Fitch Affirms Ratings on RPMLT 2014-1 After Revised Distributions

NEW YORK--()--Fitch Ratings has affirmed the ratings on all classes within RPLMT 2014-1, a U.S. RMBS transaction backed by a pool of seasoned re-performing mortgage loans. In the February remittance, principal was re-allocated among classes to correct for errors in prior distributions. A further correction is expected over the next one or more distributions, as there was not enough principal distribution cash available to make the full adjustment in the February 2016 remittance. The February 2016 redistribution of principal did not affect the ratings of any classes, nor are subsequent redistributions expected to have an impact.

Fitch affirms the following:

--Class A-1 at 'BBBsf'; Outlook Stable;

--Class A-1A at 'BBBsf'; Outlook Stable;

--Class A-1B at 'BBBsf'; Outlook Stable;

--Class A-1C at 'BBBsf'; Outlook Stable;

--Class A-1D at 'BBBsf'; Outlook Stable;

--Class A-1E at 'BBBsf'; Outlook Stable;

--Class A-1F at 'BBBsf'; Outlook Stable;

--Class A-1G at 'BBBsf'; Outlook Stable;

--Class A-1H at 'BBBsf'; Outlook Stable;

--Class B-1 at 'BB-sf'; Outlook Stable;

--Class B-1A at 'BB-sf'; Outlook Stable;

--Class B-1B at 'BB-sf'; Outlook Stable;

--Class B-1C at 'BB-sf'; Outlook Stable;

--Class B-1D at 'BB-sf'; Outlook Stable;

--Class B-1E at 'BB-sf'; Outlook Stable;

--Class B-1F at 'BB-sf'; Outlook Stable;

--Class B-1G at 'BB-sf'; Outlook Stable;

--Class B-1H at 'BB-sf'; Outlook Stable;

--Class B-1I at 'BB-sf'; Outlook Stable;

--Class B-1J at 'BB-sf'; Outlook Stable;

--Class B-1K at 'BB-sf'; Outlook Stable;

--Class B-1L at 'BB-sf'; Outlook Stable;

--Class B-1M at 'BB-sf'; Outlook Stable;

--Class B-1N at 'BB-sf'; Outlook Stable;

--Class B-1O at 'BB-sf'; Outlook Stable;

--Class B-2 at 'Bsf'; Outlook Stable;

--Class B-2A at 'Bsf'; Outlook Stable;

--Class B-2B at 'Bsf'; Outlook Stable;

--Class B-2C at 'Bsf'; Outlook Stable;

--Class B-2D at 'Bsf'; Outlook Stable;

--Class B-2E at 'Bsf'; Outlook Stable;

--Class B-2F at 'Bsf'; Outlook Stable;

--Class B-2G at 'Bsf'; Outlook Stable;

--Class B-2H at 'Bsf'; Outlook Stable;

--Class B-2I at 'Bsf'; Outlook Stable;

--Class B-2J at 'Bsf'; Outlook Stable;

--Class B-2K at 'Bsf'; Outlook Stable;

--Class B-2L at 'Bsf'; Outlook Stable;

--Class B-2M at 'Bsf'; Outlook Stable;

--Class B-2N at 'Bsf'; Outlook Stable.

KEY RATING DRIVERS

The affirmations reflect a stable to improving relationship of credit enhancement (CE) to expected loss since the latest ratings were assigned in April 2015. The CE of the A-1, B-1 and B-2 classes has increased between roughly 5% - 6% over that period, while the percentage of the pool that is serious (60+ days) delinquent has increased roughly 2%.

The rating analysis took into account recent developments concerning the transaction's operations. Between December 2014 and November 2015, scheduled principal collections were incorrectly distributed to bond holders as unscheduled principal, instead of being properly identified as scheduled and unscheduled principal and distributed accordingly. Per the transaction waterfall, senior classes are to receive 100% of unscheduled principal for the first five years of the transaction, and scheduled principal is to be distributed pro rata among all classes. Since all principal collections were being treated as unscheduled, the senior classes received a larger share of the scheduled principal collected, while the subordinate classes received little to no principal. The transaction's securities administrator is Wells Fargo Bank, N.A., the credit risk manager is The Palisades Group, LLC, and the servicer is Rushmore Loan Management Services LLC.

Starting in December 2015, scheduled and unscheduled principal collections began being distributed accurately, and subordinate classes began receiving their pro rata share of scheduled principal. In the February 2016 distribution, principal distributions were allocated disproportionately to more accurately reflect the actual mix of scheduled and unscheduled principal since transaction closing. There was not enough principal cash collections in February to fully adjust the principal balances, and the remaining adjustments are expected to be made in one or more subsequent distributions. No adjustments were made to prior interest distributions.

The principal allocation issue and resolution did not result in material changes to the credit profile of the rated bonds. The re-allocation of principal in the February 2016 distribution resulted in month-over-month changes in CE of the A-1, B-1 and B-2 classes of -52bps, -9bps and +27bps, respectively. The updated CE is sufficient to support the current ratings.

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.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 28 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes (pub. 09 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863276

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for U.S. Residential and Small Balance Commercial Mortgage Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864368

U.S. RMBS Cash Flow Analysis Criteria (pub. 06 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863973

U.S. RMBS Loan Loss Model Criteria (pub. 03 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868923

U.S. RMBS Master Rating Criteria (pub. 21 Jan 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=876378

U.S. RMBS Surveillance and Re-REMIC Criteria (pub. 01 Jun 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866259

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1000101

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1000101

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Surveillance Analyst
Matthew Shaw
Analyst
+1-212-908-0218
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Roelof Slump
Managing Director
+1-212-908-0705
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Surveillance Analyst
Matthew Shaw
Analyst
+1-212-908-0218
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Roelof Slump
Managing Director
+1-212-908-0705
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com