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Nonprime Ratings Assault Continues

Nonprime Ratings Assault Continues

Latest MBS ratings activity

December 5, 2007


photo of Coco Salazar
All three major ratings agencies continued their assault on ratings of several nonprime deals and one commercial deal, while two commercial transactions saw upgrades.

Moody’s Investors Service on Tuesday announced it issued negative ratings actions to a series of second lien loan deals because bonds’ credit enhancement levels, including excess spread and subordination was too low compared to current projected loss numbers at the previous rating levels.

Downgrades were reportedly issued to the ratings of three certificates of GSAA Home Equity Trust 2006-S1; 30 classes of GSAMP Trust 2006-S1 through S6; eight certificates from Ownit Mortgage Trust 2006-OT1; 37 certificates from Structured Asset Securities Corp Trust 2006-ARS1, and S1 through S4; and three certificates from American Home Mortgage Investment Tr 2006-3.

Other actions included downgrades for 41 and placement on review for possible downgrade for seven certificates of Terwin Mortgage Trust 2006-1, 6, 8, 2HGS, 4SL, 10SL and 12SL; downgrades on 65 and potential lower ratings on eight classes of SACO I Trust 2006-2 through 7, 9, 10 and 12; downgrades on eight classes and possible downgrade for one class from Soundview Home Loan Trust 2006-A; downgrades on 16 and possible lower ratings on 11 certificates from First Franklin Mortgage Loan Trust 2006-FFA and FFB. Moody’s also said it downgraded 10 and will possibly downgrade two certificates from IndyMac Home Equity Mortgage Loan Asset-Backed Trust Series INDS 2006-1 and A; downgraded 11 certificates and potentially lower ratings on one class of Merrill Lynch Mortgage Investors Trust 2006-SL1 and SL2; downgraded 36 and will possibly downgrade 14 certificates from CSFB Home Equity Mortgage Trust 2006-1 and 3 through 6.

NovaStar Mortgage Funding Trust 2007-1 received lower ratings on eight tranches after Moody’s applied its methodology updates on the nondelinquent portion of the transaction and because the collateral is experiencing higher-than-anticipated rates of delinquency, foreclosure, and real estate owned relative to credit enhancement levels, an announcement indicated.

Those reasons were also cited by Moody’s for actions on the following subprime deals: downgrades on seven tranches and potential downgrades on three tranches of Natixis Real Estate Capital Trust 2007-HE2; downgrades on 11 classes of Nomura Home Equity Loan Inc. Home Equity Loan Trust, Series 2007-2 and 3; downgrades on 20 tranches from Morgan Stanley ABS Capital I Inc. Trust 2007-HE1 through HE6 and NC1 through NC4, Morgan Stanley Home Equity Loan Trust 2007-1 and 2, and Morgan Stanley Structured Trust I 2007-1; and downgrades on 59 and potential downgrades on 16 tranches from Bear Stearns Asset Backed Securities I Trust 2007-AQ1, AQ2, FS1 and HE1 through HE5.

Moody’s said Monday that its analysis of the credit enhancement provided by subordination, overcollateralization and excess spread relative to expected losses resulted in downgrades to 22 classes of subprime loan-backed Aegis Asset-Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2004-1 through 3, 5, 6 and 2005-1.

Fitch Ratings announced Tuesday that a deteriorating relationship between credit enhancement and expected loss caused downgrades on nearly $293 million in outstanding certificates and led to $120 million in classes placed on Rating Watch Negative from Residential Accredited Loans Inc. Series 2005-QO4, QS10, QS12, QS14 Pool 1, QS15, QS16, and 2006-QS1, QS2 Group I 30 Year, QS5, QS6 Group I 30yr, QS6 Group II 15yr, QS7, QS8, QS11 and QS15. The RALI deals’ collateral consists of Alt-A mortgages.

Such deterioration was also cited by Fitch for downgrades on over $155 million of First Franklin Mortgage Loan Trust Series 2004-FF4, FFH3, FFH4, and FFH6; downgrades on nearly $26 million and potential downgrades on a $5 million class of Groups 1-5 and Groups 6-12 of Credit Suisse Mortgage Securities Corp. mortgage-backed pass-through certificates, series 2006-7, which is backed by Alt-A, first lien fixed-rate loans; and downgrades on about $11 million and potential lower ratings on $11 million of GS Mortgage Securities Corp. mortgage pass-through certificates Series 2005-SEA1.

Fitch’s updated subprime loss forecasting assumptions reportedly resulted in downgrades on over $141 million and placement on Rating Watch Negative for $12 million in classes of First Franklin Series 2005-FF1, FF5 and FFH3, as well as downgrades on over $24 million of second lien-backed GSAMP Trust 2005-S1, which has 60-plus day delinquency of nearly 33 percent.

Standard & Poor’s Ratings Services announced it placed on CreditWatch with negative implications the ratings of nine classes of commercial mortgage pass-through certificates from Morgan Stanley Capital I Trust 2006-IQ11 due to concerns with the third-largest loan, LeNature, secured by a 530,856-square-foot vacant industrial building in Phoenix, Ariz. Future debt service payments are dependent upon the borrower funding debt service on the loan. The owner of bottling equipment located on the premises had been paying debt service through use of reserves and payments, but it stopped making payments last month because the equipment was removed from the property.

But GE Commercial Mortgage Corp.’s series 2004-C1 saw ratings go up on nine classes because S&P said credit enhancement levels provide adequate support through various stress scenarios. Some upgrades on senior classes were specifically to reflect the defeasance of 15% percent of the collateral pool, while for other certificates were due to strong performance of loans.

Meanwhile, Fitch raised the ratings on about $59 million worth of TIAA CMBS I Trust’s commercial mortgage pass-through certificates, series 2001-C1. Improved ratings reflected increased credit enhancement levels due to additional defeasance of about 5 percent in two loans, loan payoffs and scheduled amortization since Fitch’s last rating action. As of the November 2007 distribution date, the pool’s aggregate certificate balance was $777 million, almost 47 percent below the level at issuance.


Coco Salazar is an associate editor and staff writer for

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