Nonprime Ratings Thrashed

Associates Manufactured Housing Contract Trust Series 1996-1, 1997-1 and 1997-2 saw downgrades by Fitch Ratings on $152 million in classes based on limited guarantee bonds from Associates First Capital Corp., which merged with Citigroup in November 2000. The lower ratings reflected Fitch’s downgrade of Citigroup’s corporate rating to AA on Nov. 5, 2007. The collateral consists of fixed-rate manufactured home loans, according to a news release.

Citigroup’s lowered debt rating also led Fitch to downgrade a $282 million class P of Funding XI, LTD, a collateralized debt obligation managed by TCW Asset Management Co.

Fitch said it downgraded a $16 million class of American Business Financial Services Series 2003-2 due to a guarantee of timely interest and ultimate principal by Radian Asset Assurance Inc., which had its Insurer Financial Strength rating lowered by Fitch to A+ on Sept. 5.

Classes of Ace Securities Corporation mortgage pass-through certificates 2005-HE2, Ace 2005-HE3 and Ace 2005-RM2 valued at $52 million were downgraded by Fitch while another $52 million in classes was either placed on or remains on Rating Watch Negative. The actions were based on changes to Fitch’s subprime loss forecasting assumptions.

Deterioration in the relationship between credit enhancement and expected losses led Fitch to downgrade about $150 million and place on Rating Watch Negative over $63 million in classes of Groups 1 and 2 of SARM 2006-2 through 2006-8 and 2006-10, and 2006-12 Group 2; $26 million of CitiMortgage Alternative Loan Trust mortgage pass-through certificates, Series 2006-A5 and A7; and $27 million of Lehman Mortgage Trust 2006-9, and 2006-6 Group 1 and 2. All of these deals are collateralized by Alt-A loans.

But such deteriorating relationship also reportedly resulted in Fitch downgrading $19 million of Truman Capital Series 2002-1 and 2, which are backed by performing, sub-performing and re-performing residential loans. Both deals have experienced monthly losses that have exceeded excess spread in at least 11 of the last 12 months, causing the overcollateralization amount to be at or near zero, and respectively have serious delinquencies of about 46 percent and 51 percent, and current cumulative losses of about 14 percent and 11 percent.

More than $28 million in Wells Fargo Asset Securities Corp. prime credit RMBS from 2006 were downgraded by Fitch, also because of the deterioration in the relationship between credit enhancement and expected losses. In addition, almost $60 million in classes were placed on Rating Watch Negative.

A notice of an event of default from Duke Funding High Grade II-S/EGAM I, LTD prompted Fitch to downgrade ten classes valued at $463 million of the deal, which is managed by Ellington Global Asset Management LLC. The deal is backed by primarily floating-rate private-label prime, mid-prime, and subprime RMBS. The default resulted from market value declines of the portfolio which have left the issuer unable to meet margin calls from repurchase counter parties.

Moody’s Investors Service downgraded the ratings of three tranches from Accredited Mortgage Loan Trust 2007-1. Moody’s said it combined its published methodology updates as of July 13th, 2007 to the non delinquent portion of the transactions, which are backed by subprime loans that are also experiencing higher than anticipated rates of delinquency, foreclosure, and real estate owned relative to credit enhancement levels.

That reason was also cited Moody’s for downgrades on the ratings of 10 tranches from Carrington Mortgage Loan Trust Series 2007-FRE1 and RFC1; 18 tranches in BNC Mortgage Loan Trust 2007-1 through 3; and 14 classes from Nationstar Home Equity Loan Asset-Backed Certificates, Series 2007-C and Nationstar Home Equity Loan Trust 2007-A and B; and eight tranches from Saxon Asset Securities Trust 2007-1 and 2.

And subprime deals affected by both downgrades and potential downgrades by Moody’s were reportedly Option Once Mortgage Loan Trust 2007-1 through 6, CP1 and FXD2; Asset Backed Securities Corporation Home Equity Loan Trust Series AMQ 2007-HE2 and RFC 2007-HE1; CSFB Home Equity Asset Trust 2007-1 through 3; HSI Asset Securitization Corporation Trust 2007-HE1, HE2, NC1, OPT1, and WF1; Citigroup Mortgage Loan Trust 2007-AHL1, AHL2, AHL3, AMC1 through AMC4, and WFHE1 through WFHE3; RASC Series 2007-KS1 Trust, as well as KS2 through KS4; First Franklin Mortgage Loan Trust 2007-FF1 and Mortgage Loan Asset-Backed Certificates, Series 2007-FF2; Renaissance Home Equity Loan Trust 2007-1 and 2; CWABS Asset-Backed Certificates Trust 2007-1 through 3, 5 through 9, 11, and BC1 through BC3; and Wells Fargo Home Equity Asset-Backed Securities 2007-1 Trust and 2007-2 Trust.

And 51 tranches of Structured Asset Securities Corp. Trust in 2007 were downgraded, 10 tranches were placed on review for downgrade and two downgraded tranches were placed on review for further downgrades because of Moody’s updated methodology. The deal is backed by subprime loans.

Fieldstone Mortgage Investment Trust 2006-S1, backed by second lien loans, received downgrades by Moody’s on nine certificates 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. All certificates have experienced erosion in credit enhancement available due to pool losses over the last few months.

Standard & Poor’s Ratings Services said placed on CreditWatch with negative implications its ratings on the commercial paper and medium-term notes of structured investment vehicles Harrier Finance Funding Ltd./Harrier Finance Funding LLC and Orion Finance Corp./Asset Backed Capital Finance Inc./Orion Finance LLC. At the same time, it assigned a negative outlook to the long-term issuer credit ratings on U.S. deals Centauri Corp./CC and K2 Corp. / K2 LLC.

The negative outlook on the Orion deal is a result of the vehicle’s move into “the enforcement mode of operation.” For the Harrier deal, it was due to the fact that the net asset value has fallen below 50 percent and a higher concentration of assets that S&P deems to currently have high price volatility, which are defined as collateralized debt obligations of ABS and U.S. subprime, Alt-A, and closed second-lien RMBS, compared with its peers, S&P said.