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Downgrades Hit NIMs, Mixed CMBS Activity


Downgrades Hit NIMs, Mixed CMBS Activity

Recent ratings activity

October 8, 2007


photo of Coco Salazar
Commercial mortgage-backed securities, which have been mostly immune to the avalanche of negative ratings activity recently, saw two deals downgraded this past week — though several deals were also upgraded. Meanwhile, one ratings agency has been busy downgrading net interest margin securities.

On nine First Franklin NIM notes, Fitch Ratings downgraded $160 million, of which almost $5 million face a potential lower rating, and placed an additional $3 million in classes on review for possible downgrade. The actions reflect actual pay-down performance of the NIM securities to date compared to initial projections, as well as, recent changes on Fitch’s subprime loss forecasting assumptions for underlying transactions, which, in this case, were First Franklin Mortgage Loan Trust 2005-FF5, H2, H3, H4 and 2006-FF8, 10, 12, 15 and 17.

The same reasons were cited by Fitch for lower ratings on $45 million in classes of HSI Asset Securitization Corp. NIM Notes 2006-FF7, 9, 11, and HASCO NIM Company 2006-WMC1.

The pay-down performance and updated subprime loss forecasting assumptions also knocked down the rating of a $24 million class of Ameriquest NIM trust, series 2006-M3, Fitch said.

And such factors reportedly also drove worse ratings by Fitch on $15 million or three classes of Long Beach NIM 2005-2 LLC Trust.

Lower ratings due to actual pay-down performance, compared to initial projections, were reportedly issued by Fitch on almost $29 million in classes of Structured Asset Investment Loan Trust NIM Notes, Series 2003-3, 6, 7, 9, and 2004-2.

A few commercial deals also saw ratings worsen — though some received upgrades as well.

Moody’s Investors Service downgraded a $33 million class of Wachovia Bank Commercial Mortgage Trust, Series 2005-WHALE 6 because of poor performance in two of the three loans backing the deal.

Lehman Brothers Floating Rate Commercial Mortgage Trust 2006-CCL C2, Series 2006-CCL C2, received $66 million in downgrades, but also saw $50 million in classes upgraded. While the lower ratings reflected poor performance in four loans, improved ratings were due decreased loan leverage from condominium unit releases on two loans, as well as increased credit support from loan payoffs and partial property releases, Moody’s reported.

Four classes worth nearly $114 million of J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2006-FL2 received upgrades by Moody’s because of increased credit support from the payoff of three loans and stable performance in the remaining 12 loans collateralizing the certificates.

Fitch said it upgraded two classes or about $25 million of Credit Suisse First Boston’s commercial mortgage pass-through certificates, series 2002-CP3 because credit enhancement increased after an additional 1.2 percent paydown and 10.2 percent defeasance since its last rating action.

First Union National Bank Commercial Mortgage Trust, series 2001-C3 saw upgrades on a reported $31 million or two classes as a result of credit enhancement improving through a reduction of the pool’s collateral balance, as well as the defeasance of a dozen additional loans since it was last rated by Fitch.

Coco Salazar is an associate editor and staff writer for

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