OREANDA-NEWS. S&P Global Ratings today completed its review of 13 classes from three U. S. residential mortgage-backed securities (RMBS) resecuritized real estate mortgage investment conduit (Re-REMIC) transactions from Structured Asset Securities Corporation Trust, which are directly or indirectly supported by Fannie Mae or Freddie Mac. The review yielded seven downgrades and six withdrawals (see list). We also removed all 13 ratings from CreditWatch, where we had placed them with negative implications on June 27, 2016. The seven lowered ratings and six withdrawn ratings are corrections reflecting Intex Solutions Inc.'s (Intex) revised reporting for these classes (see below).

While the internal model we use in connection with our determination of U. S. RMBS ratings typically applies our criteria assumptions, third-party data provider Intex, in many cases, provides the collateral composition and structural modeling used as inputs into our analysis. Therefore, the resulting collateral characteristics and structural mechanics that use our input assumptions depend on the modeling and data provided by Intex.

Intex had previously not reported interest shortfalls on these classes. Based on Intex's reporting, we previously affirmed the ratings on the classes following our earlier reviews. However, we later observed that the trustee for these classes reported interest shortfalls in its remittance reports, and we placed the ratings on CreditWatch with negative implications on June 27, 2016, pending our verification of the interest shortfalls and adjustment of the ratings as appropriate pursuant to our criteria.

Based on our further review, we verified that interest shortfalls on these classes have occurred and have informed Intex of the shortfalls' existence. Intex has since revised its reporting on these transactions to indicate that these classes have experienced interest shortfalls.

APPLICATION OF CRITERIAOur seven downgrades reflect the application of our interest shortfall criteria (see "Structured Finance Temporary Interest Shortfall Methodology," Dec. 15, 2015). The six withdrawals reflect the application of our interest only (IO) criteria (see "Global Methodology For Rating Interest-Only Securities," April 15, 2010).

Our interest shortfall criteria impose a maximum rating threshold on classes that have incurred interest shortfalls resulting from credit or liquidity erosion. Based on the immediate reimbursement provisions within each payment provision for the applicable classes, we used the maximum length of time until full interest is reimbursed as part of our analysis to assign the rating on each class.

Some of the bonds that were supporting the Re-REMIC classes have interest payments subject to a net weighted average coupon (WAC) cap and experienced a reduction in interest payments. The reduced payments were passed to the Re-REMIC classes, which have a stated coupon and were to be paid accrued interest in full. Additionally, each of the three Re-REMIC transactions experienced extraordinary expenses, also resulting in reduced interest being paid to the Re-REMIC classes. These two factors combined resulted in interest shortfalls on the Re-REMIC classes.

Pursuant to our imputed promise criteria (see "Principles For Rating Debt Issues Based On Imputed Promises," Dec. 19, 2014), we would not lower our rating on a security to 'D' if the amount of interest shortfall it is experiencing is de minimis (i. e., one basis point of the original balance on a cumulative basis). The aggregate interest shortfall amount for class 1-A1 from Structured Asset Securities Corporation Trust 2008-1 has not breached the one-basis-point threshold that would cause us to lower the rating to 'D (sf)'. However, we anticipate that the interest shortfall will soon breach the threshold, thereby making this class virtually certain to default. Accordingly, we are lowering the rating of this class to 'CC (sf)'. We will continue to monitor the interest shortfall for this class and will lower the rating to 'D (sf)' if the one-basis-point threshold is breached.

Further, we withdrew our ratings on six classes, which are IO securities, according to our IO criteria, which state that we will maintain the rating on an IO class until the ratings on all of the classes that the IO security references, in the determination of its notional balance, are either lowered below 'AA-' or have been retired. Because we have lowered our ratings on the reference classes for these IO classes to 'CC (sf)' and 'D (sf)' as part of this review, we are, accordingly, withdrawing our ratings on these six IO classes.

ECONOMIC OUTLOOKWhen determining a U. S. RMBS collateral pool's relative credit quality, our loss expectations stem, to a certain extent, from our view of how the loans will behave under various economic conditions. S&P Global Ratings' baseline macroeconomic outlook assumptions for variables that we believe could affect residential mortgage performance are as follows:An overall unemployment rate of 4.8% in 2016;Real GDP growth of 2.0% for 2016;An inflation rate of 2.2% in 2016; andAn average 30-year fixed mortgage rate of about 3.7% in 2016.Our outlook for RMBS is stable. Although we view overall housing fundamentals positively, we believe RMBS fundamentals still hinge on additional factors, such as the ultimate fate of modified loans, the propensity of servicers to advance on delinquent loans, and liquidation timelines.

Under our baseline economic assumptions, we expect RMBS collateral quality to improve. However, if the U. S. economy were to become stressed in line with S&P Global Ratings' downside forecast, we believe that U. S. RMBS credit quality would weaken. Our downside scenario reflects the following key assumptions:Total unemployment will tick up to 4.9% for 2016;Downward pressure will cause GDP growth to fall to 1.8% in 2016;Home price momentum will slow as potential buyers are not able to purchase property; andWhile the 30-year fixed mortgage rate remains a low 3.7% in 2016, limited access to credit and pressure on home prices will largely prevent consumers from capitalizing on these rates.