https://www.intex-pool-shop.de
Wir bieten eine große Auswahl an Pools, Intex Poolfolie, Intex Spa, Intex Booten, Luftbetten und Zubehör. Bei Swimmingpools gehort Intex zu den Marktfuhrern in Deutschland. Mit den Pools von Intex kann der Sommer kommen.
4. www.derivativefitch.com 4
Understanding Fitch SMARTView
> Each month, monitoring criteria determines deals that are
selected for review
> The ‘Under Analysis’ deals are posted on the website and a
press release is issued. All other deals are marked as not being
selected for review that month
> ‘Under Analysis’ is not the same as ‘Rating Watch’. Whole deals
are placed under analysis, and only after analysis is completed
are individual tranches upgraded/downgraded/put on ‘Watch’, or
affirmed
> Separate lists are posted for subprime and Alt-A/prime
> Fitch’s goal is to process all deals under review within 30 days
5. www.derivativefitch.com 5
The July 2007 Subprime ‘Under Analysis’ List
170 Transactions
> Vintage Distribution: 2006 – 106; 2005 – 27; Older - 37
> Ratings Distribution by # Tranches (2005 and 2006 Deals):
– AAA: 611
– AA/A: 812
– BBB: 339
– BB/B: 126
‘Stressed’ Vintage Selection Criteria
> Deals from 2H 2005 and 2006
> Estimated loss expectation of 8% or greater; Estimated ‘BBB’
Loss Coverage less than 1.25
6. www.derivativefitch.com 6
Fitch’s Approach On ‘Under Analysis’ List
> Develop enhanced criteria for evaluating stressed vintages
> Conduct rating committees for each transaction
> Publish Rating Action Commentaries with detailed information on
analysis of each rated security.
7. www.derivativefitch.com 7
Risk Factors For Stressed Vintages
> High Combined Loan-To-Value Ratios
> Limited/No Borrower Documentation
> Payment Shock At ARM Reset
> Declining Home Prices
– Fitch RMBS model estimates 6%-8% from peak prices
8. www.derivativefitch.com 8
Criteria Changes For Expected Loss Projection
> Greater weight to early performance in projecting lifetime
performance. This can add several points of pool balance
expected to default.
– e.g. Prior expectation of 15%, New Expectation of 20%
> Increased default expectations for 2/28 hybrid ARM loans.
– 1.2x prior default expectation if the ARM does not have a ‘piggy-
back’ second-lien
– 1.5x prior default expectation if the ARM does have a ‘piggy-back’
second-lien
– Combined multiples for analyzed pools range from around 1.15x to
around 1.35x
– Results in 2% to 4.5% of additional pool balance expected to default
10. www.derivativefitch.com 10
Criteria Changes For Expected Loss Projection
(cont.)
> Capture impact of second liens
– The worst performing ‘first-lien’ RMBS contain substantial
percentages of second liens, 5%-10%.
– Loss severity estimates reflect the impact of second-liens over time
> The net impact of the changes described above generated
expected lifetime losses for the ‘Under Analysis’ stress vintage
transactions ranging from 6% to 17% of the original pool balance.
13. www.derivativefitch.com 13
‘Under Analysis’ Expected Loss Ranges
5
7
9
11
13
15
17
4 6 8 10 12 14 16
(% orig. bal)
Projected Expected Remaining Loss by Deal Age
Source: Fitch
14. www.derivativefitch.com 14
Cash Flow Modeling: Prepayment Assumptions
> Fitch’s cash flow model employs standard prepayment
assumptions for various mortgage products
> Stressed vintage analysis incorporates the slow observed
speeds, but reverts to the faster standard speeds over time
> This approach avoids undue credit to excess spread during peak
loss periods
16. www.derivativefitch.com 16
Minimum Loss Coverage Ratios
> The Fitch surveillance model indicates recommended actions
based on Break Loss (BL) and Loss Coverage Ratio (LCRs)
analysis.
> The BL is the amount of mortgage pool loss a bond can sustain
without incurring a principal loss.
– Example: Class A BL = 32% (% of outstanding pool balance)
> The LCR is the ratio of the Break Loss to the Expected Loss.
– Example: EL = 12%, Class A BL = 32%, Class A LCR = 2.67
> To maintain a rating, each class must meet minimum LCR
requirements
> Specific minimum LCRs have been established for the stressed
vintages
17. www.derivativefitch.com 17
Minimum Loss Coverage Ratios
Rating Minimum Loss
Coverage
AAA 2.50
AA+ 2.25
AA 2.00
AA- 1.75
A+ 1.60
A 1.50
A- 1.40
BBB+ 1.30
BBB 1.20
BBB- 1.10
BB 0.95
B 0.75
CCC 0.00
18. www.derivativefitch.com 18
Rationale For Minimum Loss Coverage Ratios
> The expected loss represents a stressed environment. The
probability of extreme stress is still remote, so a more
compressed multiple for higher rating categories is warranted,
relative to new issue.
> To remain investment grade, a class should not default in the
expected case, even if it is stressed. Investment grade classes
therefore have multiples greater than 1.0.
> Fitch believes the Minimum LCR framework and disclosure of BL
and LCR data for each rated class creates a clearer picture of
the relative strength of each rating category.
> Note: Classes which pay-off in 60 months or less in the Expected
Loss scenario are not recommended for downgrade based on
LCR.
19. www.derivativefitch.com 19
Results From Applying New Criteria
As of August 6, 2007
> Transaction Reviews Completed: 90 of 170
> Affirmations: 850 classes, $74 billion par
> Downgrades: 491 classes, $9 billion par
> Ratings Distribution After Actions:
– ‘AAA’: 430 classes, $61 billion par
– Investment Grade (including ‘AAA’): 1,076 classes, $79.3 billion par
– Below Investment Grade: 265 classes, $3.5 billion par
22. www.derivativefitch.com 22
Conclusions and Next Steps
> The average loss expectations for the poor performing deals on
the ‘Under Analysis’ list is around 11% of original balance.
Analysis of all deals in these vintages should yield lower average
losses
> Highly-rated ‘AAA’ and ‘AA’ RMBS demonstrate ability to
withstand high multiples to expected loss
> The expected case will be monitored closely against actual
performance, and additional action will be taken if warranted
> We will apply the methodology against all 2005, 2006 and 2007
YTD ratings
24. www.derivativefitch.com 24
The Fitch ResiLogic Default and Loss Model
> ResiLogic is a loan-level model used to project expected case
losses for mortgage pools, as well as Loss Coverage levels for
each rating category.
> The ResiLogic model was introduced late in 2006.
> ResiLogic is designed to analyze prime, Alt-A and subprime
pools.
> The changes announced yesterday represent the first major
revision to ResiLogic
25. www.derivativefitch.com 25
Enhancements/Revisions To ResiLogic
> Greater weight to regional economic indicators
– increases default expectations around 20%
> Increased default expectations for Hybrid ARM mortgages
– 22% increase for 2-year hybrid ARMs
> Greater differentiation among documentation programs through a
new ‘Low’ documentation category. Impact varies by program
> Use back-end versus front-end DTI ratios with a missing value
default of 50% DTI for subprime. Generally minor impact, varies
based on data quality
> No benefit for recent vintage loans that are 2 or more months
seasoned. Minor impact.
26. www.derivativefitch.com 26
Increased Regional Risk Weighting
> Fitch started using University Financial Associates (UFA) state-
level default multipliers with the introduction of ResiLogic
> Observing the UFA forecasts through the current downturn has
supported their effectiveness
> Fitch believes that continued home-price weakness is the
greatest risk to new RMBS. A more dynamic approach to
regional risk can help mitigate that risk.
> Greater weighting to the UFA multipliers supports this goal.
27. www.derivativefitch.com 27
Performance Is Deteriorating For “Good” Subprime
0%
2%
4%
6%
8%
10%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Months
2004 2005 2006
(%)
Defaults of Subprime First-Liens With Full-Doc, No Piggy-Back
Source: Fitch, LoanPerformance
29. www.derivativefitch.com 29
Increased Regional Risk Weighting: Implications
> ResiLogic will be updated quarterly with new UFA multipliers
> Expected Loss rates will rise or fall accordingly
> Fitch will publish the updated multipliers with an impact analysis
> Impacts Alt-A and Prime, not just Subprime
30. www.derivativefitch.com 30
ARM Default Rate Adjustments
> Many large lenders have abandoned 2/28 and other 2-year ARM
products.
> Interagency guidance requires qualification at the fully indexed
rate
> Existing hybrid ARM borrowers with teaser rates may have
severely curtailed refinancing options
> A mass of existing hybrid ARM originations is yet to be
securitized
> Fitch’s adjustment reflects the increased payment shock risk to
these products. 2/28 default rate expectations are increased
22%.
32. www.derivativefitch.com 32
Impact Of Revisions: ABX.HE 07-1 Example
> Estimated Initial Expected Losses For ABX.HE 07.1 Collateral
Pool
– Prior Model: 5.65%
– New Model: 8.23%
– Difference: 2.58%
> Components of Change: UFA: 1.20%, ARM: ~1.10%, Other:
~0.30%
> Notes:
– Fitch did not rate 10 of the 20 reference entities
– Actual ratings did not utilize ResiLogic
– Based on current UFA multipliers, not those prevailing when deals
were originated.
33. www.derivativefitch.com 33
What Is Not Changing: Cash Flow Analysis
> Dynamic interest-rate risk methodology introduced in 2006. No-
arbitrage approach to swap analysis.
> New loss timing and prepayment curves introduced in 2006 in
conjunction with Intex-based cash flow modeling.
> Updated (slower) prepayment curves in early 2007.
> We remain very comfortable with our approach. All curves are
published on our website.
> Further commentary coming on impact of modifications
34. www.derivativefitch.com 34
What’s Next: Additional Enhancements To ResiLogic
> Expansion to MSA-level UFA forecasts
> Application of UFA forecasts to expected case Loss Severity
Good morning, and thank you all for joining us today. my name is Glenn Costello. I am the co-head of the U.S. residential mortgage backed group at Fitch Ratings. The focus of my discussion today will be the list of subprime deals we placed ‘Under Analysis’ last week, how we intend to proceed on that list, and our view on the stresses we see on those deals.
Good morning, and thank you all for joining us today. my name is Glenn Costello. I am the co-head of the U.S. residential mortgage backed group at Fitch Ratings. The focus of my discussion today will be the list of subprime deals we placed ‘Under Analysis’ last week, how we intend to proceed on that list, and our view on the stresses we see on those deals.
Turning to future actions, I’d like to first discuss the Fitch SMARTView system and what it means to put deals ‘Under Analysis’. SMARTView is an initiative to make the surveillance process more transparent by providing the market information on which deals are being evaluated each month. This list is posted on our website and a press release notifies the market that it has been updated.
We’ve been doing this for several months. Hopefully recent events will increase awareness.
NOT THE SAME AS WATCH
ACTIONS COME AFTER THE
The July list that we posted is the first to feature a large number of 2006 first lien transactions, and I will discuss in a moment how we expanded our selection criteria to pick up this wider set of deals. While the focus is on 2006 you can see that older vintages are still represented.
Here you can see the distribution of tranches by rating in the deals under analysis. I want to stress that while we place the whole deal under analysis, rating actions will be focused o below-investment grade and low investment grade tranches. In the last few days there have been reports of substantial price declines in high-grade bonds. While we can’t comment on the market forces that may be driving that, we can say that we continue to be confident that ‘AAA’ ratings reflect the high credit quality of those bonds. These bonds can withstand something like 40%-50% of the original mortgage pool defaulting at a 50% loss severity which is still a substantial multiple to expected performance.
Our focus is on reviewing more recent deals, and the list you see comprises those deals that we do think have signficant risk to BBB ratings. These deals reflect loss expecations of 8% or more which would result in estimated loss coverage to ‘BBB’ bonds of less than 1.25. I want to stress that is an estimate, the individual deal analysis we are engaged in now will better reflect the actual loss coverage in each deal, which could vary in either direction.
We did update our loss expections to generate this list. We have been adjusting our expectations around performing loan defaults to reflect the actual experience and at this point its around 16% on average. Another substantial change is loss severity which also reflects recent history and can be much higher in some instances.
I think this latter point is important when talking about the timing of analysis and actions. We have been assessing the impact of second liens on loss severity. When second liens are backed out, loss severity actually does not look very bad. However what has become clear over time is the degree of home price deflation and also the build-up in foreclosure and REO inventory, that justifies using higher severities.
Our other roll rate assumptions remain unchanged from those documented in our report “US Subprime RMBS Upgrade/Downgrade Criteria” which is freely available on our website.
But in 2006 that stopped.
California only.
Each line relates to loans originated in that quarter. 2006 underwater, note that 2005 rapidly going flat to negative.
The turn was very sharp. This is when bonds are supposed to come under stress, when home prices are falling.
But in 2006 that stopped.
California only.
Each line relates to loans originated in that quarter. 2006 underwater, note that 2005 rapidly going flat to negative.
The turn was very sharp. This is when bonds are supposed to come under stress, when home prices are falling.
But in 2006 that stopped.
California only.
Each line relates to loans originated in that quarter. 2006 underwater, note that 2005 rapidly going flat to negative.
The turn was very sharp. This is when bonds are supposed to come under stress, when home prices are falling.
But in 2006 that stopped.
California only.
Each line relates to loans originated in that quarter. 2006 underwater, note that 2005 rapidly going flat to negative.
The turn was very sharp. This is when bonds are supposed to come under stress, when home prices are falling.
2006 Higher risk
Good morning, and thank you all for joining us today. my name is Glenn Costello. I am the co-head of the U.S. residential mortgage backed group at Fitch Ratings. The focus of my discussion today will be the list of subprime deals we placed ‘Under Analysis’ last week, how we intend to proceed on that list, and our view on the stresses we see on those deals.
But in 2006 that stopped.
California only.
Each line relates to loans originated in that quarter. 2006 underwater, note that 2005 rapidly going flat to negative.
The turn was very sharp. This is when bonds are supposed to come under stress, when home prices are falling.
But in 2006 that stopped.
California only.
Each line relates to loans originated in that quarter. 2006 underwater, note that 2005 rapidly going flat to negative.
The turn was very sharp. This is when bonds are supposed to come under stress, when home prices are falling.
