Downgrades Pile Up

More fallout has resulted from changes to Fitch Ratings’ subprime loss forecasting assumptions.

Eight Securitized Asset Backed Receivables LLC Trust mortgage pass-through certificates from last year saw $6.4 billion in classes downgraded, with $3.6 billion remaining on Rating Watch Negative. Delinquency of at least 60 days ranges from 15.8 percent to 28.2 percent, while cumulative expected losses are between 29.9 percent and 38.2 percent.

Classes amounting to $2.8 billion of four 2007 HSBC mortgage pass-through certificates were downgraded and another $1.6 billion were placed on watch. Delinquency ranges from 18.8 percent to 21.1 percent while cumulative losses are expected to be from 25.4 percent to 34.2 percent.

Eight Carrington Mortgage Loan Trust mortgage pass-through certificate transactions from 2006 had $2.6 billion in classes downgraded, with $0.2 billion in classes remaining on watch. Delinquency is between 20.1 percent and 34.6 percent and expected cumulative losses range from 11.7 percent to 28.0 percent.

Two 2007 Washington Mutual mortgage pass-through certificates had $2.3 billion in classes downgraded and $1.3 billion in classes placed on watch for downgrades. One deal has delinquency of 19.8 percent and expected cumulative losses of 32.9 percent while delinquency on the other deal is 14.7 percent and expected cumulative losses are 30.6 percent.

Downgrades to $1.7 billion in classes hit three Credit Suisse First Boston Home Equity Asset Trust mortgage pass-through certificates from 2007 while another $1.0 billion in classes remain on watch. Delinquency falls between 13.9 percent and 24.2 percent, and cumulative losses are expected to be between 25.2 percent and 29.1 percent.

Two IndyMac mortgage pass-through certificates from last year had $1.6 billion in classes downgraded, with $1.2 billion left on watch. Delinquency is 18.9 percent and 15.8 percent, and cumulative losses are expected to be between 28.5 percent and 32.3 percent.

Classes totaling $1.5 billion from two Natixis mortgage pass-through certificates from 2007 were downgraded and $0.8 billion in classes remain on watch. Delinquency on the two transactions is 32.6 percent and 29.7 percent, and cumulative losses are projected at 33.8 percent and 38.4 percent.

Three GMAC Residential Funding Co. mortgage pass-through certificates from 2007 had $0.9 billion in classes downgraded. Delinquency is between 13.2 percent and 19.4 percent, and projected cumulative losses are from 19.8 percent to 29.0 percent.

Four Credit-Based Asset Servicing and Securitization LLC transactions from last year saw $0.9 billion in classes downgraded and $0.8 billion in classes left on ratings watch. Between 12.4 percent and 16.0 percent of loans are delinquent while cumulative losses range between 14.1 percent and 25.2 percent.

Just under $0.9 billion in classes from three Carrington Mortgage Loan Trust mortgage pass-through certificate transactions from 2007 were downgraded. Delinquency falls between 10.1 percent and 22.7 percent and cumulative losses are expected to be from 24.0 percent to 25.9 percent.

New Century 2006-1, with delinquency of 27.0 percent and cumulative losses projected at 21.6 percent, had $0.8 billion in classes downgraded.

Equifirst Loan Securitization Trust mortgage pass-through certificates, series 2007-1, saw $0.7 billion in classes downgraded. Delinquency is 11.2 percent, while cumulative losses are expected to be 23.3 percent.

Two Asset Backed Securities Corp. deals from last year had $0.6 billion in classes downgraded with $0.5 billion in classes remaining on watch. Delinquency is 18.7 percent and 18.5 percent, and expected cumulative losses are 22.6 percent and 29.7 percent.

Less than $0.3 billion in classes of UBS MASTR Asset Backed Securities Trust 2007-NCW were placed on ratings watch.

Four GMAC-RFC deals from 2006, with delinquency ranging from 12.1 percent to 24.6 percent, had $0.2 billion downgraded. GSAMP Trust 2007-H1, which has 19.6 percent in delinquency and expected cumulative losses of 27.4 percent, saw $0.2 billion in classes downgraded.

Just over $0.1 billion in classes of Morgan Stanley ABS Capital I Inc. Trust 2007-NC4 was downgraded and another $0.8 billion remains on watch.

GSAMP mortgage pass-through certificate, series 2005-SEA2, had less than $0.1 billion in classes downgraded due to Fitch’s updates, as did Credit-Based Asset Servicing and Securitization LLC 2007-SP1 and 2007-SP2.

But not all of Fitch’s actions were the result of the changes to its subprime assumptions.

The ratings agency downgraded 10 classes for less than $0.1 billion from GS Mortgage Securities Corp. trusts, Series 2005-SD1 and 2005-SD2, as a result of a deteriorating relationship between credit enhancement and expected loss. The underlying collateral consists of performing, sub-performing and re-performing firstand second liens as well as loans secured by manufactured homes.

Fitch cited similar logic in its downgrade of $0.1 billion in classes from Credit Suisse First Boston Mortgage Securities Corp. Home Equity Mortgage Trust mortgage pass-through certificates, series 2006-2 Group 1. That deal is backed by second liens.

Standard and Poor’s placed 1,887 classes for $14.0 billion of Alt-A RMBS from 404 transactions in 2006 and 2007 on CreditWatch with negative implications. The hybrid-ARM and exotic loans backing the deals have seen 90+ day delinquency rise to 10.1 percent for the 2006 deals and 5.7 percent for last year’s deals.

Moody’s announced three classes of Citigroup Mortgage Loan Trust, Series 2004-CB3, C-Bass Mortgage Loan Asset-Backed Certificates, were downgraded due to thin credit enhancement levels that made it more vulnerable to pool deterioration in the tail end of its life.

Four Bayview Financial Mortgage Pass-Through Trust from 2004 and 2005 had 12 tranches upgraded by Moody’s based on the analysis of the credit enhancement provided by subordination, overcollateralization and excess spread relative to the expected loss. Those deals are backed by a mix of subprime, Alt-A and commercial loans.

In the world of collateralized debt obligations, Moody’s announced a report indicating the performance this year of structured-finance CDOs are unlikely to improve from last year because difficult market conditions remain. The agency foresees higher loss projections on subprime and Alt-A mortgages leading to “significantly negative rating activity.” Before investor confidence is restored and there is a full recovery in the CDO markets, the effects of the subprime mortgage crisis must be fully measured.

“In addition to performance considerations, investor demand will also be driven by the market’s capacity to respond to an increased desire for information transparency in terms of underlying and structural risks,” Moody’s wrote. “While credit spreads have widened in general, the increases have been particularly sharp for CDO liabilities, resulting in much reduced relative arbitrage opportunities.”

Fitch placed $97.0 billion in tranches from 430 structured finance CDOs across 197 transactions on Rating Watch Negative following continued deterioration in the subprime and Alt-A RMBS markets. Loss expectations have increased to 21 percent and 26 percent of initial securitized balances for subprime RMBS from the 2006 and 2007 vintage, respectively, leading to $139 billion of subprime RMBS being placed on Rating Watch Negative.

Fitch downgraded $0.2 billion in classes from Westways Funding XI Ltd., a CDO, due to the uncertainty in the proceeds that will be achieved during a sale of assets given the price volatility that even highly rated securities have seen in the current market environment.

Moody’s said it concluded an analysis of mortgage-related CDO exposures of Ambac Assurance Corp., and is continuing a review for possible downgrade. Moody’s believes that Ambac’s capital exceeds the minimum Aaa standard but falls below the Aaa target level.

The ratings of 34 credit linked notes and 3 credit default swaps with respect to which the Reference Obligations are ABX.HE 07-1, ABX.HE 06-2, ABX.HE 06-1, or TABX.HE 07-1 06-2, were downgraded by Moody’s in response to continued credit deterioration of first lien subprime residential mortgages securitized in 2006.

Seven classes for $456.4 million of Paine Webber Mortgage Acceptance Corporation V, Commercial Mortgage Pass-Through Certificates, Series 1999-C1, were upgraded by Moody’s. Nearly 50 loans, representing 36.5% of the pool, have defeased and have been replaced with U.S. Government securities.

LaSalle Small Balance CMBS Securities 2006-MF3 had seven classes for $19.8 million downgraded by Fitch as a result of additional specially serviced loans and increased loss expectations since Fitch’s last rating action.

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

e-mail: mtgsam@aol.com