Nonprime Ratings Rampage

Bear Stearns Mortgage Funding Trust 2006-SL1 through SL6, which are collateralized by second lien loans, received lower ratings on 41 certificates and had nine placed on review for possible downgrade by Moody’s because the bonds’ credit enhancement levels, including excess spread and subordination, were too low compared to the current projected loss numbers at the previous rating levels. Moody’s expects significant delinquency pipelines will have a further negative impact on the credit support for senior and mezzanine certificates.

That explanation was also cited by Moody’s for downgrades on 35 classes of Nomura Asset Acceptance Corporation, Alternative Loan Trust Series 2006-S1 through S5, 16 certificates of CWABS Asset-Backed Certificates Trust 2006-SPS1 and SPS2, six certificates from Long Beach Mortgage Loan Trust 2006-A, six certificates from New Century Home Equity Loan Trust, Series 2006-S1 and four certificates from Fremont Home Loan Trust 2006-B.

Other second lien loan-backed deals reportedly affected were C-BASS Mortgage Loan Asset-Backed Certificates, Series 2006-SL1, which saw eight classes downgraded and four placed on review for possible downgrade; Morgan Stanley Mortgage Loan Trust Series 2006-10SL, 14SL, and 4SL, which got lower ratings on 17 certificates while two face potential downgrade; and Ace Securities Corp. Home Equity Loan Trust, Series 2006-ASL1, and SL1 through SL4, with 34 certificates downgraded and eight facing potential lower ratings.

Merrill Lynch First Franklin Mortgage Loan Trust, Series 2007-1 through 4, and Merrill Lynch Mortgage Investors Trust 2007-MLN1 and Series 2007-HE1 through 3 saw 43 tranches downgraded and 12 placed on review for potential downgrade by Moody’s. The ratings agency said it applied its updated methodology on non delinquent portion of the subprime transactions, which have collateral that is also experiencing higher-than-anticipated rates of delinquency, foreclosure, and real estate owned relative to credit enhancement levels.

Moody’s updates also impacted Securitized Asset Backed Receivables LLC Trust 2007-BR1, 2007-BR2, 2007-BR3, 2007-BR4, 2007-BR5, 2007-HE1, 2007-NC1, 2007-NC2, which saw 41 classes downgraded and 15 tranches placed on review for downgrades. The SABR deals are backed by subprime loans.

NovaStar Mortgage Funding Trust Series 2003-3 and 4, and 2004-1, 2 received downgrades on nine classes reportedly due to Moody’s analysis of credit enhancement provided by subordination, overcollateralization, excess spread and mortgage insurance relative to the expected losses.

Meanwhile, analysis of current credit enhancement levels provided by excess spread, overcollateralization, and subordinate classes relative to expected losses led to downgrades on a total of 20 classes and placement on review for seven tranches of.Alt-A loan-backed CSFB Adjustable Rate Mortgage Trust 2004-1, 2, 4 and 5, 2005-1 through 3, and subprime-collateralized CSFB Home Equity Pass-Through Certificates, Series 2005-1.

However, analysis of the credit enhancement provided by subordination relative to expected losses led to upgrades reported by Moody’s on seven classes of certificates from Sequoia Mortgage Trust, Mortgage Pass-Through Certificates, Series 2004-4 through 7, and 10, and 2005-1. All six deals are backed by ARMs.

S&P today announced it raised its ratings on four classes of certificates from CAM Commercial Mortgage Corp.’s series 2002-CAM2 in order to reflect credit enhancement levels that provide adequate support through various stress scenarios. Currently calculated weighted average debt service coverage of 1.34x is down from 1.44x at issuance, all loans in the pool are current and the trust has not experienced a loss to date.

Increased credit enhancement levels resulting from loan payoffs, and an analysis of the credit characteristics of the remaining loans in the pool resulted in higher ratings by S&P on nine classes from J.P. Morgan Chase Commercial Mortgage Securities Corp.’s series 2005-F. As of Nov. 15, the trust collateral balance had paid down 67 percent to $206.2 million, from $620.5 million at issuance.