Fitch Takes Rating Action on 31 Classes from 2 U.S. RMBS Transactions
A spreadsheet detailing Fitch's rating actions can be found at 'www.fitchratings.com' by performing a title search for 'U.S. RMBS Rating Actions for Jan. 13, 2016' or by clicking on the link.
KEY RATING DRIVERS
The two 2015 transactions reviewed were Towd Point Mortgage Trust 2015-1 (re-performing loans) and Nomura Resecuritization Trust 2015-1R (re-REMIC). The affirmations on these two transactions reflect performance to date in line with expectations and sufficient amounts of credit enhancement (CE) to withstand stressed loss expectations on the underlying assets.
The 12 classes for which the Positive Rating Watch was maintained were originally placed on watch in July 2015 in connection with the pending $8.5 billion Countrywide/Bank of America settlement. To date, the settlement payments have not been made to the associated trusts, but are expected within the next two months. The final approval date of the settlement was Oct. 13, 2015, and Countrywide/Bank of America is required to make payments within 120 days of the final approval date.
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. As default becomes more imminent, bonds currently rated 'CCCsf' and 'CCsf' will migrate toward '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.
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