NEW YORK–(BUSINESS WIRE)–
Fitch Ratings has affirmed 32 classes from six Government Sponsored Enterprise (GSE) risk-sharing transactions issued in 2014:
–Four classes from two Fannie Mae Connecticut Avenue Securities (CAS)transactions;
–28 classes from four Freddie Mac Structured Agency Credit Risk (STACR) transactions.
A spreadsheet detailing the actions can be found on Fitch’s website by performing a title search for ‘U.S RMBS Risk Share Rating Actions for April 8, 2015′ or by using the link.
KEY RATING DRIVERS
The notes are general unsecured obligations of Fannie Mae or Freddie Mac (both rated ‘AAA’; Outlook Stable). Payments on the notes are subject to the credit and principal payment risk of reference pools of certain residential mortgage loans held in various guaranteed MBS.
The reference pools have performed well to date, with no pool reporting more than 14 basis points (bps) of serious (60+ days) delinquency as of the most recent remittance report. The credit composition of the reference pools has changed little since issuance in 2014.
Property values in the reference pools have benefitted from home price appreciation. Weighted average combined loan-to-values have improved between 5% to 10% for the reference pools depending on the time since origination.
Credit enhancement (CE) as a percentage of the remaining pool balance has increased modestly since issuance. CE for rated M-1 notes has generally increased by 10bps since issuance for the CAS transactions while the STACR M-1 notes has seen slightly higher increases depending on deal age.
Fitch’s mortgage loss projections have not changed materially since issuance. In the base-case scenario, Fitch expects the reference pools to incur on average 33 bps in loss.
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 outcomes. 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.
Fitch currently considers national home prices to be at or near sustainability and does not expect either positive or negative movements in prices in the near future. 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.
Additionally, because of the counterparty dependence on Fannie Mae and Freddie Mac, Fitch’s rating on the notes could be affected by the Issuer Default Rating (IDR) of the GSEs if the IDR was to fall below the credit rating implied by the relationship of CE to expected reference mortgage pool loss.
Additional information is available at ‘www.fitchratings.com‘.
Applicable Criteria and Related Research:
–’U.S. RMBS Surveillance and Re-REMIC Criteria’ (June 24, 2014);
–’Global Structured Finance Rating Criteria’ (March 31, 2015);
–’U.S. RMBS Loan Loss Model Criteria’ (Nov. 17, 2014);
–’U.S. RMBS Cash Flow Analysis Criteria’ (April 6, 2015);
–’Criteria for Interest Rate Stresses in Structured Finance Transactions’ (Dec. 19, 2014);
–’Criteria for Rating Caps and Limitations in Global Structured Finance Transactions’ (May 28, 2014);
–’Counterparty Criteria for Structured Finance and Covered Bonds’ (May 14, 2014);
–’Structured Finance Recovery Estimates for Distressed Securities’ (Nov. 18, 2011).
Applicable Criteria and Related Research: U.S RMBS Risk Share Rating Actions for April 8, 2015
- Security Upgrades & Downgrades
- Fitch Ratings
- Freddie Mac
- Fannie Mae
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