Fitch Rates Sequoia Mortgage Trust 2013-4

Thu Mar 21, 2013 5:12pm EDT

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NEW YORK--(Business Wire)--
Fitch Ratings assigns the following ratings to Sequoia Mortgage Trust 2013-4,
mortgage pass-through certificates, series 2013-4 (SEMT 2013-4): 

--$170,408,000 class A-1 certificates 'AAAsf'; Outlook Stable; 

--$170,000,000 class A-2 certificates 'AAAsf'; Outlook Stable; 

--$157,795,000 class A-3 certificates 'AAAsf'; Outlook Stable; 

--$42,205,000 class A-4 certificates 'AAAsf'; Outlook Stable; 

--$540,408,000 notional class A-IO1 certificates 'AAAsf'; Outlook Stable; 

--$170,408,000 notional class A-IO2 certificates 'AAAsf'; Outlook Stable; 

--$157,795,000 notional class A-IO3 certificates 'AAAsf'; Outlook Stable; 

--$10,952,000 class B-1 certificates 'AAsf'; Outlook Stable; 

--$9,511,000 class B-2 certificates 'Asf'; Outlook Stable; 

--$6,340,000 class B-3 certificates 'BBBsf'; Outlook Stable; 

--$3,170,000 class B-4 certificates 'BBsf'; Outlook Stable. 

The 'AAAsf' rating on the senior certificates reflects the 6.25% subordination
provided by the 1.90% class B-1, 1.65% class B-2, 1.10% class B-3, 0.55%
non-offered class B-4 and 1.05% non-offered class B-5. The $6,054,465
non-offered class B-5 certificates will not be rated by Fitch. 

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
underwriters. In addition, Wells Fargo Bank, N.A. will act as the master
servicer and Christiana 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). 

SEMT 2013-4 will be Redwood Residential Acquisition Corporation's fourth
transaction of prime residential mortgages in 2013. The certificates are
supported by a pool of prime fixed rate mortgage loans. The loans are
predominantly fully amortizing; however, 2.2% have a 10-year interest-only (IO)
period. The aggregate pool included loans originated from First Republic Bank
(11.3%), Cole Taylor Bank (8.5%), PrimeLending (7.9%), United Shore Financial
Services (6.2%) and Fremont Bank (5.3%). The remainder of the mortgage loans was
originated by various mortgage lending institutions, each of which contributed
less than 5% to the transaction. 

As of the cut-off date, the aggregate pool consisted of 716 loans with a total
balance of $576,435,465; an average balance of $805,077; a weighted average
original combined loan-to-value ratio (CLTV) of 64.9%, and a weighted average
coupon (WAC) of 3.8%. Rate/Term and cash out refinances account for 68.2% and 9%
of the loans, respectively. The weighted average original FICO credit score of
the pool is 773. Owner-occupied properties comprise 96% of the loans. The states
that represent the largest geographic concentration are California (42.1%),
Massachusetts (9.7%), and Washington (7.2%). 

KEY RATING DRIVERS 

High-Quality Mortgage Pool: The collateral pool consists primarily of 30-year
fixed-rate fully documented loans to borrowers with strong credit profiles, low
leverage, and substantial liquid reserves. The majority of the loans are fully
amortizing, with only nine loans (2.2% of the pool) having a 10-year
interest-only (IO) period. Third-party loan-level due diligence was conducted on
approximately 92% of the overall pool, and Fitch believes the results of the
review generally indicate strong underwriting controls. 

Originators with Limited Performance History: Approximately 89% of the pool was
originated by lenders with limited non-agency performance history. While the
significant contribution of loans from these originators is a concern, Fitch
believes the lack of performance history is partially mitigated by the 100%
third-party diligence conducted on these loans that resulted in immaterial
findings. Fitch also considers the credit enhancement (CE) on this transaction
sufficient to mitigate the originator risk. 

Geographically Diverse Pool: The overall geographic diversity is in line with
other SEMT transactions. The percentage of the top three metropolitan
statistical areas (MSA) is 25%, the second lowest concentration to date. Fitch
applied a 1.05x default penalty to the pool to account for the geographic
concentration risk. 

Transaction Provisions Enhance Performance: As in other recent SEMT transactions
rated by Fitch, SEMT 2013-4 contains binding arbitration provisions that may
serve to provide timely resolution to representation and warranty disputes. In
addition, all loans that become 120 days or more delinquent will be reviewed for
breaches of representations and warranties. 

RATING SENSITIVITIES 

Fitch's analysis incorporates sensitivity analyses to demonstrate how the
ratings would react to steeper market value declines (MVDs) than assumed at both
the metropolitan statistical area (MSA) and national levels. The implied rating
sensitivities are only an indication of some of the potential outcomes and do
not consider other risk factors that the transaction may become exposed to or be
considered in the surveillance of the transaction. 

Fitch conducted sensitivity analysis on areas where the model projected lower
home price declines than that of the overall collateral pool. The model
currently projects sustainable MVDs (sMVDs) at the MSA level. For one of the top
10 regions, Fitch's sustainable home price (SHP) model does not project declines
in home prices and for another, the projected decline is less than 2.00%. These
regions are Chicago-Joliet-Naperville in Illinois (4.2%) and
Cambridge-Newton-Framingham in Massachusetts (4.6%). Fitch conducted sensitivity
analysis assuming sMVDs of 10%, 15%, and 20% compared with those projected by
Fitch's SHP model for these regions. The sensitivity analysis indicated no
impact on ratings for all bonds in each scenario. 

Another sensitivity analysis was focused 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 13% for this pool. The analysis
indicates there is some potential rating migration with higher MVDs, compared
with the model projection. 

Additional detail on the transaction is described in the new issue report
'Sequoia Mortgage Trust 2013-4'. 

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings. 

In addition to the information sources identified in Fitch's criteria listed
below, Fitch's analysis incorporated data tapes, due diligence results, deal
structure and legal documents from the 17g5 website available on
'www.structuredfn.com'. 

Applicable Criteria and Related Research: 

--'Global Structured Finance Rating Criteria', June 6, 2012; 

--'Counterparty Criteria for Structured Finance Transactions', May 30, 2012; 

--'Criteria for Special-Purpose Vehicles in Structured Finance Transactions',
May 30, 2012; 

--'U.S. RMBS Rating Criteria', July 20, 2012; 

--'U.S. RMBS Loan Loss Model Criteria', Aug. 10, 2012; 

--'U.S. RMBS Cash Flow Analysis Criteria', April 19, 2012; 

--'U.S. RMBS Representations and Warranties Criteria', June 29, 2012; 

--'U.S. RMBS Originator Review and Third-Party Due Diligence Criteria', April
27, 2012; 

--'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating
Criteria', Jan. 31, 2011; 

--'U.S. RMBS Surveillance Criteria', Aug. 10, 2012. 

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
WEBSITE.

Fitch Ratings
Primary Analyst
Patrick Gervais, +1-212-908-9132
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Michele Patterson, +1-212-908-0779
Senior Director
or
Committee Chairperson
Grant Bailey, +1-212-908-0544
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com

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