NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns the following ratings to Agate Bay Mortgage Trust 2015-5:
--$193,929,000 class A-6 initial exchangeable certificates 'AAAsf'; Outlook Stable;
--$64,643,000 class A-8 initial exchangeable certificates 'AAAsf'; Outlook Stable;
--$20,005,000 class A-10 initial exchangeable certificates 'AAAsf'; Outlook Stable;
--$278,577,000 class A-X-1 notional certificates 'AAAsf'; Outlook Stable;
--$193,929,000 class A-X-4 initial exchangeable notional certificates 'AAAsf'; Outlook Stable;
--$64,643,000 class A-X-5 initial exchangeable notional certificates 'AAAsf'; Outlook Stable;
--$20,005,000 class A-X-6 initial exchangeable notional certificates 'AAAsf'; Outlook Stable;
--$6,868,000 class B-1 certificates 'AAsf'; Outlook Stable;
--$5,225,000 class B-2 certificates 'Asf'; Outlook Stable;
--$3,732,000 class B-3 certificates 'BBBsf'; Outlook Stable;
--$1,792,000 class B-4 certificates 'BBsf'; Outlook Stable.
Exchangeable certificates:
--$278,577,000 class A-1 exchangeable certificates 'AAAsf'; Outlook Stable;
--$278,577,000 class A-2 exchangeable certificates 'AAAsf'; Outlook Stable;
--$258,572,000 class A-3 exchangeable certificates 'AAAsf'; Outlook Stable;
--$258,572,000 class A-4 exchangeable certificates 'AAAsf'; Outlook Stable;
--$193,929,000 class A-5 exchangeable certificates 'AAAsf'; Outlook Stable;
--$64,643,000 class A-7 exchangeable certificates 'AAAsf'; Outlook Stable;
--$20,005,000 class A-9 exchangeable certificates 'AAAsf'; Outlook Stable;
--$278,577,000 class A-X-2 exchangeable notional certificates 'AAAsf'; Outlook Stable;
--$258,572,000 class A-X-3 exchangeable notional certificates 'AAAsf'; Outlook Stable.
The $2,388,927 class B-5 certificates and $298,582,927 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 2015-5 will be Agate Bay Mortgage Trust's fifth 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 397 loans with a total balance of $298,582,927.63; an average balance of $752,098; a weighted average original combined loan-to-value ratio (CLTV) of 65.3%, and a weighted average coupon (WAC) of 3.92%. Rate/term and cash out refinances account for 46.1% and 16.2% of the loans, respectively. The weighted average original FICO credit score of the pool is 770. Owner-occupied properties comprise 96.7% of the loans. The states that represent the largest geographic concentration are California (49.9%), Virginia (11.6%) and Massachusetts (4.9%).
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 770 and an original CLTV ratio of 65%. Additionally, over 25% 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 49.9% of the properties are located. In addition, the metropolitan areas encompassing Los Angeles, San Francisco and Washington D.C. combine for 49% 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 2015-5 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 the 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.
RATING SENSITIVITIES
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 8.2% 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%, 30% and 49% 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.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
Rating Criteria for U.S. Residential and Small Balance Commercial Mortgage Servicers (pub. 23 Apr 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864368
U.S. RMBS Cash Flow Analysis Criteria (pub. 06 Apr 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863973
U.S. RMBS Loan Loss Model Criteria (pub. 03 Aug 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868923
U.S. RMBS Master Rating Criteria (pub. 12 Jun 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866607
U.S. RMBS Surveillance and Re-REMIC Criteria (pub. 01 Jun 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866259
Related Research
Agate Bay Mortgage Trust 2015-5 -- Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869327
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990038
ABS Due Diligence Form 15E 1
ABS Due Diligence Form 15E 2
ABS Due Diligence Form 15E 3
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990038
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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.