DBRS Morningstar Takes Rating Actions on 26 U.S. RMBS Transactions

DBRS, Inc. (DBRS Morningstar) reviewed 327 classes from 26 legacy U.S. residential mortgage-backed security (RMBS) transactions issued prior to the Great Recession. Of the 327 classes reviewed, DBRS Morningstar confirmed all classes.

Due to the potential economic hardship caused by Coronavirus Disease (COVID-19), DBRS Morningstar anticipates that delinquencies may arise in the coming months for many RMBS asset classes, some meaningfully. In the legacy sector, borrowers who recently defaulted and/or modified, or those who are currently “underwater,” may be most at risk for future defaults. However, these same borrowers have also weathered the last downturn and have generally accumulated some equity in their homes. In addition, compared with those in the prime jumbo sector, these borrowers are more likely to benefit from the direct-to-consumer economic support offered by the various government relief initiatives.

DBRS Morningstar will continue to monitor transactions across U.S. RMBS asset classes with respect to their exposure to coronavirus and will take necessary rating actions if performance deteriorates beyond expectation.

The rating actions are a result of DBRS Morningstar’s application of the U.S. RMBS Surveillance Methodology published in February 2020.

The pools backing these RMBS transactions consist of Alt-A, second-lien, and subprime collateral.

The ratings assigned to the securities below differ from the ratings implied by the quantitative model. DBRS Morningstar considers this difference to be a material deviation, but in this case, the ratings of the subject securities reflect either additional seasoning being warranted to substantiate a further upgrade or actual deal or tranche performance not being fully reflected in the projected cash flows/model output.

-- Aegis Asset Backed Securities Trust 2005-2, Mortgage-Backed Notes, Series 2005-2, Class M3
-- Accredited Mortgage Loan Trust 2006-1, Asset-Backed Notes, Series 2006-1, Class A-4
-- Accredited Mortgage Loan Trust 2006-1, Asset-Backed Notes, Series 2006-1, Class M-1
-- ACE Securities Corp. Home Equity Loan Trust, Series 2004-HE4, Asset-Backed Pass-Through Certificates, Series 2004-HE4, Class M-1
-- ACE Securities Corp. Home Equity Loan Trust, Series 2005-RM1, Asset-Backed Pass-Through Certificates, Series 2005-RM1, Class M-3
-- ACE Securities Corp. Home Equity Loan Trust, Series 2005-RM1, Asset-Backed Pass-Through Certificates, Series 2005-RM1, Class M-4
-- Citigroup Mortgage Loan Trust Inc., Series 2005-WF2, Asset-Backed Pass-Through Certificates, Series 2005-WF2, Class MV-3
-- Citigroup Mortgage Loan Trust Inc., Series 2005-WF2, Asset-Backed Pass-Through Certificates, Series 2005-WF2, Class MV-4
-- Citigroup Mortgage Loan Trust Inc., Series 2005-WF2, Asset-Backed Pass-Through Certificates, Series 2005-WF2, Class MV-5
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2006-FM1, Asset-Backed Certificates, Series 2006-FM1, Class I-A
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2006-FM1, Asset-Backed Certificates, Series 2006-FM1, Class II-A-3
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2006-FM1, Asset-Backed Certificates, Series 2006-FM1, Class II-A-4
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2006-HE2, Home Equity Loan Trust Asset-Backed Certificates, Series 2006-HE2, Class A-4
-- Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2006-HE2, Home Equity Loan Trust Asset-Backed Certificates, Series 2006-HE2, Class M-1
-- Structured Asset Securities Corporation Mortgage Loan Trust 2005-OPT1, Mortgage Pass-Through Certificates, Series 2005-OPT1, Class A2
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-BC1, Mortgage Pass-Through Certificates, Series 2007-BC1, Class A1
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-BC1, Mortgage Pass-Through Certificates, Series 2007-BC1, Class A4
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-BC1, Mortgage Pass-Through Certificates, Series 2007-BC1, Class A5
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-BC1, Mortgage Pass-Through Certificates, Series 2007-BC1, Class A6
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-BC4, Mortgage Pass-Through Certificates, Series 2007-BC4, Class A1
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-BC4, Mortgage Pass-Through Certificates, Series 2007-BC4, Class A2
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-BC4, Mortgage Pass-Through Certificates, Series 2007-BC4, Class A4
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-BC4, Mortgage Pass-Through Certificates, Series 2007-BC4, Class M1
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-WF2, Mortgage Pass-Through Certificates, Series 2007-WF2, Class A1
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-WF2, Mortgage Pass-Through Certificates, Series 2007-WF2, Class A3
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-WF2, Mortgage Pass-Through Certificates, Series 2007-WF2, Class A4
-- SG Mortgage Securities Trust 2006-OPT2, Asset-Backed Certificates, Series 2006-OPT2, Class A-1
-- SG Mortgage Securities Trust 2006-OPT2, Asset-Backed Certificates, Series 2006-OPT2, Class A-3B
-- Sequoia Mortgage Trust 2005-3, Mortgage Pass-Through Certificates, Series 2005-3, Class X-A
-- Sequoia Mortgage Trust 2005-3, Mortgage Pass-Through Certificates, Series 2005-3, Class X-B

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
The principal methodologies are the U.S. RMBS Surveillance Methodology and RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The rated entity or its related entities did not participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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