NEW YORK--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: U.S. RMBS Manufactured Housing Rating Actions for Oct. 2, 2012
Fitch Ratings has revised loss expectations and taken various rating actions on 134 U.S. Manufacture Housing (MH) RMBS transactions. A detailed list of the rating actions is available at 'www.fitchratings.com' by performing a title search for 'U.S. RMBS Manufactured Housing Rating Actions for Oct. 2, 2012.' In addition, a summary of the mortgage pool and bond analysis can be found by performing a title search for 'RMBS Loss Metrics.'
Fitch's rating actions are as follows:
--408 affirmed classes;
--1 upgraded class;
--7 downgraded classes.
Collateral performance for the sector has generally remained stable over the last year. The performance stability can be attributed to consistent servicing practices, and the significant seasoning of the assets. More than 95% of the transactions reviewed were issued over 10 years ago.
As of this review, the average percent current decreased slightly to 94% from 94.14%, the average losses to date increased to 20.3% from 19.4%, and the average 60+ days delinquent decreased to 3.15% from 3.3%. As a result of the stable performance, Fitch's revised average base case probability of default, severity, and expected loss are very similar to last year and are: 22.49%, 80%, and 17.99% respectively.
Although Fitch relies on loan-level analysis for the majority of the agency's rated portfolio in the Prime, Alt-A and Subprime sectors, MH transactions are generally analyzed using pool-level collateral data. Fitch determined the probability of default (PD) for the MH transactions using a vintage average analysis based off of the pre-2002 subprime vintage probability of default assumptions that were derived using Fitch's new non-prime loss model and were adjusted for pool specific performance. Fitch determined the severity for each transaction based off of each issuers' 12 month average actual severity.
Once Fitch determined the base case assumptions, the stressed assumptions were determined using Fitch's new non-prime loss model PD and severity multiples. This in turn derived Fitch's expected losses in the 'BBsf-AAAsf' stresses.
The cash flow assumptions used in the 2012 MH analysis consisted of running a flat 10 year CDR curve, a flat CPR rate of 10% (10% CPR was based on the three month average CPR for all Fitch rated MH transactions), zero advancing on delinquent loans, and a haircut to the WAC in the 'Asf-AAAsf' rating stresses.
To determine each class's rating, a committee reviewed the cash flows for each class focusing on the projected recovery in the 'Bsf-AAAsf' rating stresses, actual interest shortfalls and projected interest shortfalls in the 'Bsf' and 'BBBsf' rating stresses, actual principal write-downs, and months to pay off/months to default in the base case. If cash flow analysis was not available, Fitch determined the rating for each class by comparing the bond credit enhancement to the projected pool loss in each rating stress.
The majority of the classes were affirmed at their current rating with a stable rating outlook due to sufficient credit enhancement to withstand losses in their current rating stress. One class was upgraded one rating category due to 100% recovery in the 'AAAsf' rating stress and less than three years to pay off. Of the seven classes that were downgraded, six were one-rating category downgrades and one was a two category downgrade. The two category downgrade was caused by a deterioration in credit enhancement while the one category downgrades were due to increased expected loss assumptions due to a methodology change.
The spreadsheet 'U.S. RMBS Manufactured Housing Rating Actions for Oct. 2, 2012' provides the contact information for the performance analyst.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'U.S. RMBS Surveillance Criteria' (Aug. 10, 2012);
--'U.S. RMBS Loan Loss Model Criteria' (Aug. 10, 2012);
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Structured Finance Recovery Estimates for Distressed Securities' (Nov. 18, 2011);
--'Counterparty Criteria for Structured Finance Transactions' (May 30, 2012);
--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (March 20, 2012);
--'Criteria for Rating Caps in Global Structured Finance Transactions' (Aug. 2, 2012).
Applicable Criteria and Related Research:
U.S. RMBS Surveillance Criteria
U.S. RMBS Loan Loss Model Criteria
Global Structured Finance Rating Criteria
Structured Finance Recovery Estimates for Distressed Securities
Counterparty Criteria for Structured Finance Transactions
Criteria for Interest Rate Stresses in Structured Finance Transactions
Criteria for Rating Caps in Global Structured Finance Transactions
Grant Bailey, +1-212-908-0544
One State Street Plaza
New York, NY 10004
Sandro Scenga, New York, +1-212-908-0278
Source: Fitch Ratings