Fitch Ratings - New York - 14 Jul 2022: Fitch Ratings has revised the Rating Outlooks on 104 classes from 23 GSE Credit Risk Sharing (CRT) transactions.

104 classes affirmed; Rating Outlooks revised to Stable from Negative.

RATING ACTIONS

Entity / Debt

Rating

Prior

Structured Agency Credit Risk Debt Notes 2016-HQA3

M-3A 3137G0LB3

LT

AAAsf

Affirmed

AAAsf

M-3AF 3137G0LC1

LT

AAAsf

Affirmed

AAAsf

M-3AI 3137G0LD9

LT

AAAsf

Affirmed

AAAsf

Connecticut Avenue Securities, Series 2015-C01

1M-2 30711XAT1

LT

AAAsf

Affirmed

AAAsf

STACR 2016-HQA4

M-3A 3137G0LY3

LT

AAAsf

Affirmed

AAAsf

M-3AF 3137G0MA4

LT

AAAsf

Affirmed

AAAsf

M-3AI 3137G0MB2

LT

AAAsf

Affirmed

AAAsf

Page

of 13

VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Direct Credit Linkage (Positive): On July 8, 2022, Fitch affirmed the U.S. sovereign's 'AAA' Issuer Default Rating (IDR) and revised the Outlook to Stable. Subsequently, on July 11, 2022, Fitch affirmed Fannie Mae's and Freddie Mac's 'AAA' Long-Term IDRs and the Rating Outlooks were revised to Stable from Negative.

GSE CRT transactions have a direct credit linkage to the IDR of Fannie Mae and Freddie Mac respectively, as payments are directly reliant on the liquidity of the GSE. Fannie Mae's and Freddie Mac's Long-Term IDRs and GSRs are directly linked to the U.S. sovereign's Long-Term IDRs, based on Fitch's view of the U.S. government's direct financial support of the two-housing government sponsored enterprises (GSEs).

As of June 23, 2022, 104 GSE CRT classes were subject to Rating Outlook cap of 'AAAsf'/Negative based on the IDR of the GSEs at the time of the review, see 'Fitch Ratings Reviews 66 Credit Risk Transfer Transactions' (June 2022). Since the review, performance remains stable, and there are no changes to Fitch's view on the collateral or structural credit considerations. To align the credit linkage on the 104 GSE-CRT classes, Fitch revised the Outlook to Stable.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

This defined negative stress sensitivity analysis demonstrates how the ratings would react to steeper market value declines (MVDs) at the national level. The analysis assumes MVDs of 10.0%, 20.0% and 30.0%, in addition to the model projected decline at the base case. This analysis indicates that there is some potential rating migration with higher MVDs compared with the model projection.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

This defined positive rating sensitivity analysis demonstrates how the ratings would react to positive home price growth with no assumed overvaluation. The analysis assumes positive home price growth of 10.0%. Excluding the senior classes already rated 'AAAsf' as well as classes that are constrained due to qualitative rating caps, the analysis indicates there is potential positive rating migration for all of the other rated classes.

This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. The modeling process uses the modification of these variables to reflect asset performance in up and down environments. The results should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. It should not be used as an indicator of possible future performance. For enhanced disclosure of Fitch's stresses and sensitivities, please refer to U.S. RMBS Loss Metrics.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

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.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

All deals within this review have an ESG credit relevance score of '4'. Certain drivers of these ratings include exposure to accessibility to affordable housing and exposure to compliance risks including fair lending practices, mis-selling, repossession/foreclosure practices, consumer data protection (data security). This has a negative impact on the deals' credit profiles and is relevant to the ratings in conjunction with other factors.

For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

Additional information is available on www.fitchratings.com

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