NEW YORK, February 27 (Fitch) Fitch Ratings assigns the following ratings and Outlooks to Credit Suisse First Boston Mortgage Securities Corp. (CSMC) Trust‘s, mortgage pass-through certificates, series 2013-TH1 (CSMC 2013-TH1):
--$392,437,000 class A-1 certificates ‘AAAsf’; Outlook Stable;
--$392,437,000 notional class A-IO-1 certificates ‘AAAsf’; Outlook Stable;
--$8,655,000 class B-1 certificates ‘AAsf’; Outlook Stable;
--$6,966,000 class B-2 certificates ‘Asf’; Outlook Stable;
--$4,344,000 class B-3 certificates ‘BBBsf’; Outlook Stable;
--$3,799,000 class B-4 certificates ‘BBsf’; Outlook Stable.
The ‘AAAsf’ rating on the senior certificates reflects the 7.05% subordination provided by the 2.05% class B-1, 1.65% class B-2, 1.05% class B-3, 0.90% non-offered class B-4 and 1.40% non-offered class B-5. Class B-5 is not rated by Fitch.
High-Quality Mortgage Pool: The collateral pool that was aggregated by Credit Suisse (CS) consists primarily of 30-year fixed-rate, fully amortizing, and fully documented loans to borrowers with strong credit profiles, low leverage, and substantial liquid reserves. Third-party, loan-level due diligence was conducted on 100% of the overall pool. As such, Fitch believes the results of the review indicate strong controls. Originators with Limited Performance History: The majority of the pool was originated by lenders with limited non-agency performance history.
However, only two originators, representing 3.3% of the pool, have not contributed to prior post-crisis RMBS securitizations. Fitch has performed a full originator review on originators who contributed over 50% of the pool. On an additional 10% of the pool, Fitch conducted a conference call with senior staff to familiarize itself with the originators’ underwriting guidelines and procedures. Fitch believes the credit enhancement (CE) on this transaction is sufficient to mitigate the originator risk.
Limited Protection from CS Representations and Warranties (R&W) Backstop: While the transaction benefits from notable rep and warranty improvements relative to the CSMC 2012-CIM3 transaction issued last year, Fitch believes that the backstop being provided by Credit Suisse (CS) is weaker relative to those provided in other Fitch rated post-crisis RMBS transactions due to the inclusion of a 36-month sunset on a number of provisions and the conditional clauses in the breach definition. CSMC 2013-TH1 does benefit from life of loan reps being provided by each of the lenders that are generally consistent with Fitch’s criteria. The transaction also does not provide for an automatic breach review trigger.
However, senior and subordinate investors can direct the trustee to initiate loan reviews and enforce put-back rights on loans that breach R&W covenants. Fitch accounted for the weaker R&W features as part of its transaction analysis. High Geographic Concentration: While the collateral pool has a sizable geographic concentration risk in California (50%), the properties are distributed across several metropolitan statistical areas (MSA) in the state. Fitch applied a 1.05x lifetime default expectation adjustment across the entire pool to account for the geographic concentration risk.
Fitch’s analysis incorporates sensitivity analysis to demonstrate how the ratings would react to steeper market value declines (MVDs) than assumed at the MSA level. 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 to demonstrate how the ratings would react to steeper MVDs at the national level. The analysis assumed MVDs of 10%, 20%, and 30%, in addition to the 10% projected by the sustainable home price (SHP) model.
The analysis indicated no rating impact with further 10% MVDs from the current model projection. However, Fitch’s analysis did indicate some potential rating migration with higher MVDs, compared with the model projection. Another set of sensitivities was focused on areas where the model projected lower home price declines than that of the overall collateral pool. From the top ten contributing MSAs, Fitch selected four regions with the lowest sustainable MVDs (sMVDs). Fitch conducted sensitivity analysis assuming increased sMVDs of 10%, 15%, and 20% for these identified metropolitan areas. The sensitivity analysis indicated no impact on ratings for all bonds in each scenario.
CSMC 2013-TH1 will be Credit Suisse’s first transaction of prime residential mortgages in 2013. The aggregate pool included loans originated from Quicken Loans (19%), PHH Mortgage (17%), BofI Federal Bank (10%), First Savings Mortgage (10%), Skyline Financial (9%), Caliber Funding (8%), Pinnacle Capital Mortgage (5%), and Prospect Mortgage (5%). The remainder of the mortgage loans was originated by various mortgage lending institutions, eachof which contributed less than 5% to the transaction. As of Fitch’s final collateral analysis, the aggregate pool consisted of 555 loans with a total balance of $425,672,567; an average balance of $766,978; a weighted average original combined loan-to-value ratio (CLTV) of 68.2%, and a weighted average coupon (WAC) of 3.99%. Rate/Term and cash out refinances account for 64.6% and 3.5% of the loans, respectively. The weighted average original FICO credit score of the pool is 779.
Owner-occupied properties comprise 98.1% of the loans. The states that represent the largest geographic concentration are California (50%), Virginia (6.2%), and Washington (5.8%) As of the closing date, five loans were removed from the pool resulting in a total pool balance of $422,202,729. 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). Fitch will publish a full new issue report for this transaction next week. Contact: