Fitch Ratings has taken various rating actions on 57 total classes and related exchangeable notes from 15 GSE Credit Risk Transfer (CRT) transactions issued between 2013 and 2015 and one private label CRT transaction issued in 2018.
Fitch has placed six classes on Rating Watch Negative.
Rating Action Summary:
one class Paid-In-Full;
18 classes Downgraded, of which six classes were placed on Rating Watch Negative;
29 classes Affirmed;
nine classes Rating Watch Maintained.
Five classes previously had a Positive or Stable Rating Outlook that is now revised to Negative.
RATING ACTIONS
ENTITY/DEBT RATING PRIOR
Structured Agency Credit Risk Debt Notes, Series 2014-DN2
M-3 3137G0AY5
LT Bsf Downgrade BBBsf
M-3F 3137G0BD0
LT Bsf Downgrade BBBsf
M-3I 3137G0BE8
LT Bsf Downgrade BBBsf
MA 3137G0BG3
LT Bsf Downgrade BBBsf
1M-2 30711XAT1
LT BBsf Downgrade A-sf
2M-2 30711XAV6
LT AAsf Affirmed AAsf
Structured Agency Credit Risk (STACR) Debt Notes, Series 2014-DN3
M-3 3137G0BK4
LT A-sf Rating Watch Maintained A-sf
M-3F 3137G0BQ1
LT A-sf Rating Watch Maintained A-sf
M-3I 3137G0BR9
LT A-sf Rating Watch Maintained A-sf
MA 3137G0BS7
LT A-sf Rating Watch Maintained A-sf
Structured Agency Credit Risk (STACR) Debt Notes, Series 2015-HQ2
M-12 3137G0FN4
LT AAAsf Affirmed AAAsf
M-2 3137G0FF1
LT AAAsf Affirmed AAAsf
M-2F 3137G0FG9
LT AAAsf Affirmed AAAsf
M-2I 3137G0FH7
LT AAAsf Affirmed AAAsf
M-3 3137G0FJ3
LT AAAsf Affirmed AAAsf
M-3F 3137G0FK0
LT AAAsf Affirmed AAAsf
M-3I 3137G0FL8
LT AAAsf Affirmed AAAsf
MA 3137G0FP9
LT AAAsf Affirmed AAAsf
Connecticut Avenue Securities Series 2014-C02
1M-2 30711XAF1
LT BBsf Downgrade A-sf
2M-2 30711XAH7
LT AA+sf Rating Watch Maintained AA+sf
M-1 693458AC5
LT PIFsf Paid In Full BBBsf
M-2 693458AD3
LT CCCsf Downgrade Bsf
M-2A 693458AH4
LT BBB-sf Affirmed BBB-sf
M-2B 693458AJ0
LT CCCsf Downgrade BBsf
M-2C 693458AK7
LT CCCsf Downgrade Bsf
Fannie Mae Connecticut Avenue Securities Series 2014-C01
M-2 30711XAD6
LT BBBsf Downgrade A+sf
1M-2 30711XBB9
LT Bsf Downgrade BBB-sf
2M-2 30711XBD5
LT A+sf Affirmed A+sf
Structured Agency Credit Risk (STACR) Debt Notes, Series 2014-HQ1
M-3 3137G0BW8
LT AA+sf Affirmed AA+sf
M-3F 3137G0CB3
LT AA+sf Affirmed AA+sf
M-3I 3137G0CC1
LT AA+sf Affirmed AA+sf
MA 3137G0CD9
LT AA+sf Affirmed AA+sf
Structured Agency Credit Risk (STACR) Debt Notes, Series 2014-HQ2
M-12 3137G0CR8
LT AAAsf Affirmed AAAsf
M-2 3137G0CG2
LT AAAsf Affirmed AAAsf
M-2F 3137G0CL1
LT AAAsf Affirmed AAAsf
M-2I 3137G0CM9
LT AAAsf Affirmed AAAsf
M-3 3137G0CH0
LT AAsf Affirmed AAsf
M-3F 3137G0CN7
LT AAsf Affirmed AAsf
M-3I 3137G0CP2
LT AAsf Affirmed AAsf
MA 3137G0CQ0
LT AAsf Affirmed AAsf
Structured Agency Credit Risk Debt Notes, Series 2013-DN2
M-2 3137G0AD1
LT Bsf Downgrade BBBsf
M-2F 3137G0AG4
LT Bsf Downgrade BBBsf
M-2I 3137G0AH2
LT Bsf Downgrade BBBsf
MA 3137G0AJ8
LT Bsf Downgrade BBBsf
Structured Agency Credit Risk Debt Notes, Series 2014-HQ3
M-3 3137G0DF3
LT AA+sf Affirmed AA+sf
M-3F 3137G0DL0
LT AA+sf Affirmed AA+sf
M-3I 3137G0DM8
LT AA+sf Affirmed AA+sf
MA 3137G0DN6
LT AA+sf Affirmed AA+sf
M-2 30711XAB0
LT BBBsf Downgrade AAsf
Structured Agency Credit Risk Debt Notes, Series 2014-DN4
M-3 3137G0CU1
LT Asf Rating Watch Maintained Asf
M-3F 3137G0CZ0
LT Asf Rating Watch Maintained Asf
M-3I 3137G0DA4
LT Asf Rating Watch Maintained Asf
MA 3137G0DB2
LT Asf Rating Watch Maintained Asf
1M-2 30711XAK0
LT Bsf Downgrade A-sf
2M-2 30711XAM6
LT AAsf Affirmed AAsf
Connecticut Avenue Securities Series 2015-C02
1M-2 30711XAX2
LT Bsf Downgrade BBB-sf
2M-2 30711XAZ7
LT AA-sf Affirmed AA-sf
VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
The transactions reviewed include eight
Borrowers on a forbearance plan are counted as delinquent until the missed payments are fully repaid or borrowers resume the monthly payment with the missed payments deferred as part of the resolution strategies announced by
Later STACR fixed severity transactions STACR 2014-DN3, STACR 2014-DN4, STACR 2014-HQ1, STACR 2014-HQ2, STACR 2014-HQ3, and STACR 2015-HQ2 contain provisions for loans on a forbearance plan as a result of natural disasters including the coronavirus. Affected borrowers have 18 months to bring a loan current before the loan is recognized as a credit event. Bonds in these transactions were all affirmed, and their Outlooks were unchanged.
Four CAS (CAS 2013-C01, CAS 2014-C01, CAS 2014-C02, and CAS 2014-C03) and two STACR (STACR 2013-DN2 and STACR 2014-DN2) fixed severity transactions in this review do not contain language addressing the treatment of loans in forbearance as a result of the coronavirus or any natural disasters or casualty events. As a result, loans to borrowers that are on a forbearance plan due to the coronavirus pandemic will be recognized as a credit event once they are 180 days delinquent and cause write downs to the bonds.
For CAS 2015-C01, CAS 2015-C02, and CAS 2015-C03, and
For the 10 aforementioned deals, the assumed risk of the bond incurring a loss was based on the assumption that the entire current delinquency pipeline (30 days delinquent or more) goes 180-days delinquent and become credit events. Default risk is deemed low, the ratings capped at 'BBBsf', if the current delinquency pipeline may increase by another 50bps-100bps before eroding current CE and causing bond writedowns. Default risk is deemed low but elevated and the ratings capped at 'BBsf', if the future delinquency cushion is between 1bps-50bps before eroding CE and causing bond writedowns. For deals that would require the delinquency pipeline to cure by 1bps-100bps to prevent bond losses, the ratings are capped at 'Bsf'. Default is a real possibility and the ratings capped at 'CCCsf' for those deals requiring the current delinquency pipeline to cure by over 100bps. Tranches are placed on Negative Watch to reflect elevated sensitivity to delinquency rates.
RATING SENSITIVITIES
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 to occur. Given the current economic environment, Fitch applied adjustments to its Economic Risk Factor (ERF) variable in its loss model as well as minimum delinquency assumptions. These adjustments are the main rating drivers in the context of this review.
Factors that could, individually or collectively, lead to a negative rating action/downgrade:
This defined negative rating sensitivity analysis demonstrates how the ratings would react to a worsening economic environment above what Fitch is currently assuming. Assuming a higher ERF value above the current floor would result in additional downgrades at the Non-Investment Grade ratings as well as potential downgrades to 'BBBsf'-rated classes if the floor was raised to 2.5 and potential downgrades at 'Asf'-rated classes if the floor was raised to 3.0. Further, a higher percentage of forbearance would lead to more downgrades at 'AAAsf'- and 'AAsf'-rated classes due to a higher risk of temporary interest shortfalls.
Factors that could, individually or collectively, lead to a positive rating action/upgrade:
This defined positive rating sensitivity analysis demonstrates how the ratings would react to a more benign economic environment than what is currently assumed. If the ERF floor was lowered to 1.5, the 'BBsf' classes currently impacted would likely be unaffected and if the floor was lowered to 1.0, the 'Bsf' floors would likely be unaffected as well. A decline in the percentage of borrowers with principal forbearance would result in less negative pressure among 'AAAsf'- and 'AAsf'-rated classes as the chance of temporary disruptions would be reduced.
This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modeling process uses the modification of these variables to reflect asset performance in up- and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance.
Additionally, because of the counterparty dependence on
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
No third-party due diligence was provided or reviewed in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Additional information is available on www.fitchratings.com
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