Fitch Ratings has affirmed the ratings on the following classes of Chase Education Loan Trust 2007-A (Chase 2007-A) as indicated:
–Class A-3 at ‘AAAsf’; Outlook Stable;
–Class A-4 at ‘AAAsf’; Outlook Stable;
–Class B at ‘Asf’; Outlook Stable;
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral is 100% comprised of Federal Family Education Loan Program (FFELP) loans, with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The U.S. sovereign rating is currently ‘AAA’/Stable Outlook.
Collateral Performance: Fitch assumes a base case default rate of 14.75% and a 44.25% default rate under the ‘AAA’ credit stress scenario. The base case default assumption of 14.75% implies a constant default rate of 2.3% (assuming a weighted average life of 13.0 years) consistent with the trailing-12-month (TTM) average constant default rate utilized in the maturity stresses. Fitch applies the standard default timing curve. The claim reject rate is assumed to be 0.25% in the base case and 2% in the ‘AAA’ case.
The trailing-12-month average of deferment, forbearance, Income-based repayment (prior to adjustment) and constant prepayment rate (voluntary and involuntary) are 7.5%, 4.6%, 6.9% and 10.6%, respectively, which are used as the starting point in cash flow modeling. Subsequent declines or increases are modeled as per criteria. The borrower benefit is assumed to be approximately 0.21%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Fitch applies its standard basis and interest rate stresses to this transaction as per criteria.
Payment Structure: Credit Enhancement (CE) is provided by overcollateralization and excess spread. In addition, the class A notes benefit from subordination provided by the class B notes. As of the September 2016 payment date, total parity is at the release level of 100.00% and senior parity is 105.31%. Cash is being released from the trust given the trust has reached its release level threshold of 100.00% parity.
Maturity Risk: Fitch’s Student Loan ABS (SLABS) cash flow model indicates that the notes are paid in full on or prior to the legal final maturity dates under the commensurate rating scenario
Operational Capabilities: Xerox Education Services, Inc, as the sub-servicer, is responsible for the day-to-day servicing of this trust. Xerox Education Services is an acceptable servicer due to its extensive track record as servicer of FFELP loans.
Criteria Variation
Under the ‘Counterparty Criteria for Structured Finance and Covered Bonds’, dated Sept. 1, 2016, Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty’s creditworthiness. The definition of permitted investments for this deal allows for the possibility of using investments not rated by Fitch, which represents a criteria variation. Since the only available funds to invest are those held in the Collection Account, and the funds can only be invested for a short duration given the payment frequency of the notes, Fitch does not believe such variation has a measurable impact upon the ratings assigned.
RATING SENSITIVITIES
‘AAAsf’ rated tranches of most FFELP securitizations will likely move in tandem with the U.S. sovereign rating, given the strong linkage to the U.S. sovereign by nature of the reinsurance and SAP provided by ED. Sovereign risks are not addressed in Fitch’s sensitivity analysis.
Fitch conducted a CE sensitivity analysis by stressing both the related lifetime default rate and basis spread assumptions. In addition, Fitch conducted a maturity sensitivity analysis by running different assumptions for the IBR usage and prepayment rate. The results below should only be considered as one potential model implied outcome as the transaction is exposed to multiple risk factors that are all dynamic variables.
Credit Stress Rating Sensitivity
–Default increase 25%: class A ‘AAAsf’; class B ‘Asf’
–Default increase 50%: class A ‘AAAsf’; class B ‘Asf’
–Basis Spread increase 0.25%: class A ‘AAAsf’; class B ‘Asf’
–Basis Spread increase 0.50%: class A ‘AAAsf’; class B ‘Asf’
Maturity Stress Rating Sensitivity
–CPR decrease 50%: class A ‘AAAsf’; class B ‘Asf’
–CPR increase 100%: class A ‘AAAsf’; class B ‘AAAsf’
–IBR Usage increase 100%: class A ‘AAAsf’; class B ‘AAAsf’
–IBR Usage decrease 50%: class A ‘AAAsf’; class B ‘AAAsf’
It is important to note that the stresses are intended to provide an indication of the rating sensitivity of the notes to unexpected deterioration in trust performance. Rating sensitivity should not be used as an indicator of future rating performance.}
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
https://www.fitchratings.com/site/re/886006
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 26 Oct 2016)
https://www.fitchratings.com/site/re/888492
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/site/re/883130
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 10 Nov 2016)
https://www.fitchratings.com/site/re/889777
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1016497
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1016497
Endorsement Policy
https://www.fitchratings.com/regulatory
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[Source:-Business Wire]
