Fitch Rates Agate Bay Mortgage Trust 2015-6
--\\$200,956,000 class A-6 initial exchangeable certificates 'AAAsf'; Outlook Stable;
--\\$66,985,000 class A-8 initial exchangeable certificates 'AAAsf'; Outlook Stable;
--\\$19,667,000 class A-10 initial exchangeable certificates 'AAAsf'; Outlook Stable;
--\\$287,608,000 class A-X-1 notional certificates 'AAAsf'; Outlook Stable;
--\\$200,956,000 class A-X-4 initial exchangeable notional certificates 'AAAsf'; Outlook Stable;
--\\$66,985,000 class A-X-5 initial exchangeable notional certificates 'AAAsf'; Outlook Stable;
--\\$19,667,000 class A-X-6 initial exchangeable notional certificates 'AAAsf'; Outlook Stable;
--\\$7,067,000 class B-1 certificates 'AAsf'; Outlook Stable;
--\\$5,224,000 class B-2 certificates 'Asf'; Outlook Stable;
--\\$3,226,000 class B-3 certificates 'BBBsf'; Outlook Stable;
--\\$1,690,000 class B-4 certificates 'BBsf'; Outlook Stable.
--\\$287,608,000 class A-1 exchangeable certificates 'AAAsf'; Outlook Stable;
--\\$287,608,000 class A-2 exchangeable certificates 'AAAsf'; Outlook Stable;
--\\$267,941,000 class A-3 exchangeable certificates 'AAAsf'; Outlook Stable;
--\\$267,941,000 class A-4 exchangeable certificates 'AAAsf'; Outlook Stable;
--\\$200,956,000 class A-5 exchangeable certificates 'AAAsf'; Outlook Stable;
--\\$66,985,000 class A-7 exchangeable certificates 'AAAsf'; Outlook Stable;
--\\$19,667,000 class A-9 exchangeable certificates 'AAAsf'; Outlook Stable;
--\\$287,608,000 class A-X-2 exchangeable notional certificates 'AAAsf'; Outlook Stable;
--\\$267,941,000 class A-X-3 exchangeable notional certificates 'AAAsf'; Outlook Stable.
The \\$2,459,143 class B-5 certificates and \\$307,274,143 class A-IO-S notional certificates will not be rated.
Fitch's ratings reflect the high quality of the underlying collateral, the clear capital structure and the high percentage of loans reviewed by third party due diligence companies. In addition, Wells Fargo Bank, N.A. will act as the master servicer and Christina Trust will act as the trustee for the transaction. For federal income tax purposes, elections will be made to treat the trust as one or more real estate mortgage investment conduits (REMICs).
On June 16, 2015, the Office of the Comptroller of the Currency (OCC) entered into an amended consent order (the ACO) with Wells Fargo Bank. Under the terms of the ACO, Wells Fargo Bank is prohibited, during the continuation of the ACO, from assuming the servicing of mortgage loans on behalf of the Trust, and will not perform such servicing activities in the event of the resignation, removal or termination of any Servicer. The duration of the ACO will be determined by the OCC based on its assessment of compliance by Wells Fargo Bank with the requirements set forth in the ACO. The ACO does not prohibit Wells Fargo from providing servicer advances if deemed necessary per the transaction documents.
Although during this period Wells Fargo is prohibited to take on servicing, Fitch does not consider this a material risk as Cenlar is the primary servicer for the entire pool and is rated 'RPS2' by Fitch. In addition, transaction documents reflect the prohibition of Wells Fargo from acting in such capacity if the ACO is in effect. The successor servicer is also subject to the approval of the trustee and servicing administrator.
ABMT 2015-6 will be Agate Bay Mortgage Trust's sixth transaction of prime residential mortgages in 2015. The certificates are supported by a pool of prime 30-year fixed-rate mortgage (FRM) loans. The mortgages in the pool were originated by various entities, all of which contributed less than 15% of the pool.
As of the cut-off date, the aggregate pool consisted of 398 loans with a total balance of \\$307,274,143.79; an average balance of \\$772,045; a weighted average original combined loan-to-value ratio (CLTV) of 65.2%, and a weighted average coupon (WAC) of 3.91%. Rate/term and cash out refinances account for 41.1% and 12.1% of the loans, respectively. The weighted average original FICO credit score of the pool is 773. Owner-occupied properties comprise 95.2% of the loans. The states that represent the largest geographic concentration are California (49.3%), Virginia (12.3%) and Colorado (6.9%).
KEY RATING DRIVERS
High-Quality Mortgage Pool: The collateral pool consists of very high-quality 30-year, fixed-rate, fully amortizing loans to borrowers with strong credit profiles, low leverage and liquid reserves. The pool has a weighted average (WA) FICO score of 773 and an original CLTV ratio of 65%. Additionally, over 33% of the borrowers have liquid reserves in excess of 30% of their mortgage amount.
Geographic Concentration Risk: The pools' primary concentration risk is California, where 49.3% of the properties are located. In addition, the metropolitan areas encompassing Los Angeles, Washington D.C. and San Francisco combine for 47% of the collateral balance and represent three of the top 10 regions. The regional concentration resulted in an additional penalty to the pool's probability of default (PD) of roughly 13% to its lifetime default expectation.
Robust Representation Framework: Fitch considers the transaction's representation, warranty and enforcement (RW&E) mechanism framework to be consistent with a Tier 1 quality. The transaction benefits from a life-of-loan representation and warranty (R&W), as well as a backstop by the seller, TH TRS Corp., in case of insolvency or dissolution of the related originator (excluding NYCB Mortgage and NYCB Community Bank originated loans). Similar to recent transactions rated by Fitch, ABMT 2015-6 contains binding arbitration provisions that may serve to provide timely resolution to R&W disputes.
Originators With Limited Performance History: Many of the loans were originated by lenders with a limited non-agency performance history. However, all the loans were originated to meet TH TRS' purchase criteria and were reviewed by a third-party due diligence firm to TH TRS' guidelines with no material findings. TH TRS is a wholly owned subsidiary of Two Harbors Investment Corp. In addition, Fitch conducted an in-depth call with three of the top five originators, which account for approximately 33% of the pool.
Extraordinary Expense Treatment: The trust provides for expenses, including indemnification amounts and costs of arbitration, to be paid by the net WAC of the loans, which does not impact the contractual interest due on the certificates. Furthermore, the expenses to be paid from the trust are capped at \\$300,000 per annum (\\$125,000 for the trustee), which can be carried over each year, subject to the cap until paid in full.
Safe Harbor Qualified Mortgages: All the loans in the pool have application dates of Jan. 10, 2014 or later and are, therefore, subject to the ability-to-repay (ATR)/qualified mortgage (QM) Rule. All the loans subject to this rule were classified as safe harbor QM (SHQM), for which no adjustment was made.
After Fitch determines credit ratings through a rating stress scenario analysis, additional sensitivity analyses are considered. The analyses provide a defined stress sensitivity to demonstrate how the ratings would react to steeper market value declines (MVDs) than assumed at issuance as well as a defined sensitivity that demonstrates the stress assumptions required to reduce a rating by one full category, to non-investment grade, and to 'CCCsf'.
The defined stress sensitivity analysis focuses on determining how the ratings would react to steeper MVDs at the national level. The analysis assumes MVDs of 10%, 20%, and 30%, in addition to the model projected 8% for this pool. The analysis indicates there is some potential rating migration with higher MVDs, compared with the model projection.
Fitch also conducted defined rating sensitivities analyses which determine the stresses to MVDs that would reduce a rating by one full category, to non-investment grade, and to 'CCCsf'. For example, additional MVDs of 6%, 29% and 48% could potentially lower the 'AAAsf' rated class one rating category, to non-investment grade, and to 'CCCsf', respectively.
DUE DILIGENCE USAGE
Fitch was provided with due diligence information from Clayton Holdings LLC (Clayton). The due diligence focused on a compliance, credit, valuation and data integrity review. Fitch considered this information in its analysis and the findings did not have an adverse impact on our analysis.
Fitch received certifications indicating that the loan-level due diligence was conducted in accordance with Fitch's published standards for credit, property valuation and legal/regulatory compliance. The certifications also stated that the company performed its work in accordance with the independence standards, per Fitch's criteria.