OREANDA-NEWS. S&P Global Ratings today completed its review of 72 classes from 29 U. S. residential mortgage-backed securities (RMBS) transactions issued between 2003 and 2008. The review, which follows the updates to our rating methodology for small balance commercial loan-backed transactions, yielded 28 upgrades, 14 downgrades, 22 affirmations, six withdrawals, and two discontinuances.

On March 2, 2016, we revised our rating surveillance methodology to assess the performance of small balance commercial loan-backed transactions (see "U. S. RMBS Surveillance Credit And Cash Flow Analysis For Pre-2009 Originations," published March 2, 2016). Under the revised methodology, small balance commercial transactions will be evaluated using assumptions similar to Alternative-A (Alt-A) transactions.

UPGRADESThe upgrades include 17 ratings that were raised three or more notches. Our projected credit support for the affected classes is sufficient to cover our projected losses for these rating levels. The upgrades reflect one or more of the following:Improved collateral performance/delinquency trends;Increased credit support relative to our projected losses;A change in payment allocation due to failing performance triggers; and/orInterest shortfall reimbursements. We raised our rating on class A-1 from Bayview Commercial Asset Trust 2007-2 to 'BBB (sf)' from 'D (sf)'. In addition we raised our ratings on classes A-3 and A-4 from Bayview Commercial Asset Trust 2008-1 to 'BB+ (sf)' and 'B (sf)', respectively, from 'D (sf)'. These classes were previously downgraded to 'D (sf)' due to outstanding interest shortfalls, which have since been reimbursed. In addition, each transaction contained an IO class that was allocated a significant amount of interest every month. These IO classes have since matured, and as a consequence, there is extra interest available on a monthly basis in these transactions to help prevent interest shortfalls to the upgraded classes in the future.

DOWNGRADESThe downgrades include 11 ratings that were lowered three or more notches. We lowered our ratings on seven classes to speculative grade ('BB+' or lower) from investment grade ('BBB-' or higher). Another five of the lowered ratings remained at an investment-grade level, while the remaining two downgraded classes already had speculative-grade ratings. The downgrades reflect our belief that our projected credit support for the affected classes will be insufficient to cover our projected losses for the related transactions at a higher rating. The downgrades reflect one or more of the following:Deteriorated credit performance trends; and/orA high amount of modified or reperforming loans. AFFIRMATIONSThe affirmations of ratings in the 'AAA' through 'B' rating categories reflect our opinion that our projected credit support on these classes remained relatively consistent with our prior projections and is sufficient to cover our projected losses for those rating scenarios.

For certain transactions, we considered specific performance characteristics that, in our view, could add volatility to our loss assumptions and, in turn, to the ratings suggested by our cash flow projections. When our model recommended an upgrade, we either limited the extent of our upgrade or affirmed our ratings on those classes to account for this uncertainty and promote ratings stability. In general, these classes have one or more of the following characteristics that limit any potential upgrade:Insufficient subordination, overcollateralization, or both;Delinquency trends;Historical interest shortfalls;Low priority in principal payments; and/orSignificant growth in observed loss severities. The ratings affirmed at 'CCC (sf)' reflect our belief that our projected credit support will remain insufficient to cover our 'B' expected case projected losses for these classes. Pursuant to our "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," published Oct. 1, 2012, the 'CCC (sf)' affirmations reflect our view that these classes are still vulnerable to defaulting.

WITHDRAWALSWe withdrew our ratings on class 4-A-1 from Impac CMB Trust Series 2004-10, class 2-A-1 from Impac CMB Trust Series 2005-2, and class 2-A-1 from Impac CMB Trust Series 2005-4 because the related pools have a small number of loans remaining. Once a pool has declined to a de minimis amount, we believe there is a high degree of credit instability that is incompatible with any rating level.

We withdrew our ratings on class IO from Bayview Commercial Asset Trust 2003-2, class IO from Bayview Commercial Asset Trust 2006-1, and class IO from Bayview Commercial Asset Trust 2006-2 according to our interest-only (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 - (sf)' or have been retired (see "Global Methodology For Rating Interest-Only Securities," April 15, 2010). The highest ratings on the referenced classes for each transaction have all been lowered to 'BBB - (sf)', 'BB - (sf)', and 'BBB - (sf)' for Bayview Commercial Asset Trust 2003-2, Bayview Commercial Asset Trust 2006-1, and Bayview Commercial Asset Trust 2006-2, respectively.

A criteria interpretation for the above-mentioned criteria was issued to clarify that when the criteria state "we will maintain the current ratings," it means that we will maintain active surveillance of these IO classes using the methodology applied before this criteria was released.

DISCONTINUANCESWe discontinued our ratings on two classes that were paid in full during recent remittance periods.

Analytical ConsiderationsWe incorporate various considerations into our decisions to raise, lower, or affirm ratings when reviewing the indicative ratings suggested by our projected cash flows. These considerations are based on transaction-specific performance or structural characteristics (or both) and their potential effects on certain classes.

With respect to insured obligations, where we maintain a rating on the bond insurer that is lower than what we would rate the class without bond insurance, or where the bond insurer is not rated, we relied solely on the underlying collateral's credit quality and the transaction structure to derive the rating on the class. As discussed in our criteria, "The Interaction Of Bond Insurance And Credit Ratings," published Aug. 24, 2009, the rating on a bond-insured obligation will be the higher of the rating on the bond insurer and the rating of the underlying obligation, without considering the potential credit enhancement from the bond insurance.

Further, the reviewed transactions have two classes that were insured by a rated insurance provider when the deal was originated, but S&P Global Ratings has since withdrawn the rating on the insurance provider of those 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;The inflation rate will be 2.2% in 2016; andThe 30-year fixed mortgage rate will average 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 causes GDP growth to fall to 1.8% in 2016;Home price momentum slows 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.