OREANDA-NEWS. S&P Global Ratings today completed its review of 121 classes from 12 U. S. residential mortgage-backed securities (RMBS) transactions issued between 2002 and 2007. The review yielded 15 downgrades, 98 affirmations, two withdrawals and six discontinuances. The transactions in this review are backed by a mix of fixed - and adjustable-rate Alternative-A mortgage loans, which are secured primarily by first liens on one - to four-family residential properties.

With respect to insured obligations, 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.

The reviewed transactions have three classes that were insured by a rated insurance provider when the deal was originated, but S&P Global Ratings has since withdrawn its rating on the insurance provider of those classes.

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.

DOWNGRADESThe 15 downgrades include eight ratings that were lowered three or more notches. We lowered our ratings on five classes to speculative grade ('BB+' or lower) from investment grade ('BBB-' or higher). Another four of the lowered ratings remained at an investment-grade level, while the remaining six 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, andTail risk. The downgrades on seven classes from five transactions listed below reflect the increase in our projected losses due to higher reported delinquencies during the most recent performance periods when compared to those reported during the previous review dates:We lowered our rating on Credit Suisse First Boston Mortgage Securities Corp. 2002-26 class IV-A-1 to 'BBB - (sf)' from 'A+ (sf)', as the total delinquencies increased to 53.67% at July 2016 from 13.79% at October 2015. We also lowered our rating on class IV-P, a principal-only (PO) strip class from the same transaction. PO strip classes receive principal primarily from discount loans within the related transaction. The credit risk of this type of class, in our view, is typically commensurate with the credit risk of the lowest-rated senior class in the transaction structure, which, in this case, is class IV-A-1 ('BBB - (sf)');We lowered our rating on Alternative Loan Trust 2003-20CB class 1-A-1 to 'BB+ (sf)' from 'BBB+ (sf)', as the total delinquencies increased to 13.12% at July 2016 from 9.40% at April 2015;We lowered our rating on PPT Asset-Backed Certificates Series 2004-1 class A to 'BBB - (sf)' from 'A (sf)', as the total delinquencies increased to 13.98% at August 2016 from 11.87% at September 2014;We lowered our rating on Adjustable Rate Mortgage Trust 2005-10 classes 6-A-1 and 6-A-2 to 'B (sf)' from 'BB (sf)', as the total delinquencies increased to 22.52% at July 2016 from 14.80% at September 2015; andWe lowered our rating on CSMC Mortgage Backed Trust 2007-5 class 9-A-2 to 'CCC (sf)' from 'BB - (sf)', as the total delinquencies increased to 13.79% at July 2016 from 0.65% at September 2015. Tail RiskCredit Suisse First Boston Mortgage Securities Corp. 2002-26 and Banc of America Funding 2007-3 Trust are backed by a small remaining pool of mortgage loans. We believe that pools with less than 100 loans remaining create an increased risk of credit instability, because a liquidation and subsequent loss on one loan, or a small number of loans, at the tail end of a transaction's life may have a disproportionate impact on a given RMBS tranche's remaining credit support. We refer to this as "tail risk."

We addressed the tail risk on the classes in this review by conducting a loan-level analysis that assesses this risk, as set forth in our tail risk criteria. We lowered our ratings on Credit Suisse First Boston Mortgage Securities Corp. 2002-26 class IV-B-1 to 'B - (sf)' from 'B+ (sf)' and on Banc of America Funding 2007-3 Trust class 3-A-3 to 'B - (sf)' from 'BB+ (sf)' to reflect the application of our tail risk criteria.

AFFIRMATIONSThe affirmations of ratings in the 'AAA' through 'B' rating categories reflect our opinion that our projected credit support on these classes remains 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; and/orHistorical interest shortfalls. In addition, some of the transactions have failed their delinquency triggers, resulting in reduced--or a complete stop of--unscheduled principal payments to their subordinate classes. However, these transactions allow for unscheduled principal payments to resume to the subordinate classes if the delinquency triggers begin passing again. This would result in an erosion of the credit support available for the more senior classes. Therefore, we affirmed our ratings on certain classes in these transactions even though these classes may have passed at higher rating scenarios.

The ratings affirmed at 'CCC (sf)' or 'CC (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 "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012, the 'CCC (sf)' affirmations reflect our view that these classes are still vulnerable to defaulting, and the 'CC (sf)' affirmations reflect our view that these classes remain virtually certain to default.

WITHDRAWALSWe withdrew our ratings on the interest-only Bear Stearns Alt-A Trust 2003-6 classes I-X-A-1 and I-X-A-2 because they are not entitled to any future payments as per the transaction documents.

DISCONTINUANCESWe discontinued our ratings on Banc of America Alternative Loan Trust 2003-2 classes B3, B4, and B5 and on Alternative Loan Trust 2003-13T1 classes A9, B3 and B4, as these transactions were redeemed during recent remittance periods.

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.