Delinquency on second mortgages backing residential mortgage-backed securities issued last year has accelerated.
Second liens from the 2006 vintage are defaulting at a significantly higher rate than originally projected, Moody's Investors Service announced Friday.
"Those loans were originated in an environment of aggressive underwriting and lack protection from home owner equity," according to the announcement. "The combination of this risk layering with slowing home price appreciation has caused significant loan performance deterioration and is the primary factor in these rating actions."
The New York-based ratings agency said the performance led to negative ratings actions on 267 transactions securitized last year, including 131 downgrades and 111 deal placed on review for downgrade.
Previously, most of the affected RMBS had ratings of A or lower , the statement said.