Subprime Downgrades Persist

Before that, Fitch Ratings upgraded DB Mortgage Services LLC’s primary servicer rating to CPS2- from CPS3+. The upgrade came as a result of a large reduction in staff turnover last year, the use of borrower and investor web portals, the execution of an ongoing process improvement program and the increased focus on staff training.

Fitch downgraded $1.7 billion in classes on 11 First Franklin Mortgage Loan subprime transactions from 2005, and $0.5 billion was placed on Rating Watch Negative. Delinquency ranged from 24 to 41 percent, while the total expected losses were from 4.4 to 18.0 percent. The downgrades were based on changes to Fitch’s subprime loss forecasting assumptions.

New Century 2005-A, 2005-1, 2005-3 and 2005-4 saw $0.7 billion in classes downgraded because of Fitch’s subprime updates, and another $108.4 million was placed on Rating Watch Negative. Delinquency falls between 8.4 and 31.5 percent, and cumulative losses are expect to be between 5.2 and 11.0 percent.

For the same reason, more than $0.2 billion in classes on six Carrington Mortgage Loan Trust 2005 subprime deals was downgraded by Fitch. The amount of cumulative expected losses was from 3 to 9 percent, and delinquency ranged from 19 to 40 percent.

Fitch’s updates also impacted HSBC Home Equity mortgage pass-through certificates, which saw $0.2 billion in classes from seven 2005 deals downgraded and less than $0.1 billion placed on watch. Delinquency ranges from 2.7 percent to 43.8 percent, and cumulative losses are expected at between 2.6 percent and 9.5 percent.

Moody’s Investors Service downgraded 268 tranches from 27 subprime residential mortgage-backed security transactions of Bear Stearns, with 92 of those kept on review for further possible downgrade. These actions followed higher-than-projected rates of delinquency, foreclosure, and REO in the underlying collateral in relation to levels of credit enhancement.

For similar reasoning, Moody’s also issued downgrades on 104 tranches of 11 subprime RMBS transactions issued by Argent and 92 tranches from nine subprime RMBS deals by INABS. Twenty-four of the tranches of INABS remain on review for possible further downgrade, while 21 tranches of Argent were placed on review.

Countrywide saw 63 tranches downgraded and four upgraded from 27 transactions issued in 2004 and 2005. The downgrades were the effects of recent and anticipated pool losses and the ensuing erosion of credit support, while the upgrades took into account the improved performance on two transactions backed by fixed-rate collateral.

Also in subprime deals, 63 tranches from seven RMBS transactions issued by IXIS were downgraded — nine of those still on review for further downgrade — by Moody’s due to rates of delinquency, foreclosure and REO in the underlying collateral in relation to credit enhancement levels that were greater-than-expected.

Moody’s downgraded 35 tranches from six ACE Securities Corp. Home Equity Loan Trust subprime deals issued in 2004. The downgrades come as a result of analysis of the credit enhancement from subordination, overcollateralization and extra spread in relation to anticipated losses.

Because of continued and worsening performance of deals backed by closed-end-second collateral, Moody’s downgraded 16 certificates, maintaining three on review for potential further downgrade, on three transactions of First Franklin Mortgage Loan Trust: series 2007-FFB-SS, 2007-FFC and 2005-FFA.

Fifteen tranches from two subprime deals issued by Long Beach Mortgage Loan Trust in 2005 were downgraded by Moody’s after study of credit development stemming from subordination, overcollateralization and additional spread related to anticipated losses.

ACE Securities Corp. Home Equity Loan Trust saw eight certificates, with one still on review, on two transactions—series 2005-SL1 and 2006-SL2 — downgraded by Moody’s. The actions are due to the continued and declining performance of transactions backed by closed-end-second collateral.

Moody’s downgraded seven certificates, keeping four on review for further possible downgrade, of a transaction by Alliance Bancorp Trust, series 2007-S1. The low credit enhancement levels of the bonds in comparison to the current expected loss numbers at the prior rating levels were the cause of the downgrades.

As a result of the analysis of the credit enhancement from subordination, overcollateralization and excess spread relative to foreseen losses, six tranches of Citigroup Mortgage Loan Trust, series 2005-HE1, and six certificates of C-BASS, series 2007-SL1 Trust, were also downgraded by Moody’s. Also for the same reason, Moody’s downgraded six tranches issued by NovaStar Mortgage Funding Trust, series 2005-2.

For the same justification, two tranches of Ownit Mortgage Loan Trust, series 2004-1, were also downgraded by Moody’s.

Further, Moody’s downgraded two certificates of Fremont Home Loan Trust, series 2006-B, because of the low level of credit enhancement levels of bonds measured against the current expected loss numbers at the previous rating levels.

In Alt-A transactions, Residential Accredit Loans Inc. saw 468 tranches from 24 deals downgraded by Moody’s. The downgrades followed higher-than-expected rates of delinquency, foreclosure and REO in the underlying collateral related to credit enhancement levels.

In another Alt-A deal, with the same rationale, Moody’s downgraded 245 tranches of 33 deals issued by GSAA, and 91 of those were kept on review for further possible downgrade, while 68 were placed on review for potential downgrade.

Commercially, Moody’s also upgraded two classes of Wachovia Bank Commercial Mortgage Trust, series 2003-C8, because of a rise in credit support stemming from loan pay offs, improved pool performance and amortization.

Moody’s upgraded the ratings of three classes of N-45 First CMBS Issuer Corp., series 2003-1. The upgrades are the outcome of higher credit support resulting from loan pay offs, amortization and better pool performance.

Two classes of GMAC Commercial Mortgage Securities Inc., series 1997-C2, were upgraded by Moody’s as ensuing results of a growth in credit subordination and defeasance.

In further positives, Moody’s upgraded the rating of one class of Merrill Lynch

Mortgage Investors Inc. mortgage pass-through certificates, series 1998-C2 because of greater subordination levels and defeasance.

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

e-mail: merrill.natalie@yahoo.com