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NEW YORK (Standard & Poor's) Jan. 22, 2008--Standard & Poor's Ratings Services
today lowered its ratings on 85 classes from 56 U.S. net interest margin
securities (NIMS) residential mortgage-backed securities (RMBS) transactions
backed mostly by subprime U.S. mortgage collateral issued in 2004.
Concurrently, we removed our ratings on five of these classes from CreditWatch
with negative implications (see list).
The 85 downgraded classes from the 56 U.S. NIMS RMBS transactions had an
original total principal balance of approximately $1.31 billion, which
represents 8.22% of the roughly $15.94 billion in U.S. NIMS RMBS that Standard
& Poor's rated in 2004. The 85 downgraded classes have an outstanding
principal balance of approximately $304.20 million, or roughly 23.21% of their
original principal amount. The total balance of Standard & Poor's rated U.S.
RMBS securities backed by all types of residential mortgage loans issued in
the non-agency market in 2004 was more than $712 billion.
During 2004, Standard & Poor's rated a total of 278 U.S. NIMS RMBS
transactions, 204 of which have paid off. As of the December 2007 distribution
period, the remaining 74 NIMS transactions were still outstanding. Eighteen of
the 74 outstanding NIMS transactions are not included in this release, for the
following reasons: six of these deals contain just one class each, rated 'AAA'
due to a bond insurance policy; one deal has a confidential rating; and for
the remaining 11, we will need to run additional cash flow stresses after the
January 2008 distribution period, when the overcollateralization for all of
the underlying transactions should have stepped down.
Approximately 60.52% of the U.S. NIMS RMBS classes downgraded today, as a
percentage of the $1.31 billion original principal balance of the downgraded
NIMS securities, were rated 'BBB' or lower before the downgrades.
Standard & Poor's is making more active use of the 'CC' rating category in the
surveillance of these 2004 NIMS transactions, in response to the deterioration
in the U.S. mortgage markets and the consequent decline in the
creditworthiness of rated mortgage-backed securities. The expanded use of this
rating category is intended to provide greater credit differentiation at the
low end of the rating scale. An issue rated 'CC' is, in our view, currently
highly vulnerable to nonpayment. RMBS securities rated 'CC' evidence,
according to Standard & Poor's applicable rating criteria and methodology,
insufficient capacity to repay and no apparent prospect for restoration of
such capacity to pay. Securities rated 'CCC' are, in our view, currently
vulnerable to nonpayment and are dependent on favorable business, financial,
and economic conditions to meet financial obligations. In the event of adverse
business, financial, and economic conditions, the obligor is not likely to
have the capacity to meet such obligations. We anticipate the continued use of
'CC' ratings on RMBS transactions backed by a variety of residential mortgage
collateral, as we expect the collateral performance to continue to
deteriorate.
The resulting ratings associated with the downgraded classes, as a percentage
of the total $1.31 billion original principal balance of the downgraded
securities, are as follows:
Rating (%)
CCC 1.79
CC 98.21
These 56 NIMS transactions are, on average, 40 months seasoned. Although cash
flow projections run at the time we assigned the original ratings to these
transactions projected that the deals should have already paid off in full,
due to the performance of the underlying transactions and
higher-than-projected losses and prepayment speeds, these NIMS transactions
did not receive the cash flows originally projected. As a result, just over
23% of the original principal balances of these NIMS transactions remains
outstanding, on average, whereas approximately 19% of the original pool
balances of the underlying transactions is outstanding.
We evaluated a number of performance measures for each U.S. NIMS RMBS
transaction. These performance measures included the amount and type of cash
(excess interest, prepayment penalty fees, and cap payments) received from the
underlying transaction(s); the rate at which the NIMS is repaying relative to
original projections; whether or not the NIMS has incurred an actual interest
shortfall; and the outstanding principal balance relative to the amount of
cash being received from its underlying transaction(s). We also considered
whether or not the overcollateralization of the underlying deal is at or below
its target.
We lowered our rating on a NIMS class to 'CC' if the class had incurred an
interest shortfall, the NIMS deal had not received any cash flows from the
underlying deal, and the overcollateralization of the underlying deal was
below its target or below its floor, or if the difference between the current
overcollateralization and the floor was less than the outstanding class
balance.
We lowered our rating on a NIMS class to 'CCC' if the class had not yet
incurred an interest shortfall and the outstanding class balance was small
relative to the cash flow.
RATING AND CREDITWATCH ACTIONS
Aegis Net Interest Margin Trust 2004-5
Series Class To From
2004-5 Notes CC BBB
Ameriquest NIM 2004-RN5
Series Class To From
2004-RN5 B CC BBB-
Asset Backed Funding Corp. NIM 2004-OPT4 Ltd.
Series Class To From
2004-OPT4 N2 CC BBB-
Asset Backed Funding Corp. NIM 2004-OPT4 Ltd.
Series Class To From
2004-OPT4 N3 CC BB
Asset Backed Funding Corp. NIM 2004-OPT5 Ltd.
Series Class To From
2004-OPT5 N4 CC BBB-
Asset Backed Funding Corp. NIM Trust 2004-AHL1
Series Class To From
2004-AHL1 Notes CC BBB-
Asset Securitization Corp. Net Interest Margin Trust 2004-AP1
Series Class To From
2004-AP1 Notes CCC BBB
Asset-Backed Funding Corp. NIM 2004-HE1 Ltd.
Series Class To From
2004-HE1 N3 CC BB
Bear Stearns Structured Products Inc. NIM Trust 2004-12
Series Class To From
2004-12 Notes CC BBB+
Bear Stearns Structured Products Inc. NIM Trust 2004-14
Series Class To From
2004-14 A CC A
Cayman ABSC NIMs 2004-HE7
Series Class To From
2004-HE7 A2 CC BBB-
Cayman ABSC NIMs 2004-HE9
Series Class To From
2004-HE9 A2 CC BB+
CFLAT Cayman NIM 2004-AQ1 Ltd.
Series Class To From
2004-AQ1 C CC BBB-
2004-AQ1 D CC BB
CMO Holdings II Ltd.
Series Class To From
2004-1 A-1 CC A-
2004-1 A-2 CC BBB-
CMO Holdings II Ltd.
Series Class To From
2004-1 A-3 CC BB
CMO Holdings II Ltd.
Series Class To From
2004-11 A-2 CC A
2004-11 A-3 CC BBB
CMO Holdings II Ltd.
Series Class To From
2004-HE3 A-2 CCC BB
CMO Holdings II Ltd.
Series Class To From
2004-KS-10-A A-2 CC BB
CMO Holdings II Ltd.
Series Class To From
2004-KS10-B A-1 CC BBB
2004-KS10-B A-2 CC BB
Countrywide Home Loan Trust 2004-BC1N
Series Class To From
2004-BC1N Notes CC BBB-
CWABS 2004-BC4N Ltd.
Series Class To From
2004-BC4N A-3 CC BBB-
Equifirst CI-2
Series Class To From
2004-2 N-3 CC BBB-
2004-2 N-4 CC BB+
Finance America CI-2
Series Class To From
2004-2 N3 CC BBB-
First Franklin NIM Trust 2004-FF10
Series Class To From
2004-FF10 N3 CC BBB-
First Franklin NIM Trust 2004-FF10
Series Class To From
2004-FF10 N4 CC BB+
Homestar NIM Trust 2004-3
Series Class To From
2004-3 A-2 CC BBB-
2004-3 A-3 CC BB
Homestar NIM Trust 2004-4
Series Class To From
2004-4 A-2 CC BBB
2004-4 A-3 CC BBB-
2004-4 A-4 CC BB
Impac NIM Series 2004-1N Ltd.
Series Class To From
2004-1N A-1 CC A-
2004-1N A-2 CC BBB-
Long Beach Asset Holdings Corp. CI 2004-6
Series Class To From
2004-6 N-2 CC BBB-
2004-6 N-3 CC BB
MASTR CI-6
Series Class To From
2004-OPT2 N3 CC BBB-
2004-OPT2 N4 CC BB+
Meritage CI-1
Series Class To From
2004-1 N4 CC BB+
2004-1 N5 CC BB
Merrill Lynch Mortgage Investors NIM Trust Series 2004-WMC1
Series Class To From
2004-WMC1 N1 Notes CC BBB+
MLMI Cayman NIM 2004-HE2 Ltd.
Series Class To From
2004-HE2 N2 CC BB
MLMI Cayman NIM 2004-OPT1 Ltd.
Series Class To From
2004-OPT1 N2 CCC BBB-
MLMI Cayman NIM 2004-WMC3 Ltd.
Series Class To From
2004-WMC3 N1 CC BBB+
MLMI Cayman NIM 2004-WMC3 Ltd.
Series Class To From
2004-WMC3 N2 CC BB+
MLMI Cayman NIM 2004-WMC4 Ltd.
Series Class To From
2004-WMC4 N2 CC BBB
MLMI Cayman NIM 2004-WMC4 Ltd.
Series Class To From
2004-WMC4 N3 CC BBB-
Park Place NIM 2004-MHQN1
Series Class To From
2004-MHQN1 F CCC BB+
People's Choice Net Interest Margin Trust 2004-1
Series Class To From
2004-1 Notes CC BBB+
People's Choice NIM Trust 2004-2
Series Class To From
2004-2 B CC BBB-
RASC NIM 2004-NT11 Trust
Series Class To From
2004-NT11 Notes CC BBB-
SASCO ARC Co.
Series Class To From
2003-11 B CC B/Watch Neg
SASCO ARC Co.
Series Class To From
2004-1 A CC BBB+
2004-1 B CC BBB-
SASCO ARC Co.
Series Class To From
2004-10 B CC BB+
SASCO ARC Co.
Series Class To From
2004-2 A CC BB/Watch Neg
2004-2 B CC B/Watch Neg
SASCO ARC Co.
Series Class To From
2004-3 A CC A-
2004-3 B CC BBB-
2004-3 C CC BB
SASCO ARC Co.
Series Class To From
2004-5 B CC BBB
SASCO ARC Co.
Series Class To From
2004-6 B CC BBB-
SASCO ARC Co.
Series Class To From
2004-6XS B CCC BB+
SASCO ARC Co.
Series Class To From
2004-7 B CC BBB-
SASCO ARC Co.
Series Class To From
2004-8 B CC BBB-
SASCO ARC Co.
Series Class To From
2004-A B CC BBB-
2004-A C CC BB
SASCO ARC Co.
Series Class To From
2004-BNC1 B CC BBB-
SASCO ARC Co.
Series Class To From
2004-BNC2 B CC BB
SB Finance CI-4
Series Class To From
2004-OPT1 N10 CC BBB-
SB Finance CI-4
Series Class To From
2004-OPT1 N11 CC BB+
SB Finance CI-4
Series Class To From
2004-OPT1 N9 CC BBB
Sharps SP I LLC Net Interest Margin Trust 2004-HE1N
Series Class To From
2004-HE1N Notes CC BB-/Watch Neg
Sharps SP I LLC Net Interest Margin Trust 2004-HS1N
Series Class To From
2004-HS1N Notes CC BB-/Watch Neg
Terwin Cayman NIM 2004-11HE Ltd.
Series Class To From
2004-11HE N1 CC A
Terwin Cayman NIM 2004-11HE Ltd.
Series Class To From
2004-11HE N2 CC BBB-
Terwin Cayman NIM 2004-11HE Ltd.
Series Class To From
2004-11HE N3 CC BB
Terwin Cayman NIM 2004-21 Ltd.
Series Class To From
2004-21 1N1 CC BBB-
Terwin Cayman NIM 2004-21 Ltd.
Series Class To From
2004-21 1N2 CC BB
Terwin Cayman NIM 2004-21 Ltd.
Series Class To From
2004-21 2N1 CC BBB-
Terwin Cayman NIM 2004-21 Ltd.
Series Class To From
2004-21 2N2 CC BB
Terwin NIMs Trust TMTS 2004-13ALT
Series Class To From
2004-13ALT N CC BBB-
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