Fitch to rate Sequoia Mortgage Trust 2013-4

Global rating agency Fitch expects to rate Sequoia Mortgage Trust 2013-4 (SEMT 2013-4).

High-Quality Mortgage Pool: The collateral pool consists primarily of 30-year fixed-rate fully documented loans to borrowers with strong credit profiles, low leverage, and substantial liquid reserves. The majority of the loans are fully amortizing, with only nine loans (2.2% of the pool) having a 10-year interest-only (IO) period. Third-party loan-level due diligence was conducted on approximately 92% of the overall pool, and Fitch believes the results review generally indicate underwriting controls.

Originators with Limited Performance History: Approximately 89% of the pool was originated by lenders with limited non-agency performance history. While the significant contribution of loans from these originators is a concern, Fitch believes the lack of performance history is partially mitigated by the 100% third-party diligence conducted on these loans that resulted in immaterial findings. Fitch also considers the credit enhancement (CE) on this transaction sufficient to miti- of the strong gate the originator risk.

Geographically Diverse Pool: The overall geographic diversity is in line with other SEMT transactions. The percentage of the top three metropolitan statistical areas (MSA) is 25%, the second lowest concentration to date. The agency applied a 1.05x default penalty to the pool to account for the geographic concentration risk.

Transaction Provisions Enhance Performance: As in other recent SEMT transactions rated by Fitch, SEMT 2013-4 contains binding arbitration provisions that may serve to provide timely resolution to represen- tation and warranty disputes. In addition, all loans that become 120 days or more delinquent will be reviewed for breaches of representations and warranties.

Fitch’s analysis incorporates sensitivity analyses to demonstrate how the ratings would react to steeper market value declines (MVDs) than assumed at both the metropolitan statistical area ( MSA) and national levels. The implied rating sensitivities are only an indication of some of the potential outcomes and do not consider other risk factors that the transaction may become exposed to or be considered in the surveillance of the transaction.

Fitch conducted sensitivity analysis on areas where the model projected lower home price declines than that of the overall collateral pool. The model currently projects sustainable MVDs (sMVDs) at the MSA level. For one of the top 10 regions, Fitch’s sustainable home price (SHP) model does not project declines in home prices and for another, the projected decline is less than 2.00%. These regions are Chicago-Joliet-Naperville in Illinois (4.2%) and Cambridge-NewtonFramingham in Massachusetts (4.6%).