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Downgrades Hit 2003, 2004 Vintages

Downgrades Hit 2003, 2004 VintagesRecent MBS ratings activity

April 28, 2008


Downgrades have spread to subprime residential mortgage-backed securities issued in 2003 and 2004, though there were still some downgrades on deals issued from 2005 through 2007. Other ratings activity included downgrades on the servicer ratings of affiliates of Residential Capital LLC and on collateralized-debt obligations backed by commercial MBS.

The servicer quality rating of GMAC-RFC as a Master Servicer was downgraded to SQ2 from SQ1- by Moody’s Investors Service as a result of Moody’s rating action on the senior unsecured debt rating of GMAC-RFC’s corporate parent, Residential Capital, LLC. Moody’s also cited a decline in the master servicing portfolio, the company’s commitment to the service platform and the resignation of two independent directors — which the rating agency considered “a key component of ResCap’s corporate governance due to their responsibility to protect the interests of ResCap’s creditors in certain matters.”

GMAC-RFC affiliate Homecomings Financial LLC saw its servicer quality rating as a primary servicer of prime loans downgraded by Moody’s to SQ2- from SQ2. In addition, Homecomings’ ratings as a primary servicer of subprime mortgages, second liens, high loan-to-value loans and as a special servicer was downgraded to SQ3+ from SQ2-.

The latest subprime RMBS to be downgraded as a result of changes to Fitch Ratings’ subprime loss forecasting assumptions included six classes for $0.2 billion from J.P. Morgan Mortgage Acquisition Corp. 2006-WMC3.

Fitch also downgraded the following subprime deals that were issued in 2003 and 2004:

  • $0.8 billion in classes from 34 Morgan Stanley mortgage pass-through certificates with delinquency of between 11.1 percent and 38.0 percent;
  • $0.3 billion in classes from five New Century deals with delinquency at 14.6 percent to 30.1 percent;
  • $0.2 billion in classes from eight Aegis Mortgage Corp. transactions with delinquency ranging from 15.4 percent to 39.2 percent;
  • $0.1 billion in classes from 11 Ace Securities Corp. transactions with delinquency ranging from 15.1 percent to 33.5 percent;
  • less than $0.1 billion in classes from CitiFinancial Mortgage Securities mortgage pass-through certificates with delinquency between 30.9 percent and 31.1 percent;
  • less than $0.1 billion in classes from three Citigroup mortgage pass-through certificates with delinquency from 11.1 percent to 22.7 percent
  • less than $0.1 billion in classes from seven UBS MABS deals with delinquency ranging from 10.2 percent to 21.5 percent;

Worsening performance on transactions backed by closed-end-second liens prompted Moody’s to downgrade six certificates from Ownit Mortgage Trust 2006-OT1 and 63 classes of Nomura Asset Acceptance Corp. transactions from 2005, 2006 and 2007.

In commercial, six classes for $92 million from Wachovia Bank Commercial Mortgage Trust, series 2004-C12, were upgraded by Fitch due to 9 percent defeasance and 1 percent paydown since last review.

JER CRE CDO 2006-2, which is backed by CMBS, saw 14 classes for $558 million downgraded by Fitch because the risks facing first loss (unrated) and junior rated bonds within the capital structure of CMBS transactions have increased with expectations of a rise in commercial real estate defaults from current low levels.


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of


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