Alt-A Performance Continues Deterioration

Today, higher than anticipated rates of delinquency, foreclosure, and real estate owned in underlying collateral relative to credit enhancement levels resulted in Moody’s Investors Service announcing negative ratings actions on 51 Alt-A deals issued in 2007. The re-ratings also reflected Moody’s updated methodology to non-delinquent portions.

Thirty-one of the affected deals were backed by first lien, adjustable and fixed Alt-A mortgages. Six of these deals issued by Structured Adjustable Rate Mortgage Loan Trust saw nine tranches downgraded and 18 placed under review for possible downgrade, five Lehman XS transactions had ratings lowered on 43 tranches and face potential downgrades on 31 other classes, and five deals from Washington Mutual saw 16 tranches downgraded and 10 placed on review for possible downgrade.

Four Bank of America transactions saw 16 tranches downgraded and 14 facing possible downgrade, three deals by MASTR Adjustable Rate Mortgages Trust had 14 classes downgraded and seven facing potential downgrades, two J.P. Morgan Alternative Loan Trust deals had 10 classes downgraded and nine facing potential lower ratings, and two TBW Mortgage-Backed Trust deals had 10 tranches downgraded and two classes facing possible lower ratings. Additionally, three deals issued by Nomura Asset Acceptance Corp., Alternative Loan Trust and one by Nomura Home Equity Loan, Inc., Home Equity Loan Trust, saw downgrades on 25 tranches and potential lower ratings on 20 other tranches.

Of 17 transactions backed by option Alt-A ARMs, 11 were issued by WaMu and had 61 tranches downgraded, with 12 of them being within the 16 tranches that were placed under review for possible downgrade. Three deals from IndyMac received lower ratings on nine tranches, two deals issued by Chevy Chase Funding LLC had 10 tranches placed on review for possible downgrade, and Alliance Securities Corp, Series 2007-OA1 saw class M-9 downgraded, Moody’s reported.

The remaining three deals of the total 51 were backed by Alt-A and subprime mortgages and issued by Terwin Mortgage Trust. These transactions received lower ratings on nine tranches and had three classes placed under review for possible downgrade, Moody’s reported.

And 14 deals issued by Ameriquest Mortgage Securities Inc. and Argent Securities Inc. in 2002 and 2003 saw Moody’s knock down ratings on 37 certificates and place 12 on review for possible downgrade. Moody’s said its actions on these subprime deals, of which one is backed by “scratch and dent” seasoned and reperforming loans, are based on analysis of current credit enhancement levels provided by excess spread, overcollateralization, and subordinate classes relative to stressed estimates of future losses.