Moody's Investors Service has taken negative ratings actions on nearly $12 billion in Alternative-A transactions from 2005 and 2006.
The ratings agency announced today that following a Nov. 27 review of Alt-A residential mortgage-backed securities rated in the fourth quarter of 2005 and all of 2006, it downgraded or placed on review for downgrade 1,469 securities.
Excluded from the activity was option adjustable-rate mortgages, which will reportedly be reviewed and rated during the next several weeks.
The actions affected $10.2 billion of 2006 transactions and $1.5 billion of 2005 transactions, the statement said.
"The review was prompted by deteriorating mortgage performance in pools backing transactions issued during this period, resulting from aggressive underwriting combined with a tightened lending market and prolonged home price weakness that is expected to continue," Moody's stated. "The rating actions were based on the resulting updated pool loss expectations when compared to credit enhancement in the deals in the form of available subordination, overcollateralization and excess spread."
Moody's explained that certain Alt-A pools and shelves perform more like prime loans while others "may perform closer to the subprime sector with very sizeable early severe delinquencies."
Lifetime loss estimates were boosted by an average of 110 percent, with estimates increased by as much as 270 over initial expectations on some pools.