While the bulk of the securitized Franchise Mortgage Acceptance Co. (FMAC) loans are being master serviced by GMAC Commercial Mortgage, BNY Asset Solutions is taking the reins on the portion of the portfolio backing two deals wrapped by MBIA.
According to sources at the surety, servicing on the MBIA-wrapped deals was not transferred from FMAC to GMAC, as was the rest of the performing portfolio earlier this year. The transfer to BNY went into effect Friday, Aug. 16, although the parties had signed off on it the week prior. GMAC was in no way party to those deals.
Investors in the senior notes of the wrapped deals are theoretically unaffected by the performance of the collateral. MBIA is guarantying the A classes of FMAC 1995-A and FMAC 1996-A. There are as many as five workouts at varying degrees of seriousness in the 1996 deal, and no problem loans in the 1995 deal.
FMAC itself - or the few former principals still operating the shop under that name - is still the special servicer, retained by GMAC, on the workout loans of the remaining portfolio.
Meanwhile, Moody's Investors Service recently took significant action on FMAC 1998-C, hitting all classes of the deal, including the formerly triple-A seniors. Significantly, Moody's made distinctions among the three class A tranches, nicking each to varying degrees: the A-1 class was lowered to Aa1' from Aaa'; the A-2 class was lowered to A1' from Aaa'; and the A-3 was lowered to Baa2' from Aaa'.
Unlike many ABS transactions, in this FMAC deal losses are not allocated on a pro rata basis within the class A notes, but rather allocated first to the A-3 notes, then to the A-2 notes, and finally to the A-1 notes, Moody's said. In other deals, losses are allocated on a pro rata basis within the class A notes. This alternative structure allows the issuer to issue a sort of super-senior class.
"The increasingly poor performance is causing the market to focus on the structural features of the franchise deals," said Kent Becker, senior vice president at Moody's. "Now investors are calling us to better understand how losses are allocated within the A class notes."
Moody's adds that if the servicer recoups advances, the cash flow could be disrupted all the way to the seniors.
While Fitch Ratings downgraded the sub classes from the same series in January, Fitch has yet to hit the seniors. It's unclear whether or not Fitch takes the same view as Moody's, that the A class can become senior/subordinate within itself.