NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken rating action on 189 U.S. RMBS classes from 112 Alt-A and Subprime transactions:
--130 classes maintained on Rating Watch Negative;
--44 classes maintained on Rating Watch Positive;
--6 classes downgraded to 'Dsf';
--9 classes marked Paid-in-Full (PIF).
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 June 6, 2016'.
KEY RATING DRIVERS
All classes in this review exhibited either positive or negative rating pressure during their last review in December 2015. At that time, the classes were placed on Rating Watch while Fitch's U.S. RMBS Loan Loss Model was undergoing its annual review. With the model review recently completed, Fitch maintains Rating Watch on the majority of classes and expects to resolve the ratings of the affected classes in the coming months.
Six classes that were on Rating Watch Negative have incurred principal writedowns since the last review and have been downgraded to 'Dsf'. Additionally, nine classes have received full principal with no losses and have been marked PIF.
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.
U.S. RMBS Rating Actions for June 6, 2016
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
U.S. RMBS Master Rating Criteria (pub. 21 Jan 2016)
U.S. RMBS Surveillance and Re-REMIC Criteria (pub. 21 Apr 2016)
Dodd-Frank Rating Information Disclosure Form