New York, April 18, 2011 -- The April 13th press release for this action provided an incorrect link to Moody's current loss expectation on the Prime Jumbo pools. This has been corrected, and the appropriate link is included below. Revised release follows.
Moody's Investors Service has downgraded the ratings of five classes and confirmed the ratings of two classes issued by BCAP 2006-RR1.
The actions are a result of the bonds not having sufficient credit enhancement to maintain the current ratings when compared to the revised loss expectation on the pools of mortgages backing the underlying certificates.
The resecuritization bonds PA, PB, PC, PD, and PE are backed by classes A-2 and A-5 ("Underlying certificates") issued by Wells Fargo Mortgage Backed Securities 2006-16 Trust. The resecuritization bonds CF and CS are backed by class A-18 ("Underlying certificate") issued by Wells Fargo Mortgage Backed Securities 2006-16 Trust. The underlying certificates are backed primarily by first-lien, prime Jumbo residential mortgage loans.
The resecuritization bonds PA through PE receive principal payments sequentially and absorb losses on a pro-rata basis from the related underlying certificates. The class CF receives all principal payments and absorbs all losses from the related underlying certificate. The class CS is an interest only bond whose notional amount is linked to the Class CF.
Moody's first updated its loss assumption on the underlying pools of mortgage loans (backing the underlying certificates) and then arrived at updated ratings on the underlying certificates. The ratings on the underlying certificates are based on expected recoveries on the bonds under ninety-six different combinations of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to small increments in losses on the underlying mortgage pool is taken into consideration when assigning ratings. For details regarding Moody's approach to estimating losses on Prime Jumbo pools, please refer to the methodology publications " Prime Jumbo RMBS Loss Projection Update: January 2010 " respectively, available on Moodys.com.
In order to determine the ratings of the resecuritized bonds, losses on the underlying certificates were ascribed to the resecuritized bonds, according to the structure of the resecuritized transaction.
As part of the sensitivity analysis, we stressed the updated expected loss on the pools of loans backing the underlying certificates by an additional 10% and found that the implied ratings of the resecuritized bonds PC and PD changed by one notch to A3 (sf) and Baa1 (sf) respectively.