Positive Ratings Actions Emerge

Ten Countrywide Alt-A transactions issued in 2005 through 2007 received downgrades from Fitch Ratings on $238 million in outstanding certificates and had $254 million in classes placed on Rating Watch Negative, according to a news release. The ratings agency said the negative actions were done to reflect deterioration in the relationship between credit enhancement and loss expectation. The transactions are seasoned from seven to 28 months and the pool factors, or current loan principal outstanding as a percentage of the initial pool, range from 77 percent to 96 percent.

The same reason for those negative actions was also cited by Fitch for downgrades on $22 million of four GS Mortgage Securities deals issued in 2006, of which 1.18 percent to 12.75 percent of the pools are more than 60 days delinquent; $20 million of IndyMac’s RAST 2007-A3; nearly $31 million or nine outstanding certificates of RBSGC Mortgage Loan Trust deals issued in 2007; and close to $18 million of WFALT 2007-PA1. The transactions of the last two issuers are primarily backed by conventional, fixed-rate mortgages, according to announcements.

Moody’s Investors Service announced negative ratings actions for two issuers of deals backed by first-lien, Alt-A loans as a result of higher-than-anticipated rates of delinquency in the underlying collateral relative to credit enhancement levels, plus updated methodology on the non-delinquent portion of the deals. Four tranches of Lehman Mortgage Trust 2007-5 received downgrades, while four deals issued by Merrill Lynch in 2007 saw worse ratings on 19 tranches and face potential downgrades on 23 tranches.

The Class M-3 issued by Amortizing Residential Collateral Trust, Series 2002-BC10, had its rating knocked down by Moody’s after analysis of credit enhancement provided by subordination, overcollateralization, excess spread and mortgage insurance relative to expected losses. The subprime loan-backed deal has already stepped down. The small pool factor of less than 5 percent combined with a pipeline of loans in foreclosure and REO has diminished the class’s protection — to $143,158 versus a balance of $3,165,042 in foreclose and REO as of last month, Moody’s said.

Downgrades could possibly occur on two classes reportedly issued by Merrill Lynch Mortgage Investors Trust 2003-OPT1, collateralized by subprime originations of Option One Mortgage Corp., as a result of Moody’s analysis of credit enhancement provided by subordination, overcollateralization, lender-paid mortgage insurance and excess spread relative to the expected loss.

Minus the lender-paid insurance portion, that was also the reason Moody’s cited for downgrades and placement on review for potential downgrades on 18 classes of seven subprime deals issued by Long Beach Mortgage Co. in 2000 through 2003, and downgrades on three classes issued by subprime Merrill Lynch Mortgage Investors Inc. 2003-WMC1.

In contrast to all the negative ratings actions, Fitch said it removed 87 classes of residential mortgage-backed securities from Rating Watch Negative because they are supported by a financial guaranty policy provided by MBIA. The removal followed a $1 billion capital infusion at MBIA that led Fitch to affirm the AAA Insurance Financial Strength rating of MBIA and its financial guaranty insurance subsidiaries.