Moody’s takes actions on Bayview’s small business ABS

Approximately $1.3 billion of asset-backed securities affected

New York, January 14, 2016 — Moodys Investors Service has upgraded the ratings on twelve tranches
from five transactions, and downgraded the ratings on fifty-three
tranches from fifteen transactions of small business loans issued by Bayview
Commercial Asset Trusts and Bayview Commercial Mortgage Pass-Through
Trusts. The loans are secured primarily by small commercial real
estate properties in the US owned by small businesses
and investors.

Complete rating actions as follow:

Issuer: Bayview Commercial Asset Trust 2003-2

Cl. A, Downgraded to Baa1 (sf); previously on May 31,
2012 Downgraded to A3 (sf)

Cl. IO, Downgraded to B3 (sf); previously on May 31,
2012 Downgraded to B2 (sf)

Issuer: BayView Commercial Asset Trust 2004-1

Cl. A, Upgraded to Aa1 (sf); previously on Jan 23,
2015 Upgraded to Aa2 (sf)

Cl. M-1, Upgraded to Aa2 (sf); previously on
Jan 23, 2015 Upgraded to A1 (sf)

Cl. M-2, Upgraded to A2 (sf); previously on Jan
23, 2015 Upgraded to A3 (sf)

Cl. B, Upgraded to Baa1 (sf); previously on Jan 23,
2015 Upgraded to Baa3 (sf)

Issuer: BayView Commercial Asset Trust 2004-2

Cl. M-2, Upgraded to Baa1 (sf); previously on
May 31, 2012 Confirmed at Baa2 (sf)

Cl. B-1, Upgraded to Ba1 (sf); previously on
Jan 23, 2015 Upgraded to Ba2 (sf)

Issuer: Bayview Commercial Asset Trust 2004-3

Cl. M-1, Upgraded to A1 (sf); previously on Jan
23, 2015 Upgraded to A2 (sf)

Cl. M-2, Upgraded to A3 (sf); previously on May
31, 2012 Downgraded to Baa1 (sf)

Cl. B-1, Upgraded to Baa3 (sf); previously on
May 31, 2012 Downgraded to Ba1 (sf)

Issuer: BayView Commercial Asset Trust 2005-3

Cl. A-1, Downgraded to Baa1 (sf); previously
on Jan 23, 2015 Downgraded to A3 (sf)

Cl. A-2, Downgraded to Baa1 (sf); previously
on Jan 23, 2015 Downgraded to A3 (sf)

Cl. M-1, Downgraded to Baa3 (sf); previously
on Jan 23, 2015 Downgraded to Baa2 (sf)

Cl. M-2, Downgraded to Ba1 (sf); previously on
Jan 23, 2015 Downgraded to Baa3 (sf)

Cl. M-3, Downgraded to Ba2 (sf); previously on
Jan 23, 2015 Downgraded to Ba1 (sf)

Issuer: BayView Commercial Asset Trust 2006-1

Cl. A-1, Downgraded to Baa2 (sf); previously
on Jan 23, 2015 Downgraded to A3 (sf)

Cl. A-2, Downgraded to Baa2 (sf); previously
on Jan 23, 2015 Downgraded to A3 (sf)

Cl. M-1, Downgraded to Ba1 (sf); previously on
Jan 23, 2015 Downgraded to Baa3 (sf)

Cl. M-2, Downgraded to Ba2 (sf); previously on
Jan 23, 2015 Downgraded to Ba1 (sf)

Cl. M-3, Downgraded to Ba3 (sf); previously on
Jan 23, 2015 Downgraded to Ba2 (sf)

Cl. M-4, Downgraded to B1 (sf); previously on
Jan 23, 2015 Downgraded to Ba3 (sf)

Cl. M-5, Downgraded to B2 (sf); previously on
Jan 23, 2015 Downgraded to B1 (sf)

Cl. M-6, Downgraded to B3 (sf); previously on
Jan 23, 2015 Downgraded to B2 (sf)

Cl. B-1, Downgraded to Caa1 (sf); previously
on Jan 23, 2015 Downgraded to B3 (sf)

Cl. B-2, Downgraded to Caa2 (sf); previously
on Jan 23, 2015 Downgraded to Caa1 (sf)

Issuer: Bayview Commercial Asset Trust 2006-3

Cl. M-1, Downgraded to B3 (sf); previously on
May 31, 2012 Downgraded to B2 (sf)

Cl. M-2, Downgraded to Caa2 (sf); previously
on May 31, 2012 Downgraded to B3 (sf)

Cl. M-3, Downgraded to Caa3 (sf); previously
on May 31, 2012 Downgraded to Caa1 (sf)

Issuer: Bayview Commercial Asset Trust 2006-4

Cl. A-1, Downgraded to A3 (sf); previously on
May 31, 2012 Downgraded to A1 (sf)

Cl. A-2, Downgraded to Ba3 (sf); previously on
Jan 23, 2015 Downgraded to Ba2 (sf)

Cl. M-1, Downgraded to B3 (sf); previously on
Sep 13, 2012 Downgraded to B2 (sf)

Cl. M-2, Downgraded to Caa2 (sf); previously
on Jan 23, 2015 Downgraded to Caa1 (sf)

Cl. M-3, Downgraded to Caa3 (sf); previously
on Jan 23, 2015 Downgraded to Caa2 (sf)

Issuer: Bayview Commercial Asset Trust 2007-2

Cl. A-2, Downgraded to B2 (sf); previously on
May 31, 2012 Downgraded to B1 (sf)

Cl. M-1, Downgraded to Caa2 (sf); previously
on Jan 23, 2015 Downgraded to Caa1 (sf)

Issuer: Bayview Commercial Asset Trust 2007-3

Cl. A-1, Downgraded to A3 (sf); previously on
May 31, 2012 Downgraded to A1 (sf)

Issuer: Bayview Commercial Asset Trust 2007-4

Cl. A-1, Downgraded to B1 (sf); previously on
Mar 28, 2014 Downgraded to Ba2 (sf)

Cl. A-2, Downgraded to Caa2 (sf); previously
on Mar 28, 2014 Downgraded to B3 (sf)

Cl. M-1, Downgraded to C (sf); previously on
Jan 23, 2015 Downgraded to Ca (sf)

Issuer: Bayview Commercial Asset Trust 2007-6

Cl. A-4B, Downgraded to C (sf); previously on
Jan 23, 2015 Downgraded to Caa3 (sf)

Issuer: Bayview Commercial Asset Trust 2008-1

Cl. A-3, Upgraded to Aa2 (sf); previously on
Oct 31, 2013 Downgraded to Baa1 (sf)

Cl. A-4, Downgraded to B2 (sf); previously on
May 31, 2012 Downgraded to B1 (sf)

Cl. M-1, Downgraded to Caa1 (sf); previously
on May 31, 2012 Downgraded to B3 (sf)

Cl. M-2, Downgraded to C (sf); previously on
Oct 31, 2013 Downgraded to Caa2 (sf)

Issuer: Bayview Commercial Asset Trust 2008-2

Cl. A-4A, Downgraded to B1 (sf); previously on
May 31, 2012 Downgraded to Ba2 (sf)

Cl. A-4B, Downgraded to B1 (sf); previously on
May 31, 2012 Downgraded to Ba2 (sf)

Cl. M-1, Downgraded to Caa2 (sf); previously
on Jan 23, 2015 Downgraded to B3 (sf)

Cl. M-2, Downgraded to C (sf); previously on
Jan 23, 2015 Downgraded to Caa3 (sf)

Issuer: Bayview Commercial Asset Trust 2008-3

Cl. A-4, Downgraded to B1 (sf); previously on
May 31, 2012 Downgraded to Ba2 (sf)

Cl. M-1, Downgraded to B3 (sf); previously on
May 31, 2012 Downgraded to B1 (sf)

Cl. M-2, Downgraded to Caa2 (sf); previously
on Oct 31, 2013 Downgraded to B3 (sf)

Cl. M-3, Downgraded to C (sf); previously on
Jan 23, 2015 Downgraded to Caa3 (sf)

Issuer: Bayview Commercial Asset Trust 2008-4

Cl. M-1, Downgraded to Ba3 (sf); previously on
May 31, 2012 Downgraded to Ba2 (sf)

Cl. M-2, Downgraded to B2 (sf); previously on
May 31, 2012 Downgraded to B1 (sf)

Cl. M-3, Downgraded to B3 (sf); previously on
May 31, 2012 Downgraded to B2 (sf)

Cl. M-4, Downgraded to Caa2 (sf); previously
on May 31, 2012 Downgraded to B3 (sf)

Cl. M-5, Downgraded to Ca (sf); previously on
Jan 23, 2015 Downgraded to Caa3 (sf)

Issuer: BayView Commercial Mortgage Pass-Through Trust 2006-SP1

Cl. M-1, Upgraded to Aaa (sf); previously on
Mar 28, 2014 Upgraded to Aa2 (sf)

Cl. M-2, Upgraded to Aa3 (sf); previously on
Mar 28, 2014 Upgraded to A2 (sf)

Cl. B-2, Downgraded to Caa1 (sf); previously
on May 31, 2012 Downgraded to B3 (sf)

Issuer: Bayview Commercial Mortgage Pass-Through Trust 2006-SP2

Cl. A, Downgraded to Baa3 (sf); previously on Jan 23,
2015 Downgraded to Baa1 (sf)

Cl. M-1, Downgraded to Ba2 (sf); previously on
Jan 23, 2015 Downgraded to Ba1 (sf)

Cl. M-2, Downgraded to B1 (sf); previously on
Jan 23, 2015 Downgraded to Ba3 (sf)

Cl. M-3, Downgraded to B2 (sf); previously on
Jan 23, 2015 Downgraded to B1 (sf)

RATINGS RATIONALE

The upgrades related to the 2004-1, 2004-2 and 2004-3
transactions were primarily prompted by a build-up in credit enhancement
due to increasing reserve account balances relative to outstanding pool
balances, availability of excess spread and relatively stable collateral
performance. Available amounts in reserve accounts for the 2004-1,
2004-2 and 2004-3 transactions increased to 30%,
22% and 18% of outstanding pool balances, respectively,
as of the December 2015 distribution date from 23%, 17%
and 15% of the outstanding pool balance as of the December 2014
distribution date. The Class M-1 and M-2 tranches
from the 2006-SP1 transaction were upgraded due to increasing credit
enhancement, leading to improved loss coverage. The upgrade
of the 2008-1 Class A-3 tranche was due to the repayment
of accrued interest shortfall and the strong coverage of expected pool
losses by credit enhancement; as well as Moodys expectation
that no further interest shortfalls will be accrued for this tranche.

The downgrades are primarily due to continued realized losses on the underlying
pools in combination with depleted credit enhancement from overcollateralization
and subordinate tranches. For the 2007-6 transaction,
the downgrade of the A-4B tranche is largely driven by a correction
to the credit enhancement to account for the sequential payment of the
A-4A and A-4B notes. Over the past year, cumulative
net losses for Bayview 2005-3, 2006-1, 2006-SP1,
2006-3, 2006-4, 2006-SP2, 2007-2,
2007-3, 2007-4, 2007-6, 2008-1,
2008-2, 2008-3 and 2008-4 increased to a range
of 16% to 32% as of the December 2015 distribution date,
from a range of 15% to 30% as of the December 2014 distribution
date, in each case as a percent of the original pool balance.
For Bayview 2003-2, cumulative net losses have increased
from 4 to 5% over the past year. As a result of continuing
losses, Moodys believes that a full principal payment to lower
subordinate tranches which have been downgraded to Ca or C ratings is
unlikely.

The rating actions on certain of these transactions also took into account
corrections to the computation of excess spread. Previously,
the computation of excess spread overstated the lifetime excess spread
available for the 2003-2, 2004-1, 2007-4,
2007-6, 2008-1, 2008-2, 2008-3,
and 2008-4 transactions. These computation errors were mainly
due to the cash flows to the IO and SIO notes being improperly accounted
for in the excess spread calculation. The correction of the error
had a negative impact for 2004-1, but this was outweighed
by the deals increasing reserve account balance relative to the
outstanding pool balance, leading to upgrades for the transaction.
The previous rating action on the 2007-2 transaction was based
on analysis that used an overstated weighted average bond coupon,
thereby understating the lifetime spread available to that transaction.
While the correction of this error had a positive impact, this was
overridden by the negative effect of the continued realized losses for
the 2007-2 transaction as discussed above.

For the Bayview small business ABS collateral pools, excluding the
Canadian transaction, delinquencies of 60 days or more, including
loans in foreclosure and REO, have improved slightly with the average
deal experiencing a decrease in delinquencies of 0.7% over
the past 12 months. Delinquencies of 60 days or more ranged from
11% to 22% of the outstanding pool balances as of December
2015 distribution date, versus 10% to 26% as of December
2014 distribution date. Average severities are still high in the
70% to 80% range.

A key factor in Moodys loss projections is its evaluation and treatment
of modified loans. Bayview Loan Servicing has modified approximately
41% to 69% of the loan balance classified as current as
of November 2015 in the deals affected by todays rating actions.
Most of these loans were delinquent before modification and are therefore
more likely to become delinquent than non-modified loans in the
future. Moodys evaluation of loan-level data indicates
that these current, modified loans are two to three times as likely
to become defaulted compared to current, non-modified loans.
Moodys accounted for this likelihood in its loss projection methodology
described in the Methodology section below.

The current ratings reflect the likelihood of certificateholders recovering
outstanding credit risk shortfalls for the bonds on which they exist.
Even though available credit enhancement to a certificate may be high,
recovery of interest shortfalls may take several years for rated notes
with outstanding shortfalls. Transactions with ratings that continue
to be impacted by interest shortfalls include Bayview 2007-4,
2007-5, 2007-6, 2008-2, 2008-3,
and 2008-4.

METHODOLOGY

The principal methodology used in these ratings was Moodys Global Approach
to Rating SME Balance Sheet Securitizations published in October 2015.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.

Moodys evaluated the sufficiency of credit enhancement by first analyzing
the loans to determine an expected remaining net loss for each collateral
pool. Moodys compared these expected net losses with the available
credit enhancement, consisting of overcollateralization, subordination,
excess spread, and a reserve account if any. For the lower
subordinate tranches, Moodys identified relatively near term future
write-downs by examining the expected losses from loans in foreclosure
and REO in relation to a tranches available credit enhancement.

To forecast expected losses for the Bayview small business ABS collateral
pools, Moodys evaluated each pool according to the delinquency
and modification status of the underlying loans, applying different
roll rates to default to loans according to each status. In order
to determine the roll rates to default, Moodys assessed roll
rate behavior according to their delinquency status.

This approach leads to a wide range of lifetime loan default rates depending
on vintage, modification status and delinquency status. For
modified current loans, the remaining lifetime default rate assumption
was 15% to 20%, two to three times the remaining lifetime
default rate estimate of 5% to 8% for non-modified
current loans. For delinquent loans, the lifetime default
rates range from 30% to 75%. For loans in foreclosure
or REO, the lifetime default rates are roughly 70% to 100%.

For loss severities, Moodys generally applied 75% severities
for both modified and non-modified loans.

Factors that would lead to an upgrade or downgrade of the rating:

Up

Levels of credit protection that are higher than necessary to protect
investors against expected losses could drive the ratings up. Losses
below Moodys expectations as a result of a decrease in seriously delinquent
loans or lower severities than expected on liquidated loans. Reimbursement
of interest shortfalls more rapidly than anticipated when applicable.

Down

Levels of credit protection that are insufficient to protect investors
against expected losses could drive the ratings down. Losses above
Moodys expectations as a result of an increase in seriously delinquent
loans and higher severities than expected on liquidated loans.
Reimbursement of interest shortfalls slower than anticipated when applicable.

Other methodologies and factors that Moodys may have considered in the
process of rating these transactions appear on Moodys website.
More information on Moodys analysis of this transaction is available
at www.moodys.com.

REGULATORY DISCLOSURES

For further specification of Moodys key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.

The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moodys estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.

Moodys did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moodys
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support providers credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.

The person who approved the Bayview Commercial Asset Trust 2004-2,
2004-3, 2005-3, 2006-1, 2006-3,
2006-4 and 2007-3. BayView Commercial Mortgage Pass-Through
Trust 2006-SP1 and 2006-SP2. Amy Tobey, VP-Sr
Credit Officer/Manager, Structured Finance Group Structured Finance
Group, Moodys Investors Service, Inc., JOURNALISTS:
212-553-0376, SUBSCRIBERS: 212-553-1653.

The person who approved the Bayview Commercial Asset Trust 2003-2,
2004-1, 2007-2, 2007-4, 2007-6,
2008-1, 2008-2, 2008-3 and 2008-4.
Dev Debashish Chatterjee, Managing Director, Structured Finance
Group, Moodys Investors Service, Inc., JOURNALISTS:
212-553-0376, SUBSCRIBERS: 212-553-1653.

Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.

Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moodys legal entity that has issued
the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.

Thomas Meehan
Analyst
Structured Finance Group
Moodys Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Amelia (Amy) Tobey
VP – Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moodys Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moodys takes actions on Bayviews small business ABS