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NIMs, Alt-A RMBS Clobbered

Recent MBS ratings activity

July 3, 2008


The latest ratings activity involved downgrades to several net interest margin notes and Alt-A residential mortgage-backed securities. Commercial MBS, meanwhile, saw mixed activity.

But first, the Securities and Exchange Commission Tuesday published proposed rule changes to make the limits and purposes of credit ratings clear to investors and ensure that the role assigned to ratings in SEC rules is consistent with the objectives of having investors make an independent judgment of credit risks. The regulator hopes to bring increased transparency to the credit ratings process and curb practices that contributed to recent turmoil in the credit markets.

Public comments are being accepted until Sept. 5.

Standard & Poor's Ratings Services downgraded nine classes of ACE Securities Corp. Home Equity Loan Trust transactions issued from 2004 to 2006 as a result of adverse collateral performance that has caused monthly losses to exceed monthly excess interest. Subprime loans are behind the securities.

The following Alt-A option adjustable-rate mortgage, negative-amortization transactions saw classes downgraded by Moody's Investors Service because of higher-than-anticipated rates of delinquency, foreclosure and real estate owned in the underlying collateral relative to credit enhancement levels:

  • 224 tranches from 27 WaMu Mortgage Pass-Through Certificates issued from 2004 to 2007;
  • 129 classes from 28 IndyMac INDX Mortgage Loan Trust securitizations from 2004 through 2007;
  • 70 tranches from 11 Chevy Chase deals securitized from 2005 to 2007;
  • 36 tranches from Merrill Lynch Alternative Note Asset Trust RMBS issued in 2007;
  • 34 tranches from MASTR Adjustable Rate Mortgages Trust issuances from 2006 and 2007;
  • 18 classes of four Structured Adjustable Rate Mortgage Loan Trust deals issued in 2005;
  • 10 tranches from NovaStar Mortgage Funding Trust Series 2006-MTA1;
  • seven tranches from Barclays Capital LLC Trust 2007-AA4;
  • five classes of Zuni Mortgage Loan Trust 2006-OA1; and
  • three tranches from MortgageIT Trust 2005-AR1.

Four transactions from the C-BASS Mortgage Loan Asset-Backed Certificates Series RP and SP from 2003, 2006 and 2007 saw 16 tranches downgraded by Moody's in light of the deteriorating housing market and rising delinquencies and foreclosures. The deals are backed by re-performing and seasoned mortgages.

Four classes of GSMPS Mortgage Loan Trust 2005-LT1 were downgraded by S&P, reflecting continued adverse performance of the re-performing loan collateral pool, resulting in the reduction of the available credit support available to support the affected classes.

Moody's downgraded the following net interest margin securities based on the performance of underlying transactions which has negatively impacted future residual payments to the NIM holders:

  • 16 Lehman XS NIM Company NIMs from 2005 and 2006;
  • 14 MASTR Alternative Loan NIMs from 2006;
  • seven Bear Stearns Structured Products NIMs from 2004 and 2007;
  • seven Cayman Nomura Asset Acceptance Corporation NIMs from 2005, 2006 and 2007;
  • five SASCO Net Interest Margin Trust notes from 2003;
  • five SARM NIM notes from 2005;
  • three SAIL NIM notes from 2003;
  • Long Beach Asset Holdings Corp. CI 2006-WL2 NIM;
  • GSAA Home Equity Trust 2005-NIM6; and
  • First Franklin CI-2 NIM Notes Series 2003-FFC.

In the commercial world, five classes of Banc of America Commercial Mortgage Inc., series 2001-PB1, were upgraded by Moody's because of increased defeasance and credit support and overall stable pool performance.

Two classes of GMAC Commercial Mortgage Securities Inc., series 1998-C1, were upgraded by Moody's due to increased credit support.

GS Mortgage Securities Corp. II 2006-RR3 saw 13 classes downgraded by S&P, while ratings were lowered on 32 classes of Greenwich Capital Commercial Mortgage 2007-RR2 and 2006-RR1.

Four classes of CBA Commercial Assets LLC, series 2006-2, were downgraded by Moody's because of increased realized losses and projected losses from loans in special servicing.

Three classes of Merrill Lynch Mortgage Trust 2006-C2 were downgraded by Moody's due to a decline in overall pool performance and increased loan-to-value ratio dispersion.

Moody's downgraded two classes of Greenwich Capital Commercial Funding Corp., series 2004-FL-2, as a result of performance issues with the two remaining loans.

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

e-mail: [email protected]

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