Morningstar 2011/2012 - (Page 42)

42 Fund, Stock, and Credit Research Morningstar Structured Credit Ratings and Research Timely structured finance ratings and analysis. ® 3 Ratings and analysis of commercial mortgage-backed securities and residential mortgage-backed securities 3 Operational risk assessments As a Nationally Recognized Statistical Rating Organization (NRSRO), our structured credit research and ratings subsidiary stresses a transparent, investor-centric approach. It provides timely new issue and surveillance ratings and analysis for commercial mortgagebacked securities (CMBS) and residential mortgage-backed securities (RMBS), as well as operational risk assessment services. New issue CMBS securities are rated using a bottom-up approach that blends qualitative, quantitative, and legal analysis of the loan, portfolio, and issuing trust, with detailed underwriting information for 100% of the assets. Surveillance ratings and analysis are available on nearly 10,000 securities. Monthly CMBS DealView credit reports ensure that estimates of collateral value and corresponding loss forecasts reflect changes in loan workout status, collateral performance, and market conditions. Our RMBS ratings are based on a proprietary Morningstar credit model used to perform a comprehensive default analysis for each transaction. A monthly RMBS DealView report provides security-specific NRSRO ratings, collateral performance updates, loss projections, and details of the model assumptions associated with each rating and loss projection. Our operational risk assessments evaluate mortgage servicers, loan originators, and thirdparty service providers. These assessments focus on non-credit-related operational risks and the likelihood of maintaining current performance levels given ongoing market conditions. Access our research and methodologies ratingagency.morningstar.com Trusted Ratings and Analysis Based on Proprietary Methodologies CMBS Unbiased ratings and analysis for nearly 10,000 CMBS securities RMBS Monthly reports on thousands of RMBS deals Operational Risk Assessment Comprehensive review of non-credit-related operational risks CMBS DealView RMBS DealView GE Commercial Mortgage Corporation, Series 2005-C1 (GECC05C1) Report Date: October 2011 (Data as of October 2011) MORNINGSTAR ANALYST david.putro@morningstar.com Primary | David Putro | 000.000.0000 ROLE Master Servicer Special Servicer Trustee COMPANY ABCo. XYZ Partners, Inc. US Bank Ace Securities Corp. Home Equity Loan Trust Series 2007-HE5 (ACHE07HE5 / ACE 2007-HE5) October 2011 Bond Analysis OC vs. XS $30,000,000 Commercial Mortgage Servicing Operational Risk Assessment October 2011 Servicer Entity: XYZ Servicing, LLC Primary, Master and Special Mary Smith, Primary Analyst Michael Jones, Secondary Primary: Master: Special: Stable Mor C1 Mor C1 Mor C1 Backup | Mark Williams | 000.000.0000 mark.williams@morningstar.com DEAL TYPE: CURRENT BALANCE: CURRENT # OF LOANS: CURRENT DSCR: CURRENT LTV: SNAPSHOT # OF LOANS Credit Support Level 30.0 (%) Ranking Classiﬁcation(s): Analysts: Assigned Rankings: Fusion $1,197,067,091 99 1.57 64.66 CUTOFF DATE: CUTOFF BALANCE: CUTOFF # OF LOANS: CUTOFF DSCR: CUTOFF LTV: HIGH RISK LOANS 02/17/2005 $1,856,394,150 127 1.66 69.72 # OF LOANS BALANCE % OF DEAL 22,500,000 22.5 15,000,000 CURRENT MONTH Total Delinquency Total Special Servicing DSCRs above 1.25 DSCRs above 1.50 DSCRs below 1.10 DSCRs below 1.00 Defeasance Partial Term I/O Loans Full Term I/O Loans Servicer Watchlist Morningstar Watchlist 5 $85,901,031 $93,938,771 BALANCE % OF DEAL 7.18 % 5 56 37 13 11 7 0 3 19 24 7.85 % 62.31 % 49.22 % 10.33 % 8.41 % 5.92 % 0.00 % 14.98 % 21.83 % 22.30 % HRL-1 HRL-2 HRL-3 Total LOSS SUMMARY 4 1 5 10 # OF LOANS $27,062,033 $8,787,502 $93,938,771 $129,788,305 AMOUNT 2.26 % 0.73 % 7.85 % 10.84 % % OF DEAL Credit Support (%) 7,500,000 OC Target OC Actual OC Deﬁciency Net Excess Spread 15.0 A1 A2B M1 Outlook: 7.5 $745,866,133 $589,233,500 $123,666,419 $100,620,325 $70,910,670 $0 $179,345,000 $261,308,493 $266,949,342 0 0 Jun–2007 Apr–2009 Feb–2011 Dec–2012 Oct–2014 Jun–2007 Feb–2009 Oct–2010 Jun–2012 Feb–2014 Oct–2015 As of April 13, 2011, Morningstar Operational Risk assessment group assigned rankings for XYZ Servicing, LLC (XYZ) as a commercial mortgage primary, master and special servicer. We assigned Mor C1 for Primary Servicing, Mor C1 for Master Servicing, and Mor C1 for Special Servicing. Each ranking is based on our assessment of XYZ’s operational infrastructure and portfolio administration capabilities. Opinion Total Forecasted Losses Forecasted Losses from SS Loans Value Deficiency from non-SS Loans Expected Losses from non-SS Loans Historical Losses 19 4 15 12 $53,266,809 $49,169,361 15 $15,787,953 $4,097,448 $20,723,028 4.45 % 4.11 % 1.32 % 0.34 % 1.12 % Delinquency Trigger Cumulative Loss Trigger Opinion We maintain our outlooks across all classes this month. After a 2010 marked by a sharp increase in realized losses, the first eight months of 2011 have seen just three loans liquidate, including two whose losses were limited to special servicing fees. Two of these loans liquidated in July 2011. Foothill Plaza took a ~1% loss which is attributable to special servicing fees. This loan was post-maturity 67% severity, slightly higher than the 54% severity we were projecting. This property was sold via the Auction.com auction of Las Vegas properties. Classes A1A through AAB remain at 'outperform'. Amortization and prepayments have reduced the deal balance by 36% and the senior classes enjoy significantly improved credit support from issuance. We maintain an outlook of 'perform' on class AJ. Most of the pool is stable with fifty-six loans (62% of the pool) operating at a DSCR of 1.25 or better including 49% above a 1.50 coverage. The credit for these classes is bolstered by seven loans (6% of the pool) that have defeased. We continue to hold classes B through P at 'underperform' and interest shortfalls are now affecting tranches up to Class H. 60.00 40.00 30.00 40.00 Threshold Deal 20.00 20.00 Actual Trigger Value Threshold Deal Actual Trigger Value Audits and Compliance In general, the rankings reﬂect our assessment of the following: Sound operational audit programs Highly automated technology, integrated systems Proactive portfolio management processes and procedure Responsive to rating agency requests Low incidence of reporting errors or recalculations to the Trust Conservative advancing procedures Successful resolution activity within special servicing Policies and procedures that effectively manageconﬂicts of interest within special servicing In addition, the company dedicates, in our view, appropriate resources for all portfolio administration functions. It also appropriately segregates duties among cash processing and investor accounting/reporting functions. 10.00 0 Jun–2007 0 Jun–2007 Jun–2009 Jun–2011 Jun–2013 Jun–2015 Jun–2009 Jun–2011 Jun–2013 Jun–2015 3 3 3 New issue CMBS ratings, plus detailed underwriting analysis the lawsuit is unsuccessful. The loss potential is up to $36 million. We continue to monitor the resolution of the Washington Mutual Buildings loan. The collateral was originally 100% occupied by November 2010, the servicer reported that the assets were sold and a principal curtailment of $3.1 million was passed through to bondholders. Outstanding advances were also repaid. The servicer has not passed through any losses and has retained the remainder of the sales proceeds. This could be due to ongoing litigation with the borrower. The loan reverted to full recourse after the 3 3 3 Proprietary default analysis for each RMBS transaction Sample: Data and commentary not representative of final product. 3 Monthly surveillance ratings, analysis, and data available through a web-based CMBS tool The master servicer's watchlist contains nineteen loans totaling $261 million (22% of the pool). We are monitoring twenty-four loans on Five loans (11% of the pool) are specially serviced with a total of $49 million in forecasted losses. The largest forecasted loss is from the aforementioned Washington Mutual Buildings loan. Two loans (3% of the pool) have matured, both of which are speciallyFive loans (8% of the pool) will mature in the next twelve months. Two of those loans are watchlisted and could default at maturity or require a short extension. Security-speciﬁc rating, rating outlook, and loss projection Web interface offers user-deﬁned simulations and sensitivity analysis 3 In-depth analysis of management, organizational structure, and critical functions of each mortgage servicer, loan originator, and third-party service provider Point-in-time ranking plus forecast of future performance During 2010, the company experienced, in our view, signiﬁcant growth in its servicing volume overall. In particular, its primary and master servicing volume increased 25% since 2009, and its special servicing activityincreased 50% since 2009. At year end 2010, it managed to resolve approximately 30% of assets in special servicing. Web Services Feed integrates Morningstar CMBS ratings with third-party systems to support portfolio management, accounting, or compliance Morningstar’s NRSRO ratings, outlooks, and analysis are provided by Morningstar Credit Ratings, LLC. Morningstar Credit Ratings, LLC is a wholly owned subsidiary of Morningstar, Inc., and is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). http://ratingagency.morningstar.com

Table of Contents for the Digital Edition of Morningstar 2011/2012

Morningstar 2011/2012
Table of Contents
Commonwealth Financial Network
The Hartford
ING
Transamerica
Institutional Software
Custom Software and Services
Investment Data, Market Data, and Indexes
Fund, Stock, and Credit Research
Advisory, Retirement, and Portfolio Management Services
Independent Advisor Software and Services
Financial Communications
Investor Websites and Publications

Morningstar 2011/2012

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