The current crisis has drawn into sharp focus concerns that structural features in some securitization transactions may need to be re-assessed to ensure they are adequate in mitigating the impact arising from possible failures of servicers or other transaction parties. Moody's believes that the performance of a securitization transaction depends not only on the underlying collateral performance but also on the effective performance by such transaction parties of their responsibilities. Our November 2009 publication on this topic, Operational Risks in Securitizations to be Revisited, cites several occurrences where nonperformance of a transaction party may have detrimental effects on a transaction's performance regardless of the underlying pool's performance. We refer to this risk as "operational risk,"

In light of this, Moody's published a special report in May 2010, Global Structured Finance Operational Risk Request for Comment, presenting our proposed methodological approach to evaluating the de-linkage of the rating of a structured transaction and the credit quality of important securitization parties. More importantly, the report outlines our fundamental considerations when analysing (i) servicing arrangements (back-up servicer, master servicer, third-party servicer) for 'Aaa'-rated securitizations which feature a true sale of the collateral to an issuing entity, (ii) cash manager/calculation agents when this responsibility is assumed by a third party unrelated to the servicer and (iii) liquidity standards necessary to achieve 'Aaa' ratings. We invite participants in the structured finance market to review and comment on our proposals on operational risk. Comments are welcome through June 15 and should be sent to cpc@moodys.com. The final report is scheduled to be released in July 2010.

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