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Nonconforming Downgrades Continue

Nonconforming Downgrades Continue

Recent residential ratings activity

August 10, 2007


photo of Coco Salazar
Ratings agencies have busy downgrading classes of nonconforming residential mortgage-backed securities and collateralized debt obligations.

During the business week ending Aug. 3, Standard & Poor’s lowered the ratings on classes of Morgan Stanley Mortgage Loan Trust 2005-8SL, according to an announcement Wednesday.

S&P also said it placed ratings on 76 tranches from 19 U.S. cash flow and hybrid collateralized debt obligation transactions on CreditWatch with negative implications. The affected tranches have a total issuance amount of $2.163 billion.

Nine of the affected transactions are CDOs of asset-backed securities collateralized by mezzanine structured finance securities, including subprime first-lien residential mortgage-backed securities. Twenty-nine of the 76 tranches were from TABERNA issues.

Fitch Ratings downgraded $1.06 billion or 42 classes in Long Beach Mortgage Loan Trust subprime transactions all with loans originated by Long Beach.

Fitch also downgraded 42 classes or $682.2 million of six subprime Structured Asset Securities Corp., mortgage pass-through certificates. New Century-originated issues accounted for downgrades of $177.3 million while Option One, BNC and Aegis originated significant portions of the other downgraded classes.

Fitch also lowered ratings on 20 SAIL mortgage pass-through certificates or $1.47 billion. Most, or nine, of the downgraded classes, totaling $140.2 million, were from SAIL Mortgage Loan Trust, Series 2006-1, which was 78.6-percent originated by BNC and is expected to have cumulative losses of 7.76 percent.

Coco Salazar is an associate editor and staff writer for

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