OREANDA-NEWS. Fitch Ratings has taken various rating actions on 246 U.S. RMBS transactions. The transactions reviewed consisted of 24 Federal Housing Administration/U.S. Department of Veteran Affairs (FHA/VA), 66 Closed-End Second Lien (CES) and Home Equity Line of Credit (HELOC), 15 high loan-to-value (HLV), 121 Manufactured Housing (MH) and 20 Alt-A U.S. residential mortgage-backed securities (RMBS) transactions.

Rating Action Summary:
-- 637 classes (88%) affirmed;
-- 55 classes (8%) upgraded;
-- 33 classes (4%) downgraded.

A spreadsheet detailing the actions can be found on Fitch's website by performing a title search for 'U.S RMBS Rating Actions for March 24, 2015' or by using the link. In addition, a summary of the mortgage pool and bond analysis can be found by performing a title search for 'RMBS Loss Metrics.'

KEY RATING DRIVERS

The aggregate percentage of loans that were 60 or more days delinquent remained stable since the last review for the majority of sectors reviewed.

In the fourth quarter of 2014, Fitch made enhancements to its loan loss model that resulted in reduced default projections for many performing seasoned borrowers. Additionally, Fitch revised its home price opinion to reflect that home prices in a greater number of regions were closer to their long-term sustainable values. The changes generally resulted in lower loss projections for many seasoned mortgage pools.

Despite lower projected mortgage pool losses for many transactions, some classes experienced rating downgrades. The downgrades were primarily driven by rating caps applied to some investment-grade ratings in small remaining mortgage pools and by the increased certainty of default in some classes with low distressed ratings.

While roughly 8% of the classes were upgraded, for this review Fitch further constrained possible upgrades to investment grade classes. In order for a class to be upgraded to 'BBBsf' it needed a projected months to pay off of at most five years. 'Asf' upgrades required a projected months to pay off of four years while 'AAsf' and 'AAAsf' required 24 months and 12 months respectively.

RATING SENSITIVITIES

A detailed list of Fitch's updated probability of default (PD), loss severity (LS), and expected loss (XL) can be found by performing a title search for 'RMBS Loss Metrics' at www.fitchratings.com. The report provides a summary of base-case and stressed scenario projections.

Fitch uses pool level collateral data to analyze the FHA/VA, CES, HELOC, HLV, and MH transactions. The small number of Alt-A deals in this review were all analyzed at the loan level using Fitch's loan loss model.

For FHA/VA transactions Fitch determines the PD using the pre-2004 subprime vintage average derived from Fitch's non-prime loss model and adjusted for pool specific performance.

The PD for CES and MH transactions is typically based on the subprime vintage average derived from Fitch's non-prime loss model. A small number of CES transactions use the prime or Alt-A vintage average PD, since these product types better reflect the collateral characteristics and performance of those transactions. The Alt-A vintage average from Fitch's non-prime loss is used for HELOC and HLV transactions. For CES, HELOC, and HLV transactions the PD is adjusted for pool specific performance for all mortgage pools.

To determine the LS for FHA/VA transactions, Fitch relies on the FHA/VA sector historical average adjusted for the pool-specific composition of FHA, VA, and RHS loans. Fitch assumes a base case LS of 6% for FHA/RHS loans and LS of 20% for VA loans. The aggregate average base case severity was 13% for all transactions. In cases where there is limited transparency on the composition of FHA, VA and RHS loans, the severity average of the FHA/VA loans is used, which is 9%. Fitch assumes 100% servicer advancing in the 'CCCsf-AAsf' rating stresses but will discount the advancing in the 'AAAsf' rating stress.

For the MH sector, the LS assumption for each transaction is determined by each issuer's 12 month historical average. For the CES, HELOC, and HLV transactions Fitch assumes 100% severity for all rating stresses and no servicer advancing.

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. 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 Rating Actions for March 24, 2015' provides the contact information for the performance analyst.