DBRS Morningstar Takes Rating Actions on 20 U.S. RMBS Transactions

DBRS, Inc. (DBRS Morningstar) reviewed 214 classes from 20 U.S. residential mortgage-backed security (RMBS) transactions. Of the 214 classes reviewed, DBRS Morningstar confirmed 193 ratings, upgraded 18 ratings, downgraded two ratings and discontinued two ratings. Of the downgrades and discontinuances, DBRS Morningstar downgraded its rating on Asset Backed Securities Corporation Home Equity Loan Trust, Series WMC 2005-HE5’s, Asset Backed Pass-Through Certificates, Series WMC 2005-HE5, Class M3 and then subsequently discontinued it.

The rating confirmations reflect asset performance and credit-support levels that are consistent with the current ratings. The rating upgrades reflect positive performance trends and increases in credit support sufficient to withstand stresses at their new rating levels. The rating downgrades reflect the unlikely recovery of accumulated interest shortfalls because of a weak interest shortfall recoupment mechanism in the transaction. The discontinuations reflect a full repayment of principal to bondholders.

DBRS Morningstar’s rating actions are based on the following analytical considerations:

-- Key performance measures as reflected in month-over-month changes in delinquency (including forbearance) percentages, credit enhancement (CE) increases since deal inception, and CE levels relative to 30-day+ delinquencies.

-- Offset of mortgage-relief initiatives via direct-to-consumer economic aid, mortgage payment assistance, and foreclosure suspension directives.

-- Elevated economic concerns and more conservative home-price assumptions.

As a result of the Coronavirus Disease (COVID-19) pandemic, DBRS Morningstar expects increased delinquencies, loans on forbearance plans, and a potential near-term decline in the values of the mortgaged properties. Such deteriorations may adversely affect borrowers’ ability to make monthly payments, refinance their loans, or sell properties in an amount sufficient to repay the outstanding balance of their loans.

In connection with the economic stress assumed under its moderate scenario (see the “Global Macroeconomic Scenarios: March 2021 Update,” published on March 17, 2021), DBRS Morningstar applies more severe market value decline (MVD) assumptions across all rating categories than what it previously used. Such MVD assumptions are derived through a fundamental home price approach based on the forecast unemployment rates and GDP growth outlined in the aforementioned moderate scenario.

The pools backing the reviewed RMBS transactions consist of Prime, Alt-A, Option-Adjustable-Rate-Mortgage, Scratch and Dent, Second-Lien, Subprime, and Reperforming collateral.

The ratings assigned to the securities listed below differ from the ratings implied by the quantitative model. DBRS Morningstar considers this difference to be a material deviation; however, in this case, the ratings on the subject securities may either reflect additional seasoning being warranted to substantiate a further upgrade or certain structural features that are not fully captured in the quantitative model output. Generally for RMBS transactions, the reporting of recent forbearance-related delinquencies (as opposed to nonforbearance-related delinquencies) in remittance reports has not been consistent and standardized. DBRS Morningstar believes that recent increases in delinquencies mostly reflect forbearances being requested and granted as a result of the coronavirus pandemic. Additionally, DBRS Morningstar believes that forbearance-related delinquencies, especially during the coronavirus pandemic, should have a lower probability of default than nonforbearance-related delinquencies. Because of the lack of standardized reporting, DBRS Morningstar may not be able to appropriately identify delinquencies as a result of forbearance in its loss analysis; therefore, for certain transactions, DBRS Morningstar may have projected significantly higher expected losses using its quantitative model. After reviewing transaction-level performance trends and other analytical considerations outlined in this press release, however, DBRS Morningstar may assign ratings that differ from those implied by the quantitative model, thus resulting in a material deviation.

-- Asset Backed Securities Corporation Home Equity Loan Trust, Series 2005-HE2, Asset-Backed Pass-Through Certificates, Series 2005-HE2, Class M3
-- Asset Backed Securities Corporation Home Equity Loan Trust, Series 2005-HE2, Asset-Backed Pass-Through Certificates, Series 2005-HE2, Class M4
-- Asset Backed Securities Corporation Home Equity Loan Trust, Series WMC 2005-HE5, Asset-Backed Pass-Through Certificates, Series WMC 2005-HE5, Class M4
-- Asset Backed Securities Corporation Home Equity Loan Trust, Series NC 2005-HE8, Asset-Backed Pass-Through Certificates, Series NC 2005-HE8, Class M2
-- Asset Backed Securities Corporation Home Equity Loan Trust, Series NC 2005-HE8, Asset-Backed Pass-Through Certificates, Series NC 2005-HE8, Class M3
-- Asset Backed Securities Corporation Home Equity Loan Trust, Series NC 2005-HE8, Asset-Backed Pass-Through Certificates, Series NC 2005-HE8, Class M4
-- Argent Securities Inc. Series 2004-W11, Asset-Backed Pass-Through Certificates, Series 2004-W11, Class M-2
-- Argent Securities Inc. Series 2004-W11, Asset-Backed Pass-Through Certificates, Series 2004-W11, Class M-3
-- Argent Securities Inc. Series 2004-W11, Asset-Backed Pass-Through Certificates, Series 2004-W11, Class M-4
-- Argent Securities Inc. Series 2004-W11, Asset-Backed Pass-Through Certificates, Series 2004-W11, Class M-5
-- Citigroup Mortgage Loan Trust, Inc., Series 2005-WF1, Asset-Backed Pass-Through Certificates, Series 2005-WF1, Class M-1
-- Credit Suisse First Boston Mortgage Securities Corp. Home Equity Asset Trust 2005-4, Home Equity Pass-Through Certificates, Series 2005-4, Class M-5
-- Credit Suisse First Boston Mortgage Securities Corp. Home Equity Asset Trust 2005-4, Home Equity Pass-Through Certificates, Series 2005-4, Class M-6
-- Credit Suisse First Boston Mortgage Securities Corp. Home Equity Asset Trust 2005-5, Home Equity Pass-Through Certificates, Series 2005-5, Class M-3
-- Credit Suisse First Boston Mortgage Securities Corp. Home Equity Asset Trust 2005-5, Home Equity Pass-Through Certificates, Series 2005-5, Class M-4
-- Credit Suisse First Boston Mortgage Securities Corp. Home Equity Asset Trust 2005-6, Home Equity Pass-Through Certificates, Series 2005-6, Class M-3
-- Credit Suisse First Boston Mortgage Securities Corp. Home Equity Asset Trust 2005-6, Home Equity Pass-Through Certificates, Series 2005-6, Class M-4
-- Credit Suisse First Boston Mortgage Securities Corp. Home Equity Asset Trust 2005-7, Home Equity Pass-Through Certificates, Series 2005-7, Class M-1
-- Credit Suisse First Boston Mortgage Securities Corp. Home Equity Asset Trust 2005-7, Home Equity Pass-Through Certificates, Series 2005-7, Class M-2
-- Credit Suisse First Boston Mortgage Acceptance Corp. Home Equity Asset Trust 2005-9, Home Equity Pass-Through Certificates, Series 2005-9, Class M-1
-- Credit Suisse First Boston Mortgage Securities Corp. Home Equity Asset Trust 2006-3, Home Equity Pass-Through Certificates, Series 2006-3, Class M-1
-- Long Beach Mortgage Loan Trust 2005-WL1, Asset-Backed Certificates, Series 2005-WL1, Class I/II-M4
-- Long Beach Mortgage Loan Trust 2005-WL1, Asset-Backed Certificates, Series 2005-WL1, Class III-M1
-- Long Beach Mortgage Loan Trust 2005-WL1, Asset-Backed Certificates, Series 2005-WL1, Class III-M2
-- Securitized Asset Backed Receivables LLC Trust 2006-FR1, Mortgage Pass-Through Certificates, Series 2006-FR1, Class A-2C
-- Securitized Asset Backed Receivables LLC Trust 2006-OP1, Mortgage Pass-Through Certificates, Series 2006-OP1, Class M-2
-- Securitized Asset Backed Receivables LLC Trust 2006-OP1, Mortgage Pass-Through Certificates, Series 2006-OP1, Class M-3
-- Securitized Asset Backed Receivables LLC Trust 2006-OP1, Mortgage Pass-Through Certificates, Series 2006-OP1, Class M-4
-- Securitized Asset Backed Receivables LLC Trust 2006-OP1, Mortgage Pass-Through Certificates, Series 2006-OP1, Class M-5
-- Securitized Asset Backed Receivables LLC Trust 2006-OP1, Mortgage Pass-Through Certificates, Series 2006-OP1, Class M-6
-- Securitized Asset Backed Receivables LLC Trust 2006-WM1, Mortgage Pass-Through Certificates, Series 2006-WM1, Class A-2C
-- Structured Asset Investment Loan Trust, Series 2004-11, Lehman Brothers Mortgage Pass-Through Certificates, Series 2004-11, Class M-1
-- Structured Asset Investment Loan Trust, Series 2004-11, Lehman Brothers Mortgage Pass-Through Certificates, Series 2004-11, Class M-2
-- Structured Asset Investment Loan Trust, Series 2004-11, Lehman Brothers Mortgage Pass-Through Certificates, Series 2004-11, Class M-3
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-WF1, Mortgage Pass-Through Certificates, Series 2007-WF1, Class A1
-- Structured Asset Securities Corporation Mortgage Loan Trust 2007-WF1, Mortgage Pass-Through Certificates, Series 2007-WF1, Class A6
-- Soundview Home Loan Trust 2005-3, Asset-Backed Certificates, Series 2005-3, Class M-3
-- Soundview Home Loan Trust 2005-3, Asset-Backed Certificates, Series 2005-3, Class M-4
-- Terwin Mortgage Trust 2004-7HE, Asset-Backed Certificates, Series 2004-7HE, Class S

The rating actions are the result of DBRS Morningstar’s application of its “U.S. RMBS Surveillance Methodology” published on February 21, 2020.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
The principal methodologies are the U.S. RMBS Surveillance Methodology (February 21, 2020) and RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (April 1, 2020), 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 participate in the rating process for this rating action. DBRS Morningstar had 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 these credits or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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