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S&P Sees Bright Outlook for Subprime

&P Sees Bright Outlook for Subprime

Recent subprime ratings news coverage

February 19, 2004


A new report by ratings agency Standard & Poor’s (S&P) forecasts that 2004 will be a good year for the subprime mortgage market. The fundamentals for house appreciation will continue this year, with baby boomers buying second homes, immigrants buying first homes, historically low mortgage rates and house price affordability driving the subprime market, according to a written draft of report. “House price appreciation for 2004 should carry on, albeit at a slower pace,” S&P said in the report. “This trend would maintain some of the market momentum found in the cashout mortgage market, including subprime and second-lien markets.” S&P said the average price for new homes sold in the first nine months of 2003 was $240,700, an increase of 8.2% over 2002. In the third quarter alone, the price increased 12.8%.GMAC Residential Funding Corp. has entered the $8.2 billion a year manufactured housing finance market. GMAC Manufactured Housing is “dedicated to delivering capital and providing operational infrastructure to the manufactured housing market,” the company said in a statement. The company plans to originate, acquire and service manufactured housing loans. “GMAC Manufactured Housing, along with our strategic partners, including Fannie Mae, is committed to providing an influx of capital to this underserved housing segment with the goal of establishing the highest standard for nonconforming and conforming manufactured housing financing,” Chris Gilson, executive vice president of GMAC Manufactured Housing, said in the statement.

Fitch Ratings has affirmed Washington Mutual Mortgage Securities Corp.’s ‘RMS2+’ residential master service rating. Fitch said the rating is based on the company’s “successful 25 years of master servicing experience, seasoned management team and reliable proprietary technology. As of Nov. 30 the company’s master servicing portfolio consisted of more than 454,000 loans worth $101.4 million, an increase of 46.3% in loan volume and 25.7% in dollar volume as compared with the company’s total portfolio for 2002.

The Class IA and Class IIA certificates issued in Chase Funding Trust’s $1.4 billion Series 2003-6 securitization has been rated ‘Aaa’ by Moody’s Investors Service. Ratings ranging from ‘Aa2’ to ‘Baa2’ were assigned to the mezzanine and subordinate certificates. The ratings were based on credit enhancement, subordination and overcollateralization. In a written statement Moody’s said the loans underlying the transaction are of “above-average credit quality for the subprime sector.” The fixed-rate loans in Group I have a weighted average loan-to-value (LTV) of 68.9% and an average weighted FICO of 672. The Group II adjustable-rate pool has a weighted average LTV of 77.2% and a weighted average FICO of 614.

Moody’s also assigned a rating of ‘Aaa’ to the $839.3 million senior 2003-40A investor certificates issued by Structured Asset Securities Corp. because of the credit quality and level of subordination. The weighted average LTV of the issue is approximately 71% with a weighted-average FICO of approximately 710. “The loan pool is of average quality when compared to other recent issues with combined prime and Alternative ‘A’ collateral,” Moody’s said in statement.

Meanwhile, Fitch has rated three mortgage pass-through certificates issued by subprime lender Countrywide Home Loans: Series 1998-12 (ALT 1998-4), ‘AAA’ to ‘B’; Series 2001-12 (ALT 2001-7), ‘AAA’ to ‘C’; and Series 2001-17 (ALT 2001-8), ‘AAA’ to ‘B’. The ratings are due to level of losses incurred and the delinquencies in relation to credit support while affirmations — the actions taken on most certificates — reflect credit enhancement consistent with future loss expectations.

Fitch also rated Argent Securities Inc.’s $679 million asset-backed pass through certificates Series 2003-W10 with ratings ranging from ‘AAA’ to ‘BBB-‘ reflecting subordination levels, excess interest and credit enhancement. The mortgage pool of closed-end first and second lien subprime mortgage loans have a weighted average LTV of 84.31% and a weighted average FICO score of 617.

Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at:

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