 16 loans, composing 30.8% of the pool balance, with an issuance LTV lower than 59.3%, a threshold historically indicative of relatively low-leverage financing. Seven loans, composing 23.4% of the pool balance, have 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 0.4%, while the WA expected loss of the pool's conduit component was substantially higher at more than 2.1%, further illustrating the barbelled nature of the transaction. The WA DBRS Morningstar Market Rank of the high-leverage loans was 6.8. While these loans exhibit higher leverage, their location within urban markets represents a lower likelihood of midterm default. Thirty-one loans, representing a combined 73.9% of the pool by allocated loan balance, are structured with full-term interest-only (IO) periods. An additional 10 loans, representing 18.3% of the pool, have partial IO periods ranging from 12 months to 60 months. Two of the 31 identified loans are shadow-rated investment grade by DBRS Morningstar: 525 Market Street and Bellagio Hotel and Casino. The pool features a relatively high concentration of loans secured by properties in less favorable suburban market areas, as evidenced by 16 loans, which represent 24.6% of the pool balance, being secured by properties in areas with a DBRS Morningstar Market Rank of either 3 or 4. Furthermore, only six loans, representing 7.1% of the total pool balance, are secured by properties in areas with a DBRS Morningstar Market Rank of either 1 or 2, which are typically considered more rural or tertiary in nature. Ten loans, representing 15.4% of the pool balance, secured by properties in areas with a DBRS Morningstar Market Rank of 1, 2, 3, or 4 will amortize over the loan term, which can reduce default risk over time. The WA expected loss of loans with DBRS Morningstar Market Ranks of 1, 2, 3, or 4 is 2.8%, which is slightly higher than the overall conduit WA expected loss of 2.1% and is reflected in the pool's credit enhancement. Eight loans, representing 23.1% of the total pool balance, were modeled with either Weak or Bad (Litigious) sponsor strength. These loans were associated with sponsors with limited commercial real estate experience and/or low net worth and liquidities multiples. Furthermore, two of the eight loans were associated with sponsors that had a prior voluntary bankruptcy or other negative credit events. DBRS Morningstar applied a more punitive probability of default penalty toward these loans. Classes X-A, X-B, and X-D 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: With regard to due diligence services, DBRS Morningstar was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS Morningstar's methodology, DBRS Morningstar used the data file outlined in the independent accountant's report in its analysis to determine the ratings referenced herein. MORGAN STANLEY 2020-HR8: Fitch Rates Class K-RR Certs 'B-sf' ------------------------------------------------------------ Fitch Ratings has assigned final ratings and Rating Outlooks to Morgan Stanley Capital I Trust 2020-HR8 commercial mortgage pass-through certificates, series 2020-HR8. MSC 2020-HR8 -- Class A-1; LT AAAsf New Rating -- Class A-3; LT AAAsf New Rating -- Class A-3-1; LT AAAsf New Rating -- Class A-3-2; LT AAAsf New Rating -- Class A-3-X1; LT AAAsf New Rating -- Class A-3-X2; 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-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 BBB+sf New Rating -- Class E-RR; LT BBB+sf New Rating -- Class F-RR; LT BBBsf New Rating -- Class G-RR; LT BBB-sf New Rating -- Class H-RR; LT BB+sf New Rating -- Class J-RR; LT BB-sf New Rating -- Class K-RR; LT B-sf New Rating -- Class L-RR; LT NRsf New Rating -- Class M-RR; LT NRsf New Rating -- Class X-A; LT AAAsf New Rating -- Class X-B; LT A-sf New Rating -- Class X-D; LT BBB+sf New Rating -- $11,100,000 class A-1 'AAAsf'; Outlook Stable; -- $16,500,000 class A-SB 'AAAsf'; Outlook Stable; -- $145,000,000a class A-3 'AAAsf'; Outlook Stable; -- $0a class A-3-1 'AAAsf'; Outlook Stable; -- $0a class A-3-2 'AAAsf'; Outlook Stable; -- $0ab class A-3-X1 'AAAsf'; Outlook Stable; -- $0ab class A-3-X2 'AAAsf'; Outlook Stable; -- $311,068,000a class A-4 'AAAsf'; Outlook Stable; -- $0a class A-4-1 'AAAsf'; Outlook Stable; -- $0a class A-4-2 'AAAsf'; Outlook Stable; -- $0ab class A-4-X1 'AAAsf'; Outlook Stable; -- $0ab class A-4-X2 'AAAsf'; Outlook Stable; -- $483,668,000b class X-A 'AAAsf'; Outlook Stable; -- $108,826,000b class X-B 'A-sf'; Outlook Stable; -- $36,275,000a class A-S 'AAAsf'; Outlook Stable; -- $0a class A-S-1 'AAAsf'; Outlook Stable; -- $0a class A-S-2 'AAAsf'; Outlook Stable; -- $0ab class A-S-X1 'AAAsf'; Outlook Stable; -- $0ab class A-S-X2 'AAAsf'; Outlook Stable; -- $36,276,000 class B 'AA-sf'; Outlook Stable; -- $36,275,000 class C 'A-sf'; Outlook Stable; -- $6,999,000c class D 'BBB+sf'; Outlook Stable; -- $6,999,000bc class X-D 'BBB+sf'; Outlook Stable; -- $8,547,000cd class E-RR 'BBB+sf'; Outlook Stable; -- $9,501,000cd class F-RR 'BBBsf'; Outlook Stable; -- $18,137,000cd class G-RR 'BBB-sf'; Outlook Stable; -- $10,365,000cd class H-RR 'BB+sf'; Outlook Stable; -- $9,500,000cd class J-RR 'BB-sf'; Outlook Stable; -- $7,774,000cd class K-RR 'B-sf'; Outlook Stable. The following classes are not rated by Fitch: -- $11,228,000cd class L-RR; -- $16,410,372cd class M-RR. (a) See page 12 of the presale for detail on exchangeable certificates. (b) Notional amount and interest only. (c) Privately placed and pursuant to Rule 144A. (d) Horizontal credit-risk retention interest. Since Fitch published its expected ratings on July 20, 2020, the following changes occurred: The balances for classes A-3, A-4, C, D, E-RR and F-RR were finalized. At the time that the expected ratings were published, the initial certificate balances of class A-3 and A-4 were unknown and expected to be $456,068,000 in aggregate, subject to a 5% variance. The final class balances for classes A-3 and A-4 are $145,000,000 and $311,068,000, respectively. The final class balances for classes C, D, E-RR and F-RR are $36,275,000, $6,999,000, $8,547,000 and $9,501,000, respectively. The classes above reflect the final ratings and deal structure. The final ratings are based on information provided by the issuer as of July 30, 2020. TRANSACTION SUMMARY The certificates represent the beneficial ownership interest in the trust, primary assets of which are 43 loans secured by 76 commercial properties having an aggregate principal balance of $690,955,373 as of the cutoff date. The loans were contributed to the trust by Morgan Stanley Mortgage Capital Holdings LLC, Argentic Real Estate Finance LLC, Starwood Mortgage Capital LLC and Barclays Capital Real Estate Inc. Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 71.1% of the properties by balance, cash flow analysis of 88.7% 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 (i.e. bad debt expense; 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 the loans are current. The borrower of 14741 Memorial Drive (1.0% of the pool) and the lender entered into a Pre-Negotiation Agreement dated April 21, 2020, and have had discussions regarding potential modification or forbearance of the loan. However, no modification or forbearance agreement has been entered into. Additionally, the borrowers of three loans including FTERE Bronx Portfolio (7.8%), Bronx Multifamily Portfolio V (2.2%) and The Court at Hamilton (1.9%) have made forbearance or modification requests, all of which have been withdrawn or denied. 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 107.3% is higher than the YTD 2020 and 2019 averages of 98.5% and 103.0%, respectively. The pool's Fitch DSCR of 1.24x is lower than the YTD 2020 average of 1.31x and the 2019 average of 1.26x. Investment-Grade Credit Opinion Loans: Two loans, representing 11.4% of the pool, received investment-grade credit opinions. This is below the YTD 2020 and 2019 averages of 28.5% and 14.2%, respectively. 525 Market Street (5.8% of the pool) received a stand-alone credit opinion of 'A-sf*' and Bellagio Hotel & Casino (5.6% of the pool) received a stand-alone credit opinion of 'BBB-sf*'. Concentrated Pool: The top 10 loans constitute 59.3% of the pool, which is greater than the YTD 2020 average of 54.4% and the 2019 average of 51.0%. The loan concentration index of 463 is greater than the YTD 2020 and 2019 averages of 409 and 379, respectively. Favorable Property Type Concentrations: Multifamily properties represent the second largest concentration at 38.3% of the pool, which is higher than the YTD 2020 and 2019 average multifamily concentrations of 20.6% and 16.9%, respectively. In Fitch's multiborrower model, multifamily properties have a below-average likelihood of default, all else equal. Office properties, which represent the largest concentration at 39.9% of the pool, have an average likelihood of default in Fitch's multiborrower model, all else equal. However, the pool includes nine loans (12.4%) secured by retail properties and one loan (5.6%) secured by a hotel property. 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 below 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 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'/'BBB+sf'/ 'BBB-sf'/ 'BB-sf'/ 'B-sf' 10% NCF Decline: 'A+sf'/ 'A-sf'/ 'BBB-sf' /'BBB-sf'/'BB-sf'/'CCCsf'/'CCCsf' 20% NCF Decline: 'A-sf'/ 'BBBsf'/ 'BB+sf' / 'BB-sf'/ 'CCCsf'/'CCCsf'/ 'CCCsf' 30% NCF Decline: 'BBBsf'/ 'BB+sf'/ 'B-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 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'/ 'BBB+sf'/ 'BBB-sf'/ 'BB-sf'/ 'B-sf' 20% NCF Increase: 'AAAsf'/ 'AAAsf'/ 'AA+sf'/ 'AAsf'/ '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. 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 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 its 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. 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). NATIXIS COMMERCIAL 2017-75B: DBRS Gives B(high) on 3 Tranches ------------------------------------------------------------- DBRS, Inc. assigned ratings to the Commercial Mortgage Pass-Through Certificates, Series 2017-75B issued by Natixis Commercial Mortgage Securities Trust 2017-75B (the Issuer) as follows: -- Class A at AAA (sf) -- Class B at AA (sf) -- Class C at A (sf) -- Class D at BBB (low) (sf) -- Class E at B (high) (sf) -- Class XA at AAA (sf) -- Class XB at A (high) (sf) -- Class V1XB at A (high) (sf) -- Class V1A at AAA (sf) -- Class V1B at AA (sf) -- Class V1C at A (sf) -- Class V1D at BBB (low) (sf) -- Class V1E at B (high) (sf) -- Class V2 at B (high) (sf) All trends are Stable. These certificates are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these certificates Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 14, 2020. In accordance with MCR's engagement letter covering these certificates, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. On March 1, 2020, DBRS Morningstar finalized its "North American Single-Asset/Single-Borrower Ratings Methodology" (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the "North American CMBS Surveillance Methodology," as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis. The total $250.0 million financing consisted of $59.0 million of pooled trust debt, $84.0 million of a subordinated B note held in the trust, $33.0 million of nonpooled pari passu debt outside the trust, and $54.0 of a subordinated B note held outside the trust. The 10-year loan called for interest-only (IO) payments for the entire term with no amortization. The total mortgage debt of $230.0 million was supplemented by $20.0 of mezzanine debt. Collateral for the loan is the fee simple interest in a 35-story Class B office tower in the Financial District of lower Manhattan. The property was developed in 1928 as the headquarters of ITT Inc. (formerly International Telephone & Telegraph) not long after the company was founded in 1920. Many architectural details remain from that time, including the large entrance lobby with hanging brass chandeliers, terrazzo and marble floors, fresco painted vaulted ceilings, brass cab elevators (with modernized controls and mechanics), and a separate domed mosaic entrance on the corner of Broad and William Streets used from time to time by the New York City high school tenant that controls the interior space. The 671,369-square-foot building has undergone recent renovations and upgrades to the lobby, elevator, and mechanical systems. The property is located along Broad Street within one block of the New York Stock Exchange and the National Museum of the American Indian and within a short walk to the World Trade Center complex, the New Jersey PATH commuter rail station, the Staten Island Ferry, and Fulton Street Subway Station with access to approximately nine subway lines and several bus lines all converging in lower Manhattan. The property is surrounded by a revitalizing neighborhood with other office buildings, large apartment and condominium buildings, restaurants, sports facilities, entertainment, cultural and tourist attractions, multiple transportation options, and places for outdoor recreation. As of April 2020, Reis, Inc. (Reis) reported occupancy in the building at 87.1%. The April 30, 2020, rent roll shows occupancy at 86.0%. Tenants included the Board of Education of the City School District of the City of New York and AT&T Inc. Internap Corporation departed when its lease expired at the end of 2018. According to the 2017 appraisal, the submarket vacancy was 8.1%. Reis placed the Downtown Manhattan office market vacancy at 9.4% in 2017 and 10.5% in Q4 2019, and expected vacancy to trend slightly higher through the end of 2020 before the impact of the Coronavirus Disease (COVID-19). The DBRS Morningstar net cash flow (NCF) derived at issuance was reanalyzed for the subject rating action to confirm its consistency with the "DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria." The resulting NCF figure was 13.2 million and a cap rate of 7.00% was applied, resulting in a DBRS Morningstar Value of $188.9 million, a variance of -53.1% from the appraised value at issuance of $403.0 million. The DBRS Morningstar Value implies an LTV of 121.8% on the total mortgage debt of $230.0 million compared with the LTV of 57.1% on the appraised value at issuance. The NCF figure applied as part of the analysis represents a -16.6% variance from the Issuer's NCF, primarily driven by estimated annual leasing costs, vacancy assumptions, and utilities expense. The Q4 2019 Operating Statement Analysis Report reported a NCF of $13.9 million, roughly $1.96 million less than the Issuer's underwritten NCF at issuance and $0.67 million more than the DBRS Morningstar reanalyzed NCF estimate. The cap rate DBRS Morningstar applied is at the lower end of the DBRS Morningstar Cap Rate Ranges for office properties, reflecting the property's location in Manhattan's Financial District, history of stable occupancy, as well as stable cash flow with the large New York City public school tenant, below-market rents, and its ability to attract the technology sector with high-speed national and international telephone and Internet services. In addition, the 7.00% cap rate DBRS Morningstar applied is substantially above the implied cap rate of 3.9% based on the Issuer's underwritten NCF and appraised value and within the range of DBRS Morningstar office cap rates for similar-quality buildings in the Financial District submarket. DBRS Morningstar made positive qualitative adjustments to the final LTV sizing benchmarks used for this rating analysis, totaling 2.50% to account for cash flow volatility, property quality, and market fundamentals. The DBRS Morningstar rating is three notches higher than the final LTV sizing benchmarks after all adjustments because of the historically stable occupancy in the office submarket and at the property, albeit with a recent large tenant departure affecting DBRS Morningstar's cash flow analysis; the rental stability offered by the New York City public school tenant; as well as the property's highly visible location, strong sponsor, and long-term ownership. Classes XA, XB, and V1XB 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. OAKTOWN RE IV: DBRS Finalizes B(low) Rating on Class M-2 Notes -------------------------------------------------------------- DBRS, Inc. finalized its provisional ratings on the Mortgage Insurance-Linked Notes, Series 2020-1 (the Notes) issued by Oaktown Re IV Ltd. (OMIR 2020-1 or the Issuer): -- $81.4 million Class M-1A at BBB (low) (sf) -- $125.4 million Class M-1B at BB (low)(sf) -- $98.3 million Class M-2 at B (low) (sf) The BBB (low) (sf), BB (low) (sf), and B (low) (sf) ratings reflect 6.05%, 4.20%, and 2.75% of credit enhancement, respectively. Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction. OMIR 2020-1 is National Mortgage Insurance Corporation's (NMI; the ceding insurer) third-rated MI-linked note transaction. Payments to the Notes are backed by reinsurance premiums, eligible investments, and related account investment earnings, in each case relating to a pool of MI policies linked to residential loans. The Notes are exposed to the risk arising from losses that the ceding insurer pays to settle claims on the underlying MI policies. As of the cut-off date, the pool of insured mortgage loans consists of 100,621 fully amortizing first-lien fixed- and variable-rate mortgages. They all have been underwritten to a full documentation standard, have original loan-to-value ratios (LTVs) less than or equal to 97%, and have never been reported to the ceding insurer as 60 or more days delinquent. The mortgage loans were originated on or after April 2019. On the closing date, the Issuer will enter into the Reinsurance Agreement with the ceding insurer. Per the agreement, the ceding insurer will receive protection for the funded portion of the MI losses. In exchange for this protection, the ceding insurer will make premium payments related to the underlying insured mortgage loans to the Issuer. The Issuer is expected to use the proceeds from selling the Notes to purchase certain eligible investments that will be held in the reinsurance trust account. The eligible investments are restricted to AAA or equivalently rated U.S. Treasury money market funds and securities. Unlike other residential mortgage-backed security (RMBS) transactions, cash flow from the underlying loans will not be used to make any payments; rather, in MI-linked note (MILN) transactions, a portion of the eligible investments held in the reinsurance trust account will be liquidated to make principal payments to the noteholders and to make loss payments to the ceding insurer when claims are settled with respect to the MI policy. The Issuer will use the investment earnings on the eligible investments, together with the ceding insurer's premium payments, to pay interest to the noteholders. The calculation of principal payments to the Notes will be based on a reduction in the aggregate exposed principal balance on the underlying MI policy. The subordinate Notes will receive their pro rata share of available principal funds if the minimum credit enhancement test and the delinquency test are satisfied. The minimum credit enhancement test will purposely fail at the closing date, thus locking out the rated classes from initially receiving any principal payments until the subordinate percentage grows to 8.00% from 7.25%. The delinquency test will be satisfied if the three-month average of 60+ days delinquency percentage is below 75% of the subordinate percentage. Unlike earlier rated NMI MILN transactions where the delinquency test is satisfied when the delinquency percentage falls below a fixed threshold, this transaction incorporates a dynamic delinquency test. Interest payments are funded via (1) premium payments that the ceding insurer must make under the Reinsurance Agreement and (2) earnings on eligible investments. On the Closing Date, the ceding insurer will establish a cash and securities account, the premium deposit account, and deposit an amount that covers 70 days of interest payments to be made to the noteholders. The calculation of the initial deposit amount also takes into account any potential investment income that may be earned on eligible investments held in the trust account. In case of the ceding insurer's default in paying coverage premium payments to the Issuer, the amount available in this account will be used to make interest payments to the noteholders. The presence of this account mitigates certain counterparty exposure that the trust has to the ceding insurer. On each payment date, if the amount available in the premium deposit account is less than the target premium amount, and the ceding insurer's average financial strength rating is lower than the highest rating assigned to the Notes, then the ceding insurer must fund the premium deposit account up to its target amount. Please refer to the offering circular for more details. The Notes are scheduled to mature on the payment date in July 2030 but will be subject to early redemption at the option of the ceding insurer (1) for a 10% clean-up call or (2) on or following the payment date in July 2027, among others. The Notes are also subject to mandatory redemption before the scheduled maturity date upon the termination of the Reinsurance Agreement. NMI will act as the ceding insurer. The Bank of New York Mellon (rated AA (high) with a Stable trend by DBRS Morningstar) will act as the Indenture Trustee, Paying Agent, Note Registrar, and Reinsurance Trustee. 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. Various MI companies have set up programs to issue MILNs. These programs aim to transfer a portion of the risk related to MI claims on a reference pool of loans to the investors of the MILNs. In these transactions, investors' risk increases with higher MI payouts. The underlying pool of mortgage loans with MI policies covered by MILN reinsurance agreements are typically conventional/conforming loans that follow government-sponsored enterprises' acquisition guidelines and therefore have LTVs above 80%. However, a portion of each MILN transaction's covered loans may not be agency eligible. 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 the moderate scenario in its commentary, see "Global Macroeconomic Scenarios: July Update," published on July 22, 2020, for the MILN asset class, DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. DBRS Morningstar derives such MVD assumptions through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario. In addition, DBRS Morningstar may assume a portion of the pool (randomly selected) to be on forbearance plans in the immediate future. For these loans, DBRS Morningstar assumes 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 MILN asset class, while the full effect of the coronavirus may not occur until a few performance cycles later, DBRS Morningstar generally believes that loans with layered risk (low FICO score with high LTV/high debt-to-income ratio) may be more sensitive to economic hardships resulting from higher unemployment rates and lower incomes. Additionally, higher delinquencies might cause a longer lockout period or a redirection of principal allocation away from outstanding rated classes because performance triggers failed. Notes: All figures are in U.S. dollars unless otherwise noted. OBX TRUST 2020-EXP2: Fitch Rates Class B-F Debt 'Bsf' ----------------------------------------------------- Fitch Ratings has assigned ratings to OBX 2020-EXP2 Trust. OBX 2020-EXP2 - 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-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-10; LT AAAsf New Rating - Class A-11; LT AAAsf New Rating - Class A-11X; LT AAAsf New Rating - Class A-12; LT AAAsf New Rating - Class A-IO1; LT AAAsf New Rating - Class A-IO2; LT AAAsf New Rating - Class A-IO3; LT AAAsf New Rating - Class A-IO4; LT AAAsf New Rating - Class A-IO5; LT AAAsf New Rating - Class A-IO6; LT AAAsf New Rating - Class A-IO71; LT AAAsf New Rating - Class A-IO72; LT AAAsf New Rating - Class A-IO781; LT AAAsf New Rating - Class A-IO782; LT AAAsf New Rating - Class A-IO81; LT AAAsf New Rating - Class A-IO82; LT AAAsf New Rating - Class B-1; LT A+sf New Rating - Class B1-IO; LT A+sf New Rating - Class B1-A; LT A+sf New Rating - Class B2-1; LT A+sf New Rating - Class B2-1-IO; LT A+sf New Rating - Class B2-1-A; LT A+sf New Rating - Class B2-2; LT Asf New Rating - Class B2-2-IO; LT Asf New Rating - Class B2-2-A; LT Asf New Rating - Class B-3; 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 TRANSACTION SUMMARY The notes are supported by 961 loans with a total unpaid principal balance of approximately $489.4 million as of the cutoff date. The pool consists of fixed-rate mortgages acquired by Annaly Capital Management, Inc. from various originators and aggregators. Distributions of principal and interest and loss allocations are based on a traditional senior-subordinate, shifting-interest structure. 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 current baseline outlook for U.S. GDP growth is -5.6% for 2020, down from 1.7% for 2019. To account for declining macroeconomic conditions, the Economic Risk Factor default variable for the 'Bsf' and 'BBsf' rating categories was increased from a floor of 1.0 and 1.5, respectively to 2.0. High-Quality Mortgage Pool (Positive): The pool consists of 30-year and 40-year fixed-rate fully amortizing loans to borrowers with strong credit profiles, relatively low leverage and large liquid reserves. The loans are seasoned an average of seven months. The pool has a weighted average Fitch calculated model FICO score of 761, high average balance of $509,211 and a low sustainable loan-to-value ratio of 70.1%. Expected Payment Deferrals Related to the Coronavirus (Negative): The outbreak of 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 at least 40% of the pool will be 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 observed in 2009. Payment Forbearance (Mixed): There are currently 65 loans (7.6% by UPB) on a coronavirus-related forbearance plan and an additional five loans (0.8%) that are on a coronavirus-related deferral plan. All of the borrowers on a coronavirus-related forbearance plan are currently making their payments; however, in Fitch's analysis, any borrower on a deferral plan was treated as delinquent regardless of the reported current payment status. A payment deferral moves the borrower's payment due date forward a month and therefore the borrower is not counted as delinquent per the RMBS documentation. The servicers or the P&I advancing party will advance delinquent P&I for borrowers not making the monthly payment 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. Fitch increased its loss expectations by 25 bps at each rating category to address the potential for write-downs due to reimbursements of servicer advances. This increase is based on Fitch's 40% payment stress assumption first six months. Investor Properties, Non-QM and Alternative Documentation (Negative): The pool contains a meaningful amount of investor properties (42%), nonqualified mortgage loans (58%) and non-full documentation loans (27%). Fitch's loss expectations reflect the higher default risk associated with these attributes as well as loss severity adjustments for potential ability-to-repay challenges. Higher LS assumptions are assumed for the investor property product to reflect potential risk of a distressed sale or disrepair. Low Operational Risk (Positive): Operational risk is well-controlled in this transaction. Annaly employs an effective loan aggregation process and has an 'Average' assessment from Fitch. The majority of the loans (87%) are being serviced by Select Portfolio Servicing, Inc., which is rated 'RPS1-'/Negative for this product. 10% of the loans are serviced by Quicken Loans (Quicken), which is not rated by Fitch and the remaining 3% are serviced by Specialized Loan Servicing, LLC, which is rated 'RPS2'/Negative. Fitch applies a servicer credit to servicers rated RPS1- or higher, which resulted in a reduction of 81bps to the 'AAAsf' expected loss. The issuer's retention of at least 5% of the bonds helps ensure an alignment of interest between issuer and investor. Representation and Warranty Framework (Negative): Fitch considers the transaction's representation, warranty and enforcement mechanism framework to be consistent with Tier 2 quality. The RW&Es are being provided by Onslow Bay Financial, LLC, which does not have a financial credit opinion or public rating from Fitch. While an automatic review can be triggered by loan delinquencies and losses, the triggers can toggle on and off from period to period. Additionally, a high threshold of investors is needed to direct the trustee to initiate a review. The Tier 2 framework and non-rated counterparty resulted in a loss penalty of 76 bps at 'AAAsf'. Third-Party Due Diligence (Positive): A very low incidence of material defects was found in the third-party credit, compliance and valuation due diligence performed on 100% of the pool. A third-party review was conducted by SitusAMC and IngletBlair; SitusAMC is assessed by Fitch as 'Acceptable - Tier 1' and IngletBlair is assessed as 'Acceptable - Tier 2'. The due diligence results are in line with industry averages, and based on loan count, 100% were graded 'A' or 'B'. Since loan exceptions either had strong mitigating factors or were accounted for in Fitch's loan loss model, no additional adjustments were made. The model credit for the high percentage of loan level due diligence combined with the adjustments for loan exceptions reduced the 'AAAsf' loss expectation by 31 bps. Servicing Advancing (Neutral): Advances of delinquent P&I will be made on the mortgage loans for the first 120 days of delinquency to the extent such advances are deemed recoverable. Quicken will be responsible for advancing delinquent monthly scheduled payments of P&I in respect of the loans serviced by Quicken, to the extent deemed recoverable. For the loans serviced by SPS and SLS, advances will be made (to the extent deemed recoverable) from amounts on deposit for future distribution, the excess servicing strip fee that would otherwise be allocable to the class A-IO-S notes and the P&I advancing party fee. If such amounts are insufficient, the P&I advancing party (Onslow Bay Financial LLC) will be responsible for any remaining amounts. In the event the underlying obligations are not fulfilled, Wells Fargo Bank, N.A. (Wells Fargo), as master servicer, will be required to make advances. High California Concentration (Negative): Approximately 52% of the pool is located in California. In addition, the metropolitan statistical area concentration is large, as the top three MSAs (Los Angeles, New York and San Francisco) account for 42% of the pool. As a result, a geographic concentration penalty of 1.04x was applied to the probability of default. Shifting Interest Deal Structure (Negative): The mortgage cash flow and loss allocation are based on a senior-subordinate, shifting-interest structure, whereby the subordinate classes receive only scheduled principal and are locked out from receiving unscheduled principal or prepayments for five years. While there is only minimal leakage to the subordinate bonds early on in the transaction, the structure is more vulnerable to defaults occurring later on in the life of the deal compared 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 1.75% of the original balance will be maintained for the notes. Extraordinary Expense Treatment (Neutral): The trust provides for expenses, including indemnification amounts and costs of arbitration, to be paid by the net weighted average coupon of the loans, which does not affect the contractual interest due on the notes. Furthermore, the expenses to be paid from the trust are capped at $275,000 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 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 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. 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 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 an upgrade for the rated class excluding those being assigned ratings of 'AAAsf'. 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%, 20% and 30% in addition to the model-projected 7.1%. 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. 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 A third-party diligence review was completed on 100% of the loans in this transaction and the scope was consistent with Fitch's criteria. The diligence results indicated moderate operational risk. Approximately 18% (174 loans) of the loans were assigned a 'B' grade for credit. There were no loans graded 'C' or 'D'. 40.5% of the loans were graded 'B' due to nonmaterial credit and compliance findings. Roughly 18% of the 'B' loans (174 loans) were for various nonmaterial credit exceptions granted by the lender. Additionally, exceptions were granted due to the presence of mitigating factors such as DTI, LTV and disposable income. No adjustments were made to Fitch's expected losses based on the loan level due diligence findings. Form "ABS Due Diligence 15E" was reviewed and used as part of the rating process 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). OCTAGON INVESTMENT 36: Moody's Confirms Class F Notes at B3 ----------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by Octagon Investment Partners 36, Ltd.: US$30,000,000 Class D Secured Deferrable Mezzanine Floating Rate Notes due 2031 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$20,000,000 Class E Secured Deferrable Junior Floating Rate Notes due 2031 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$10,000,000 Class F Secured Deferrable Junior Floating Rate Notes due 2031 (the "Class F Notes"), Confirmed at B3 (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, E, and F Notes. The CLO, issued in April 2018 is a managed cashflow CLO. The notes are collateralized primarily by a portfolio of broadly syndicated senior secured corporate. The transaction's reinvestment period will end in April 2023. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D, E, and F 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, E, and F Notes. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $487.0 million, defaulted par of $7.6 million, a weighted average default probability of 25.19% (implying a WARF of 3036), a weighted average recovery rate upon default of 46.72%, a diversity score of 76 and a weighted average spread of 3.55%. Moody's also analyzed the CLO by incorporating an approximately $2.4 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. 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. PIKES PEAK 2: Moody's Confirms Ba3 Rating on Class E Notes ---------------------------------------------------------- Moody's Investors Service has confirmed the ratings on the following notes issued by Pikes Peak CLO 2: US$24,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes Due 2032 (the "Class D Notes"), Confirmed at Baa3 (sf); previously on June 3, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$22,550,000 Class E Junior Secured Deferrable Floating Rate Notes Due 2032 (the "Class E Notes"), Confirmed at Ba3 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on June 3, 2020 on the Class D and the Class E Notes. The CLO, issued in December 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 December 2023. RATINGS RATIONALE Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D and the Class E 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 and the Class E Notes. Based on Moody's calculation, the weighted average rating factor was 3257 as of July 2020, or 12.1% worse compared to 2905 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2945 reported in the July 2020 trustee report [2] by 312 points. Moody's noted that approximately 28% of the CLO's par was from obligors assigned a negative outlook and 1.6% 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 18% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $397.8 million, or $2.2 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 and Class E notes as of July 2020 at 115.55% and 108.45%, respectively. Moody's noted that the OC tests for the Class D and Class E notes, as well as the interest diversion test were recently reported [3] as passing. 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 $397.0 million, defaulted par of $3.2 million, a weighted average default probability of 27.40% (implying a WARF of 3257), a weighted average recovery rate upon default of 47.74%, a diversity score of 67 and a weighted average spread of 3.44%. Moody's also analyzed the CLO by incorporating an approximately $1.3 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. 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. PROGRESS RESIDENTIAL: DBRS Assigns BB Rating on 4 Classes --------------------------------------------------------- DBRS, Inc. assigned ratings to the following five transactions (the Covered Transactions) issued by Progress Residential (PRD) trusts: PRD 2017-SFR1 -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class C at AA (low) (sf) -- Class D at A (low) (sf) -- Class E at BBB (sf) PRD 2018-SFR1 -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class C at AA (sf) -- Class D at A (sf) -- Class E at BBB (low) (sf) -- Class F at BB (sf) PRD 2018-SFR2 -- Class A at AAA (sf) -- Class B at AA (high) (sf) -- Class C at AA (low) (sf) -- Class D at A (low) (sf) -- Class E at BBB (low) (sf) -- Class F at BB (sf) PRD 2019-SFR2 -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class C at AA (sf) -- Class D at A (low) (sf) -- Class E at BBB (low) (sf) -- Class F at BB (low) (sf) PRD 2019-SFR3 -- Class A at AAA (sf) -- Class B at AAA (sf) -- Class C at AA (high) (sf) -- Class D at A (high) (sf) -- Class E at BBB (low) (sf) -- Class F at BB (sf) These securities are currently also rated by DBRS Morningstar's affiliated rating agency, Morningstar Credit Ratings, LLC (MCR). In connection with the ongoing consolidation of DBRS Morningstar and MCR, MCR previously announced that it had placed its outstanding ratings of these securities Under Review–Analytical Integration Review and that MCR intended to withdraw its outstanding ratings; such withdrawal will occur on or about August 5, 2020. In accordance with MCR's engagement letter covering these securities, upon withdrawal of MCR's outstanding ratings, the DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings. The Covered Transactions are single-family rental transactions. As stated in its May 28, 2020, press release, "DBRS and Morningstar Credit Ratings Confirm U.S. Single-Family Rental Asset Class Coverage," DBRS Morningstar applied MCR's "U.S. Single-Family Rental Securitization Ratings Methodology" to assign these ratings. DBRS Morningstar's ratings are based on the following analytical considerations: -- DBRS Morningstar reviewed MCR's rating analysis on the Covered Transactions on or prior to the closing dates, including the collateral pool, cash flow analysis, legal review, operational risk review, third-party due diligence, and representations and warranties (R&W) framework. -- DBRS Morningstar notes that MCR and/or its external counsel had performed a legal analysis, which included but was not limited to legal opinions and various transaction documents as part of its process of assigning ratings to the Covered Transactions on or prior to the closing dates. For the purpose of assigning new ratings to the Covered Transactions, DBRS Morningstar did not perform additional legal analysis unless otherwise indicated in this press release. -- DBRS Morningstar relied on MCR's operational risk assessments when assigning ratings to the Covered Transactions on or prior to the closing dates. DBRS Morningstar may have conducted additional operational risk reviews as applicable. -- DBRS Morningstar reviewed key transaction performance indicators, as applicable, since the closing dates as reflected in bond factors, loan-to-value (LTV) ratios or credit enhancements, vacancies, delinquencies, capital expenditures, and cumulative losses. RATING AND CASH FLOW ANALYSIS DBRS Morningstar reviewed MCR's rating analysis on the Covered Transactions, which used the Morningstar Single-Family Rental Subordination Model to generate property-level cash flows for the Covered Transactions. The analytics included calculating the debt service coverage ratio (DSCR) needed to adequately cover the monthly debt service in each period under a given rating stress and examining the sufficiency of the aggregate stressed property liquidation values to cover the unpaid balance at a given rating level in accordance with MCR's "U.S. Single-Family Rental Securitization Ratings Methodology." OPERATIONAL RISK REVIEW DBRS Morningstar relied on MCR's operational risk assessments when assigning ratings to the Covered Transactions on or prior to the closing dates. DBRS Morningstar may have conducted additional operational risk reviews as applicable. HISTORICAL PERFORMANCE DBRS Morningstar reviewed the historical performance of the Covered Transactions as reflected in bond factors, LTVs or credit enhancements, vacancies, delinquencies, capital expenditures, and cumulative losses and deemed the transactions' performances to be satisfactory. THIRD-PARTY DUE DILIGENCE Several third-party review firms (the TPR firms) performed due-diligence reviews of the Covered Transactions. DBRS Morningstar has not conducted reviews of the TPR firms. The scope of the due diligence generally comprised lease, valuation, title, and homeowners' association discrepancy reviews. DBRS Morningstar also relied on the written attestations the TPR firms provided to MCR on or prior to the closing dates. R&W FRAMEWORK DBRS Morningstar conducted reviews of the R&W frameworks for the Covered Transactions. The reviews covered key considerations, such as the R&W provider, breach discovery, enforcement mechanism, and remedy. CORONAVIRUS DISEASE (COVID-19) ANALYSIS To reflect the current concerns and conditions surrounding the coronavirus pandemic, DBRS Morningstar tested the following additional rating assumptions for single-family rental transactions to reflect the moderate macroeconomic scenario outlined in its commentary, "Global Macroeconomic Scenarios: July Update," published on July 22, 2020: -- Vacancy (higher vacancy rate assumptions to account for potential increases in single-family rental vacancies as a result of rising unemployment and further economic deterioration). -- Home prices (an additional property valuation haircut to account for the potential decline in broader asset markets). The ratings DBRS Morningstar assigned to the Covered Transactions were able to withstand the additional coronavirus assumptions with minimal to no rating volatilities. SUMMARY The ratings are a result of DBRS Morningstar's application of MCR's "U.S. Single-Family Rental Securitization Ratings Methodology" unless otherwise indicated in this press release. DBRS Morningstar's ratings address the timely payment of interest (other than payment-in-kind bonds) and full payment of principal by the rated final maturity date in accordance with the terms and conditions of the related securities. The ratings DBRS Morningstar assigned to certain securities may differ from the ratings implied by the quantitative model, but no such difference constitutes a material deviation. When assigning the ratings, DBRS Morningstar considered the rating analysis detailed in this press release and may have made qualitative adjustments for the analytical considerations that are not fully captured by the quantitative model. READY CAPITAL 2019-6: DBRS Confirms B(low) Rating on Class G Certs ------------------------------------------------------------------ DBRS, Inc. confirmed all ratings on the following classes of the Commercial Mortgage Pass-Through Certificates (the Certificates) issued by Ready Capital Mortgage Trust 2019-6 (the Issuer): -- Class A Certificates at AAA (sf) -- Class IO-A Certificates at AAA (sf) -- Class B Certificates at AAA (sf) -- Class IO-B/C Certificates at AA (sf) -- Class C Certificates at AA (low) (sf) -- Class D Certificates at A (low) (sf) -- Class E Certificates at BBB (low) (sf) -- Class F Certificates at BB (low) (sf) -- Class G Certificates at B (low) (sf) DBRS Morningstar assigned a Negative trend to the Class G Certificates, while all other trends are Stable. The rating confirmations reflect the overall stable performance of the transaction since issuance. DBRS Morningstar assigned a Negative trend to the Class G Certificates because of the number of recent loan transfers to the special servicer, which totaled 10 loans (19.0% of the trust balance) per the June 2020 remittance report. At issuance, the trust consisted of 89 fixed- and floating-rate mortgages secured by 110 stabilized and transitional properties with a trust balance of $430.7 million, excluding approximately $5.6 million of future funding commitments related to five loans. Per the June 2020 remittance, there were 88 loans secured by 109 properties totaling $425.8 million remaining in the trust, representing a 1.1% collateral reduction since issuance. The pool contains a mix of stabilized properties seeking short-term bridge financing, loans backing properties that are in a period of transition with plans to stabilize and improve the asset value, and long-term stabilized loans. Although the majority of the loans are fixed-rate, the loans backing transitional properties have a hybrid interest-rate structure that features a fixed rate for the loan portion held within the trust but a floating rate for the future funding component outside of the trust. The collateral is generally secured by traditional property types with very limited exposure to hospitality properties (3.5% of the pool balance) and student-housing properties (2.6% of the pool balance). Per the June 2020 remittance, there were 26 loans, representing 45.2% of the pool balance, that have DBRS Morningstar Market Ranks of five or greater. The loan pool is also very granular as the top 15 largest loans encompass 54.8% of the trust balance. As previously mentioned, the June 2020 remittance report showed 10 loans had transferred to the special servicer, which all occurred between March 2020 and May 2020. Most of the transfers were related to cash flow concerns driven by the Coronavirus Disease (COVID-19) pandemic recession. The largest loan (Prospectus ID#1 – Houston Portfolio (6.2% of the pool balance)) transferred to the special servicer in May 2020 after the sponsor requested a forbearance as property operations were considerably affected by the pandemic. The loan is secured by eight Class C multifamily properties totaling 415 units in Houston, Texas. The portfolio was stabilized at issuance, and the sponsor planned to hold the properties for the long term and may sell the properties individually under favorable circumstances. The sponsor reported monthly rent collections were approximately 80% and the sponsor offered to use security deposits to cover past-due rents. The forbearance request was later withdrawn by the sponsor and loan payments were made current as of June 2020. Despite the withdrawal of the forbearance request, this loan may stay with the special servicer until rent collections return to historical levels. In addition, one loan (Prospectus ID#44 – Glowzone (0.7% of the pool balance) became real estate owned after the foreclosure process was completed in June 2020. Glowzone is a Class B single-tenant retail property in Houston, Texas, that was formerly owner-occupied. Loan payments were delinquent beginning in November 2019 as the tenant unexpectedly vacated the property and the loan transferred to the special servicer in March 2020 as the sponsor did not notify the special servicer of the major tenant event. A liquidation analysis was applied to the loan based on the "dark" value from the issuance appraisal of $4.1 million, resulting in a loss severity of approximately 10.0%. DBRS Morningstar believes the stabilization of the property could be prolonged as the subject is currently built-out as a special purpose use as experiential retail and this product type faces specific re-leasing challenges caused by the coronavirus pandemic. The probability of defaults were adjusted accordingly for the remainder of the specially serviced loans based on the increased risk since issuance. Waypoint – Main Street Crossroads (Prospectus ID#12 – 2.7% of the pool balance) was added to the DBRS Morningstar Hotlist as the loan exemplifies increased probability of default characteristics. The loan is secured by a ground lease on a anchored retail property in Carson, California, that is anchored by a Chuze Fitness and Big Air Trampoline, representing 62.8% of NRA. These tenants are anticipated to remain nonoperational as the state of California has ordered fitness centers in the subject county to close as coronavirus cases are resurging. The June 2020 remittance report also showed 16 loans, representing 25.8% of the pool balance, on the servicer's watchlist as borrowers indicated stressed cash flow caused by the coronavirus pandemic. ESG CONSIDERATIONS Classes IO-A and IO-B/C are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall. Notes: All figures are in U.S. dollars unless otherwise noted. SARANAC CLO VI: Moody's Hikes Rating on Class E Notes to B2 ----------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Saranac CLO VI Limited: US$21,000,000 Class C Secured Deferrable Fixed Rate Notes due 2031 (the "Class C Notes"), Downgraded to Baa1 (sf); previously on Jun 03, 2020 A2 (sf) Placed Under Review for Possible Downgrade US$20,000,000 Class D Secured Deferrable Floating Rate Notes due 2031 (the "Class D Notes"), Downgraded to Ba1 (sf); previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$17,000,000 Class E Secured Deferrable Floating Rate Notes due 2031 (the "Class E Notes"), Downgraded to B2 (sf); previously on Apr 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the rating on the following notes: US$37,000,000 Class B Senior Secured Floating Rate Notes due 2031 (the "Class B Notes"), Confirmed at Aa2 (sf); previously on Jun 03, 2020 Aa2 (sf) Placed Under Review for Possible Downgrade These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class D and E notes and on June 3, 2020 on the Class B and Class C notes issued by the CLO. Saranac CLO VI Limited, issued in August 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 August 2023. RATINGS RATIONALE The downgrades on the Class C, Class D, 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 declined substantially, exposure to Caa-rated assets has increased significantly, and expected losses on certain notes have increased materially. The rating confirmation on the Class B notes reflects the notes' priority position in the CLO's capital structure and the level of credit enhancement available to it either from over-collateralization or from cash flows that would be diverted as a result of coverage test failures. As of the June 2020 payment date, $935,476.44[1], has been diverted due to one or more coverage test failures to pay down the notes. Based on Moody's calculation, the weighted average rating factor was 3447 as of July 2020, or 19% worse compared to 2897 reported in the March 2020 trustee report [2]. Both the rate and the magnitude of the WARF deterioration are higher than the averages observed for other BSL CLOs. Moody's calculation also showed the WARF was failing the test level of 2909 reported in the July 2020 trustee report [3] by 538 points. Moody's noted that approximately 34.3% of the CLO's par was from obligors assigned a negative outlook and 1.9% 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 24.2% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $335.7 million, or $14.3 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class B, Class C, Class D and Class E notes as of July 2020 at 127.37%, 117.97%, 110.22%, and 104.40%, respectively. Moody's noted that the OC test for the Class E notes, as well as the interest diversion test were recently reported [4] as failing. If these failures occur on the next payment date, repayment of senior notes could result. 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 $332.6 million, defaulted par of $11.3 million, a weighted average default probability of 28.34% (implying a WARF of 3447), a weighted average recovery rate upon default of 48.67%, a diversity score of 77 and a weighted average spread of 3.69%. Moody's also analyzed the CLO by incorporating an approximately $3.7 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. 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. 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. SARATOGA INVESTMENT 2013-1: Moody's Cuts Class F-R-2 Notes to Caa1 ------------------------------------------------------------------ Moody's Investors Service has downgraded the rating on the following notes issued by Saratoga Investment Corp. CLO 2013-1, Ltd.: US$2,500,000 Class F-R-2 Deferrable Junior Floating Rate Notes due 2030 (the "Class F-R-2 Notes"), 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$31,000,000 Class D-R-2 Deferrable Mezzanine Floating Rate Notes due 2030 (the "Class D-R-2 Notes"), Confirmed at Baa3 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$27,000,000 Class E-1-R-2 Deferrable Mezzanine Floating Rate Notes due 2030 (the "Class E-1-R-2 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-R-2, Class E-1-R-2 and Class F-R-2 Notes. The CLO, originally issued in October 2013 and refinanced in Decmeber 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 Janauary 2021. RATINGS RATIONALE The downgrade on the Class F-R-2 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. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class D-R-2 and E-1-R-2 Notes continue to be consistent with the current rating after taking into account the CLO's latest portfolio, its relevant structural features, its actual OC levels, and the benefit of the short period of time remaining before the end of reinvestment period. Consequently, Moody's has confirmed the ratings on the Class D-R-2 and E-1-R-2 Notes. Based on Moody's calculation, the weighted average rating factor was 3286 as of July 2020, or 14% worse compared to 2895 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 3059 reported in the July 2020 trustee report [2] by 227 points. Moody's noted that approximately 28.5% of the CLO's par was from obligors assigned a negative outlook and 1.3% 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 19.8% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $495.9 million, or $4.1 million less than the deal's ramp-up target par balance. Nevertheless, based on July 2020 trustee report[3], the over-collateralization ratios for the Class D-2-R2, Class E-1-R-1, and the Interest Diversion Test which is equivalent to the OC ratio for the Class F-R-2 Notes are reported at 112.21%,105.62% and 105.05% respectively and passing their respective triggers levels of 109.50%, 103.70%, and 104.10%. 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." 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. 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 or portfolio par of $491.9 million, defaulted par of $7.1million, a weighted average default probability of 24.38% (implying a WARF of 3286), a weighted average recovery rate upon default of 47.65%, a diversity score of 67 and a weighted average spread of 3.95%. Moody's also analyzed the CLO by incorporating an approximately 10.0 million par haircuts in calculating the OC and interest diversion test ratios. Finally, Moody's also considered in its analysis impending restrictions on trading resulting from the end of the reinvestment period and the CLO manager's recent investment decisions and trading strategies. 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. SCF EQUIPMENT 2020-1: Moody's Gives (P)B3 Rating on Class F Notes ----------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to the Equipment Contract Backed Notes, Series 2020-1, Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E, and Class F to be issued by SCF Equipment Leasing 2020-1 LLC and SCF Equipment Leasing Canada 2020-1 Limited Partnership. Stonebriar Commercial Finance LLC (unrated, Stonebriar) along with its Canadian counterpart - Stonebriar Commercial Finance Canada Inc. (unrated) are the originators and Stonebriar alone will be the servicer of the assets backing this transaction. The issuers are wholly-owned, limited purpose subsidiaries of Stonebriar and Stonebriar Commercial Finance Canada Inc. The assets in the pool will consist of loan and lease contracts, secured primarily by railcars, corporate aircraft, and manufacturing and assembly equipment. The Series 2020-1 transaction will be the seventh securitization sponsored by Stonebriar and the sixth that Moody's rates. Stonebriar was founded in 2015 and is led by a management team with an average of over 25 years of experience in equipment financing. The complete rating actions are as follows: Issuer: SCF Equipment Leasing 2020-1 LLC/SCF Equipment Leasing Canada 2020-1 Limited Partnership Class A-1 Notes, Assigned (P)P-1 (sf) Class A-2 Notes, Assigned (P)Aaa (sf) Class A-3 Notes, Assigned (P)Aaa (sf) Class B Notes, Assigned (P)Aa1 (sf) Class C Notes, Assigned (P)A2 (sf) Class D Notes, Assigned (P)Baa3 (sf) Class E Notes, Assigned (P)Ba3 (sf) Class F Notes, Assigned (P)B3 (sf) RATINGS RATIONALE The provisional ratings are based on; the experience of Stonebriar's management team and the company as servicer; U.S. Bank National Association (long-term deposits Aa1/ long-term CR assessment Aa2(cr), short-term deposits P-1, BCA aa3) as backup servicer for the contracts; the weak credit quality and concentration of the obligors backing the loans and leases in the pool; the assessed value of the collateral backing the loans and leases in the pool; the credit enhancement, including overcollateralization, excess spread and non-declining reserve account and the sequential pay structure. The rating also considers the heightened risk owing to the unprecedented shock that the coronavirus outbreak is causing on the global economy. Additionally, Moody's bases its (P)P-1 (sf) rating of the Class A-1 notes on the cash flows that Moody's expects the underlying receivables to generate during the collection periods prior to the Class A-1 notes' legal final maturity date on August 20, 2021. At current size, and assuming no prepayment or defaults, the A-1 tranche can withstand at least 50% reduction in expected cashflows prior to maturity without incurring a loss. At closing the Class A, Class B, Class C, Class D, Class E and Class F notes benefit from 36.0%, 26.0%, 18.25%, 14.0%, 9.5% and 6.5% of hard credit enhancement, respectively. Hard credit enhancement for the notes consists of a combination of initial overcollateralization of 4.50% which will build to a target of 8.00% of the outstanding pool balance with a floor of 5.50% of the initial pool balance, a 1.50% fully funded, non-declining reserve account and subordination. The notes will also benefit from excess spread. 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 obligors and related collateral from the collapse in U.S. 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. It is a global health shock, which makes it extremely difficult to provide an economic assessment. On April 28th, Moody's revised its baseline growth forecast and now expects real GDP in the US to contract by 5.7% in 2020. The equipment loans and leases that will back the notes were extended primarily to middle market obligors and are secured by various types of equipment including; aircraft, railcars, manufacturing and assembly equipment, and a training facility. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was "Moody's Approach to Rating ABS Backed by Equipment Leases and Loans" published in July 2020. Factors that would lead to an upgrade or downgrade of the ratings: Up Moody's could upgrade the ratings on the notes if levels of credit protection are greater than necessary to protect investors against current expectations of loss. Moody's updated expectations of loss may be better than its original expectations because of lower frequency of default by the underlying obligors or lower than expected depreciation in the value of the equipment that secure the obligor's promise of payment. As the primary drivers of performance, positive changes in the US macro economy and the performance of various sectors where the obligors operate could also affect the ratings. Down Moody's could downgrade the notes if levels of credit protection are insufficient to protect investors against current expectations of portfolio losses. Losses could rise above Moody's original expectations as a result of a higher number of obligor defaults or greater than expected deterioration in the value of the equipment that secure the obligor's promise of payment. Transaction performance also depends greatly on the US macro economy. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance and fraud. Additionally, Moody's could downgrade the Class A-1 short term rating following a significant slowdown in principal collections that could result from, among other reasons, high delinquencies or a servicer disruption that impacts obligor's payments. SIERRA TIMESHARE 2020-2: Fitch to Rate Class D Debt 'BB(EXP)' ------------------------------------------------------------- Fitch Ratings has assigned expected ratings and Outlooks to notes issued by Sierra Timeshare 2020-2 Receivables Funding LLC. The social and market disruption caused by the coronavirus pandemic and related containment measures has negatively affected the U.S. economy. To account for the potential impact, Fitch incorporated conservative assumptions in deriving the base case cumulative gross default proxy. The analysis focused on peak extrapolations of 2007-2009 and 2017-2018 vintages, as a starting point. The sensitivity of the ratings to scenarios more severe than currently expected is provided in the Rating Sensitivities section below. Sierra Timeshare 2020-2 Receivables Funding LLC - Class A; LT AAA(EXP)sf Expected Rating - Class B; LT A(EXP)sf Expected Rating - Class C; LT BBB(EXP)sf Expected Rating - Class D; LT BB(EXP)sf Expected Rating KEY RATING DRIVERS Borrower Risk — Strong Collateral Quality: Approximately 68.9% of Sierra 2020-2 consists of WVRI-originated loans; the remaining loans were originated by WRDC. Fitch has determined that, on a like-for-like FICO basis, WRDC's receivables perform better than WVRI's. The weighted average original FICO score of the pool is 727. Overall, the 2020-2 pool shows a marginal increase in WRDC loans and moderate shift upward in the FICO-band concentrations for both platforms relative to the 2019-3 transaction. Forward-Looking Approach on CGD Proxy — Weakening CGD Performance: Similar to other timeshare originators, Wyndham Destinations' delinquency and default performance exhibited notable increases in the 2007-2008 vintages, stabilizing in 2009 and thereafter. However, more recent vintages from 2014-2018 have experienced increasing gross defaults versus vintages back to 2009, partially driven by increased paid product exits. Fitch's CGD proxy for this pool is 22.50% (higher than 19.45% in 2019-3). Given the current economic environment and increasing gross default trends, Fitch applied a conservative approach to the CGD proxy. Coronavirus Causing Economic Shock: Fitch has made assumptions about the spread of coronavirus and the economic impact of the related containment measures. As a base-case 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 as the health crisis subsides. Under this scenario, Fitch's initial base case loss proxy was derived utilizing 2007-2009 recessionary performance along with recent weaker performing 2017-2018 managed portfolio vintages and ABS performance. The CGD proxy accounts for the weaker performance and potential negative impacts from the severe downturn in the tourism and travel industries during the pandemic that are highly correlated with the timeshare sector. As a downside (sensitivity) scenario provided in the Expected Rating Sensitivity section, Fitch considers a more severe and prolonged period of stress with an inability to begin meaningful recovery until after 2021. Under the downside case, Fitch also completed a rating sensitivity by doubling the initial base case loss proxy (please refer to Expected Rating Sensitivity section on page 11 of the presale). Under this scenario, the notes could be downgraded by one to three categories. Structural Analysis — Higher CE Structure: To compensate for higher expected defaults and the current economic environment, initial hard credit enhancement is expected to be 75.50%, 45.25%, 22.75% and 12.50% for class A, B, C and D notes, respectively. Notably higher for class A, B, C, and D relative to 2019-3, given the higher expected defaults under Fitch's new baseline scenario. Hard CE comprises overcollateralization, a reserve account and subordination. Soft CE is also provided by excess spread and expected to be 10.29% per annum. Loss coverage for all notes can support default multiples of 3.50x, 2.50x, 1.75x and 1.25x for 'AAAsf', 'Asf', 'BBBsf' and 'BBsf', respectively. Originator/Seller/Servicer Operational Review — Quality of Origination/Servicing: Wyndham Destinations has demonstrated sufficient abilities as an originator and servicer of timeshare loans. This is evidenced by the historical delinquency and loss performance of securitized trusts and of the managed portfolio. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels and consideration for potential upgrades. If CGD is 20% less than the projected proxy, the expected ratings would be maintained for class A notes at stronger rating multiples. For the class B, C and D notes, the multiples would increase resulting for potential upgrade of one rating category, one notch, and one rating category, respectively. Factors that could, individually or collectively, lead to negative rating action/downgrade: Unanticipated increases in the frequency of defaults could produce CGD levels higher than the base case and would likely result in declines of CE and remaining default coverage levels available to the notes. Additionally, unanticipated increases in prepayment activity could also result in a decline in coverage. Decreased default coverage may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage. Hence, Fitch conducts sensitivity analysis by stressing both a transaction's initial base case CGD and prepayment assumptions and examining the rating implications on all classes of issued notes. The CGD sensitivity stresses the CGD proxy to the level necessary to reduce each rating by one full category, to non-investment grade (BBsf) and to 'CCCsf' based on the break-even loss coverage provided by the CE structure. The prepayment sensitivity includes 1.5x and 2.0x increases to the prepayment assumptions representing moderate and severe stresses, respectively. These analyses are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance. Additionally, Fitch conducts increases of 1.5x and 2.0x to the CGD proxy, which represents moderate and severe stresses, respectively. These analyses are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance. A more prolonged disruption from the pandemic is accounted for in the severe downside stress of 2.0x and could result in downgrades of one to three rating categories. Due to the coronavirus pandemic, the U.S. and the broader global economy remain under stress, with surging unemployment and pressure on businesses stemming from government social distancing guidelines. Unemployment pressure on the consumer base may result in increases in delinquencies. For sensitivity purposes, Fitch also assumed a 2.0x increase in delinquency stress. The results indicated no adverse rating impact to the notes. 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 third-party due diligence information from Deloitte & Touche LLP. The third-party due diligence focused on a comparison and recalculation of certain characteristics with respect to 200 sample loans. Fitch considered this information in its analysis and the findings did not have an impact on its analysis/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). SILVERMORE CLO: Moody's Cuts Rating on Class E Notes to Ca ---------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Silvermore CLO, Ltd.: US$26,200,000 Class D Senior Secured Deferrable Floating Rate Notes Due May 15, 2026, Downgraded to Caa3 (sf); previously on June 3, 2020 B2 (sf) Placed Under Review for Possible Downgrade US$5,000,000 Class E Senior Secured Deferrable Floating Rate Notes Due May 15, 2026 (current outstanding balance of $5,276,028.53), Downgraded to Ca (sf); previously on June 3, 2020 Caa3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the rating on the following notes: US$26,000,000 Class C Senior Secured Deferrable Floating Rate Notes Due May 15, 2026, Confirmed at Ba1 (sf); previously on June 3, 2020 Ba1 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on June 3, 2020 on the Class C, Class D, and Class E notes. The CLO, originally issued in May 2014 and partially refinanced 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 ended in May 2018. RATINGS RATIONALE The downgrades on the Class D and E notes reflect the risks posed by credit deterioration, decreasing collateralization, 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. Despite the credit quality deterioration stemming from the coronavirus outbreak, Moody's concluded that the expected losses on the Class C Notes continue to be consistent with the current rating after taking into account deleveraging of the senior tranches, the CLO's latest portfolio, its relevant structural features and its actual over-collateralization levels. Consequently, Moody's has confirmed the rating on the Classes C Notes. Based on Moody's calculation, the weighted average rating factor was 3249 as of July 2020, or 7% worse compared to 3044 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2519 reported in the July 2020 trustee report [2] by 730 points. Moody's noted that approximately 37% of the CLO's par was from obligors assigned a negative outlook and 3% 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 21% as of July 2020. Furthermore, Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class C, Class D, and Class E notes as of July 2020 at 110.5%, 98.4%, and 96.3%, respectively. Moody's noted that the OC tests for the Class D notes, as well as the interest diversion test were recently reported[2] as failing, and as a result, $0.3 million of interest collections was applied to repay the Class A-1-R notes and consequently, the interest payments to the Class E notes have been deferred. If these failures were to continue on the next payment date, they would result in a portion of interest collections being diverted towards repayment of senior notes and continued deferral of the interest payments to the Class E notes. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $236.1 million, defaulted par of $17.2 million, a weighted average default probability of 21.72% (implying a WARF of 3249), a weighted average recovery rate upon default of 47.19%, a diversity score of 57 and a weighted average spread of 3.05%. Moody's also analyzed the CLO by incorporating an approximately $9.4 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. 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 principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in March 2019. TESLA AUTO 2020-A: Moody's Gives Ba2 Rating on Class E Notes ------------------------------------------------------------ Moody's Investors Service has assigned definitive ratings to the notes issued by Tesla Auto Lease Trust 2020-A. This is the first auto lease transaction in 2020 for Tesla Finance LLC (TFL; not rated). The notes will be backed by a pool of closed-end retail automobile leases originated by TFL, who is also the servicer and administrator for this transaction. The complete rating actions are as follows: Issuer: Tesla Auto Lease Trust 2020-A $71,400,000, 0.21533%, Class A-1 Notes, Definitive Rating Assigned P-1 (sf) $214,790,000, 0.55%, Class A-2 Notes, Definitive Rating Assigned Aaa (sf) $198,260,000, 0.68%, Class A-3 Notes, Definitive Rating Assigned Aaa (sf) $67,060,000, 0.78%, Class A-4 Notes, Definitive Rating Assigned Aaa (sf) $54,570,000, 1.18%, Class B Notes, Definitive Rating Assigned Aa2 (sf) $42,880,000, 1.68%, Class C Notes, Definitive Rating Assigned A2 (sf) $29,230,000, 2.33%, Class D Notes, Definitive Rating Assigned Baa2 (sf) $31,180,000, 4.64%, Class E Notes, Definitive Rating Assigned Ba2 (sf) RATINGS RATIONALE The ratings are based on the quality of the underlying collateral and its expected performance, the strength of the capital structure, and the experience and expertise of TFL as the servicer and administrator. Moody's expected median cumulative net credit loss expectation for TALT 2020-A is 0.50% and the total loss at a Aaa stress on the collateral is 34.50% (including 4.50% credit loss and 30.00% residual value loss at a Aaa stress). The residual value loss at a Aaa stress of 30.00% is higher than the 28.00% assigned to the prior 2019-A transaction mainly due to higher RV setting as percentage of MSRP. In general, the relatively high residual value loss at a Aaa stress for TALT transactions are the result of (1) the sponsor's very limited securitization history and short operating history; (2) thin RV performance data, especially for Model 3, which is included in ABS transactions for the second time; (3) a lack of model diversification; (4) high RV maturity and geographic concentration: (5) unique or significantly greater RV risk for BEVs, especially for Tesla vehicles, which have significant technology risks including those that relate to self-driving and battery technology; (6) the impact of a potential manufacturer bankruptcy on RV, especially in the context of Tesla's vertically integrated production model; and (7) the current expectations for the macroeconomic environment during the life of the transaction. Moody's based its cumulative net credit loss expectation and loss at a Aaa stress of the collateral on an analysis of the quality of the underlying collateral; the historical credit loss and residual value performance of similar collateral, including securitization performance and managed portfolio performance; the ability of TFL and its sub-servicer LeaseDimensions to perform the servicing functions; and current expectations for the macroeconomic environment during the life of the transaction. At closing, the Class A notes, Class B notes, Class C notes, Class D notes, and Class E notes benefit from 30.75%, 23.75%, 18.25%, 14.50%, and 10.50% of hard credit enhancement, respectively. Hard credit enhancement for the notes consists of a combination of overcollateralization, non-declining reserve account and subordination, except for the Class E notes, which do not benefit from subordination. The notes may also benefit from excess spread. The rapid spread of the COVID-19 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 auto leases from the collapse in 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. Specifically, for US Auto lease deals, the softening of the used car market will impact residual value performance on leases. In addition, performance will weaken due to the unprecedented spike in the unemployment rate, which may limit lessees' income and their ability to make lease payments, also a credit negative. Furthermore, lessee assistance programs such as lease deferrals and extensions may adversely impact scheduled cash flows to bondholders. As a result, the degree of uncertainty around its forecasts is unusually high. Moody's regards the COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was "Moody's Global Approach to Rating Auto Loan- and Lease-Backed ABS" published in July 2020. Please note that a Request for Comment was published in which Moody's requested market feedback on potential revisions to one or more of the methodologies used in determining these Credit Ratings. If the revised methodologies are implemented as proposed, it is not currently expected that the Credit Ratings referenced in this press release will be affected. Factors that would lead to an upgrade or downgrade of the ratings: Up Moody's could upgrade the subordinated notes if, given current expectations of portfolio losses, levels of credit enhancement are consistent with higher ratings. In sequential pay structures, such as the one in this transaction, credit enhancement grows as a percentage of the collateral balance as collections pay down senior notes. Prepayments and interest collections directed toward note principal payments will accelerate this build of enhancement. Moody's expectation of pool losses could decline as a result of a lower number of obligor defaults or appreciation in the value of the vehicles securing an obligor's promise of payment. Portfolio losses also depend greatly on the US job market, the market for used vehicles, and changes in servicing practices. Down Moody's could downgrade the notes if, given current expectations of portfolio losses, levels of credit enhancement are consistent with lower ratings. Credit enhancement could decline if excess spread is not sufficient to cover losses in a given month. Moody's expectation of pool losses could rise as a result of a higher number of obligor defaults or deterioration in the value of the vehicles securing an obligor's promise of payment. Portfolio losses also depend greatly on the US job market, the market for used vehicles, and poor servicing. Other reasons for worse-than-expected performance include error on the part of transaction parties, inadequate transaction governance, and fraud. In its analysis of the Class A-1 money market tranche, Moody's applied incremental stresses to its typical cash flow assumptions in consideration of a likely slowdown in borrower payments brought on by the economic impact of the COVID-19 pandemic. Additionally, Moody's could downgrade the Class A-1 short-term rating following a significant slowdown in principal collections that could result from, among other things, high delinquencies or a servicer disruption that impacts obligor's payments. THARALDSON HOTEL 2018-THPT: Moody's Cuts Class D Certs to Ba2 ------------------------------------------------------------- Moody's Investors Service affirmed the ratings on two and downgraded the ratings on three classes of Tharaldson Hotel Portfolio Trust 2018-THPT, Commercial Mortgage Pass-Through Certificates, Series 2018-THPT. Moody's rating action is as follows: Cl. A, Affirmed Aaa (sf); previously on Jan 31, 2019 Affirmed Aaa (sf) Cl. B, Affirmed Aa2 (sf); previously on Jan 31, 2019 Affirmed Aa2 (sf) Cl. C, Downgraded to Baa1 (sf); previously on Jan 31, 2019 Affirmed A2 (sf) Cl. D, Downgraded to Ba2 (sf); previously on Jan 31, 2019 Affirmed Baa3 (sf) Cl. X-EXT*, Downgraded to Baa1 (sf); previously on Jan 31, 2019 Affirmed A3 (sf) *Reflects Interest-Only Class RATINGS RATIONALE The ratings on the two most senior P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value ratio, are within acceptable ranges. The ratings on Cl. C and Cl. D were downgraded due to an increase in Moody's LTV as a result of immediate decline in performance due to the coronavirus outbreak and the uncertainty over the timing and extent of the recovery. Moody's has assumed a significant drop in net cash flow in 2020, followed by two years of improvement in pool performance, resulting in a lower than previously assumed Moody's NCF levels. The rating on the IO class, X-EXT, was downgraded based on the credit quality of the referenced classes. Moody's does not rate Classes E, F, G, and H. 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 commercial real estate from the collapse in 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. 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. 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, defeasance of the loan or an improvement in loan performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the loan, or interest shortfalls. METHODOLOGY UNDERLYING THE RATING ACTION The principal methodology used in rating all classes except interest-only classes was "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020. DEAL PERFORMANCE As of the July 13, 2020 distribution date, the transaction's certificate balance decreased to $777.7 million from $960.0 million at securitization due to release of 46 properties totaling 3,891 guestrooms. The certificates are collateralized by a single floating rate loan backed by a first lien commercial mortgage related to a portfolio of limited-, extended stay, select-, and full-service hotels. The loan's final maturity date including three one-year extension options is in November 2022. There is $65 million of mezzanine debt held outside the Trust. The loan is secured by the fee and leasehold interests in 89 lodging properties across 23 states and 47 MSAs and containing a total of 8,583 guestrooms. The NCF including the remaining 89 assets have declined each year since 2016. The 89-asset portfolio's NCF for 2016, TTM ending September 2017, 2018 and 2019 were $94.1 MM, $92.3 MM, $86.6 MM, and $77.3 MM, respectively. The US lodging sector neared its cyclical peak in 2018 and 2019. During this time US hotels experienced slowing RevPAR growth rates and some net cash flow erosions due to expenses increasing faster than revenues. For full year 2020 NCF, Moody's expects a significant drop due to coronavirus outbreak induced property closures and travel restrictions that were put into effect in the first half of the year and negative impact from those measures. In the foreseeable future, Moody's expects demand for lodging in leisure drive-to destinations to lead the recovery, followed by the return of corporate transient segment. Due to the length and the magnitude of the disruption, Moody's does not expect hotel performance to return to pre-COVID levels within the next 18 months on average, and the pace of recovery to vary depending on the property's primary market segment and location. The loan status is 90+ days delinquent as of the July distribution date and there are outstanding P&I advances totaling approximately $8.5 million. The first mortgage balance represents a Moody's stabilized LTV of 133%. Moody's first mortgage stressed debt service coverage ratio is 0.93X. However, these metrics are based on return of travel demand for leisure and corporate travel and normalized operation after 24 months of stabilization period. The downgrade of ratings on Cl. C and Cl. D take into account volatility and uncertainty of the pool's near-term performance. There are no outstanding interest shortfalls and no losses as of the current distribution date. TICP CLO I-2: Moody's Lowers Rating on Class E Notes to Caa3 ------------------------------------------------------------ Moody's Investors Service has downgraded the ratings on the following notes issued by TICP CLO I-2, Ltd.: US$29,100,000 Class C Mezzanine Secured Deferrable Floating Rate Notes due 2028 (the "Class C Notes"), Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$24,600,000 Class D Junior Secured Deferrable Floating Rate Notes due 2028 (the "Class D Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$4,200,000 Class E Junior Secured Deferrable Floating Rate Notes due 2028 (the "Class E Notes"), Downgraded to Caa3 (sf); previously on April 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade This action concludes the review for downgrade initiated on April 17, 2020. RATINGS RATIONALE The downgrades on the Class C, Class D and Class E 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, 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 3378 as of June 2020, or 7% worse compared to a WARF of 3163 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 3092 by 286 points. Moody's noted that approximately 30.8% of the CLO's par was from obligors assigned a negative outlook and 1.5% 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 19.9% of the CLO par as of June 2020. Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $434.1 million, and Moody's calculated the OC ratios (excluding haircuts) for the Class C, Class D, and Class E Notes as of July 2020 at 109.24%, 102.87% and 101.86%, respectively. Moody's noted that the OC test for the Class D Notes was recently reported in the July 2020 trustee report [2] as failing, and as a result on the July 27, 2020 payment date, interest collections were applied to repay the senior notes in order to cure the test. 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 $429.0 million, defaulted par of $14.7 million, a weighted average default probability of 23.81% (implying a WARF of 3378), a weighted average recovery rate upon default of 48.07%, a diversity score of 67 and a weighted average spread of 3.18%. 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; - 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. 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. TRINITAS CLO IX: Moody's Lowers Rating on Class F Notes to Caa2 --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Trinitas CLO IX, Ltd.: US$37,800,000 Class D Deferrable Floating Rate Notes Due January 2032, Downgraded to Ba1 (sf); previously on June 3, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$30,000,000 Class E Deferrable Floating Rate Notes Due January 2032, Downgraded to B1 (sf); previously on June 3, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade US$12,000,000 Class F Deferrable Floating Rate Notes Due January 2032, Downgraded to Caa2 (sf); previously on June 3, 2020 B3 (sf) Placed Under Review for Possible Downgrade These actions conclude the review for downgrade initiated on June 3, 2020 on the Class D, Class E and Class F notes. The CLO, 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 on November 2023. RATINGS RATIONALE The downgrade rating actions on the Class D, Class E and Class F 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 and expected losses on certain notes have increased materially. Based on Moody's calculation, the weighted average rating factor is 3330 as of July 2020, or 12.5% worse compared to 2959 reported in the February 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2922 reported in the July 2020 trustee report [2] by 408 points. Moody's noted that approximately 27.0% of the CLO's par was from obligors assigned a negative outlook and 1.4% 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 17.9% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $591.7 million, or $8.3 million less than the deal's original ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class A/B, Class C, Class D and Class E notes as of July 2020 is at 129.8%, 122.2%, 113.4% and 107.2% respectively. Nevertheless, Moody's noted that the OC tests for the Class A, Class B, Class C, Class D and Class E notes as well as the interest diversion test were recently reported in the July 2020 trustee report [3] as passing. 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 of $589 million, defaulted par of $7.2 million, a weighted average default probability of 28.26% (implying a WARF of 3330), a weighted average recovery rate upon default of 47.60%, a diversity score of 73 and a weighted average spread of 3.55%. Moody's also analyzed the CLO by incorporating an approximately $4.2 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. 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. 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. UBS COMMERCIAL 2018-C12: Fitch Cuts Class G-RR Certs to CCCsf ------------------------------------------------------------- Fitch Ratings has downgraded one class and affirmed 16 classes of UBS Commercial Mortgage Trust, commercial mortgage pass-through certificates, series 2018-C12. In addition, Fitch has revised Rating Outlooks of nine classes to Negative from Stable. UBS 2018-C12 - Class A-1 90353DAU9; LT AAAsf; Affirmed - Class A-2 90353DAV7; LT AAAsf; Affirmed - Class A-3 90353DAX3; LT AAAsf; Affirmed - Class A-4 90353DAY1; LT AAAsf; Affirmed - Class A-5 90353DAZ8; LT AAAsf; Affirmed - Class A-S 90353DBC8; LT AAAsf; Affirmed - Class A-SB 90353DAW5; LT AAAsf; Affirmed - Class B 90353DBD6; LT AA-sf; Affirmed - Class C 90353DBE4; LT A-sf; Affirmed - Class D 90353DAC9; LT BBBsf; Affirmed - Class D-RR 90353DAE5; LT BBB-sf; Affirmed - Class E-RR 90353DAG0; LT BB+sf; Affirmed - Class F-RR 90353DAJ4; LT BB-sf; Affirmed - Class G-RR 90353DAL9; LT CCCsf; Downgrade - Class X-A 90353DBA2; LT AAAsf; Affirmed - Class X-B 90353DBB0; LT AA-sf; Affirmed - Class X-D 90353DAA3; LT BBBsf; Affirmed KEY RATING DRIVERS Increased Loss Expectations/FLOCs: Loss expectations have increased due to the increasing number of Fitch Loans of Concern, including five loans (4.9%) that have transferred to special servicing in addition to performance concerns associated with loans impacted by the coronavirus pandemic. Twenty-eight loans (46.8%) are on the master servicer's watchlist, many due to coronavirus relief requests, as well as upcoming rollover, declines in occupancy and/or deferred maintenance. In total, 23 loans (36%) are considered FLOCs. The largest specially serviced loan, Holiday Inn Matteson (2.2% of the pool), is secured by a 202 key full-service hotel located in Matteson, IL. The loan was transferred to special servicing in September 2019 and is currently 90+ days delinquent. Per the special servicer, GF Hospitality was appointed as receiver in November 2019. The receiver is working to correct all physical and operational issues and maintain the flag going forward, and cure outstanding franchise defaults. Major capital projects have been completed. Per the special servicer, disposition strategy and timing will be recommended following franchisor inspection of the property in 3Q20 and receipt of updated property improvement requirements (PIP requirements). The remaining four specially serviced loans are either 1% of the pool and below and are secured by one full-service hotel located in Houston, TX and three retail properties located in Charlottesville, VA, Mansfield, TX and Cedar Hill, TX. All of the loans were transferred to special servicing due to the impact of the coronavirus pandemic. The largest FLOC, Riverwalk (5.6% of the pool), is secured by a 630,379-sf office property located in Lawrence, MA, built in 1901 and renovated in 2007. The property has 41% of upcoming rollover between 2020 and 2021, including three of the top five tenants. The property's occupancy as of YE 2019 remained stable at 91.1% from 91.5% at YE 2018 and NOI DSCR improved to 1.64x from 1.42x at YE 2018. An update on the status of lease renewals was requested but is unknown at this time. The master servicer has requested an updated rent roll. The second largest FLOC, 139 Ludlow Street (4.2% of the pool), is secured by a 21,912-sf unanchored retail center located within the Lower East Side in Manhattan. The property is fully leased to single tenant, Soho House. The tenant signed a 25-year NNN lease in May 2016 that expires in April 2041. The lease runs well past the ten-year loan term. The property, which serves as a private social club, is temporary closed. The loan is on the master servicer's watchlist due to a request for coronavirus relief; however, this request was recently cancelled. The borrower is working with the special servicer towards a possible solution. While the loan meets the property specific coronavirus NOI DSCR tolerance thresholds, Fitch applied additional stresses to address expected declines in performance. The third largest FLOC, Aspect RHG Hotel Portfolio (4.2% of the pool), is secured by a portfolio of four full-service hotels with a total of 461 rooms operating under Aloft Hotel Broomfield, Hampton Inn Nashville Smyrna, Hilton Garden Inn Nashville Smyrna, and Hyatt Place Phoenix North flags located in Broomfield, CO, Smyrna, TN and Phoenix, AZ, respectively. At issuance, there was required Performance Improvement Plan Work noted, as the hotels were developed between 1998 and 2009 and had varying levels of deferred maintenance. Following acquisition, the sponsors would invest a total of $5.7 million ($12,364 per room) across all four hotels as part of the change of ownership PIPs. The loan was structured with an upfront reserve account for deferred maintenance or PIP requirements, estimated to be $5.7 million. The most recent YE 2019 servicer reported net operating income indicates a 39% decline in NOI compared to issuance due to a 14% decline in revenues. Fitch has asked the master servicer for an explanation regarding the significant reported decline in NOI and whether any properties are undergoing renovation; the servicer is awaiting a response from the borrower. Per the master servicer, the borrower has also requested coronavirus relief. The loan also failed to meet the property specific coronavirus NOI DSCR tolerance thresholds; Fitch applied additional stresses to address expected declines in performance. The fourth largest FLOC, Savi Ranch Center (3.1% of the pool), is secured by a 160,773-sf anchored retail center located in Yorba Linda, CA. The property's largest tenants are Dick's Sporting Goods (31.1% of NRA), expiration June 2021; Bed Bath & Beyond (26.7%), expiration 2022; Michaels (14.9%), expiration 2023; Home Consignment Center (8.1%) and Thomasville Home Furnishings (7.6%). Additionally, the property is shadow-anchored by Best Buy, Kohl's and La-Z-Boy Furniture. The five largest tenants, collectively comprising 88.4% of NRA and 85.7% of issuance base rent, have all been in occupancy for at least 17 years. All leases will roll during the loan term, with 53.1% of the NRA and 61.0% of total base rent expiring by June 2021. Per the rent roll dated July 2020, it seems the majority of the tenants are paying partial rents and some have not paid rent since March or April. The property is 100% occupied as of July 2020. The most recent DSCR is 2.18x as of YE 2019 up from 1.58x. The loan is on the master servicer's watchlist due to a request for coronavirus relief. The loan is categorized as 30 days delinquent per the July 2020 remittance. While the loan meets the property specific coronavirus NOI DSCR tolerance thresholds, Fitch applied additional stresses to address rollover. The fifth largest FLOC, Spotsylvania Crossing (2.7% of the pool), is secured by a 256,757-sf anchored retail center located in Fredericksburg, VA. Largest tenants are At Home (35.4%), expiration 2027; Gabe's (21.8%), expiration 2024; Value City Furniture (19.5%), expiration 2021. The property is 95.4% occupied as of YE 2019, in line with issuance occupancy of 95.1%. There is upcoming rollover of 3.2% (2020), 20% (2021), 3.5% (2023, 22.9% (2024). The most recent DSCR as of YE 2019 is 1.66x down from 2.04x YE 2018 and 1.55x at issuance. The loan is on the master servicer's watchlist due to a request for coronavirus relief; however, this request was recently cancelled. The loan is categorized as late but less than 30 days delinquent per the July 2020 remittance, and is being monitored for covenant compliance. Lockbox activation is in process due to material tenant trigger event. Value City (50,000 SF, 19.5% NRA, Feb. 28, 2021 expiration) failed to renew lease 12 months prior to expiration. The loan also failed to meet the property specific coronavirus NOI DSCR tolerance thresholds; Fitch applied additional stresses to address expected declines in performance. Minimal Change in Credit Enhancement: As of the July 2020 distribution date, the pool's aggregate balance has been reduced by 0.9% to $797.6 million from $804.9 million at issuance. All original 65 loans remain in the pool. No loans have defeased. At issuance, based on the scheduled balance at maturity, the pool was expected to pay down by 8.8% prior to maturity, which is slightly better than the average for transactions of a similar vintage. Twenty-seven loans (38.3% of the pool) are full-term interest only and seventeen loans (31.9%) have partial interest-only periods. Pool Concentration: The top 10 loans comprise 40.1% of the pool. Loan maturities are concentrated in 2028 (87.9%). Three loans (10.8%) mature in 2023 and two loans (0.7%) in 2025. Based on property type, the largest concentrations are office at 26%, retail at 22% and hotel at 19%. Exposure to Coronavirus Pandemic: Fourteen loans (19.1% of the pool) are secured by hotel properties. The weighted average NOI DSCR for all the hotel loans is 0.74x. These hotel loans could sustain a weighted average decline in NOI of 38% before DSCR falls below 1.00x. Twenty loans (22%) are secured by retail properties. The weighted average NOI DSCR for all performing retail loans is 2.08%. These retail loans could sustain a weighted average decline in NOI of 52% before DSCR fall below 1.00x. Additional coronavirus specific base case stresses were applied to twelve hotel loans (16.6%), nine retail loans (13.5%). These additional stresses contributed to the Negative Outlook revisions on classes A-S, B, C, D, D-RR, E-RR, F-RR, X-B, X-D and the downgrade to class G-RR. Investment-Grade Credit Opinion Loans: Two loans comprising 9.4% of the transaction received an investment-grade credit opinion at issuance. The largest loan, Wyvernwood Apartments (6.3% of the pool), received a credit opinion of 'BBB-sf' on a stand-alone basis. The sixth largest loan, 20 Times Square (3.1% of the pool), received a standalone credit opinion of 'Asf'. Eleven loans (34.3% of the pool), all in the top 15, are pari passu loans. RATING SENSITIVITIES The downgrade on class G-RR and the Negative Outlook revisions on classes A-S, B, C, D, D-RR, E-RR, F-RR, X-B and X-D reflect the increased losses on both the specially serviced loans and other FLOCs. Downgrades are possible should performance of the FLOCs not improve or continue to deteriorate. The Stable Outlooks on classes A-1 through A-SB reflect sufficient credit enhancement and expected continued amortization. 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 A-S, B, C and X-B 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 classes D and X-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. Upgrades of classes D-RR, E-RR, F-RR, and G-RR are 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 class is 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 A-SB are not likely due to the position in the capital structure. Downgrades of classes A-S through F-RR, X-B and X-D 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. 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). US AUTO 2020-1: Moody's Gives (P)B3 Rating on Class D Notes ----------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to the notes to be issued by U.S. Auto Funding Trust 2020-1. This is the first 144a auto loan transaction of the year and second in total for U.S. Auto Sales (U.S. Auto Finance, unrated). The notes will be backed by a pool of retail automobile loan contracts originated by U.S. Auto Sales, Inc. (unrated), an affiliate of U.S. Auto Finance. USASF Servicing LLC, an affiliate of U.S. Auto Finance, is the servicer for this transaction and U.S. Auto Finance is the administrator. The complete rating actions are as follows: Issuer: U.S. Auto Funding Trust 2020-1 Class A Notes, Assigned (P)Baa1 (sf) Class B Notes, Assigned (P)Baa3 (sf) Class C Notes, Assigned (P)Ba3 (sf) Class D Notes, Assigned (P)B3 (sf) RATINGS RATIONALE The ratings are based on the quality of the underlying collateral and its expected performance, the strength of the capital structure, the experience and expertise of USASF and US Auto Finance as the servicer and administrator respectively and the presence of Wells Fargo Bank N.A. (Wells Fargo, Aa1(cr)) as named backup servicer. Moody's median cumulative net credit loss expectation for USAUT 2020-1 is 36%. Moody's based its cumulative net credit loss expectation on an analysis of the quality of the underlying collateral; managed portfolio performance; the historical credit loss of similar collateral; the ability of USASF to perform the servicing functions; and current expectations for the macroeconomic environment during the life of the transaction. At closing, the Class A notes, the Class B notes, the Class C notes and Class D notes are expected to benefit from 53.05%, 36.50%, 31.20% and 22.60% of hard credit enhancement, respectively. Hard credit enhancement for the notes consists of a combination of overcollateralization, a non-declining reserve account and subordination, except for the Class D notes, which do not benefit from subordination. The notes may also benefit from excess spread. 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 auto loan asset backed securities sector from the collapse in 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. Specifically, for auto loan ABS, loan performance will weaken due to the unprecedented spike in the unemployment rate that may limit the borrower's income and their ability to service debt. The softening of used vehicle prices due to lower demand will reduce recoveries on defaulted auto loans, also a credit negative. Furthermore, borrower assistance programs to affected borrowers, such as extensions, may adversely impact scheduled cash flows to bondholders. 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 regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was "Moody's Global Approach to Rating Auto Loan- and Lease-Backed ABS" published in July 2020. Please note that a Request for Comment was published in which Moody's requested market feedback on potential revisions to one or more of the methodologies used in determining these Credit Ratings. If the revised methodologies are implemented as proposed, the Credit Ratings referenced in this press release might be negatively affected. Factors that would lead to an upgrade or downgrade of the ratings: Up Moody's could upgrade the notes if levels of credit enhancement are higher than necessary to protect investors against current expectations of portfolio losses. 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 vehicles securing an obligor's promise of payment. Portfolio losses also depend greatly on the US job market and the market for used vehicles. Other reasons for better-than-expected performance include changes to servicing practices that enhance collections or refinancing opportunities that result in prepayments. Down Moody's could downgrade the notes if, given current expectations of portfolio losses, levels of credit enhancement are consistent with lower ratings. Credit enhancement could decline if excess spread is not sufficient to cover losses in a given month. Moody's expectation of pool losses could rise as a result of a higher number of obligor defaults or deterioration in the value of the vehicles securing an obligor's promise of payment. Portfolio losses also depend greatly on the US job market, the market for used vehicles, and pool servicing. Other reasons for worse-than-expected performance include error on the part of transaction parties, inadequate transaction governance, and fraud. VENTURE XIV: Moody's Lowers Rating on Class E-R Notes to B1 ----------------------------------------------------------- Moody's Investors Service has downgraded the rating on the following notes issued by Venture XIV CLO, Limited: US$31,750,000 Class E-R Junior Secured Deferrable Floating Rate Notes due 2029 (the "Class E-R Notes"), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade Moody's also confirmed the rating on the following notes: US$34,000,000 Class D-R Mezzanine Secured Deferrable Floating Rate Notes due 2029 (the "Class D-R 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-R and Class E-R Notes. The CLO, originally issued in August 2013, refinanced in August 2017, and partially refinanced in February 2020 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 August 2021. RATINGS RATIONALE The downgrade on the Class E-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, the credit enhancement available to the CLO notes has eroded, and the 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-R 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 Classes D-R Notes. Based on Moody's calculation, the weighted average rating factor was 3216 as of July 2020, or 17% worse compared to 2734 reported in the March 2020 trustee report [1] . Moody's calculation also showed the WARF was failing the test level of 2819 reported in the June 2020 trustee report [2] by 397 points. Moody's noted that approximately 44.2% of the CLO's par was from obligors assigned a negative outlook and 1.0% 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 18.43% as of June 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $547.75 million, or $19.25 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-R and Class E-R Notes as of July 2020 at 110.54% and 103.89% respectively. Moody's noted that the interest diversion test was recently reported [3] as 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. 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 $536.3 million, defaulted par of $31 million, a weighted average default probability of 26.34% (implying a WARF of 3216), a weighted average recovery rate upon default of 46.87%, a diversity score of 94 and a weighted average spread of 3.77%. Moody's also considered in its analysis impending restrictions on trading resulting from the CLO manager's recent investment decisions and trading strategies. Finally, Moody's notes that it also considered the information in the July 2020 trustee report [3] which became available prior to the release of this announcement. 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. 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. VERUS SECURITIZATION 2020-4: DBRS Finalizes B Rating on B-2 Certs ----------------------------------------------------------------- DBRS, Inc. finalized its provisional ratings on the following Mortgage Pass-Through Certificates, Series 2020-4 (the Certificates) issued by Verus Securitization Trust 2020-4 (Verus 2020-4 or the Trust): -- $281.7 million Class A-1 at AAA (sf) -- $27.9 million Class A-2 at AA (sf) -- $44.2 million Class A-3 at A (sf) -- $28.8 million Class M-1 at BBB (low) (sf) -- $15.5 million Class B-1 at BB (sf) -- $9.9 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 34.40% of credit enhancement provided by subordinate certificates. The AA (sf), A (sf), BBB (low) (sf), BB (sf), and B (sf) ratings reflect 27.90%, 17.60%, 10.90%, 7.30%, and 5.00% of credit enhancement, respectively. This securitization is 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 1,084 mortgage loans with a total principal balance of $429,454,733 as of the Cut-Off Date (July 1, 2020). The originators for the mortgage pool are Athas Capital Group, Inc. (35.9%), Calculated Risk Analytics LLC doing business as Excelerate Capital (16.1%), Sprout Mortgage Corporation (11.0%), and other originators, each comprising less than 10.0% of the mortgage loans. The Servicers of the loans are Shellpoint Mortgage Servicing (98.1%) and Specialized Loan Servicing LLC (1.9%). Although the mortgage loans were originated to satisfy the Consumer Financial Protection Bureau's (CFPB'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, 51.1% of the loans are designated as non-QM, 0.1% are designated as QM safe harbor, and 0.2% are designated as QM rebuttable presumption. Approximately 48.6% 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 July 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 Certificates at a price equal to the greater of (A) the class balances of the related Certificates plus accrued and unpaid interest, including any cap carryover amounts and (B) 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. Similar to Verus 2020-2 and Verus 2020-3 (though dissimilar to other previously issued Verus non-QM deals), the principal and interest (P&I) Advancing Party will fund advances of delinquent 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 Servicers, however, are 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 affected by the Coronavirus Disease (COVID-19). As a large number of borrowers may seek forbearance on their mortgages in the coming months, P&I collections may be reduced meaningfully. Unlike Verus 2020-2 and Verus 2020-3 (though similar to other previously issued Verus non-QM deals), this transaction incorporates a sequential-pay cash flow structure with a pro rata feature among the senior tranches. Principal proceeds can be used to cover interest shortfalls on the Class A-1 and A-2 Certificates sequentially (IIPP) after a Trigger Event. For more subordinated 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. Unlike previously issued Verus non-QM deals (though similar to the Verus INV shelf), 24.0% of the loans were originated under the Property Focused Investor Loan Debt Service Coverage Ratio program and 17.9% were originated under the Property Focused Investor Loan program. Both programs allow for property cash flow/rental income to qualify borrowers for income. In contrast to other non-QM transactions, which employ a fixed coupon for senior bonds (Classes A-1, A-2, and A-3), Verus 2020-4's senior bonds are subject to a rate update starting on the distribution date in August 2024. From this distribution date forward, the Class A-1, A-2, and A-3 bonds are subject to a step-up rate (a yearly rate equal to 1.0%). CORONAVIRUS DISEASE (COVID-19) IMPACT 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 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 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 pandemic, 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: July Update," published on July 22, 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, 10.0% (as of July 6, 2020) of the borrowers had been granted forbearance or deferral plans because of financial hardship related to the coronavirus pandemic. These forbearance plans allow temporary payment holidays, followed by repayment once the forbearance period ends. The Servicers, in collaboration with the Servicing Administrator, are 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 Servicers will contact each related borrower to identify the options available to address related forborne payment amounts. As a result, the Servicers, 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 principal and interest 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 twelve 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 the AAA (sf) and AA (sf) rating levels. Notes: All figures are in U.S. dollars unless otherwise noted. VIBRANT CLO III: Moody's Cuts Rating on Class D-RR Notes to B1 -------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Vibrant CLO III, Ltd.: US$31,000,000 Class C-RR Mezzanine Secured Deferrable Floating Rate Notes due 2031 (the "Class C-RR Notes"), Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$24,000,000 Class D-RR Mezzanine Secured Deferrable Floating Rate Notes due 2031 (the "Class D-RR 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 C-RR Notes, and Class D-RR Notes. The CLO, originally issued in March 2015 and fully refinanced in December 2016 and subsequently in October 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-RR Notes and Class D-RR 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 the July 2020 trustee report [2], the weighted average rating factor was reported at 3246, or 13.1% worse compared to 2869 reported in the March 2020 trustee report [1]. Moody's calculation showed the WARF was failing the test level of 2943 reported in the July 2020 trustee report [2] by 303 points. Moody's noted that approximately 30.0% of the CLO's par was from obligors assigned a negative outlook and 1.0% 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 14.5% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $481.7 million, or 3.7% or $18.3 million less than the deal's ramp-up target par balance. Based on the July 2020 trustee report, the over-collateralization ratios for the Class D-RR Notes and the Interest Diversion Test are both at 103.64%, failing their respective trigger levels of 104.70% and 105.70%. The failure of the Class D OC test will divert the residual interest proceeds to be used to pay down and deleverage the senior notes. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in "Moody's Global Approach to Rating Collateralized Loan Obligations." The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $477.0 million, defaulted par of $13.7 million, a weighted average default probability of 26.10% (implying a WARF of 3190), a weighted average recovery rate upon default of 47.20%, a diversity score of 65 and a weighted average spread of 3.59%. Moody's also analyzed the CLO by incorporating an approximately $5.0 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. 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. Fitch 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. VIBRANT CLO IV: Moody's Cuts Rating on Class E-R Notes to B1 ------------------------------------------------------------ Moody's Investors Service has downgraded the ratings on the following notes issued by Vibrant CLO IV, Ltd.: US$18,400,000 Class C-R Secured Deferrable Floating Rate Notes Due 2032 (the "Class C-R Notes"), Downgraded to A3 (sf); previously on August 22, 2019 Assigned A2 (sf) US$24,750,000 Class D-R Secured Deferrable Floating Rate Notes Due 2032 (the "Class D-R Notes"), Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$15,000,000 Class E-R Secured Deferrable Floating Rate Notes Due 2032 (the "Class E-R 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-R Notes and Class E-R Notes. The CLO, originally issued in June 2016 and refinanced in August 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 July 2024. RATINGS RATIONALE The downgrades on the Class C-R, Class D-R, and Class E-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, 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. According to the July trustee report [2], the weighted average rating factor was reported at 3221, or 14.9% worse compared to 2804 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2852 reported in the July 2020 trustee report [2] by 369 points. Moody's noted that approximately 30.7% of the CLO's par was from obligors assigned a negative outlook and 1.5% 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 (adjusted for negative outlook or watchlist for downgrade) was approximately 14.3% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $388.9 million, or 4.8% or $19.1 million less than the deal's ramp-up target par balance. 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 $384.9 million, defaulted par of $11.2 million, a weighted average default probability of 25.43% (implying a WARF of 3133), a weighted average recovery rate upon default of 47.20%, a diversity score of 63 and a weighted average spread of 3.58%. 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. 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. Fitch 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. VIBRANT CLO V: Moody's Lowers Rating on Class E Notes to B1 ----------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by Vibrant CLO V, Ltd.: US$24,750,000 Class D Secured Deferrable Floating Rate Notes due 2029 (the "Class D Notes"), Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$22,500,000 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 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 December 2016 and partially refinanced in November 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 July 2021. RATINGS RATIONALE The downgrades on the Class D 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 the July 2020 trustee report [2], the weighted average rating factor was 3200, or 11.4% worse compared to 2873 reported in the March 2020 trustee report[1]. Moody's calculation also showed the WARF was failing the test level of 2864 reported in the July 2020 trustee report [2] by 336 points. Moody's noted that approximately 29.4% of the CLO's par was from obligors assigned a negative outlook and 1.1% 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 13.8% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $433.9 million, or 3.6% or $16.1 million less than the deal's ramp-up target par balance. 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 $429.4 million, defaulted par of $12.3 million, a weighted average default probability of 23.18% (implying a WARF of 3137), a weighted average recovery rate upon default of 47.38%, a diversity score of 63 and a weighted average spread of 3.62%. 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. 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. Fitch 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. VISIO 2020-1: S&P Assigns 'B (sf)' Rating to Class B-2 Notes ------------------------------------------------------------ S&P Global Ratings assigned its ratings to Visio 2020-1 Trust's mortgage-backed notes. The note issuance is an RMBS transaction backed by first-lien, fixed-, and adjustable-rate fully amortizing investment property mortgage loans secured by single-family residential properties, planned-unit developments, condominiums, and two- to four-family residential properties to both prime and nonprime borrowers. The pool has 813 business-purpose investor loans and are exempt from the qualified mortgage/ability-to-repay rules. The 'AA+ (sf)' rating assigned to class A-2 is higher than the preliminary rating we assigned. This is due to additional credit enhancement resulting from excess spread as a result of lower final coupons. In this transaction, excess spread is used to make turbo payments to the notes when a credit event trigger is in effect, which contributed to the assigned ratings. The ratings reflect: -- The pool's collateral composition; -- The credit enhancement provided for this transaction; -- The transaction's associated structural mechanics; -- The representation and warranty framework for this transaction; The geographic concentration; -- The mortgage originator, Visio Financial Services Inc.; 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. RATINGS ASSIGNED Visio 2020-1 Trust Class Rating Amount ($) A-1 AAA (sf) 102,945,000 A-2 AA+ (sf) 10,150,000 A-3 A+ (sf) 16,545,000 M-1 BBB+ (sf) 7,193,000 B-1 BB (sf) 10,231,000 B-2 B (sf) 4,795,000 B-3 NR 7,992,844 XS NR Notional(i) (i)Notional amount equals the loans' unpaid principal balance. NR--Not rated. VISTA POINT 2020-2: DBRS Gives Prov. BB Rating on Class B-1 Certs ----------------------------------------------------------------- DBRS, Inc. assigned provisional ratings to the following Mortgage Pass-Through Certificates, Series 2020-2 (the Certificates) to be issued by Vista Point Securitization Trust 2020-2 (VSTA 2020-2 or the Trust): -- $151.7 million Class A-1 at AAA (sf) -- $16.8 million Class A-2 at AA (high) (sf) -- $24.9 million Class A-3 at A (sf) -- $11.8 million Class M-1 at BBB (sf) -- $11.7 million Class B-1 at BB (sf) -- $10.0 million Class B-2 at B (low) (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 36.25% of credit enhancement provided by subordinate Certificates. The AA (high) (sf), A (sf), BBB (sf), BB (sf), and B (low) (sf) ratings reflect 29.20%, 18.75%, 13.80%, 8.90%, and 4.70% of credit enhancement, respectively. This transaction is a securitization of a portfolio of fixed- and adjustable-rate, prime, expanded prime, and non-prime first-lien residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 516 mortgage loans with a total principal balance of $238,003,315 as of the Cut-Off Date (July 1, 2020). This is the second 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 (dba) the Lender (the Lender; 44.5%) and other originators each comprising less than 15.0% 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 the Lender, the largest originator by balance, where the team provided an overview of the origination practices. Although new in Non-QM origination, the management team at the Lender has been originating agency and other mortgage loans for over 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 (non-investor) and InvestPoint (investor) programs as described in the report. Although the non-investor 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 non-agency prime jumbo products for various reasons. In accordance with the QM/ATR rules, 37.8% of the loans are designated as Non-QM. Approximately 62.2% of the loans are made to investors for business purposes including 56.5% of loans underwritten to property-level cash flows (DSCR). The business purpose loans are not subject to the QM/ATR rules. The pool has a concentrated geographic composition with California representing 67.4% of the pool. In addition, approximately 47.8% 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. (Wells Fargo; 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. Of note, if the Servicer defers or capitalizes the repayment of any amounts owed by a borrower in connection with the borrower's loan modification, the Servicer is entitled to reimburse itself from the principal collections for any previously made advances of the capitalized principal amount at the time of such modification. 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. Unlike the prior transaction by Vista Point (Vista Point Securitization Trust 2020-1), which used a sequential-pay cash flow structure across the entire capital stack (though similar to other previously issued non-QM deals), this transaction incorporates a sequential-pay cash flow structure with a pro rata distribution among the senior tranches subject to certain performance triggers related to cumulative losses or delinquencies exceeding a specified threshold (Trigger Event). After a Trigger Event, principal proceeds can be used to cover interest shortfalls on the Class A-1 and Class A-2 Certificates (IIPP) before being applied sequentially to amortize the balances of the senior and subordinated certificates. Additionally, the excess interest 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. 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 interest-only (IO) or higher debt-to-income (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, 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: July Update," published on July 22, 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 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 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 (CARES) Act, signed into law on March 27, 28 borrowers (approximately 5.7% by balance) either have completed forbearance plans, have been approved for forbearance plans, or are in the process of being reviewed for forbearance plans because the borrowers reported financial hardship related to the coronavirus impact. As of July 28, 2020, 18 borrowers (3.1% of the pool balance) have completed their forbearance plans, having repaid all forborne amounts. Four borrowers (about 1.0% by balance) were offered modifications and received a payment deferral (a total of $23,569 or about 0.01% of the pool balance) due to the previously granted coronavirus-related forbearance plans. Those four borrowers have since declined the deferral modification and are continuing to make their payments. Five borrowers (about 1.1% by balance) have applied for forbearance in April, though they have not submitted the required documentation and made their regular payments. One borrower (about 0.4% by balance) has had the forbearance request approved but elected to make monthly payments through the Cut-Off Date. 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 or some of the missed mortgage payments at once, deferring the unpaid missed payments, 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, the 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 that genuinely need payment relief may receive such relief and those that can make payments but use the payment relief to conserve cash may not. SLS 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, SLS, in collaboration with Vista Point, may offer a repayment plan or other forms of payment relief, such as deferral of the unpaid principal and interest 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 principal and interest 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. (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. WELLS FARGO 2014-C22: Fitch Affirms CCC Ratings on 4 Tranches ------------------------------------------------------------- Fitch Ratings has affirmed all classes of Wells Fargo Bank, N.A.'s WFRBS Commercial Trust Series 2014-C22 commercial mortgage trust pass-through certificates. Fitch also revised Rating Outlooks on two classes to Negative from Stable. WFRBS 2014-C22 - Class A-3 92890KAY1; LT AAAsf; Affirmed - Class A-4 92890KAZ8; LT AAAsf; Affirmed - Class A-5 92890KBA2; LT AAAsf; Affirmed - Class A-S 92890KBC8; LT AAAsf; Affirmed - Class A-SB 92890KBB0; LT AAAsf; Affirmed - Class B 92890KBF1; LT AA-sf; Affirmed - Class C 92890KBG9; LT A-sf; Affirmed - Class D 92890KAJ4; LT Bsf; Affirmed - Class E 92890KAL9 LT CCCsf; Affirmed - Class F 92890KAN5; LT CCCsf; Affirmed - Class X-A 92890KBD6; LT AAAsf; Affirmed - Class X-C 92890KAA3 LT CCCsf; Affirmed - Class X-D 92890KAC9 LT CCCsf; Affirmed KEY RATING DRIVERS Increased Loss Expectations: The Negative Rating Outlooks reflect increased expected losses from the several hotel loans in the pool and increased losses to the Stamford Plaza Portfolio. The Stamford Plaza Portfolio (7.51% of pool) is the third largest loan and the largest Fitch Loan of Concern. The loan is secured by two, 15-story, class A office buildings and two, 16-story, class A office buildings containing 982,483 square feet located in Stamford, CT. Occupancy for the portfolio remained relatively flat at 67% as of year-end 2019, a slight increase from 65% as of YE18. However, the partial interest-only period ended in August 2019 and the loan began amortizing, resulting in a YE19 NOI DSCR of 0.72x, compared with 0.95x at YE18. The Stamford office market remains soft with submarket vacancy of approximately 23%. While occupancy and cash flow have declined, the loan remains current and is not scheduled to mature until 2024, leaving some time for lease-up and improved performance. Fitch modeled a base case loss of 29% for the Stamford Portfolio, which equates to a value of $192 psf and is in line with recent comparable sales in the submarket. Fitch conducted an additional sensitivity analysis on the loan, which assumed a loss of 58%, based on a more conservative recovery estimate given the loan's continued performance decline. The sensitivity analysis as well as the increased loss expectations to several loans as a result of the coronavirus pandemic contributed to the Negative Rating Outlook on class A-S. Five loans (3.6% of pool) are in special servicing including three loans (1.23% of pool) that transferred to special servicing since the last rating action. In addition to the Stamford Plaza Portfolio, there are eight additional non-specially serviced loans (10.5% of pool) flagged as FLOCs due to actual or expected performance deterioration. Coronavirus Exposure: The social and market disruption caused by the effects of the coronavirus pandemic and related containment measures have added additional stress to hotel and retail properties. The hotel sector as a whole is expected to experience significant declines in RevPAR in the near term due to travel disruptions. Additionally, retail properties are expected to face cash flow disruption as tenants may not be able to pay rent or as leases with upcoming expiration dates are not renewed, as many retailers are closed for business or have undergone significant changes in operation in order to reopen. Within the pool, 15 non-defeased loans are secured by hotel properties (11.6% of pool). This includes two hotels in the top 15, both of which are considered to be FLOCs with increased loss expectations since the last rating action, and three additional hotels in special servicing. There are 29 non-defeased loans secured by retail properties (13.1%). Ten loans (4.72% of pool) have been granted forbearance due to the impact of the coronavirus pandemic. Fitch's base case analysis included additional stresses to 12 hotel loans (10.3% of pool) and 14 retail loans (6.1% of pool) related to ongoing performance concerns in light of the coronavirus pandemic. Minimal Changes to Credit Enhancement: Three loans have disposed since the last rating action, including one REO asset that was liquidated and resulted in a loss of $13.7 million to the trust (85% of the original loan balance). The other two dispositions were payoffs, and three loans have defeased since the last rating action. As of the July 2020 distribution date, the pool's aggregate principal balance had paid down by 11.61% to $1.31 billion from $1.488 billion at issuance. Three loans representing 2.8% of the pool are scheduled to mature in 2021. There are no other scheduled maturities until 2024. Eleven loans are fully defeased ($97 million; 7.4% of pool). Property Concentrations: Of the top 20 loans, five (10.25% of pool) are secured by properties leased to a single tenant. These include CSM Bakery Supplies Portfolio I & II (5.2%), Preferred Freezer Houston (1.95%), 400 Atlantic (1.90%) and Lincoln Plaza (1.20%). These loans are considered to be more prone to cash flow disruption in the event of changes in occupancy compared to multitenant properties. RATING SENSITIVITIES The Rating Outlooks on classes A-3 through A-SB remain Stable. The Rating Outlook on classes A-S and X-A is revised to Negative from Stable. The Rating Outlook on classes B through D remains Negative. 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 pay down and/or defeasance. Upgrades of classes B and C are unlikely but would occur with continued paydown and/or defeasance, and would be limited as concentrations increase. Class D would only be upgraded 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. Upgrades to classes E and F are not likely unless the performance of FLOCs stabilizes, recoveries on specially serviced loans exceed expectations and the performance of the remaining pool is stable, which would likely not 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 classes A-3 through A-SB are not considered likely due to their position in the capital structure, but may occur should interest shortfalls occur. Class A-S may be downgraded should the largest FLOC default and performance of the loans susceptible to the coronavirus pandemic not stabilize. Downgrades to classes B and C are possible should additional defaults occur or loss expectations increase. Class D may be downgraded should the performance of the FLOCs fail to stabilize or decline further. Downgrades to the distressed classes are likely as losses 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 Rating Outlook or those with Negative Rating 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. 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 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). WELLS FARGO 2015-NXS4: Fitch Cuts Rating on 2 Tranches to CCCsf --------------------------------------------------------------- Fitch Ratings has downgraded two and affirmed 14 classes of Wells Fargo Commercial Mortgage Trust Pass-Through Certificates series 2015-NXS4. WFCM 2015-NXS4 - Class A-2B 94989XBA2; LT AAAsf; Affirmed - Class A-3 94989XBB0; LT AAAsf; Affirmed - Class A-4 94989XBC8; LT AAAsf; Affirmed - Class A-S 94989XBE4; LT AAAsf; Affirmed - Class A-SB 94989XBD6; LT AAAsf; Affirmed - Class B 94989XBH7; LT AA-sf; Affirmed - Class C 94989XBJ3; LT A-sf; Affirmed - Class D 94989XBL8; LT BBBsf; Affirmed - Class E 94989XAL9; LT BBB-sf; Affirmed - Class F 94989XAN5; LT BB-sf; Affirmed - Class G 94989XAQ8; LT CCCsf; Downgrade - Class X-A 94989XBF1; LT AAAsf; Affirmed - Class X-B 94989XBG9; LT AA-sf; Affirmed - Class X-D 94989XBK0; LT BBB-sf; Affirmed - Class X-F 94989XAA3; LT BB-sf; Affirmed - Class X-G 94989XAC9; LT CCCsf; Downgrade KEY RATING DRIVERS Increased Loss Expectations: The downgrades and Negative Rating Outlooks reflect the increased loss expectations due to loans impacted by the coronavirus as well as properties with significant performance declines. While the majority of the pool continues to exhibit generally stable performance, several loans have transferred to special servicing since Fitch's prior rating action. There are now eight loans in special servicing (9.87% of the pool's balance). Inclusive of the specially serviced loans, Fitch has designated 11 loans (15.93% of the pool's balance) as Fitch Loans of Concern, which are the major contributors for the increase in loss expectations. The largest FLOC is the ninth largest loan in the pool, Somerset Park (3% of the deal). The loan is collateralized by a 206,829-sf office property located in Raleigh, NC. Historically, occupancy at the subject has fluctuated between 87% and 93%. However, in March of 2019, the largest tenant, Itron (approximately 38% of the NRA) vacated at lease expiration. Due to the reduction in occupancy, financials were severely impacted, and the 2019 NOI decreased approximately 45% yoy from 2018. Per the servicer's watchlist, as of July 2020, the servicer has approved a 15-year lease for a local governmental entity to take occupancy of 52,741 sf of vacant space at the property. Per previous communication, the borrower also stated they were also finalizing a seven-year lease with a software company to occupy 27,188 sf with a target occupancy date September 2020. At YE 2019, NOI DSCR was 1.10x and occupancy was 52%. While the loan remains current, it is currently cash managed with a cash trap in place. The second largest FLOC is the Yosemite Resorts loan (2.6%), which transferred to special servicing in July 2020. The loan is secured by two hotels located several miles west of Yosemite National Park in El Portal, CA. The subjects are situated along State Route 140 and adjacent to the Merced River. Yosemite View Lodge is a 327-key full-service hotel while the Yosemite Cedar Lodge property is a 209-key full-service hotel. Per Trepp, the loan has paid through April and is now 60 days delinquent. Per the TTM ending March 2020, NOI DSCR was 2.30x and occupancy was 67%. The third largest FLOC is the twelfth largest loan in the pool, 1954 Halethorpe Farms Road (2.5%). The loan is secured by a 677,375-sf industrial warehouse located in Halethorpe, MD, approximately six miles southwest of the Baltimore CBD. The loan is on the servicer's watchlist due to the largest tenant, Arconic (55% of NRA / approximately 379,000 sf) having a lease expiration date of June 30, 2020. According to the servicer, Arconic chose not to renew its lease at the expiration date. The borrower is currently marketing the space for lease. A total of 40,000 sf of the former Arconic space has been leased and an letter of intent is in negotiation with a prospective tenant for 50,000 sf. As of YE 2019, occupancy and DSCR were 79% and 1.83x, respectively. The remaining eight FLOCs total 7.87% of the pool's balance and range in size from 1.9% of the deal to 0.4% and consist of hotel and retail properties. Minimal Changes to Credit Enhancement: To date, the pool has paid down by 12.7% to $676.2 million from $774.5 million. There are currently four defeased loans totaling 5.4% of the pool. Excluding defeased loans, there are seven full-term IO loans representing 25.2% of the pool, 25 balloon loans (31.5%), 23 partial IO loans (43.2%), and one fully amortizing loan (0.1%). Pool Concentrations: Compared to other similar vintage transactions, the deal has higher concentrations in retail and hotel properties. Retail concentration is currently 33% of the pool while hotel concentration is 20%. Coronavirus Exposure: Fitch performed additional haircuts on 11 hotel and retail properties due to exposure to the coronavirus. RATING SENSITIVITIES The Negative Outlooks on classes E and F as well as IO classes X-D and X-F reflect concerns related primarily to the pool's hotel and retail exposure, which are more prone to disruptions from the coronavirus pandemic, as well as the loans that have transferred to the special servicer. Factors that could, individually or collectively, lead to a positive rating action/upgrade: Factors that lead to upgrades would include stable to improved asset performance coupled with paydown and/or continued defeasance. Upgrades to classes B and C may occur with increased paydown and/or defeasance combined with increased performance. An upgrade to class D is not likely unless the FLOCs' performance stabilizes and if the performance of the remaining pool improves. Factors that could, individually or collectively, lead to a 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 'AAsf' or 'Asf' should interest shortfalls occur. Downgrades to classes D through F are possible should defaults occur, loss expectations continue to increase or the FLOCs' performance fails to stabilize. 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 Rating 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. 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 2020-4: Fitch to Rate Class B-5 Debt 'B+(EXP)sf' ------------------------------------------------------------ Fitch Ratings expects to rate Wells Fargo Mortgage-Backed Securities 2020-4 Trust. WFMBS 2020-4 - Class A-1; LT AAA(EXP)sf Expected Rating - Class A-2; LT AAA(EXP)sf Expected Rating - Class A-3; LT AAA(EXP)sf Expected Rating - Class A-4; LT AAA(EXP)sf Expected Rating - Class A-5; LT AAA(EXP)sf Expected Rating - Class A-6; LT AAA(EXP)sf Expected Rating - Class A-7; LT AAA(EXP)sf Expected Rating - Class A-8; LT AAA(EXP)sf Expected Rating - Class A-9; LT AAA(EXP)sf Expected Rating - Class A-10; LT AAA(EXP)sf Expected Rating - Class A-11; LT AAA(EXP)sf Expected Rating - Class A-12; LT AAA(EXP)sf Expected Rating - Class A-13; LT AAA(EXP)sf Expected Rating - Class A-14; LT AAA(EXP)sf Expected Rating - Class A-15; LT AAA(EXP)sf Expected Rating - Class A-16; LT AAA(EXP)sf Expected Rating - Class A-17; LT AAA(EXP)sf Expected Rating - Class A-18; LT AAA(EXP)sf Expected Rating - Class A-19; LT AAA(EXP)sf Expected Rating - Class A-20; LT AAA(EXP)sf Expected Rating - Class A-IO1; LT AAA(EXP)sf Expected Rating - Class A-IO2; LT AAA(EXP)sf Expected Rating - Class A-IO3; LT AAA(EXP)sf Expected Rating - Class A-IO4; LT AAA(EXP)sf Expected Rating - Class A-IO5; LT AAA(EXP)sf Expected Rating - Class A-IO6; LT AAA(EXP)sf Expected Rating - Class A-IO7; LT AAA(EXP)sf Expected Rating - Class A-IO8; LT AAA(EXP)sf Expected Rating - Class A-IO9; LT AAA(EXP)sf Expected Rating - Class A-IO10; LT AAA(EXP)sf Expected Rating - Class A-IO11; LT AAA(EXP)sf Expected Rating - Class B-1; LT AA+(EXP)sf Expected Rating - Class B-2; LT A(EXP)sf Expected Rating - Class B-3; LT BBB+(EXP)sf Expected Rating - Class B-4; LT BB+(EXP)sf Expected Rating - Class B-5; LT B+(EXP)sf Expected Rating - Class B-6; LT NR(EXP)sf Expected Rating TRANSACTION SUMMARY The certificates are supported by 427 prime fixed-rate mortgage loans with a total balance of approximately $335 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 ninth post-crisis issuance from Wells Fargo. KEY RATING DRIVERS Revised GDP Due to Coronavirus (Negative): The 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' and below. Expected Payment 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. 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 prior to or on the closing date will be removed from the pool (at par) within 30 days of closing. For borrowers who enter a coronavirus 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. Fitch increased its loss expectations by 10 bps for the 'BB+sf' ratings categories and below to address the potential for writedowns due to reimbursements of servicer advances. This increase is based on a servicer reimbursement scenario analysis which incorporated collateral similar to WFMBS 2020-4. Fitch did not adjust its loss expectations above 'BB+sf' because its model output levels were sufficiently lower than its loss floors for 30-year collateral. 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 nonrecoverable. 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 7.2 months. The pool has a weighted average original FICO score of 774, which is indicative of very high credit-quality borrowers. Approximately 82% has original FICO scores at or above 750. In addition, the original WA CLTV ratio of 70.3% 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 55% of the pool is concentrated in California with relatively low MSA concentration. The largest MSA concentration is in San Francisco MSA (20.4%) followed by the Los Angeles MSA (13.6%) and the New York MSA (12.5%). The top three MSAs account for 46.6% of the pool. As a result, there was an additional penalty of approximately 6% 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, which are among Fitch's highest servicer ratings. On March 27, 2020 Fitch revised the Rating Outlook for these servicers to Negative from Stable due to the changing economic landscape. The expected losses at the 'AAAsf' rating stress were reduced by approximately 61 bps to reflect these strong operational assessments. 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 credit enhancement. In response to the coronavirus 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 coronavirus). 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. 99.8% 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. One loan was graded 'C' due to a material property valuation exception where the secondary review value yielded a negative variance greater than 10% of the original appraisal value. Fitch applied the lower of the values to calculate the LTV. The adjustment did not have a material impact on the expected loss levels. Loans with due diligence receive a credit in the loss model; the aggregate adjustment reduced the 'AAAsf' expected losses by 15 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 1.40% 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 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 38.4% 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 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 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 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 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. 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. Fitch considered this information in its analysis and, as a result, Fitch made the following adjustment to its analysis: loans with due diligence received a credit in the loss model. This adjustment reduced the 'AAAsf' expected losses by 15 bps. 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 2020-4 has an ESG Relevance Score of '4' for Transaction Parties & Operational Risk. Operational risk is well controlled for in WFMBS 2020-4, including strong R&W and transaction due diligence and a strong originator and servicer, which resulted in a reduction in expected losses. Except for the matters discussed, 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, either due to their nature or the way in which they are being managed by the entity. WELLS FARGO 2020-4: Moody's Gives (P)Ba3 Rating on Class B-5 Debt ----------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to 25 classes of residential mortgage-backed securities issued by Wells Fargo Mortgage Backed Securities 2020-4 Trust. The ratings range from (P)Aaa (sf) to (P)Ba3 (sf). WFMBS 2020-4 is the fourth prime issuance by Wells Fargo Bank, N.A. (Wells Fargo Bank, the sponsor and mortgage loan seller) in 2020, consisting of 427 primarily 30-year, fixed rate, prime residential mortgage loans with an unpaid principal balance of $335,327,214. 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 5.16 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 427 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. Fitch 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 2020-4 Trust Cl. A-1, Assigned (P)Aaa (sf) Cl. A-2, Assigned (P)Aaa (sf) Cl. A-3, Assigned (P)Aaa (sf) Cl. A-4, Assigned (P)Aaa (sf) Cl. A-5, Assigned (P)Aaa (sf) Cl. A-6, Assigned (P)Aaa (sf) Cl. A-7, Assigned (P)Aaa (sf) Cl. A-8, Assigned (P)Aaa (sf) Cl. A-9, Assigned (P)Aaa (sf) Cl. A-10, Assigned (P)Aaa (sf) Cl. A-11, Assigned (P)Aaa (sf) Cl. A-12, Assigned (P)Aaa (sf) Cl. A-13, Assigned (P)Aaa (sf) Cl. A-14, Assigned (P)Aaa (sf) Cl. A-15, Assigned (P)Aaa (sf) Cl. A-16, Assigned (P)Aaa (sf) Cl. A-17, Assigned (P)Aa1 (sf) Cl. A-18, Assigned (P)Aa1 (sf) Cl. A-19, Assigned (P)Aaa (sf) Cl. A-20, Assigned (P)Aaa (sf) Cl. B-1, Assigned (P)Aa3 (sf) Cl. B-2, Assigned (P)A3 (sf) Cl. B-3, Assigned (P)Baa3 (sf) Cl. B-4, Assigned (P)Ba1 (sf) Cl. B-5, Assigned (P)Ba3 (sf) RATINGS RATIONALE Summary Credit Analysis and Rating Rationale Moody's expected loss for this pool in a baseline scenario-mean is 0.24% and reaches 3.39% at a stress level consistent with its Aaa ratings. 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 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 its forecasts is unusually high. Fitch increased its model-derived median expected losses by 15% (9.19% for the mean) and its Aaa losses by 5% to reflect the likely performance deterioration resulting from a slowdown in US economic activity in 2020 due to the COVID-19 outbreak. Fitch regards the COVID-19 outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Fitch 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 2020-4 transaction is a securitization of 427 first lien residential mortgage loans with an unpaid principal balance of $335,327,214. The loans in this transaction have strong borrower characteristics with a weighted average original FICO score of 780 and a weighted-average original loan-to-value ratio (LTV) of 70.0%. In addition, 5.9% of the borrowers are self-employed, rate-and-term refinance and cash-out loans comprise approximately 54.6% of the aggregate pool (inclusive of construction to permanent loans). Of note, 8.4% (by loan balance) of the pool comprises 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 such 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, Fitch treated these loans as a rate term refinance rather than a cash out refinance loan. The pool has a high geographic concentration with 54.9% of the aggregate pool located in California and 12.5% 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 Fitch has rated. Origination Quality Wells Fargo Bank, N.A. (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, Fitch 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 427 loans in the initial population of this transaction (100% of the mortgage pool). For an initial population of 437 loans, Clayton Services LLC identified 391 loans with level A and 46 loans with level B credit component grades. Most of the level B loans were underwritten using underwriter discretion. Areas of discretion included insufficient cash reserves, length of mortgage/rental history, cash out amount exceeds guidelines, and explanation for other multiple credit exceptions. The due diligence firm noted that these exceptions are minor and/or provided an explanation of compensating factors. Also, Clayton Services LLC identified 434 loans with level A, two (2) loans with level B, and one (1) loan with level C property valuation grade. For the one (1) level C loan there is finding related to property valuation review, because Clayton determined that the appraisal value used in the origination of such mortgage loan was not supported by field review within a negative 10% variance. Low DTI and LTV along with a long history of self-employment were cited as compensating factors. For the two loans with property valuation grade of B, one loan had the home escrow requirement waived with compensating factors such as high credit score, low loan-to-value and debt-to-income ratios. The other loan with a property valuation grade B was located in a FEMA disaster area and was missing a post disaster inspection report post a hurricane. No subsequent inspection was performed on the property after the disaster and there was no contact from the borrower regarding property damage. High credit score, income, and cash reserves and low DTI and CLTV are the compensating factors. Fitch therefore, did not run any additional sensitivity analysis on these loans. 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 Fitch 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. Such excluded disaster mortgage loans may be subject to a review in future periods if certain conditions are satisfied. Overall, Fitch 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. Fitch 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 1.40% 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 1.40% of the closing pool balance. Fitch calculates the credit neutral floors for a given target rating as shown in its principal methodology. The senior subordination floor of 1.40% and subordinate floor of 1.40% 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 2020-4, unlike other prime jumbo transactions, Wells Fargo Bank acts 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, Fitch 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 30 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. ZAIS CLO 5: Moody's Lowers Rating on Class C Notes to Ba2 --------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by ZAIS CLO 5, Limited: US$25,200,000 Class B Senior Secured Deferrable Floating Rate Notes due 2028 (the "Class B Notes"), Downgraded to Baa1 (sf); previously on October 26, 2016 Definitive Rating Assigned A2 (sf) US$21,600,000 Class C Senior Secured Deferrable Floating Rate Notes due 2028 (the "Class C Notes") (current outstanding balance of $21,912,251), Downgraded to Ba2 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$18,400,000 Class D Secured Deferrable Floating Rate Notes due 2028 (the "Class D Notes") (current outstanding balance of $19,201,554), Downgraded to Caa1 (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 C and Class D notes. The CLO, issued in October 2016 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 October 2020. RATINGS RATIONALE The downgrades on the Class B, Class C, and Class D 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 3514 as of July 2020, or 19% worse compared to 2953 reported in the March 2020 trustee report [1]. Moody's calculation also showed the WARF was failing the test level of 2839 reported in the July 2020 trustee report [2] by 675 points. The recent WARF, the extent of the CLO's failure of the WARF test, and the rate and magnitude of the WARF deterioration, are worse than the averages Moody's has observed for other BSL CLOs. Moody's noted that approximately 47.8% of the CLO's par was from obligors assigned a negative outlook and 0.8% 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 24.13% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $374.9 million, or $25.1 million less than the deal's ramp-up target par balance, and Moody's calculated the over-collateralization ratios (excluding haircuts) for the Class A-2, Class B, Class C and Class D Notes as of July 2020 at 125.49%, 115.73%, 108.40%, and 102.70%, respectively. Moody's noted that all the OC tests were recently reported [3] as failing, and that interest payments were deferred on the Class D Notes and senior notes were repaid. If these failures occur on the next payment date repayment of senior notes, diversion of excess interest collections towards reinvestment in collateral, or deferral of current interest payments on the junior notes could result. Notably however, the notes are supported by the portfolio's better than weighted average spread. 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 $366.3 million, defaulted par of $26.5 million, a weighted average default probability of 25.92% (implying a WARF of 3514), a weighted average recovery rate upon default of 46.92%, a diversity score of 76 and a WAS of 4.01%. Moody's also analyzed the CLO by incorporating an approximately $10 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. 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. 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. ZAIS CLO 7: Moody's Lowers Rating on Class E Notes to B1 -------------------------------------------------------- Moody's Investors Service has downgraded the ratings on the following notes issued by ZAIS CLO 7, Limited: US$33,000,000 Class C Deferrable Mezzanine Floating Rate Notes due 2030 (the "Class C Notes"), Downgraded to A3 (sf); previously on April 17, 2020 A2 (sf) Placed Under Review for Possible Downgrade US$30,250,000 Class D Deferrable Mezzanine Floating Rate Notes due 2030 (the "Class D Notes") (current outstanding balance of $30,629,947), Downgraded to Ba1 (sf); previously on April 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade US$24,750,000 Class E Deferrable Mezzanine Floating Rate Notes due 2030 (the "Class E Notes") (current outstanding balance of $25,273,578), Downgraded to B1 (sf); previously on April 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade The Class C notes, Class D notes, and the Class E notes are referred to herein, collectively, as the "Downgraded Notes." These actions conclude the reviews for downgrade initiated on April 17, 2020 on the Class C notes, Class D notes, and Class E notes. The CLO, issued in October 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 on April 2022. RATINGS RATIONALE The downgrades on the Downgraded 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 2020, 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, the credit enhancement available to the CLO notes has declined, and expected losses on certain notes have increased. According to the July 2020 trustee report, the weighted average rating factor was reported at 3513[1], compared to 2888 reported in the March 2020 trustee report [2]. Moody's calculation also showed the WARF was failing the test level of 2989 reported in the July 2020 trustee report [3]. 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 22.5% as of July 2020. Furthermore, Moody's calculated the total collateral par balance, including recoveries from defaulted securities, at $520.2 million, or $29.8 million less than the deal's ramp-up target par balance. Moody's noted that the OC tests for the Class B, Class C, Class D, and Class E Notes, as well as the interest diversion test, were recently reported [4] as failing, which could result in repayment of senior notes at the next payment date should the failures continue. 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." For modeling purposes, Moody's used the following base-case assumptions: Par amount and principal proceeds balance: $505,386,810 Defaulted Securites: $38,950,594 Diversity Score: 86 Weighted Average Rating Factor: 3395 Weighted Average Life (WAL): 5.79 years Weighted Average Spread (WAS): 3.99% Weighted Average Recovery Rate (WARR): 46.76% Par haircut in O/C tests and interest diversion test: $12.2 million 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. 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. [*] Fitch Affirms 35 Distressed Ratings in 4 US CMBS Deals ---------------------------------------------------------- Fitch Ratings, on Aug. 5, 2020, affirmed 35 distressed bonds in four U.S. commercial mortgage-backed securities 1.0 transactions. Each has less than five assets remaining. Fitch has affirmed all classes of Credit Suisse First Boston Mortgage Securities Corp. series 2003-C3 at their distressed ratings of 'Csf' and 'Dsf. The largest remaining asset is an REO shopping center located in Las Vegas, NV. The collateral consists of 31,845 sf of a 176,508-sf retail property, comprised by two standalone buildings and one larger building containing in-line space. The property became REO after experiencing declining cash flow as a result of declining occupancy. The property failed to sell at recent auctions, including in March 2020 when the coronavirus pandemic impacted potential sales. Losses to class J are considered inevitable. Fitch affirmed all classes of Morgan Stanley Capital I Trust commercial mortgage pass-through certificates series 2007-HQ12 at their distressed ratings of 'Csf' and 'Dsf'. The largest asset is a shopping center located in Gainesville, VA. The loan transferred to special servicing in September 2016 for imminent maturity default and the asset became REO in June 2017. The grocery anchor tenant, Shoppers Food Warehouse (64.4% of total net rentable area) went dark in 2011, and a replacement tenant was never found. According to the special servicer, the asset manager completed a buyout with the former grocery anchor for $3.2 million and is currently working to re-lease the space. As of the December 2019 rent roll, the property was only 22.4% occupied, compared with 90.4% leased and 26% physically occupied in December 2018. The special servicer has no current disposition plans as the property is not being marketed for sale. Losses to class F are considered inevitable. Fitch has affirmed all classes of Wachovia Bank Commercial Mortgage Trust, Series 2006-C38 at their distressed ratings of 'CCCsf' and 'Dsf'. The largest loan is secured by a 372,730-sf interest in 514, 903 sf retail center in Flanders, NJ, anchored by Lowe's (36% NRA) and Walmart (non-collateral). The property's second-largest tenant, Babies R Us (10.2% of NRA, 7.1% of base rent) vacated in April 2018 following the bankruptcy of its parent company. Occupancy subsequently declined to 89% from 98.9% in December 2017. Occupancy as of March 2020 was 90%. The former Babies R Us space continues to be actively marketed. The loan was interest only but failed to repay at its anticipated repayment date in October 2016 and is now amortizing with all excess cashflow being applied to the loan's principal balance. The loan's final maturity date is October 2021. Fitch remains concerned about potential refinance risk for this loan given its leasing challenges, tenant roll, and substantial balloon payment. As of the July 2020 distribution date, the loan is 30 days delinquent, and the borrower has requested COVID19 relief. Losses to class D are considered possible. Fitch has affirmed all classes of Wachovia Bank Commercial Mortgage Trust, Series 2007-C30 at their distressed ratings of 'CCsf' and 'Dsf'. Both remaining assets are in special servicing and losses are expected. The largest loan, Mercedes-Benz Central Parts Warehouse (58% of pool), secured by a 518,400-sf industrial warehouse in Vance, AL, transferred to special servicing in May 2016 for imminent maturity default. The property is 100% leased to Mercedes-Benz US Industrial through October 2020. Per servicer updates, the forbearance agreement expired in January 2019. The borrower submitted a proposal to pay off the loan at a deep discount in 2019, but the payoff request was declined by the special servicer. The tenant has given notice of one-year lease extension with a rent increase based on CPI, which the borrower and tenant are finalizing. Also, the borrower and special servicer are in discussions for a one-year extension to the previously expired forbearance agreement. Losses to class E are considered probable. Morgan Stanley Capital I Trust 2007-HQ12 - Class F 61755BAP9; LT Csf; Affirmed - Class G 61755BAQ7; LT Dsf; Affirmed - Class H 61755BAR5; LT Dsf; Affirmed - Class J 61755BAS3; LT Dsf; Affirmed - Class K 61755BAT1; LT Dsf; Affirmed - Class L 61755BAU8; LT Dsf; Affirmed - Class M 61755BAV6; LT Dsf; Affirmed - Class N 61755BAW4; LT Dsf; Affirmed - Class O 61755BAX2; LT Dsf; Affirmed - Class P 61755BAY0; LT Dsf; Affirmed - Class Q 61755BAZ7; LT Dsf; Affirmed Credit Suisse First Boston Mortgage Securities Corp. 2003-C3 - Class J 22541QEG3; LT Csf; Affirmed - Class K 22541QEH1; LT Dsf; Affirmed - Class L 22541QEJ7; LT Dsf; Affirmed - Class M 22541QEK4; LT Dsf; Affirmed - Class N 22541QEL2; LT Dsf; Affirmed - Class O 22541QEM0; LT Dsf; Affirmed Wachovia Bank Commercial Mortgage Trust 2007-C30 - Class E 92978QAN7; LT CCsf; Affirmed - Class F 92978QAP2; LT Dsf; Affirmed - Class G 92978QAR8; LT Dsf; Affirmed - Class H 92978QAT4; LT Dsf; Affirmed - Class J 92978QAV9; LT Dsf; Affirmed - Class K 92978QAX5; LT Dsf; Affirmed Wachovia Bank Commercial Mortgage Trust 2006-C28 - Class D 92978MAM8; LT CCCsf; Affirmed - Class E 92978MAN6; LT Dsf; Affirmed - Class F 92978MAT3; LT Dsf; Affirmed - Class G 92978MAU0; LT Dsf; Affirmed - Class H 92978MAV8; LT Dsf; Affirmed - Class J 92978MAW6; LT Dsf; Affirmed - Class K 92978MAX4; LT Dsf; Affirmed - Class L 92978MAY2; LT Dsf; Affirmed - Class M 92978MAZ9; LT Dsf; Affirmed - Class N 92978MBA3; LT Dsf; Affirmed - Class O 92978MBB1; LT Dsf; Affirmed - Class P 92978MBC9; LT Dsf; Affirmed KEY RATING DRIVERS High Expected Losses: All of the transactions have high expected losses, as most of the remaining assets are in special servicing or have modifications that will cause losses. Each transaction has one or two assets remaining and all ratings are distressed. Low Credit Enhancement: Each of the remaining classes has insufficient credit enhancement to absorb the expected losses. All ratings are distressed and losses are considered possible, probable or inevitable. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: All classes in these transactions are distressed. Further downgrades to 'Dsf' are expected as losses are incurred. Classes currently rated 'Dsf' will remain unchanged as losses have already been incurred. Factors that could, individually or collectively, lead to positive rating action/upgrade: Although not expected, factors that could lead to upgrades include significant improvement in valuations and performance of the remaining assets. 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). [*] Fitch Takes Action on 46 Tranches From 5 US Preferred CDOs -------------------------------------------------------------- Fitch Ratings has affirmed the ratings of 44 classes, upgraded two classes and assigned a Rating Outlook to one class from five collateralized debt obligations. The CDOs have exposure to trust preferred securities, senior and subordinated debt issued by real estate investment trusts, corporate issuers, tranches of structured finance CDOs, and commercial mortgage backed securities. Attentus CDO III, Ltd./LLC - Class A-2 04973PAC3; LT Bsf; Affirmed - Class B 04973PAD1; LT CCCsf; Affirmed - Class C-1 04973PAE9; LT CCsf; Affirmed - Class C-2 04973PAH2; LT CCsf; Affirmed - Class D 04973PAF6; LT CCsf; Affirmed - Class E-1 04973PAG4; LT Csf; Affirmed - Class E-2 04973PAJ8; LT Csf; Affirmed - Class F 04973MAA4; LT Csf; Affirmed Kodiak CDO I, Ltd./Inc. - Class A-2 50011PAB2; LT Bsf; Affirmed - Class B 50011PAC0; LT Dsf; Affirmed - Class C 50011PAD8; LT CCsf; Affirmed - Class D-1 50011PAE6; LT Csf; Affirmed - Class D-2 50011PAJ5; LT Csf; Affirmed - Class D-3 50011PAK2; LT Csf; Affirmed - Class E-1 50011PAF3; LT Csf; Affirmed - Class E-2 50011PAL0; LT Csf; Affirmed - Class F 50011PAG1; LT Csf; Affirmed - Class G 50011PAH9; LT Csf; Affirmed - Class H 50011NAC5; LT Csf; Affirmed Taberna Preferred Funding I, Ltd./Inc. - Class A-1A 87330PAA0; LT Bsf; Affirmed - Class A-1B 87330PAB8; LT Bsf; Affirmed - Class A-2 87330PAC6; LT CCCsf; Affirmed - Class B-1 87330PAD4; LT CCsf; Affirmed - Class B-2 87330PAE2; LT CCsf; Affirmed - Class C-1 87330PAF9; LT CCsf; Affirmed - Class C-2 87330PAG7; LT CCsf; Affirmed - Class C-3 87330PAH5; LT CCsf; Affirmed - Class D 87330PAJ1; LT CCsf; Affirmed - Class E 87330PAK8; LT Csf; Affirmed Attentus CDO I, Ltd./LLC - Class A-1 049730AA2; LT BBsf; Upgrade - Class A-2 049730AB0; LT Bsf; Upgrade - Class B 049730AC8; LT CCsf; Affirmed - Class C-1 049730AD6; LT CCsf; Affirmed - Class C-2A 049730AE4; LT Csf; Affirmed - Class C-2B 049730AF1; LT Csf; Affirmed - Class D 049730AG9; LT Csf; Affirmed - Class E 049730AH7; LT Csf; Affirmed Kodiak CDO II, Ltd./Corp. - Class A-2 50011RAB8; LT Asf; Affirmed - Class A-3 50011RAC6; LT Bsf; Affirmed - Class B-1 50011RAD4; LT CCCsf; Affirmed - Class B-2 50011RAE2; LT CCCsf; Affirmed - Class C-1 50011RAF9; LT CCsf; Affirmed - Class C-2 50011RAG7; LT CCsf; Affirmed - Class D 50011RAH5; LT CCsf; Affirmed - Class E 50011RAJ1; LT Csf; Affirmed - Class F 50011QAA2; LT Csf; Affirmed KEY RATING DRIVERS The main driver behind the upgrades to the class A-1 and A-2 notes in Attentus CDO I, Ltd./LLC was deleveraging from collateral redemptions and excess spread, which resulted in paydowns to the class A-1 notes of 13% of its balance at last review. Overall, collateral quality of the underlying assets has deteriorated since last review, with all of the CDOs experiencing negative credit migration. There was one new default across two CDOs since last review. While the other transactions also experienced deleveraging, the effects were offset by the decrease in asset quality and the high levels of portfolio concentration. Ratings were constrained by the concentration sensitivity described in the "U.S. Trust Preferred CDOs Surveillance Rating Criteria". Kodiak CDO I, Ltd./Inc. is in acceleration, which diverts excess spread to the class A-2 notes while cutting off interest due on the timely class B notes, which are currently rated 'Dsf'. RATING SENSITIVITIES Ratings of the notes issued by these CDOs remain sensitive to significant levels of defaults and collateral redemptions. To address potential risks of adverse selection and increased portfolio concentration, Fitch applied a sensitivity scenario, as described in the criteria, to applicable transactions. In addition to the standard analytical framework set forth in the TruPS CDO Criteria, this review applied a coronavirus baseline stress scenario where all issuers in the pool were downgraded by one notch. A downside sensitivity scenario, which contemplates a more severe and prolonged economic stress caused by a re-emergence of infections in the major economies, was applied as well where all issuers were downgraded by three notches. Due to the application of the concentration sensitivity scenario described above, no class of notes from the CDOs in this review was impacted by these scenarios. Factors that could, individually or collectively, lead to positive rating action/upgrade: Future upgrades to the rated notes may occur if a transaction experiences improvement in credit enhancement through deleveraging from collateral redemptions and/or interest proceeds being used for principal repayment. Factors that could, individually or collectively, lead to negative rating action/downgrade: Downgrades to the rated notes may occur if a significant share of the portfolio issuers default and/or experience negative credit migration, which would cause a deterioration in rating default rates. 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. ********* 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. 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