Fitch Takes Various Actions on 2 Terwin Mortgage Trusts

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken various rating actions on the following classes of Terwin RMBS Trust issues:

Series 2005-5SL

--Class A affirmed at 'AAA';

--Class M-1a affirmed at 'AA';

--Class M-1b affirmed at 'AA';

--Class M-2 affirmed at 'A';

--Class M-3 affirmed at 'A-';

--Class B-1 affirmed at 'BBB+';

--Class B-2 affirmed at 'BBB';

--Class B-3 affirmed at 'BBB-';

--Class B-4 affirmed at 'BB+';

--Class B-5 downgraded to 'CCC' from 'BB', assigned 'DR2' and removed from Rating Watch Negative.

Series 2005-7SL

--Class A affirmed at 'AAA';

--Class M-1 affirmed at 'AA';

--Class M-2 affirmed at 'AA';

--Class M-3 affirmed at 'A+';

--Class B-1 affirmed at 'A';

--Class B-2 affirmed at 'A-';

--Class B-3 affirmed at 'BBB+';

--Class B-4 affirmed at 'BBB';

--Class B-5 affirmed at 'BBB-';

--Class B-6, rated 'BB+', placed on Rating Watch Negative;

--Class B-7PI downgraded to 'B' from 'BB'.

The mortgage loans consist of fixed-rate subprime mortgage loans secured entirely by second-lien mortgages on residential properties. The mortgage loans have various originators, which include Ameriquest Mortgage Company and Impac Funding Corporation. Chase Home Finance, LLC (rated 'RPS1' by Fitch) is the master servicer and Specialized Loan Servicing, LLC (rated 'RPS3' by Fitch) is the servicer for all of the mortgage loans.

The affirmations affect approximately $417.54 million in outstanding certificates. The downgrades of class B-5 of series 2005-5SL and class B-7PI of series 2005-7SL affect approximately $23.89 million of the outstanding certificates. Class B-6 of series 2005-7SL is placed on Rating Watch Negative, affecting approximately $5.85 million of the outstanding certificates.

The negative actions on the classes of the above transactions are due to a decline in the overcollateralization (OC) amount. The OC deterioration is a result of losses associated with the mortgage pools as well as a reduction in the dollar amount of excess spread (XS) due to much faster-than-expected prepayments and rising interest rates. Based on the performance to date, it is expected that the OC of these transactions will not reach their target amounts. The low OC balances increase the credit risk of the subordinate bonds, as indicated by the downgrades and Rating Watch Negative status.

The OC of series 2005-5SL currently equals 0.45% of the original collateral balance, as compared to a target level of 4% of the original collateral balance. Monthly losses have exceeded XS in recent months causing the OC to decline significantly from $6.17 million to $2.95 million. The six-month average loss net of XS is approximately $340,000, which would result in the depletion of the OC within the next eight months. The current OC of $2.95 million equates to 1.18% of the current collateral balance. The target OC of $26 million equates to 10.42% of the current collateral balance. The cumulative loss is $12.56 million or 1.93% of the original collateral balance. The transaction is seasoned 19 months and has a pool factor (i.e., current mortgage loans outstanding as a percentage of the initial pool) of 38%.

The OC of series 2005-7SL currently equals 1.28% of the original collateral balance, as compared to a target level of 4% of the original collateral balance. Monthly losses have exceeded XS in the last three months causing the OC to decline from $7.42 million to $5.74 million. The six-month average loss net of XS is approximately $434,000, which would result in the depletion of the OC within the next 13 months. The current OC of $5.74 million equates to 2.77% of the current collateral balance. The target OC of $18 million equates to 8.7% of the current collateral balance. The cumulative loss is $9.09 million or 2.02% of the original collateral balance. The transaction is seasoned 17 months and has a pool factor of 46%.

Fitch will continue to closely monitor the relationship between XS and monthly losses in all transactions. Further information regarding current delinquency, loss and credit enhancement statistics is available on the Fitch Ratings web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.