$17 Billion in Subprime RMBS Downgraded

Fitch Ratings announced downgrades to $5.0 billion in classes from five Fremont Home Loan Trust mortgage pass-through certificate transactions issued in 2006 based on deterioration in the relationship between credit enhancement and expected losses, continued poor loan performance and home price weakness. Delinquency of at least 60 days on the Fremont classes ranges from 21.6 percent to 34.2, while cumulative expected losses are from 28.0 percent to 61.7 percent.

Two Wells Fargo Home Equity Trust deals from 2006 saw $0.2 billion in classes downgraded based on changes Fitch made to its subprime loss forecasting assumptions. The transactions have delinquency of 17.1 percent and 17.9 percent, while expected cumulative losses are at 11.9 percent and 16.8 percent.

Updates to Fitch’s assumptions also led to downgrades to 12 classes for $0.6 billion of classes from Centex HELT 2006-A and the placement of $0.3 billion in classes on Ratings Watch Negative.

Securitized Asset Backed Receivables LLC Trust deals from 2006 had $6.2 billion in classes downgraded and $2.4 billion placed on watch because of Fitch’s updates. Delinquency on the transactions ranges from 23.2 percent to 35.1 percent while expected remaining cumulative losses are between 5.1 percent and 31.6 percent.

Additionally, $1.3 billion in classes from Ixis Real Estate Capital Trust transactions issued in 2006 were downgraded by Fitch as a result of its changes and $0.8 billion in classes remain on watch. 60-day delinquency on the Ixis deals ranges from 30.5 percent to 33.5 percent while cumulative expected losses are from 17.9 percent to 25.6 percent.

And the updated assumptions left $2.2 billion in classes from three Societe Generale Mortgage Securities Trust mortgage pass-through certificate transactions downgraded while another $0.8 billion was placed or remains on Rating Watch Negative. Delinquency was between 24.2 percent and 37.3 percent, while expected cumulative losses were in the range of 24.3 percent to 28.4 percent.

A 2006 Saxon deal with 19.0 percent delinquency and 13.0 percent in expected losses saw $0.2 billion in classes downgraded, also because of Fitch’s updates.

Fitch also downgraded $2.1 billion in classes from 5 Nomura deals from 2006 and placed $1.3 billion in classes on ratings watch, attributing the move to its changes. Delinquency on the Nomura deals ranges from 14.1 percent to 37.1 percent, and cumulative expected losses are between 11.0 percent and 32.0 percent.

Moody’s Investors Service announced today that only “a relatively small number of banks and securities firms” will be significantly impacted by a deterioration in the credit risk profiles of financial guarantors. Though its analysis is still underway, the New York-based firm said nearly all of the underlying assets were investment grade quality when they were guaranteed, adding that the guarantors should still be able to meet guarantees despite any deterioration ins ratings.

Should guarantors or there ratings deteriorate further, Moody’s expects holders “of CDS on ABS CDOs purchased from financial guarantors as hedges” will be exposed to the biggest losses.

“Our initial assessment has identified CDS hedges with financial guarantors on ABS CDOs totaling approximately $120 billion,” Moody’s said. “Those banks holding securities backed by subprime, Alt-A, and 2nd Lien mortgage or home equity loans and wrapped by financial guarantors may also face impairment.”

On the commercial MBS side, three Classes for $30.5 million of Merrill Lynch Financial Assets Inc. Commercial Mortgage Pass-Through Certificates, Series 2002-Canada, were upgraded by Moody’s.

The ratings agency also upgraded five classes for $84.7 million of GE Capital Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2003-C1.

Moody’s downgraded three classes for $30.9 million of LB Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 1999-C1. Also downgraded was one class for $28.1 million of GS Mortgage Securities Corporation II, Series 1998-GL II.

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

e-mail: mtgsam@aol.com