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Subprime RMBS Pounded by Downgrades

Recent MBS ratings activity

April 10, 2008

By NATALIE MERRILL


Downgrades on billions of dollars in classes of subprime residential mortgage-backed securities issued since 2005 continued to pile up -- with no end in sight. The sole upgrade during the past few days was a commercial deal from 2002.

Fitch Ratings handed out more downgrades as a result of changes to its subprime loss expectations, including the downgrading of $2.1 billion in classes on seven Long Beach Mortgage Co. mortgage pass-through certificates issued in 2005, with an additional $0.7 billion placed on Rating Watch Negative. Delinquency of at least 60 days ranged from 30.4 to 44.9 percent, and total expected losses were from 6.5 to 16.3 percent.

Also downgraded because of the changes were $1.2 billion in classes on 10 subprime deals issued by Soundview Home Loan Trust in 2005. On top of that, less than $0.1 billion was placed on watch. The cumulative anticipated losses were from 5.0 to 17.7 percent, while delinquency ranged from 25.5 to 43.7 percent.

For the same reason, Fitch downgraded nearly $0.8 billion in classes on three People's Choice Home Loan subprime deals: series 2005-2, 2005-3 and 2005-4, and an additional $0.1 billion was put on watch for downgrade. Delinquency ranged from 39.4 to 42.4 percent, and the total amount of expected losses was from 11.1 to 19.8 percent.

The changes also resulted in downgrades on $0.7 billion in classes on four subprime Option One mortgage pass-through certificates issued in 2005. The total predicted losses range from 3.3 to 12.8 percent, while delinquency extended from 27.6 to 36.1 percent.

With the same logic, Fitch downgraded $0.6 billion in classes on five subprime deals of J.P. Morgan Mortgage Acquisition Corp. issued in 2005. Additionally, less than $0.1 billion was placed on rating watch. Cumulative anticipated losses stretched from 7.7 to 16.2 percent, and delinquency was from 22.9 to 37.8 percent.

Five classes for $0.4 billion of ACE Securities Corp Home Equity Loan Trust pass-through certificates issued in 2005 felt the effects of Fitch's changes and were downgraded, with less than $0.1 billion placed on watch. Delinquency ranged from 7.3 to 46.5 percent, and cumulative expected losses were from 3.8 to 11.8 percent.

In similar reasoning, Fitch downgraded $0.3 billion in classes on three Fieldstone mortgage pass-through certificates: series 2005-1, 2005-2 and 2005-3, and nearly an extra $0.4 billion was placed on watch. Total expected losses varied from 5.5 to 19.2 percent, while delinquency ranged from 37.5 to 39.3 percent.

Six subprime transactions issued in 2005 by former Fieldstone parent C-BASS saw $0.3 billion downgraded because of Fitch's adjusted assumptions, while less than $0.1 billion was placed on watch. Delinquency ranges from 19.1 percent to 32.6 percent, and cumulative losses are expected to be from 4.6 percent to 13.6 percent.

Almost $0.3 billion in classes on two subprime deals of GSAMP Trust, series 2005-HE3 and 2005-HE4, with less than $0.1 billion put on watch for downgrade because of Fitch changes. Delinquency spanned from 33.8 to 36.6 percent, while total expected losses ranged from 7.6 to 13.0 percent.

Also as a result of changes to subprime loss assumptions by Fitch, $0.1 billion in classes on three subprime deals of Wells Fargo Home Equity Asset-Backed Securities: series 2005-1, 2005-2 and 2005-4 were downgraded.

CSFB Home Equity Asset Trust, series 2005-6, saw $0.1 billion downgraded by Fitch because of the changes. The projected losses were 11.3 percent, while delinquency sat at 32.3 percent.

Also due to Fitch's modifications, less than $0.1 billion on Meritage Mortgage Loan Trust, series 2005-2 was downgraded. Delinquency was 46.9 percent, and total expected losses were 13.5 percent.

Additionally, Fitch downgraded less than $0.1 billion in classes on Renaissance HELT, series 2005-4, with $0.2 billion put on downgrade watch as a result of the ratings agency's modifications. Cumulative losses anticipated were 11.1 percent, and delinquency was 19.1 percent.

Capping off downgrades due to Fitch's adjusted subprime assumptions were less than $0.1 billion in classes from three Terwin Mortgage Trust deals securitized in 2005. Delinquency ranged from 24.6 percent to 28.9 percent, and cumulative losses were expected to be from 7.2 percent to 13.1 percent.

Moody's Investors Service downgraded 218 tranches, 56 of which remain on review for further possible downgrade, from 24 subprime RMBS deals of Merrill Lynch Mortgage Investors Trust. The downgrades came as a result of higher-than-expected rates of delinquency, foreclosure and real estate owned in the underlying collateral in relation to levels of credit improvement.

For the same reason, 205 tranches from 33 subprime RMBS transactions of RASC were downgraded by Moody's, and 68 of those downgraded remain on review.

Also downgraded by Moody's because of the higher-than-anticipated rates were 156 tranches, 38 of which remain on review for potential further downgrade, from 20 RAMP subprime RMBS transactions.

Moody's also downgraded 17 tranches from three subprime transactions of CDC Mortgage Capital Trust issued in 2004 and also downgraded 20 tranches from three deals issued by IXIS Real Estate Capital Trust in 2004 and 2005. These downgrades followed the analysis of improved credit provided by subordination, over-collateralization and surplus spread in relation to anticipated losses.

On the commercial side, Fitch upgraded three classes on mortgage pass-through certificates of Bear Stearns Commercial Mortgage Securities Inc., series 2002-PBW1, as an ensuing result of steady performance and a growth in credit enhancement that followed the repayment of six loans and scheduled amortization since Fitch last issued rating actions.


Natalie Merrill is a staff writer for MortgageDaily.com with a Journalism degree from Southern Methodist University.

e-mail: [email protected]


Servicing News | Servicer Ranking | Delinquency Statistics
Stories about mortgage servicers, delinquency and f o r e c l o s u r e s. Coverage of servicing lawsuits and loan servicing technology.


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hard money lending. Home-equity loans and home-equity lines of credit.


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Stories about commercial lending on multifamily, office, retail and industrial properties.



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