| Fairbanks Among Ratings Casualties
Recent subprime RMBS and servicer ratings actions May 14, 2003 By PATRICK CROWLEY |
| The financial instability of Fairbanks Capital Corp. has prompted actions by two major ratings services. Fitch Ratings downgraded Fairbanks residential subprime servicer rating to ‘RPS2-‘ from ‘RPS1’, its Alt-A and Home Equity primary service ratings to ‘RPS2-‘ from ‘RPS1’ and its special servicer rating to ‘RSS2-‘ from ‘RSS1’ as a result of recent events that have created a significant amount of uncertainty regarding Fairbanks financial viability, management stability and operational strength. Fitch has placed all of the servicer ratings on Rating Watch Negative.Because of concerns about Fairbanks’ ongoing financial stability, its ability to successfully address regulatory compliance issues without eroding loan performance and management’s ability to detect and address operational and regulatory problems Moody’s Investors Service has downgraded the servicer ratings of Fairbanks to SQ4, which is below average.
Meanwhile the Wall Street Journal has reported that ratings agencies such as Moody’s and Fitch are growing more concerned about rating subprime mortgages offered by troubled companies such as Fairbanks. The story stated that for Fairbanks, which currently services approximately $46 billion in mortgage debt, “the precipitous decline in its ranking will likely make it harder to securitize loans it services.” The $78.2 million of asset-backed securities in Option One Mortgage Corp.’s Net Interest Margin transaction, Option One Mortgage Securities Corp. NIM Trust Series 2003-2A, have been rated ‘Aaa’ by Moody’s. The underlying securitization, Option One Mortgage Loan Trust Series 2003-2, is backed by Option One originated adjustable rate (72%) and fixed-rate (28%) subprime mortgage loans. The ratings reflect excess cash flow and prepayment premiums generated by the securitization as well as a yield maintenance agreement. Citigroup’s Home Equity Loan Trust series 2003-HE1 has been assigned ratings from ‘AAA’ to ‘BBB-‘ by Fitch Ratings. The ratings reflect the level of subordination and monthly excess interest. The pool of first lien fixed-rate and adjustable-rate mortgages have a weighted average original loan-to-value (LTV) ratio of 79.02%. Fitch Ratings has assigned Equity One Inc. a primary servicer rating of ‘RPS3’ for subprime product reflecting the company’s experienced management team and the financial strength of its parent company, Popular North American Inc., a wholly owned subsidiary of Popular Inc. Due to credit quality of underlying loans and credit support provided by subordination, Moody’s has assigned ratings of ‘Aaa’ to ‘Baa3’ to the $396.1 million mortgage-backed securities in ABN-AMRO’s 2003-4 fixed-rate jumbo A securitization. Moody’s also assigned ratings from ‘Aa3’ to ‘Baa3’ to the mezzanine and subordinate tranches. The 847 loans have a weighted LTV ratio of 69.09% with a weighted-average FICO of 740. Seventeen classes of $321 million of asset-backed securities in two series backed by subprime mortgage and manufactured housing loans issued by IndyMac Abs Inc., an affiliate of IndyMac Bank, have been downgraded by Moody’s. The action was taken because of higher-than-anticipated rates of default on the loans backing the certificates and by the low rates of recovery currently realized on the sale of repossessed manufactured homes. Moody’s said the pipeline of “seriously delinquent” loans is high. A rating of ‘AAA’ has been assigned by Moody’s to the $735.6 million senior investor certificates issued by Asset Backed Securities Corp. Home Equity Loan Trust 2003-HE2. The ratings reflect collateral quality, excess spread, overcollateralization and level of subordination. The loan pool is typical subprime quality with a weighted-average LTV of 79% and a weighted-average FICO of 603. Moody’s has rated ‘Aaa’ the $231 million Class A certificates issued by Citigroup Home Equity Loan Trust Series 2003-HE1 securitization of subprime mortgages. Ratings ranging from ‘Aa2’ to ‘Baa3’ have been assigned to the mezzanine and subordinated classes. Moody’s indicated the credit quality of the loans backing the transaction, which are 67% adjustable-rate mortgages, is similar to an average quality subprime pool with a weighted-average LTV of 79% and a weighted-average FICO score of 616, with 40% of the borrowers having FICO scores of below 600. Five classes of Champion Mortgage Co. Inc.’s home equity loan asset-backed securities series 1997-2 have been affirmed by Fitch at ratings ranging from ‘AAA’ to ‘BBB-‘ reflecting credit enhancement consistent with future loss expectations. Fitch has affirmed six classes of Beneficial Mortgage Corp.’s Home Equity Loan Asset-Backed Certificates series 1997-1 and 1997-2 based on credit enhancement with future loss expectations. The ratings range from ‘AAA’ to ‘A’. |
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Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at: pcrowley@enquirer.com |
