OREANDA-NEWS. Fitch Ratings maintains 169 classes from 82 prime jumbo U. S. RMBS transactions issued before 2009 on Rating Watch Negative. A spreadsheet detailing Fitch's rating actions can be found at 'www. fitchratings. com' by performing a title search for 'U. S. RMBS Rating Watches Renewed for September 12, 2016'.


The prime jumbo classes initially were placed on Rating Watch Negative in September 2015, pending the annual review of Fitch's U. S. RMBS Loan Loss Model and subsequently maintained in March 2016. The U. S. RMBS Loan Loss Model has since been finalized and the Rating Watch is expected to be resolved in the coming weeks. Classes on rating watch will be analysed with the updated model for potential rating and recovery estimate implications.


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. 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% below their long-term sustainable level. The home price decline assumption is increased by 5% at each higher rating category up to a 35% decline in the 'AAAsf' scenario.

In addition to increasing mortgage pool losses at each rating category to reflect increasingly stressful economic scenarios, Fitch analyzes various loss-timing, prepayment, loan modification, servicer advancing, and interest rate scenarios as part of the cash flow analysis. Each class is analyzed with 43 different combinations of loss, prepayment and interest rate projections.

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 to decline in some regions 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.


No third party due diligence was provided or reviewed in relation to this rating action.