Subprime Ratings Slaughtered

Standard & Poor’s Ratings Services reported yesterday that it placed the ratings of 331 classes from 79 cash-flow and hybrid collateralized debt obligations on CreditWatch negative. About $51 billion in CDO tranches are impacted. S&P explained the move followed its placement of 559 classes from 103 subprime RMBS on CreditWatch.

“To date, including confidentially rated tranches, we have lowered our ratings on 3,240 tranches from 756 U.S. cash flow, hybrid, and synthetic CDO transactions as a result of stress in the U.S. residential mortgage market and credit deterioration of U.S. RMBS,” S&P stated. “In addition, including the CDO tranches listed below, 756 ratings from 214 transactions are currently on CreditWatch negative for the same reasons. In all, we have downgraded $339.784 billion of CDO issuances.”

Billions of dollars in classes of subprime transactions continue to be downgraded by Fitch Ratings as a result of changes the agency has made to its subprime loss forecasting assumptions.

Among impacted RMBS were $2.5 billion in classes from nine Park Place Securities, Inc. mortgage pass-through certificate transactions from 2005; $1.1 billion in classes from 11 Ameriquest Mortgage Securities Inc. transactions from 2005; $2.0 billion in classes of 4 Argent Securities Inc. securitizations from 2005; and $0.3 billion in classes from nine Structured Asset Securities Corporation mortgage pass-through certificates from 2005.

Also impacted by Fitch’s subprime updates were $0.3 billion in classes of five Residential Asset Securities Corporation mortgage pass-through certificates issued in 2005; $0.2 billion in classes from two Citigroup Mtge Loan Trust Subprime Deals issued in 2005; $0.1 billion in classes from two Popular mortgage pass-through certificates issued in 2005; less than $0.1 billion in classes from two Quest Trust mortgage pass-through certificate transactions deals issued in 2005 and 2006;

Fitch downgraded $0.3 billion in classes of 15 subprime Ameriquest Mortgage Securities Inc. issuances from 2001 to 2004 because of a deteriorating relationship between credit enhancement and expected loss. Less than $0.1 billion was placed on watch.

The same logic was used by Fitch in the downgrade of $0.2 billion of classes issued by Argent Securities Inc. in 2003 and 2004. Less than $0.1 billion was placed on watch.

Moody’s Investors Service cited an analysis of the credit enhancement provided by subordination, overcollateralization and excess spread relative to expected losses in its downgrade of subprime deals, including 16 tranches of three Aames Mortgage Investment Trust deals from 2004 and 2005; six tranches from two deals issued by ACE Securities Corp. Home Equity Loan Trust in 2004 and 2005; 9 certificates from Bear Stearns Second Lien Trust 2007-SV1; 43 certificates from seven transactions issued by CSFB Home Equity Mortgage Trust in 2005 and 2006; and 11 certificates from two CWABS Asset-Backed Certificates Trust issued in 2006.

Moody’s used the same reasoning in its downgrade of seven tranches from two deals issued by Encore Credit Receivables Trust in 2005; two tranches from Equifirst Mortgage Loan Trust 2005-1; 17 tranches from Fieldstone Mortgage Investment Trust issued in 2004 and 2005; three tranches from Meritage Mortgage Loan Trust 2005-2; one tranche from Merrill Lynch Mortgage Investors Inc. 2005-NC1; 19 tranches from four deals issued by People’s Choice Home Loan Securities Trust in 2004 and 2005; six tranches from three deals issued by Renaissance Home Equity Loan Trust in 2004; one tranche from Soundview Home Loan Trust 2005-DO1; and 12 tranches on three deals issued by Specialty Underwriting and Residential Finance in 2005.

Higher-than-anticipated rates of delinquency, foreclosure, and REO in the underlying subprime collateral relative to credit enhancement levels led Moody’s to downgrade 93 tranches from 12 transactions issued by Asset Backed Securities Corporation Home Equity Loan Trust in 2005 and 2006; 55 tranches from five RMBS issued by BNC Mortgage Loan Trust; 105 tranches from 14 transactions issued by Carrington from 2005 to 2007; and 139 tranches from 17 RMBS issued by C-BASS from 2005 to 2007.

Moody’s cited the same logic in its downgrade of 45 tranches from six Fieldstone Mortgage Investment Trust issuances in 2005 and 2006; 112 tranches from 12 Fremont Home Loan Trust transactions issued in 2005 and 2006; 212 tranches from 22 transactions issued by MASTR Asset Backed Securities Trust from 2005 to 2007; 322 tranches from 41 Morgan Stanley issuances in 2005 and 2006; 43 tranches from six transactions issued by New Century Home Equity Loan Trust in 2005 and 2006; 61 tranches from 7 subprime RMBS transactions issued by Ownit in 2006; and 69 tranches from seven WaMu Mortgage Pass-Through Certificates issued in 2006 and 2007.

An increasing proportion of severely delinquent subprime loans prompted Moody’s to downgrade four tranches from GSAMP Trust RMBS from 2004 and 2005; 29 tranches of Home Equity Mortgage Loan Asset-Backed Trust and IndyMac Home Equity Mortgage Loan Asset-Backed Trust deals from 2004 and 2005;

Moody’s cited credit enhancement levels, including excess spread and subordination that were low compared to the current projected loss numbers at the previous rating levels, in its downgrade of 10 certificates from a second lien deal issued by CWHEQ Revolving Home Equity Loan Trust last year.

Other second lien deals impacted by the same logic were six certificates of GSAA Home Equity Trust Series 2006-S1; 37 certificates from six 2006 GSAMP Trust transactions; one certificate from IndyMac Home Equity Mortgage Loan Asset-Backed Trust 2006-1; four certificates from Long Beach Mortgage Loan Trust 2006-A; 16 tranches from two transactions from the Morgan Stanley Home Equity Loan Trust 2005 shelf; 35 certificates from four Morgan Stanley Mortgage Loan Trust deals issued from 2005 to 2007; four certificates from New century Home Equity Loan Trust, Series 2006-S1,

Four classes for $90 million from Banc of America Commercial Mortgage Inc.’s commercial mortgage pass-through certificates, series 2002-2, were upgraded because of stable performance and increased credit enhancement due to the defeasance of 10 loans and scheduled amortization since Fitch’s last rating action.

Six classes for $80 million from Bear Stearns Commercial Mortgage Securities Inc., series 2003-TOP12, were upgraded by Fitch, reflecting additional pay down and defeasance since the rating agency’s last action.

GE Commercial Mortgage Corporation, series 2003-C2 saw four classes for $64 million were upgraded due to the stable performance of the transaction and an additional pay down of 9% since the last Fitch rating action.

Fitch upgraded four classes for $59 million of JP Morgan Chase’s commercial mortgage pass-through certificates, series 2003-ML1, due to stable performance and increased credit enhancement as a result of repayment of eight loans and scheduled amortization since the last rating action.

Three classes for $57 million from Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 1998-1, were upgraded by Moody’s due to an increase in subordination levels and improved overall pool performance.

Three classes for $52 million from Credit Suisse First Boston’s commercial mortgage pass-through certificates, series 2003-CK2, were upgraded because of stable performance and increased credit enhancement due to the repayment of eleven loans and scheduled amortization since Fitch’s last rating action.

COMM 2001-CITI, Commercial Mortgage Pass-Through Certificates saw three classes for $51 million upgraded by Moody’s due to improved property performance, loan amortization, and value appreciation.

Prudential Commercial Mortgage Trust commercial mortgage pass-through certificates, series 2003-PWR1, saw four classes for $47 million upgraded due to increased credit enhancement due to loan payoffs, scheduled amortization, as well as the additional defeasance of four loans since Fitch’s last rating action.

Bear Stearns Commercial Mortgage Securities Inc., Commercial Mortgage Pass-Through Certificates, Series 2007-BBA8, saw 13 classes upgraded and one class downgraded by Moody’s.

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

e-mail: mtgsam@aol.com