|Downgrades recently accelerated on Alternative-A, second-lien and subprime residential mortgage-backed securities. Standard and Poor’s Ratings Service alone downgraded more than $25 billion in securities.
But first, Fitch Ratings said last month that it is the first rating agency with the capability to evaluate and assign ratings to mortgage loans based on VantageScore.
Bank of New York Mellon’s master servicer rating was raised to RMS1- from RMS2+ by Fitch, reflecting strong oversight and monitoring of primary servicers, continued investment in enhancing its technology and increasing its use of automation. BNY’s master servicing portfolio was more than 109,519 loans for $21.5 billion as of June 30.
Fitch lowered Irwin Home Equity Corp.’s primary servicer rating for HELOC product to RPS3+ from RPS2- based on the continued financial pressures faced by its parent, Irwin Financial Corp. The downgrade also reflects the difficult operating environment which has severely affected the parent’s earnings, asset quality and financial flexibility. Irwin’s servicing portfolio was 40,356 loans for $2.1 billion as of June 30.
A whopping 717 tranches from 71 subprime CWABS deals issued from 2005 to 2007 were downgraded by Moody’s Investors Service as a result of loss-projection updates.
S&P lowered ratings today on 189 classes from 49 subprime RMBS for $5.92 billion issued in 2005, reflecting probable projected credit support for the affected classes is insufficient to maintain the previous ratings. In addition, S&P lowered ratings on 32 classes from 24 subprime deals issued from 2003 to 2007 due to principal writedowns.
S&P lowered ratings on 110 subprime classes from 46 transactions issued from 2001 to 2006, reflecting the deterioration of available credit support for the affected transactions as well as loss expectations based on the dollar amount of loans currently in the delinquency pipelines. Also, 49 classes form 20 subprime RMBS issued from 2001 to 2006 were lowered.
Another 13 subprime deals from 2003 and 2004 saw 48 classes downgraded by S&P due to the performance of underlying collateral and because of the deterioration of credit enhancement, projected losses based on the amount of loans in the transactions’ delinquency pipelines and actual loss severities experienced by the deals.
Moody’s downgraded the following second-lien classes because of declining second-lien performance as well as credit enhancement levels, including excess spread and subordination, that were low compared to the current projected loss numbers at the previous rating levels:
The following Alt-A classes were downgraded by Moody’s as a result of higher than anticipated rates of delinquency, foreclosure and REO in the underlying collateral relative to credit enhancement levels:
S&P cut ratings on 154 classes from 18 Alt-A securitizations from 2004 and 2005 for $3.25 billion because of a rise in severe delinquencies relative to credit support. Another 77 classes from five Alt-A deals from 2006 and 2007 for $2.84 billion were downgraded by S&P because projected credit support for the affected classes is insufficient to maintain the previous ratings.
In addition, nine Alt-A deals from 2005, 2006 and 2007 saw 108 classes downgraded by S&P, reflecting that the amount of credit enhancement available for the downgraded classes is not sufficient to cover losses at the previous rating levels. Six 2006 Alt-A RMBS saw 39 classes for $10.4 billion lowered by S&P because projected credit support is insufficient to maintain the previous ratings.
Also, S&P lowered ratings on 331 classes from 22 Alt-A issuances for $3.496 billion from 2006 and 2007 because projected credit support for the affected classes is insufficient to maintain the previous ratings.
Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.