Fitch Rates Sequoia Mortgage Trust 2012-1, Mortgage Pass-Through Certificates, Series 2012-1

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns the following ratings to Sequoia Mortgage Trust 2012-1, mortgage pass-through certificates, series 2012-1 (SEMT 2012-1):

--$179,733,000 class 1-A1 certificates 'AAAsf'; Outlook Stable;

--$179,733,000 notional class 1-AX certificates 'AAAsf'; Outlook Stable;

--$201,698,000 class 2-A1 certificates 'AAAsf'; Outlook Stable;

--$201,698,000 notional class 2-AX certificates 'AAAsf'; Outlook Stable;

--$11,016,000 class B-1 certificates 'AAsf'; Outlook Stable;

--$8,315,000 class B-2 certificates'Asf'; Outlook Stable;

--$5,197,000 class B-3 certificates 'BBBsf'; Outlook Stable;

--$5,404,000 class B-4 certificates 'BBsf'; Outlook Stable.

The 'AAAsf' rating on the senior certificates reflects the 8.25% subordination provided by the 2.65% class B-1, 2.00% class B-2, 1.25% class B-3, 1.30% non-offered class B-4 and 1.05% non-offered class B-5. The class B-5 is not rated by Fitch.

Fitch's ratings reflect the high quality of the underlying collateral, the strong historical performance of two originators and servicers that represent 66% of the aggregate pool (First Republic Bank and PHH Mortgage Corp.), the clear capital structure and the high percentage of loans reviewed by third party underwriters. In addition, Wells Fargo Bank, N.A. will act as the master servicer and U.S. Bank, N.A. will act as the Trustee for the transaction. For federal income tax purposes, elections will be made to treat the trust as three real estate mortgage investment conduits (REMICs).

SEMT 2012-1 will be Redwood Residential Acquisition Corporation's first transaction of prime residential mortgages in 2012. The certificates are supported by a pool of prime mortgage loans, with 69.5% fixed rate mortgages (FRMs) and 30.5% adjustable rate mortgages (ARMs). The loans are predominantly fully amortizing; however, 22.6% have a 10-year interest-only (IO) period. The aggregate pool included loans originated from First Republic Bank (54.5%), PrimeLending (19.4%), PHH Mortgage Corporation (11.2%), Flagstar Bank, F.S.B. (7.7%), Wintrust (3.4%), Sterling Savings Bank (2.3%), Cole Taylor Bank and GuardHill Financial Corp. (totaling 1.5%).

As of the cut-off date, the aggregate pool consisted of 446 loans with a total balance of $415,728,134, an average balance of $932,126, a weighted average original combined loan-to-value ratio (CLTV) of 64.95%, and a weighted average coupon (WAC) of 4.55%. Rate/Term and cash out refinances account for 50.5% and 6.4% of the loans, respectively. The weighted average original FICO credit score of the pool is 770. Owner-occupied properties comprise 89.7% of the loans. The states that represent the largest geographic concentration are California (48.6%), New York (11%) and Texas (10.8%).

In its cash flow analysis of SEMT 2012-1, Fitch considered recent prepayment performance for both Sequoia-issued transactions and the overall RMBS market, current mortgage rates, the interaction between interest rate movement and prepayment activity in past years, and the substantial percentage of the SEMT 2012-1 pool that contains a prepayment penalty provision (48.8%). As a result, in addition to using a zero voluntary prepayment assumption in its stress scenarios, Fitch utilized CPR vectors that were more representative of current market performance for each mortgage product included in this transaction, with peaks expected to occur near reset periods for most hybrid adjustable rate mortgages (ARMs). For five- and seven-year hybrid ARMs, Fitch assumed a prepayment vector that stabilized at a rate of 20% both prior to and following intermediary apexes at periods 62 and 86, respectively. CPR vectors for fixed-rate products and 10/1 ARMs rose and stabilized at 25%. These curves maintained the general shape of the benchmark CPR assumptions as detailed in Fitch's 'U.S. RMBS Cash Flow Analysis Criteria,' dated July 8, 2011.

Additional detail on the transaction is described in the new issue report 'Sequoia Mortgage Trust 2012-1', published on Jan. 27, 2012.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

In addition to the information sources identified in the criteria listed below, Fitch's analysis incorporated data tapes, due diligence results, deal structure and legal documents from 17g5 website available on www.structuredfn.com.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria', Aug. 4, 2011;

--'Counterparty Criteria for Structured Finance Transactions', March 14, 2011;

--'Criteria for Special-Purpose Vehicles in Structured Finance Transactions', June 13, 2011;

--'U.S. RMBS Rating Criteria', Aug. 15, 2011;

--'U.S. Prime RMBS Loan Loss Model Criteria', Aug. 15, 2011;

--'U.S. RMBS Cash Flow Analysis Criteria', July 8, 2011;

--'U.S. Residential Mortgage Loan Representations and Warranties Criteria', June 30, 2011;

--'U.S. Residential Mortgage Originator Review Criteria', June 30, 2011;

--'U.S. Residential Mortgage Third-Party Loan-Level Review Criteria', June 30, 2011;

--'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria', Jan. 31, 2011;

--'U.S. RMBS Surveillance Criteria', July 8, 2011.

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646569

Counterparty Criteria for Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=605425

Criteria for Special-Purpose Vehicles in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=635249

U.S. RMBS Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646455

U.S. Prime RMBS Loan Loss Model Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648737

U.S. RMBS Cash Flow Analysis Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=639993

U.S. Residential Mortgage Loan Representations and Warranties Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=639992

U.S. Residential Mortgage Originator Review Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=640489

U.S. Residential Mortgage Third-Party Loan-Level Review Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=640472

U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=600065

U.S. RMBS Surveillance Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=640869

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