Rating Action: Moody’s downgrades Class B-1 from Conseco Finance Home Improvement Loan Trust 2000-E
New York, August 18, 2020 — Moody’s Investors Service, (“Moody’s”) has downgraded the rating of Class B-1 issued by Conseco Finance Home Improvement Loan Trust 2000-E. The collateral backing this deal consists of second lien mortgage loans.
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL430447 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.
The rating downgrade of Class B-1 from Conseco Finance Home Improvement Loan Trust 2000-E is due to the deterioration in deal performance and the reduction in credit enhancement available to this bond. As of the July 2020 commercial patio furniture remittance date, Class B-1 is undercollateralized by $124,401 as losses are not allocated to reduce its balance. Furthermore, since interest accrues on the non-loss adjusted ending balance of Class B-2 and interest and interest shortfalls on Classes B-1 and B-2 are paid from available funds prior to principal on Class B-1, we expect Class B-1 to become further undercollateralized. The action also reflects the recent performance as well as Moody’s updated loss expectations on the underlying pool.
The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Our analysis has considered the effect on the performance of US RMBS from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome commercial patio umbrellas depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.
The principal methodology used in this rating was “US RMBS Surveillance Methodology” published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1231951. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Levels of credit protection that are higher than necessary to protect investors against current expectations of loss could drive the ratings of the subordinate bonds up. Losses could decline from Moody’s original expectations as a result of a lower number of obligor defaults or appreciation in the value of the mortgaged property securing an obligor’s promise of payment. Transaction performance also depends greatly on the US macro economy and housing market.
Levels of credit protection that are insufficient to protect commercial pool furniture investors against current expectations of loss could drive the ratings down. Losses could rise above Moody’s original expectations as a result of a higher number of obligor defaults or deterioration in the value of the mortgaged property securing an obligor’s promise of payment. Transaction performance also depends greatly on the US macro economy and housing market. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance and fraud.
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 this transaction.
For more information please see www.moodys.com.
The List of Affected Credit Ratings announced here are all solicited credit ratings. Additionally, the List of Affected Credit Ratings includes additional disclosures that vary with regard to some of the ratings. Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL430447 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody’s disclosures on the following items:
** Rating Solicitation
** Issuer Participation
** Participation: Access to Management
** Participation: Access to Internal Documents
** Disclosure to Rated Entity ** Endorsement ** Lead Analyst ** Releasing Office
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody’s estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each 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, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s) announced and described above.
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.
Ilana Fried Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Karandeep Bains VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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