S&P: Various Rating Actions Taken On 519 Classes From 21 Post-2008 RMBS Transactions

S&P Global Ratings today completed its review of 519 classes from 21 U. S. residential mortgage-backed securities (RMBS) issued between 2012 and 2015. All of these transactions are backed by prime jumbo or seasoned collateral. The review yielded 41 upgrades, nine downgrades, and 469 affirmations. The raised ratings, as well as one of the affirmed ratings, were removed from CreditWatch with positive implications, and the nine lowered ratings were removed from CreditWatch negative, where we placed them on March 28, 2018 (see list).

All of the ratings within this review were placed under criteria observation (UCO) on Feb. 22, 2018, following the publication of "Methodology And Assumptions For Rating U. S. RMBS Issued 2009 And Later," published Feb. 22, 2018. As a result of today's actions, all UCO placements on the reviewed classes have been removed.

In addition, today's rating actions resolve 51 of the 422 CreditWatch placements made on March 28, 2018 (see "422 Ratings From 63 U. S. RMBS Transactions Issued In 2009 Or Later Placed On CreditWatch," published March 28, 2018), based on the application of our new RMBS criteria.

For each mortgage pool, based on our updated criteria, we performed credit analysis using updated loan-level information from which we determined foreclosure frequency, loss severity and loss coverage amounts commensurate for each rating level, after which we applied our cash flow stresses. We applied adjustments at the loan and pool level when warranted.

For New Residential Mortgage Loan Trust 2014-2 and 2014-3, we maintained a 100% loss severity assumption for outstanding loans that were determined to have a grade D regulatory compliance exception at transaction origination. For loans missing updated FICOs at deal origination, we assumed the average FICO of the remaining loans. We assumed 25% of the New Residential Mortgage Loan Trust transactions contained loans to borrowers who were self-employed, for which there is a 1.10 foreclosure frequency adjustment, and that 50% of the mortgage pools contain loans with multiple borrowers, for which there is a 0.75 foreclosure frequency adjustment. The remaining transactions in this review reflected the same foreclosure frequency adjustments for any outstanding loans identified with such characteristics at deal origination.

In addition, for all transactions we applied the same mortgage operational assessment and representation and warranty loss coverage adjustments that were applied at deal origination. We also applied a 1.05 loss coverage adjustment to the New Residential Mortgage Loan Trust transactions due to performance and seasoning of loan modifications in the mortgage pools of both transactions.

We lowered our ratings on nine classes from New Residential Mortgage Loan Trust 2014-3 and removed them from CreditWatch negative. This transaction is backed by seasoned loan collateral. The downgrades were primarily driven by higher foreclosure frequency adjustment factors for loans with lower FICOs (at a given combined loan-to-value ratio [CLTV]), the change in the CLTV used to determine foreclosure frequency for seasoned loans, and an increased level of delinquencies.

The upgrades primarily reflect deleveraging as the respective transactions season and the better treatment of higher-quality collateral resulting from our recalibration of criteria relating to credit factors, such as loan purpose and loan type, as well as new factors, such as the multiborrower credit.

The affirmations reflect our opinion that our projected credit support on these classes is sufficient to cover our projected losses for those rating scenarios.

Analytical ConsiderationsWe incorporate various considerations into our decisions to raise, lower, or affirm ratings when reviewing the indicative ratings suggested by our projected cash flows. These considerations are based on transaction-specific performance or structural characteristics (or both) and their potential effects on certain classes. Some of these considerations include: Collateral performance/delinquency trends;Priority of principal payments;Priority of loss allocation; Tail risk; Expected short duration; and Available subordination, credit enhancement floors, and/or excess spread (where available).

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