OREANDA-NEWS. Fitch Ratings has taken various rating actions on 8,294 classes from 826 U.S. Prime Jumbo RMBS transactions collateralized with mortgage loans originated prior to 2009. Fitch affirmed the ratings for 91% of the classes reviewed, upgraded 2%, downgraded 5% and placed 2% on Rating Watch Negative. A spreadsheet detailing Fitch's rating actions can be found at 'www.fitchratings.com' by performing a title search for 'U.S. Legacy Prime Jumbo Rating Actions for Sept. 22, 2015'.

KEY RATING DRIVERS

The rating actions reflect the generally stable to positive collateral performance of the sector. The average 60+ delinquency rate for the sector has declined to 9.3% from 9.9% one year prior, and a peak of 12.5% in 2012. The performance has been driven by steady home price growth, declining unemployment, and positive selection among remaining borrowers.

The upgrades reflect an improvement in the relationship of credit enhancement to expected pool loss. Classes upgraded to 'AAsf' and 'AAAsf' are expected to be paid in full within the next 24 months.

Nearly all of the downgrades of investment-grade classes were 1-category downgrades driven by collateral pools with low remaining loan counts. Per its published criteria for legacy RMBS transactions that lack structural mitigants, Fitch implements rating caps wherein minimum loan count thresholds must be met at each rating category. Transactions issued post-crisis generally include structural mitigants expected to prevent negative rating pressure as the remaining loan count declines. Downgrades of classes rated 'CCCsf' or lower reflect a greater imminence of default, or a recently observed default.

Two percent of the classes reviewed were placed on Rating Watch Negative. These classes exhibited negative rating pressure under Fitch's current collateral loss assumptions, but may not warrant a rating change if loss assumptions were modestly lower. Fitch's U.S. RMBS Loan Loss Model is currently undergoing its annual review, and there are preliminary indications that potential model enhancements may result in modestly lower expected losses. The ratings of classes placed on Rating Watch Negative will be resolved following the completion of the annual model review.

Approximately 2% of the classes reviewed had their ratings withdrawn immediately following the rating action. The majority were rated 'Dsf' with no remaining balance and no projected recoveries. A small number of classes were withdrawn due to loan counts of 10 or fewer.

RATING SENSITIVITIES

Fitch's analysis includes rating stress scenarios from 'CCCsf' to 'AAAsf'. The 'CCCsf' scenario is intended to be the most-likely base-case scenario. Rating scenarios above 'CCCsf' are increasingly more stressful and less likely to occur. Although many variables are adjusted in the stress scenarios, the primary driver of the loss scenarios is the home price forecast assumption. In the 'Bsf' scenario, Fitch assumes home prices decline 10% below their long-term sustainable level. The home price decline assumption is increased by 5% at each higher rating category up to a 35% decline in the 'AAAsf' scenario.

In addition to increasing mortgage pool losses at each rating category to reflect increasingly stressful economic scenarios, Fitch analyzes various loss-timing, prepayment, loan modification, servicer advancing, and interest rate scenarios as part of the cash flow analysis. Each class is analyzed with 43 different combinations of loss, prepayment and interest rate projections.

Classes currently rated below 'Bsf' are at-risk to default at some point in the future. As default becomes more imminent, bonds currently rated 'CCCsf' and 'CCsf' will migrate towards 'Csf' and eventually 'Dsf'.

The ratings of bonds currently rated 'Bsf' or higher will be sensitive to future mortgage borrower behavior, which historically has been strongly correlated with home price movements. Despite recent positive trends, Fitch currently expects home prices to decline in some regions before reaching a sustainable level. While Fitch's ratings reflect this home price view, the ratings of outstanding classes may be subject to revision to the extent actual home price and mortgage performance trends differ from those currently projected by Fitch.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.