Downgrade Nightmare Continues

But first, Moody’s Investors Service announced it downgraded Homecomings Financial LLC’s prime servicer quality ratings to SQ2 from SQ2+. Homecoming’s subprime servicer rating was also downgraded, to SQ2- from SQ2, while its servicer rating for second liens and high loan-to-value was lowered to SQ2- from SQ2+. All of the ratings have been placed on review for further downgrades.

The actions were partly the result of a downgrade to parent Residential Capital LLC’s unsecured debt rating earlier this month by Moody’s. Also impacting the move was deterioration in the customer service performance metrics for 90 days while Homecomings’ portfolio was integrated into GMAC Mortgage’s portfolio — though service has now returned to prior levels.

ResCap saw its residential master servicer rating cut to SQ1- from SQ1 by Moody’s, which noted it may downgrade the ratings further.

Moody’s announced higher-than-anticipated rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels led to downgrades on 79 tranches and placement on review for potential downgrade for 17 tranches from the following Countrywide Alt-A loan-backed deals: CWALT, Inc. Mortgage Pass-Through Certificates, Series 2005-J12, 63, 67CB, 69, 71, 72, 76, 80CB, 81, 82, 83CB, 84 and AR1, and 2006-J1, HYB1, HY3, HY10, 12CB, HY11, 17T1, HY12, J5, J7, 26CB, 39CB, 41CB, 29T1 and 45T1; CHL Mortgage Pass-Through Trust 2005-HYB8 and HYB10, and 2006-HYB1, HYB2, HYB4 and HYB5; and CWMBS, Inc. Mortgage Pass-Through Certificates, Series 2006-7.

That reason was also cited by Moody’s for downgrades on the rating of a tranche in Group 1 of MortgageIT Mortgage Loan Trust, Mortgage Loan Pass-Through Certificates, Series 2006-1, which is backed by adjustable-rate Alt-A loans; downgrades on 15 tranches from MASTR Adjustable Rate Mortgages Trust 2005-8, MASTR Alternative Loan Trust 2006-1 through 3, and MASTR Asset Backed Securities Trust 2005-AB1 and 2006-AB1; downgrades on 23 classes and potential lower ratings for 5 tranches of J.P.Morgan Alternative Loan Trust 2006-A1 through A7 and S1 through S3.

The related negative actions continued with downgrades for 14 tranches and potential downgrades on two classes of Merrill Lynch Mortgage Investors Trust 2006-A2 through A4, and AF1 and AF2; downgrades on two tranches and possible deteriorated ratings on one class of HSI Asset Loan Obligation Trust 2006-2; downgrades on three classes from First Horizon Alternative Mortgage Securities Trust 2005-FA10, and 2006-FA3 and FA4; and downgrades on 16 tranches from Citigroup Mortgage Loan Trust 2006-AR6, 2005-8, and Series 2005-10, and Citigroup Mortgage Loan Trust Inc. 2006-WF1 and WF2. All collateralized by Alt-A loans.

Amortizing Residential Collateral Trust 2002-BC9 and BC6, and ARC Trust Mortgage Pass-Through Certificates, Series 2001-BC6 saw a total of nine classes get lower ratings because back ended losses have eroded credit support “to a point where the subordinate tranches no longer have sufficient enhancement levels to maintain their current ratings in light of the anticipated losses,” Moody’s said of the subprime deals, which all have low pool factors below 6.16 percent as of October.

Moody’s said that was also the reason behind worse ratings on five classes of C-BASS 2002-CB2 Trust, Salomon Mortgage Loan Trust, Series 2002-CB3 , and C-BASS Mortgage Loan Asset-Backed Certificates, Series 2003-CB5. But Moody’s noted it also upgraded one tranche in the Salomon subprime deal.

Analysis of the credit enhancement provided by subordination resulted in downgrades for nine certificates and potential downgrades for two certificates of First Franklin Mortgage Loan Trust 2004-FF3 and 2004-FFH1. The first of these subprime deals has high recent losses combined with a large dollar amount for loans in foreclosure and REO, while complete erosion in overcollateralization in the second transaction left certain classes exposed to future losses and tranches sequentially above them in a weaker position, Moody’s said.

High loss severities and potentially inadequate available levels of enhancement compared to current and projected pipeline losses reportedly resulted in downgrades by Moody’s for 21 certificates of the following Residential Asset Securities Corporation Trusts: RASC Series 2004-KS1 Trust, and Series 2004-KS2, KS3, KS5, KS6, KS8, and KS10 through KS12 Trusts.

Fitch Ratings lowered the ratings on over $31 million in classes of subprime loan-collateralized Countrywide Asset-Backed Securitizations mortgage pass-through certificates Series 2003-BC4 and BC5 to reflect deterioration in the relationship between credit enhancement and expected losses. Three of the 11 were additionally placed on Rating Watch Negative.

Two classes worth nearly $21 million of Aegis Asset Backed Securities Trust 2005-3 were downgraded, while a $14 million class of Aegis Asset Backed Securities Trust 2005-2 was placed on Rating Watch Negative based on changes Fitch made to its subprime loss forecasting assumptions to better capture the deteriorating performance of pools from 2007, 2006 and late 2005.

Moody’s upgraded the ratings of four classes of N-45 First CMBS Issuer Corp. 2000-2 due to increased subordination levels and improved overall pool performance. As of the Nov. 15 distribution date, the commercial loan transaction’s aggregate certificate balance has decreased to below $98 million, down 61 percent from time of securitization.

LB-UBS Commercial Mortgage Trust commercial mortgage pass-through certificates, series 2002-C4 received upgrades on the ratings of two classes worth over $25 million because of stable performance and paydown due to scheduled amortization since the last rating action, Fitch said. As of the November 2007 distribution, the pool’s aggregate principal balance has been reduced by over 13 percent since issuance to $1.26 billion and about 40 percent of the loans have defeased.