Fannie Mae (FNMA)

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Moody's upgrades Fannie and Freddie ratings on $1Billion RMBS conforming Loans ....

Rating Action: Moody's takes action on $1 Billion of Government Sponsored RMBS issued from 2013 to 2014

Global Credit Research - 02 Sep 2015

New York, September 02, 2015 -- Moody's Investors Service has upgraded the ratings of eleven tranches from three transactions backed by conforming balance RMBS loans, issued by Freddie Mac and Fannie Mae.

The complete rating action is as follows:

Issuer: Connecticut Avenue Securities, Series 2014-C01

Class M-1, Upgraded to A3 (sf); previously on Jan 27, 2014 Definitive Rating Assigned Baa2 (sf)

Issuer: Structured Agency Credit Risk (STACR) Debt Notes, Series 2013-DN2

Cl. M-1, Upgraded to A2 (sf); previously on Nov 12, 2013 Definitive Rating Assigned Baa1 (sf)

Cl. M-1F, Upgraded to A2 (sf); previously on Nov 12, 2013 Definitive Rating Assigned Baa1 (sf)

Cl. M-1I, Upgraded to A2 (sf); previously on Nov 12, 2013 Definitive Rating Assigned Baa1 (sf)

Issuer: Structured Agency Credit Risk (STACR) Debt Notes, Series 2014-DN1

Cl. M-1, Upgraded to Aa3 (sf); previously on Feb 12, 2014 Definitive Rating Assigned A1 (sf)

Cl. M-1F, Upgraded to Aa3 (sf); previously on Feb 12, 2014 Definitive Rating Assigned A1 (sf)

Cl. M-1I, Upgraded to Aa3 (sf); previously on Feb 12, 2014 Definitive Rating Assigned A1 (sf)

Cl. M-2, Upgraded to A3 (sf); previously on Feb 12, 2014 Definitive Rating Assigned Baa1 (sf)

Cl. M-2F, Upgraded to A3 (sf); previously on Feb 12, 2014 Definitive Rating Assigned Baa1 (sf)

Cl. M-2I, Upgraded to A3 (sf); previously on Feb 12, 2014 Definitive Rating Assigned Baa1 (sf)

Cl. M-12, Upgraded to A2 (sf); previously on Feb 12, 2014 Definitive Rating Assigned A3 (sf)

RATINGS RATIONALE

The actions are a result of the recent performance of the underlying pools and reflect Moody's updated default projections on the pools and credit enhancement build-up.

STACR 2013-DN2 and STACR 2014-DN1 are designed to provide credit protection to the Federal Home Loan Mortgage Corporation (Freddie Mac) against the performance of reference pools of prime first-lien conforming mortgages while CAS 2014-C01 is designed to provide credit protection to the Federal National Mortgage Association (Fannie Mae) against the performance of a reference pool of prime first-lien conforming mortgages.

Unlike a typical RMBS transaction, note holders are not entitled to receive any cash from the mortgage loans in the reference pools. Instead, the timing and amount of principal and interest that Freddie Mac or Fannie Mae are obligated to pay on the Notes is linked to the performance of the mortgage loans in the reference pool.

Today's rating upgrades on the bonds reflect low serious delinquencies and credit events in the reference pools since issuance. Credit events (defined as when a mortgage loan in the reference pool is either 180 days or more delinquent or upon the involuntary disposition of a mortgage loan in the reference pool) currently remain below 1bp of the original pool balances for all three transactions. The rating actions also reflect an increase in credit enhancement to the subordinate bonds due to sustained and rising prepayment rates on the underlying pools. The senior subordinate classes in all three transactions also benefit a sequential allocation of payments among the subordinate bonds. As of July 2015, the credit enhancement to Class M-1 in STACR 2013-DN2 has risen to 2.22% from 1.95% as of issuance. For STACR 2014-DN1 the credit enhancement to Class M-1 has risen to 3.94% from 3.50% as of issuance while the credit enhancement to Class M-2 and Class M-12 has risen to 2.25% from 2.00% as of issuance. The credit enhancement to Class M-1 in CAS 2014-C01 has risen to 1.86% from 1.65% as of issuance.

The principal methodology used in these ratings was "Moody's Approach to Rating US Prime RMBS" published in February 2015. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the rating:

Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 5.3% in July 2015 from 6.2% in July 2014. Moody's forecasts an unemployment central range of 5% to 6% for the 2015 year. Deviations from this central scenario could lead to rating actions in the sector.

House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2015. Lower increases than Moody's expects or decreases could lead to negative rating actions.

Finally, performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions.

A list of these actions including CUSIP identifiers may be found at:

Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF416895

For more information please see www.moodys.com

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Gregory Bessermann
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Linda Stesney
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653