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Fitch Takes Rating Actions on 18 Securities Sponsored by BV Legacy L.P., fka Bayview Financial, L.P.Apr 19, 2013 (Close-Up Media via COMTEX) -- Fitch Ratings has taken various rating actions on 18 securities sponsored by BV Legacy L.P., fka Bayview Financial, L.P. The securities include 12 Bayview Financial Asset Trust (BFAT) transactions, 4 Bayview Financial Asset Trust Re-Securitization transactions and 2 Bayview Financial Revolving Trust transactions. A detailed list of the rating actions is available at 'fitchratings.com' by performing a title search for 'U.S. RMBS Bayview Rating Actions for April 16.' In addition, a summary of the mortgage pool and bond analysis can be found by performing a title search for 'RMBS Loss Metrics'. Fitch's rating actions are as follows: --129 affirmed classes; --22 downgraded classes; --1 upgraded class. The 12 (BFAT) transactions were issued between 2003 and 2007 and are collateralized by fixed- and adjustable-rate senior liens on single-family, commercial, multifamily and mixed-use properties. The four Bayview Re-securitizations are secured by underlying classes of asset-backed securities. Each of the underlying securities are secured by an interest in an underlying pool of loans consisting of fixed- and adjustable-rate residential mortgage loans, small balance commercial, multi-family and mixed-use loans, installment contracts for the purchase of real property, and disaster assistance loans both unsecured and secured by second liens on commercial property and various types of non-real estate collateral. The two Bayview Revolving Trust transactions are securitized by a mix of small balance commercial micro transactions, two collateral pools of non-conforming residential loans, a collateral pool of Canadian small balance commercial loans, and several classes from Bayview Commercial Asset Trust 2008-2, 2008-3, and 2008-4 transactions. KEY RATING DRIVERS The collateral performance has generally remained stable since the last review. As of this review the average percent of current loans is 63 percent, losses to date are 10 percent and the 60+ delinquency is 32 percent. The weighted average probability of default (PD), loss severity (LS) and expected loss (XL) for the base, 'BBBsf', and 'AAAsf' rating stresses are: PD LS XL Base 58 percent 88 percent 52 percent 'BBBsf' 68 percent 95 percent 65 percent 'AAAsf 78 percent 100 percent 79 percent The investment grade classes affirmed at their current rating have an average credit enhancement of 50 percent and average time to pay off of 44 months. All but one of the classes downgraded were in BFAT transactions. The majority of the affected classes were already rated below investment grade and the downgrades were limited to one or two rating categories. One class in the Bayview 2007-SSR2 was downgraded from 'CCsf' to 'Csf' due to deterioration in credit enhancement. Four investment grade classes were downgraded to remove a rating tick of '+' or '-'. Fitch generally no longer maintains rating ticks for seasoned US RMBS classes. Two investment grade classes were downgraded due to small-pool risk. Three investment grade classes were downgraded due to increased loan default expectations. Fitch revised its methodology of projecting defaults for the BFAT mortgage pools from an approach based on historical net-loss-rate trends to one consistent with the Alt-A sector default assumptions determined by Fitch's loss model. Although the four Bayview Re-securitizations benefit from excess spread, overcollateralization and a reserve fund, the transactions contain two characteristics that increase their sensitivity to stressed scenarios. First, principal is paid pro-rata across senior and subordinate classes. This feature results in a reduction of the subordination for senior classes over time and can increase their vulnerability to higher losses later in the transaction's life. Second, the transactions all have varying degrees of basis risk as a result of fixed-rate coupons on the underlying bonds collateralizing floating-rate coupons in the Re-securitization. The ratings of the Bayview revolvers reflect the poor performance of the underlying collateral and the structural features of the BFAT transactions. All classes have received principal payments pro-rata since the revolving period ended in 2009, and there are no performance triggers that will change the payment structure to re-direct cash flow to the senior classes. The pro-rata pay structure decreases the credit enhancement of the senior classes over time, since the subordinate classes receive principal payments as well as principal writedowns due to losses. In addition this structure shows sensitivity to projected interest shortfalls in the 'CCCsf' rating stresses. RATING SENSITIVITIES Fitch used pool level collateral data to analyze the Bayview transactions. If the underlying collateral was small balance commercial/mixed assets the default assumptions were based off of the Alt-A vintage default assumptions from Fitch's non-prime loss model and were adjusted for pool specific product composition and performance. For the remaining asset types, Fitch used the subprime vintage default assumptions from Fitch's non-prime loss model adjusted for pool specific product composition and performance. Fitch assumed a 75 percent base case loss severity for the loans in the twelve BFAT transactions. For the Bayview Revolvers and BFAT resecuritizations an 80 percent severity was used if the collateral was small balance commercial, a 90 percent severity was used if the assets were first liens and a 100 percent severity was used for second liens. The stressed loss assumptions were determined using Fitch's non-prime loss model default and severity multiples. This determined Fitch's expected losses in the 'Bsf-AAAsf' stresses. The cash flow analysis assumed Fitch's benchmark CDR and CPR curves, zero servicer advance rate for all second liens while the advance rates for first liens reflected Alt-A or subprime advance rates, and a haircut to the WAC in the 'Asf-AAAsf' rating stresses. Fitch analyzes each bond in a number of different scenarios to determine the likelihood of full principal recovery and timely interest. The scenario analysis incorporates various combinations of the following stressed assumptions: mortgage loss, loss timing, interest rates, prepayments, servicer advancing and loan modifications. The 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 outcomes. Although many variables are adjusted in the stress scenarios, the primary driver of the loss scenarios is the home price forecast assumption. In the 'Bsf' scenario, Fitch assumes home prices decline 10 percent below their long-term sustainable level. The home price decline assumption is increased by 5 percent at each higher rating category up to a 35 percent decline in the 'AAAsf' scenario. Classes currently rated below 'Bsf' are at-risk to default at some point in the future. As default becomes more imminent, bonds currently rated 'CCCsf' and 'CCsf' will migrate towards 'Csf' and eventually 'Dsf'. The ratings of bonds currently rated 'Bsf' or higher will be sensitive to future mortgage borrower behavior, which historically has been strongly correlated with home price movements. Despite recent positive trends, Fitch currently expects home prices nationally to decline further before reaching a sustainable level. While Fitch's ratings reflect this home price view, the ratings of outstanding classes may be subject to revision to the extent actual home price and mortgage performance trends differ from those currently projected by Fitch. The spreadsheet 'U.S. RMBS Bayview Rating Actions for April 16,' provides the contact information for the performance analyst. Additional information is available at 'fitchratings.com'. Applicable Criteria and Related Research: --'U.S. RMBS Surveillance Criteria' (Oct. 11, 2012); --'Global Structured Finance Rating Criteria' (June 6, 2012); --'U.S. RMBS Loan Loss Model Criteria' (Aug. 10, 2012); --'U.S. RMBS Cash Flow Analysis Criteria' (April 19, 2012); --'Criteria for Interest Rate Stresses in Structured Finance Transactions' (Jan. 25,); --'Criteria for Rating Caps in Global Structured Finance Transactions' (Aug. 2, 2012); --'Counterparty Criteria for Structured Finance Transactions' (May 30, 2012); --'Structured Finance Recovery Estimates for Distressed Securities' (Nov. 18, 2011). Applicable Criteria and Related Research Global Structured Finance Rating Criteria http://fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=679923 U.S. RMBS Loan Loss Model Criteria http://fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=685646 U.S. RMBS Cash Flow Analysis Criteria http://fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=675966 U.S. RMBS Surveillance Criteria http://fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=691057 Criteria for Interest Rate Stresses in Structured Finance Transactions http://fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=695535 Criteria for Rating Caps in Global Structured Finance Transactions http://fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=684737 Counterparty Criteria for Structured Finance Transactions http://fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=678938 Structured Finance Recovery Estimates for Distressed Securities http://fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=656557 Additional Disclosure Solicitation Status http://fitchratings.com/gws/en/disclosure/solicitation pr_id=788710 Link to Fitch Ratings' Report: U.S. RMBS Bayview Rating Actions for April 16, http://fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=706529 ((Comments on this story may be sent to [email protected])) |