Over $30 Billion in Subprime Downgrades

Changes Fitch Ratings made to its subprime loss forecasting assumptions that better capture deteriorating performance from residential mortgage-backed securities pools issued from 2005 to 2006 affected over $30 billion in classes of subprime securities.

Among the actions were downgrades to $1.4 billion in classes from four NovaStar subprime deals issued in 2006, with $0.5 billion placed on Rating Watch Negative. Delinquency of at least 60 days ranges from 20.7 percent to 22.7 percent while expected cumulative losses range from 10.6 percent to 13.6 percent.

Two BNC deals from 2006 were also impacted, with nearly $1.0 billion in classes downgraded and $0.6 billion placed on negative watch. Delinquency is 24.3 percent to 24.8 percent and cumulative losses are expected to be 21.3 percent to 22.8 percent.

SAIL mortgage pass-through certificates from 2006 saw $5.5 billion downgraded and $2.5 billion on ratings watch because of Fitch’s updates. Delinquency on those deals ranges from 26.5 percent to 33.3 percent and expected cumulative losses are between 13.3 percent and 26.7 percent.

Fitch’s changes affected eight CSFB HEAT 2006 deals, with downgrades on $3.2 billion in classes and $1.4 billion in classes placed on watch. Delinquency ranges from 19.8 percent to 26.7 percent and cumulative losses of between 10.7 percent and 25.1 percent are expected.

Soundview Home Loan Trust mortgage pass-through certificate transactions had $1.0 billion downgraded and $0.6 billion placed on ratings watch because of Fitch’s updates. Those deals have delinquency ranging from 16.3 percent to 23.7 percent and expected cumulative losses of between 15.8 percent and 22.7 percent.

A 2006 GE-WMC issuance saw $0.6 billion in classes downgraded due to Fitch’s changes and another $0.3 billion in classes placed on ratings watch. Delinquency on that deal is 26.7 percent while cumulative expected losses are 25.9 percent.

Classes totaling $0.7 billion from two 2006 UBS Mortgage Asset Securitization Transaction RMBS were downgraded due to Fitch’s updates while another $0.1 billion in classes were placed on ratings watch. Delinquency on those deals is 27.6 percent and 28.0 percent, while cumulative losses are 14.5 percent and 26.4 percent.

Classes amounting to $6.2 billion on 14 SASCO mortgage pass-through certificates were downgraded and $2.7 billion in classes were placed on Rating Watch Negative, also because of Fitch’s changes. The transactions have 60-day delinquency ranging from 13.8 percent to 30.2 percent and expected cumulative losses of between 6.5 percent and 40.8 percent.

The subprime updates left $0.4 billion in classes of two 2006 Citigroup Mortgage Loan Trust mortgage pass-through certificate transactions downgraded and another $0.2 billion on ratings watch by Fitch. Delinquency is 31.4 percent and 32.6 percent, while expected cumulative losses are 14.9 percent and 18.1 percent.

Two Renaissance mortgage pass-through certificates deals from 2006 saw $0.6 billion in classes downgraded by Fitch and $0.4 billion on ratings watch. Delinquency of at least 60 days is 19.5 percent and 20.0 percent, and cumulative losses are expected at 12.5 percent and 18.2 percent.

Fitch downgraded $11.3 billion in classes from 16 Morgan Stanley transactions from 2006 as result of its updates and put $4.0 billion on Rating Watch Negative. Delinquency on those deals ranges from 23.6 percent to 32.1 percent, while cumulative expected losses are between 11.9 percent and 28.8 percent.

Moody’s Investors Service cited an analysis of credit enhancement provided by subordination, overcollateralization and excess spread relative to expected losses in its downgrade of two classes and placing of review of four classes from Aames Mortgage Trust 2002-1, a subprime deal. Four classes from series 2005-1 were also placed on review.

Eighteen tranches from 4 subprime deals issued by Fieldstone Mortgage Investment Trust in 2004 and 2005 were downgraded by Moody’s based on the analysis of the credit enhancement provided by subordination, overcollateralization and excess spread relative to expected losses.

An erosion of overcollateralization led Moody’s to downgrade 35 certificates and place 9 certificates on review of First Franklin Mortgage Loan Trust subprime deals from 2002, 2003 and 2004.

Losses in excess of available spreads caused Moody’s to downgrade two certificates and place another four on review from two 2005 GreenPoint Mortgage Funding Trust deals backed by home equity line-of-credit loans.

Moody’s placed three classes of RAAC Series 2004-SP1, a scratch and dent deal, on watch for possible downgrade because the amount of projected available credit enhancement has been reduced from a significant buildup of delinquent loans.

Fitch said it downgraded $0.2 billion in classes from five second lien Terwin Mortgage Trust mortgage pass-through certificate transactions issued in 2005 and 2006 based on deterioration in the relationship between credit enhancement and expected losses, and continued poor loan performance and home price weakness. Delinquency on those deals range from 11.4 percent to 21.6 percent and cumulative expected losses are from 12.5 percent to 56.0 percent.

Similar reasoning was cited for downgrades to $0.3 billion in classes of three second lien Soundview Home Loan Trust mortgage pass-through certificate transactions issued in 2005 and 2006. Delinquency of at least 60 days ranges from 14.9 percent to 22.5 percent and cumulative losses expected are between 14.6 percent and 41.8 percent.

J.P. Morgan, Series 2001-CIBC1 saw two classes for $20.3 million downgraded due to the increase in specially serviced assets and projected losses, Fitch reported. One class of Banc of America Large Loans Inc.’s commercial mortgage pass-through certificates, series 2004-BBA4, was downgraded.

Fitch announced it upgraded two classes for $26 million from GMAC Commercial Mortgage Securities 2001-C1, reflecting additional defeasance and pay down since its rating action.

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: mtgsam@aol.com