New York, July 05, 2022 — Moody’s Buyers Service (“Moody’s”) has downgraded the rankings of three bonds from Credit score Suisse First Boston Mortgage Securities Corp. Sequence 2004-7.
Please click on on this hyperlink https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL467507 for the Record of Affected Credit score Scores. This checklist is an integral a part of this Press Launch and identifies every affected issuer. This hyperlink additionally incorporates the related underlying collateral losses.
Full ranking actions are as follows:
Issuer: Credit score Suisse First Boston Mortgage Securities Corp. Sequence 2004-7
Cl. A-2, Downgraded to Aa2 (sf); beforehand on Oct 15, 2004 Assigned Aaa (sf)
Cl. M-1, Downgraded to A3 (sf); beforehand on Dec 20, 2018 Upgraded to A1 (sf)
Cl. M-2, Downgraded to Baa3 (sf); beforehand on Dec 20, 2018 Upgraded to Baa1 (sf)
RATINGS RATIONALE
As we speak’s ranking actions replicate the current efficiency in addition to Moody’s up to date loss expectations on the underlying swimming pools. The ranking downgrades are as a consequence of a deterioration in collateral efficiency and decline in credit score enhancement out there to the bonds. As we speak’s actions additionally replicate the correction of an error within the put up non-compulsory termination date margin utilized in our prior evaluation. The correction of the margin had a constructive credit score impression on the rankings, however this was offset by the deterioration in efficiency and the decline in out there credit score enhancement.
In mild of the present macroeconomic surroundings, we revised loss expectations based mostly on forecast uncertainties with regard to the COVID-19 pandemic. Particularly, we’ve got noticed a rise in delinquencies, fee forbearance, and fee deferrals because the begin of pandemic, which may end in increased realized losses. Our ranking actions additionally consider the buildup in credit score enhancement of the bonds, particularly in an surroundings of elevated prepayment charges, which has helped offset the impression of the rise in anticipated losses spurred by the pandemic.
We estimated the proportion of loans granted fee aid in a pool based mostly on a evaluation of mortgage stage cashflows. In our evaluation, we thought-about a mortgage to be enrolled in a fee aid program if (1) the mortgage was not liquidated however took a loss within the reporting interval (to account for loans with month-to-month deferrals that have been reported as present), or (2) the precise steadiness of the mortgage elevated within the reporting interval, or (3) the precise steadiness of the mortgage remained unchanged within the final and present reporting interval, excluding interest-only loans and pay forward loans. In circumstances the place mortgage stage information just isn’t out there, we assumed that the proportion of debtors enrolled in fee aid packages can be equal to ranges noticed in transactions of comparable asset high quality. Based mostly on our evaluation, the proportion of debtors which can be at present enrolled in fee aid plans diverse tremendously, ranging between roughly 2% and 11% amongst RMBS transactions issued earlier than 2009. In our evaluation, we assume these loans to expertise lifetime default charges which can be 50% increased than default charges on the performing loans.
As well as, for debtors unable to make up missed funds by a short-term compensation plan, servicers will typically defer the forborne quantity as a non-interest-bearing steadiness, due at maturity of the mortgage as a balloon fee. Our evaluation thought-about the impression of six months of scheduled principal funds on the loans enrolled in fee aid packages being handed to the belief as a loss. The magnitude of this loss will rely upon the proportion of the debtors within the pool topic to principal deferral and the variety of months of such deferral. The therapy of deferred principal as a loss is credit score destructive for junior bonds, which may incur write-downs on bonds when missed funds are deferred.
As we speak’s motion has thought-about how the coronavirus pandemic has reshaped US financial surroundings and the way in which its aftershocks will proceed to reverberate and affect the efficiency of residential mortgage loans. We count on the general public well being state of affairs to enhance as vaccinations in opposition to COVID-19 enhance and societies proceed to adapt to new protocols. Nonetheless, the exit from the pandemic will possible be bumpy and unpredictable and financial prospects will differ.
We regard the coronavirus outbreak as a social danger below our ESG framework, given the substantial implications for public well being and security.
Principal Methodologies
The principal methodology utilized in these rankings was “US RMBS Surveillance Methodology” revealed in July 2020 and out there at https://rankings.moodys.com/api/rmc-documents/67833. Alternatively, please see the Score Methodologies web page on https://rankings.moodys.com for a duplicate of this technique.
As well as, Moody’s publishes a weekly abstract of structured finance credit score rankings and methodologies, out there to all registered customers of our web site, www.moodys.com/SFQuickCheck.
Elements that might result in an improve or downgrade of the rankings:
Up
Ranges of credit score safety which can be increased than essential to guard traders in opposition to present expectations of loss may drive the rankings of the subordinate bonds up. Losses may decline from Moody’s authentic expectations on account of a decrease variety of obligor defaults or appreciation within the worth of the mortgaged property securing an obligor’s promise of fee. Transaction efficiency additionally relies upon tremendously on the US macro economic system and housing market.
Down
Ranges of credit score safety which can be inadequate to guard traders in opposition to present expectations of loss may drive the rankings down. Losses may rise above Moody’s expectations on account of a better variety of obligor defaults or deterioration within the worth of the mortgaged property securing an obligor’s promise of fee. Transaction efficiency additionally relies upon tremendously on the US macro economic system and housing market. Different causes for worse-than-expected efficiency embrace poor servicing, error on the a part of transaction events, insufficient transaction governance and fraud.
Lastly, efficiency of RMBS continues to stay extremely depending on servicer procedures. Any change ensuing from servicing transfers or different coverage or regulatory change can impression the efficiency of those transactions. As well as, enhancements in reporting codecs and information availability throughout offers and trustees could present higher perception into sure efficiency metrics similar to the extent of collateral modifications.
For extra data please see www.moodys.com.
REGULATORY DISCLOSURES
The Record of Affected Credit score Scores introduced listed here are all solicited credit score rankings. For extra data, please check with Moody’s Coverage for Designating and Assigning Unsolicited Credit score Scores out there on its web site https://rankings.moodys.com. Moreover, the Record of Affected Credit score Scores consists of extra disclosures that change with regard to a few of the rankings. Please click on on this hyperlink https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL467507 for the Record of Affected Credit score Scores. This checklist is an integral a part of this Press Launch and supplies, for every of the credit score rankings lined, Moody’s disclosures on the next gadgets:
Score Solicitation
Issuer Participation
Participation: Entry to Administration
Participation: Entry to Inside Paperwork
Endorsement
Lead Analyst
Releasing Workplace
For additional specification of Moody’s key ranking assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Score Symbols and Definitions could be discovered on https://rankings.moodys.com/rating-definitions.
The evaluation consists of an evaluation of collateral traits and efficiency to find out the anticipated collateral loss or a variety of anticipated collateral losses or money flows to the rated devices. As a second step, Moody’s estimates anticipated collateral losses or money flows utilizing a quantitative instrument that takes into consideration credit score enhancement, loss allocation and different structural options, to derive the anticipated loss for every rated instrument.
Moody’s quantitative evaluation entails an analysis of situations that stress components contributing to sensitivity of rankings and have in mind the chance of extreme collateral losses or impaired money flows. Moody’s weights the impression on the rated devices based mostly on its assumptions of the chance of the occasions in such situations occurring.
For rankings issued on a program, sequence, class/class of debt or safety this announcement supplies sure regulatory disclosures in relation to every ranking of a subsequently issued bond or observe of the identical sequence, class/class of debt, safety or pursuant to a program for which the rankings are derived completely from current rankings in accordance with Moody’s ranking practices. For rankings issued on a help supplier, this announcement supplies sure regulatory disclosures in relation to the credit standing motion on the help supplier and in relation to every explicit credit standing motion for securities that derive their credit score rankings from the help supplier’s credit standing. For provisional rankings, this announcement supplies sure regulatory disclosures in relation to the provisional ranking assigned, and in relation to a definitive ranking that could be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the project of the definitive ranking in a fashion that might have affected the ranking. For additional data please see the issuer/deal web page for the respective issuer on https://rankings.moodys.com.
For any affected securities or rated entities receiving direct credit score help from the first entity(ies) of this credit standing motion, and whose rankings could change on account of this credit standing motion, the related regulatory disclosures can be these of the guarantor entity. Exceptions to this strategy exist for the next disclosures, if relevant to jurisdiction: Ancillary Companies, Disclosure to rated entity, Disclosure from rated entity.
The rankings have been disclosed to the rated entity or its designated agent(s) and issued with no modification ensuing from that disclosure.
Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated ranking outlook or ranking evaluation.
Moody’s normal rules for assessing environmental, social and governance (ESG) dangers in our credit score evaluation could be discovered at https://rankings.moodys.com/paperwork/PBC_1288235.
At the least one ESG consideration was materials to the credit standing motion(s) introduced and described above.
Please see https://rankings.moodys.com for any updates on modifications to the lead ranking analyst and to the Moody’s authorized entity that has issued the ranking.
Please see the issuer/deal web page on https://rankings.moodys.com for extra regulatory disclosures for every credit standing.
Yang Yang
Asst Vice President – Analyst
Structured Finance Group
Moody’s Buyers Service, Inc.
250 Greenwich Avenue
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Consumer Service: 1 212 553 1653
Masako Oshima
Senior Vice President
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Consumer Service: 1 212 553 1653
Releasing Workplace:
Moody’s Buyers Service, Inc.
250 Greenwich Avenue
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Consumer Service: 1 212 553 1653
