New York City–(COMPANY WIRE)– Fitch Ratings has appointed the following scores and Rating Outlooks to
Fannie Maes 8th danger transfer transaction, Connecticut Opportunity
Securities, series 2015-C03:
–$254,975,000 class 1M-1 notes BBB-sf; Outlook Stable.
–$257,451,000 class 2M-1 notes BBB-sf; Outlook Steady.
The following classes will not be ranked by Fitch:
–$27,192,696,144 class 1A-H reference tranche;
–$13,420,442 class 1M-1H reference tranche;
–$644,149,000 class 1M-2 notes;
–$33,902,644 class 1M-2H reference tranche;
–$113,008,608 class 1B-H reference tranche;
–$19,221,011,441 class 2A-H reference tranche;
–$13,550,205 class 2M-1H reference tranche;
–$400,479,000 class 2M-2 notes;
–$21,078,432 class 2M-2H reference tranche;
–$160,593,307 class 2B-H reference tranche.
The BBB-sf score for the 1M-1 notes shows the 2.80 % subordination
offered by the 2.40 % class 1M-2 notes and the non-offered 0.40 % 1B-H
reference tranche. The BBB-sf rating for the 2M-1 notes shows the
2.90 % subordination offered by the 2.10 % class 2M-2 notes and the
non-offered 0.80 % 2B-H reference tranche. The notes are general senior
unsecured commitments of Fannie Mae (ranked AAA, Outlook Steady).
subject to the credit and primary payment danger of a swimming pool of specific.
property home mortgagemortgage held in different Fannie Mae-guaranteed MBS.
The reference swimming pool of mortgages will certainly be divided into two loan groups.
Group 1 will certainly include home loanmortgage with loan-to-values (LTVs) of.
less than or equal to 80 % while group 2 will certainly include mortgagehome loan.
with LTVs greater than 80 % and less than or equal to 97 %. Each loan.
group has its own loss intensity schedule and provided notes. There will certainly be.
no cross-collateralization. Aside from unique loss extent schedules,.
each groups structure will certainly be identicalequal.
Connecticut Opportunity Securities, series 2015-C03 (CAS 2015-C03) is Fannie.
Maes eighth risk transfer transaction issued as part of the Federal.
Real estate Finance Agencys Conservatorship Strategic Strategy for 2013 – 2017.
for each of the government sponsored business (GSEs) to show.
the viability of multiple kinds of danger transfer transactions including.
single household home loans.
The objective of the deal is to transfer credit risk from Fannie.
Mae to private investors with respect to a $48.33 billion swimming pool of.
home loanmortgage currently held in previously provided MBS guaranteed by.
Fannie Mae where principal payment of the notes are subject to the.
efficiency of a reference swimming pool of home loanmortgage. As loans end up being 180.
days overdue or other credit events occur, the exceptional principal.
balance of the financial obligation notes will certainly be minimized by a pre-defined, tiered loss.
extent portion related to those credit events.
While the deal structure simulates the behavior and credit danger.
of standard RMBS mezzanine and secondary securities, Fannie Mae.
will certainly be accountable for making regular monthly payments of interest and.
primary to financiers. Because of the counterparty reliance on Fannie.
Mae, Fitchs anticipated rating on the 1M-1 and 2M-1 notes will certainly be based upon.
the lower of: the quality of the mortgage loan reference pool and credit.
improvement available through subordination; and Fannie Maes Issuer.
Default Score. The 1M-1 and 2M-1 notes will certainly be released as uncapped.
LIBOR-based floaters and will certainly carry a 10-year legal final maturity.
KEY SCORE DRIVERS.
House Costs Closer to Sustainable: Nationally, house price growth has.
moderated while economic growth has continued at a stable rate, keeping.
rates near sustainable levels nationally, while some miscalculated.
local markets have actually seen decreases in the models sMVD values over.
the last quarter. In certain, economic improvements have actually been strong.
and surpassed cost development in Denver, L.a, Washington DC, Dallas,.
and Chicago, which rank among the largest contributing metropolitan.
analytical areas (MSAs) to these pools. As an outcome, the base.
sustainable loan-to-value (sLTV) decreased 1.4 % to 78.2 % and 92.5 % for.
group 1 and group 2, respectively, from the prior quarterly forecasts.
Slight FICO and CLTV Drift: Although the weighted average (WA) FICO.
score of 747 for Group 1 is the very same compared to CAS 2015-C02, the.
percentage of loans with FICOs less than 720 increased to 28.7 % from.
28 %. In addition, there are more loans with a combined loan-to-value.
(CLTV) ratio over 80 % at 7.3 % compared with 6.6 %. The subject swimming pool for.
Group 2 consists of more loans with FICOs less than 720 at 28.4 %.
compared to 27 % in the previous transaction.
Fixed Loss Intensity: Among the distinct structural functions of the.
deal is a set loss seriousness (LS) schedule tied to cumulative.
net credit events. If actual loan LS is above the set schedule, Fannie.
Mae absorbs the higher losses. Fitch sees the set LS positively, as.
it lowers the unpredictability that may occur due to future changes in.
Fannie Maes loss mitigation or loan modification policies. The fixed.
extent also offers investors higher protection versus natural.
catastrophe events where buildings are seriously damaged, as well as in.
cases of restricted or no option to insurance coverage.
10-Year Difficult Maturity: The 1M-1, 1M-2, 2M-1 and 2M-2 notes gain from.
a 10-year legal final maturity. As a result, any security losses on.
the reference pool that happen beyond year 10 are borne by Fannie Mae and.
do not affect the deal. Fitch made up the 10-year tough.
maturity window in its default analysis and used a decrease to its.
lifetime default expectations. The credit ranged from 8 % at the Asf.
score category to 12 % at the BBsf rating category.
Beneficial Payment Concern: The payment top priority of M-1 notes will.
resultlead to a much shorter life and more steady CE than mezzanine classes in.
private-label (PL) RMBS, supplying a relative credit benefit. Unlike.
PL mezzanine RMBS, which frequently do not receive a full pro-rata share of.
the swimming pools unscheduled principal payment until year 10, the M-1 notes.
can receive a complete pro-rata share of unscheduled primary immediately,.
as long as a minimum CE level is kept. Additionally, unlike PL.
mezzanine classes, which lose subordination gradually due to scheduled.
primary payments to more junior classes, the M-2 and B-H classes in.
each group will certainly not get any arranged or unscheduled appropriations.
until their M-1 classes are paid in full. The B-H classes will certainly not.
get any arranged or unscheduled primary allocations till the M-2.
classes are paid in complete.
Restricted Size/Scope of Third-Party Diligence: Only 608 loans of those.
qualified to be included in the reference pool were picked for a complete.
review (credit, commercial property valuation and compliance) by a third-party.
diligence carrier. Of the 608 loans, 530 belonged to this.
transactions reference swimming pool (310 in Group 1 and 220 in Group 2). The.
sample selection was restricted to a population of 7,010 loans that were.
formerly examined by Fannie Mae and satisfied the reference pools.
eligibility criteria. Moreover, the third-party due diligence scope.
was limited to reflect Fannie Maes post-close loan evaluation for.
compliance. Fitchs evaluation of Fannie Maes risk management and quality.
control (QC) process/infrastructure, which has been significantly.
improved over the previous numerous years, suggests a robust control.
environment that needs to minimize loan quality danger.
Solid Positioning of Interests: While the deal is developed to.
transfer credit threat to personal investors, Fitch believes that it.
benefitsgain from a solid positioning of interests. Fannie Mae will be.
maintaining credit danger in the deal by holding the A-H senior.
reference tranches, which have a loss defense of 3.75 % in Group 1 and.
4.25 % in Group 2, as well as the first loss B-H reference tranches,.
sized at 40 basis points (bps) and 80 bps, respectively. Fannie Mae is.
also maintaining a roughly 5 % vertical slice/interest in the M-1.
and M-2 tranches for Group 1 and 2, respectively.
Rep and Warranty Gaps: While the loan defect threat for 2015-C02 is.
significantly lower than for agency and non-agency home mortgage pools securitized.
prior to 2009, Fitch thinks the danger is greater for this transaction.
than for recently released United States PL RMBS. Notably, neither Fannie Mae nor.
an independent third party3rd party will certainly conduct loan file reviews for credit.
events, and Fannie Mae will certainly not perform any evaluations of loans from a.
seller once it submitsdeclares bankruptcy. Fitch incorporated this danger into.
its analysis by dealing with all historic repurchases as if they were.
defaulted loans that were not repurchased. As a result, the rating.
analysis includes a presumption that the loans will certainly experience problem.
rates constant with historical rates, and that those flaws will not.
Special Risk Leakage Slightly Mitigated: StartingBeginning with CAS 2015-C01, a.
turnaround of a credit event is now allowable if the borrower topic to.
a special danger occasion becomes present at the end of a forbearance.
period following the occasion. While bondholders would experience momentary.
principal writedowns and lower interest payments during this duration,.
Fitch views this function slightly more favorably relative to earlier.
CAS transactions, given that the decrease in credit defense for momentary.
borrower delinquencies developing from natural catastrophes that generally.
cure may be reversed.
Receivership Danger Considered: Under the Federal Housing Finance.
Regulatory Reform Act, the Federal Housing Finance Firm (FHFA) must.
place Fannie Mae into receivership if it identifies that Fannie Maes.
possessions are less than its obligations for more than 60 days following the.
deadline of its SEC filing, along with for other factors. As receiver,.
FHFA could repudiate any agreement got in into by Fannie Mae if it is.
figured out that the termination of such agreement would promote an.
organized administration of Fannie Maes affairs. Fitch thinks that the.
US government will remain to support Fannie Mae, which is reflected.
in its existing rating of Fannie Mae. However, if, at some point, Fitch.
views the support as being lowered and receivership likely, the scores.
of Fannie Mae could be downgraded and the M-1 notes scores influenced.
SCORE LEVEL OF SENSITIVITIES.
Fitchs analysis includes sensitivity analyses to show how.
the ratings would react to steeper market price declines (MVDs) than.
presumed at both the urban analytical location (MSA) and nationwide.
levels. The suggested rating sensitivities are just an indication of some.
of the possible outcomes and do not considerrule out other threat aspects that.
the deal may become exposed to or be thought about in the.
security of the deal.
This defined stress sensitivity analysis shows how the ratings.
would react to steeper MVDs at the national level. The analysis assumes.
MDVs of 10 %, 20 %, and 30 %, in addition to the model-projected 22 % at the.
BBB-sf level % for Group 1 and 20.9 % at the BBB-sf level for Group 2.
The analysis shows that there is some potential score migration.
with greater MVDs, compared to the design forecast.
Fitch likewise carried out specified rating level of sensitivities which identify the.
anxieties to MVDs that would lower a rating by one full category, to.
non-investment grade, and to CCCsf. For instance, added MVDs of.
11 %, 7 % and 28 % would potentially lower the Group 1 BBB-sf rated.
class down one rating category, to non-investment grade, and to CCCsf,.
respectively. An added MVDs of 12 %, 8 % and 33 % would potentially.
reduce the Group 2 BBB-sf rated class down one rating category, to.
non-investment grade, and to CCCsf, respectively.
DUE DILIGENCE USE.
Fitch was offered with due diligence information from Clayton Holdings.
LLC. The due diligence focused on credit and compliance reviews, desktop.
evaluation reviews and information integrity. Fitch considered this info.
in its analysis and the findings did not have an effectan influence on our analysis.
A RWamp; E appendix is not released for this deal as no possession level.
RWamp; E are consisted of in the offering files.
Extra information is offered at www.fitchratings.com.
Sources of Details:.
In addition to the info sources identified in Fitchs criteria.
noted below, Fitchs analysis integrated data tapes, due diligence.
results, deal structure and legal documents provided by Fannie Mae.
Counterparty Criteria for Structured Finance and Covered Bonds (club. 14.
Worldwide Rating Criteria for Single- and Multi-Name Credit-Linked Notes.
(club. 09 Mar 2015).
Worldwide Structured Finance Score Criteria (bar. 06 Jul 2015).
Rating Criteria for United States Residential and Small Balance Commercial.
Home mortgage Servicers (pub. 23 Apr 2015).
United States RMBS Cash CirculationCapital Analysis Requirements (club. 06 Apr 2015).
United States RMBS Loan Loss Model Criteria (pub. 17 Nov 2014).
US RMBS Master Rating Criteria (bar. 12 Jun 2015).
United States RMBS Monitoring and Re-REMIC Criteria (pub. 01 Jun 2015).
Dodd-Frank Rating Details Disclosure Form.
ALL FITCH CREDIT RATINGS UNDERGO CERTAIN CONSTRAINTS AND.
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING.
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USAGE OF SUCH RATINGS ARE.
OFFERED ON THE AGENCYS PUBLIC WEBSITE WWW.FITCHRATINGS.COM.
PUBLISHED SCORES, CRITERIA AND APPROACHES ARE AVAILABLE FROM THIS.
SITE WHATSOEVER TIMES. FITCHS CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS.
OF INTEREST, AFFILIATE FIREWALL PROGRAM, COMPLIANCE AND OTHER PERTINENT POLICIES.
AND TREATMENTS ARE ALSO READILY AVAILABLE FROM THE CODE OF CONDUCT AREA OF.
THIS SITE. FITCH MAY HAVE SUPPLIED ANOTHER PERMISSIBLE SERVICE TO THE.
RANKED ENTITY OR ITS RELATED THIRD PARTIES. INFORMATION OF THIS SERVICE FOR.
SCORES FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY.
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH.