Get Your Mortgage Rate Quote in Just 30 Seconds

Mortgage rates change every day, and your rate will vary based on your location, finances, and other factors. Get your FREE customized rate comparison below.

Nonprime Ratings Pummeled

Nonprime Ratings PummeledRecent RMBS ratings activity

October 13, 2008


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:

  • 38 classes from seven ACE Securities Corp. Home Equity Loan Trust deals issued in 2006 and 2007;
  • 36 tranches from eight GSAMP Trust securitizations from 2005 and 2006;
  • 35 certificates from 10 Bear Stearns Mortgage Funding Trust issuances from 2006 and 2007;
  • 28 classes from five First Franklin Mortgage Loan Trust transactions from 2005, 2006 and 2007;
  • eight tranches from GSAA Home Equity Trust 2006-S1; and
  • four certificates from American Home Mortgage Investment Trust 2005-SD1.

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:

  • 107 certificates of five CSAB Mortgage Backed Trust securitizations from 2006 and 2007;
  • 101 tranches from 15 option ARM transactions issued by CHL Mortgage Pass-Through Trust from 2004 through 2006;
  • 29 classes of three option-ARM, negatively amortizing GSR Mortgage Loan Trust issuances from 2006 and 2007;
  • 19 certificates from Structured Asset Mortgage Investments II Trust 2004-AR5 and Structured Asset Mortgage Investments Trust 2002-AR5 and 2003-AR3, all option-ARM deals;
  • 16 classes of CHL Mortgage Pass-Through Trust 2007-J2;
  • eight tranches from RAMP Series 2005-SL1 Trust and RFSC Series 2001-RM2 Trust — both RFC deals;
  • four certificates from negatively amortizing CWALT Inc., series 2006-OA19 and 2007-HY9; and
  • four classes of Structured Adjustable Rate Mortgage Loan Trust 2005-5 and 2005-6XS.

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



Popular posts

7 Refinance Strategies
7 Refinance Strategies

Refinance to a lower interest rate: If interest rates have dropped since you took out your original mortgage, refinancing to a lower rate can help you save money on your monthly payments and reduce the overall cost of your loan. Refinance to a shorter loan term:...

7 Refinance Strategies
Is Refinancing With Your Present Lender Preferable?

Do Not Accept the First Refinancing Offer You Receive Homeowners should not accept the first refinancing rate provided to them. This is particularly important if you are applying with your existing lender. Some mortgage lenders have mechanisms in place that prioritize...


Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

Fannie Mae Profile

Fannie Mae Profile

Last Updated December 27, 2018 7:38 PM Central   full list | other directories | bank search | SEC...