Fitch Reviews Recent Vintage U.S. Prime Jumbo RMBS Transactions

NEW YORK--()--Fitch Ratings has taken various rating actions on 791 classes from 47 U.S. Prime Jumbo RMBS transactions that were issued after 2010. Fitch affirmed the ratings for 93% of the classes reviewed and upgraded the ratings for 7%. A spreadsheet detailing Fitch's rating actions can be found at 'www.fitchratings.com' by performing a title search for 'U.S. Prime Jumbo Rating Actions for July 2, 2015'.

KEY RATING DRIVERS

The rating actions reflect the high credit quality and the superior performance of the collateral. The transactions reviewed have an average FICO score of 770 and an average mark-to-market CLTV of 54%. All of the transactions reviewed have less than 2% of the outstanding pool balance is delinquent, with the vast majority of transactions having no delinquent loans. None have incurred a realized loss to date.

The ratings of subordinate classes from several transactions were upgraded as a result of demonstrated strong performance and an improved relationship between credit enhancement and collateral loss expectations. On average, the current credit enhancement (CE) percentage for classes that were upgraded is over 2.0x higher than the original CE percentage. Due to strong home price growth to date and amortization, the average mark-to-market loan-to-value ratio of loans backing upgraded classes has declined to 48% from 66% at origination. All upgrades were a single rating category in magnitude and were only considered for transactions with at least two years of seasoning.

A number of classes originally rated 'AAsf' were upgraded to 'AAAsf' despite more senior classes remaining. These upgraded classes are projected to recover full principal in a collateral loss scenario more stressful than the 'AAAsf' scenario, across a number of cash flow timing sensitivities. In addition, they are generally expected to be paid in full before the senior classes that were originally rated 'AAAsf', due to a redirection of prepayment principal related to the fixed CE floor.

Several of the more seasoned transactions have relatively low remaining loans counts as a result of prepayments. However, all of the transactions reviewed have additional structural support in the form of fixed credit enhancement floors that mitigate tail risk. As a result, Fitch did not apply rating caps tied to small loans counts in this review. Upgrade caps associated with long remaining bond life were not applied to all classes in this review, due to the high collateral quality, strong performance, and structural strength of the transactions.

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.

Prime Jumbo RAR

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868182

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 Structured Finance Rating Criteria (pub. 31 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

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. 17 Nov 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=810788

U.S. RMBS Master Rating Criteria (pub. 12 Jun 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866607

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=987374

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=987374

Endorsement Policy

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

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Contacts

Fitch Ratings
Surveillance Analyst
Rachel Noonan
Director
+1-212-908-0224
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
Rachel Noonan
Director
+1-212-908-0224
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