| NJ Predatory Law Will Increase RMBS Risk, Moody’s Says
Recent RMBS ratings news October 7, 2003 By PATRICK CROWLEY |
| Loans addressed in a New Jersey predatory lending law set to take affect in late November will increase risks to Residential Mortgage Backed Securities (RMBS) issues, according to Moody’s Investors Services.“Thus, the agency expects that few of the ‘high cost home loans’ and refinanced ‘covered home loans’ originated in New Jersey will be securitized,” Moody’s said. Both of those categories of loans are defined in the New Jersey Home Ownership Act, a predatory lending statute that will take affect Nov. 27.
Moody’s did say that “certain” New Jersey home loans “may be included in residential mortgage-backed securitizations without increasing risk to investors.” The law defined a “covered home loan” as a mortgage loan with total points and fees, excluding either a conventional prepayment fee or not more than two discount points, generally exceeding 4% of the total loan amount. A “high cost home” loan is a loan less than $350,000 that either has an annual percentage rate exceeding the coverage limits under the federal Home Ownership Equity Protection Act of 1994 or total points and fees generally exceeding 5% of the loan amount. Moody’s also announced that a recent downgrade of in the financial strength of General Electric Mortgage Insurance Corp. (GEMICO) to ‘Aa2’ will not affect the RMBS backed by loans with primary mortgage insurance written by GEMICO. Also, ratings on outstanding RMBS supported by GEMICO pool policies are unaffected, Moody’s said. Several classes of PNC Mortgage Securities Corp. mortgage pass-through certificates have been rated by Fitch Ratings. Rated were these series: 1998-7, -8, -9, -10 and -12. The upgrades were made as a result of low delinquencies and losses, as well as increased credit support levels. Fitch has also upgraded two and affirmed 27 RMBS classes from 15 Prudential Home Mortgage Securities Corp. mortgage pass-through certificates series 1994-1, -2, -3, -5, -6, -7, -8, -12, -13, -17, -18, -20, -24, -25 and -27. All of the classes were either affirmed or upgraded to ‘AAA’. One class of PNC Mortgage Securities Corp. mortgage pass-through certificates Series 2000-3 has been downgraded by Fitch. Class DB-5 was dropped from ‘C’ to ‘D’ due to realized losses that will not be reimbursed in future periods. Fitch did affirm 12 classes of Series’ 2003-3 Groups 1, 2 and 3 and Series 1995-2 due to credit enhancement consistent with future loss expectations. The ratings of First Franklin Financial Corp.’s Series 2000-FF1 have been affirmed by Fitch at ‘AAA’ for Class A, ‘AA’ for Class M-1 and ‘A’ for Class M-2 reflecting credit enhancement consistent with future loss expectations. And Fitch also upgraded the RMBS Class M-1 of Morgan Stanley Series 2000-1 from ‘AA’ to ‘AAA’ because of an increase in credit enhancement relative to future loss expectations. Three classes were affirmed: Class A at ‘AAA’; Class M-2 at ‘A’; and Class B-1 at ‘BBB’. The affirmations reflect credit enhancement consistent with future loss expectations. |
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Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at: pcrowley@enquirer.com |
