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$3.1 Billion in 2005 RMBS Downgraded

$3.1 Billion in 2005 RMBS DowngradedRecent RMBS, servicer ratings activity

December 26, 2007


Changes to subprime forecasting assumptions led Fitch Ratings to downgrade more than $3 billion in classes from residential mortgage-backed securities issued in 2005. But deals from 2006 and even 2007 were also impacted from the move.

Fitch warned it placed 19 RMBS classes insured by Security Capital Assurance Ltd. on Rating Watch Negative because the insurer’s own AAA rating from Fitch was also place on watch. Another 35 RMBS classes were placed on watch because insurer FGIC Corp.’s rating was also placed on watch, while a Rating Watch Negative for Ambac Assurance Corp. debt led to 64 RMBS being placed on negative watch.

Fitch cited deterioration in the relationship between credit enhancement and expected losses in number of residential deals downgraded, including classes amounting to $39 million issued by Long Beach between 2002 and 2004 while another $12 million was placed on watch for a downgrade.

And approximately $52 million from Aegis securitizations in 2003 and 2004 were among the downgrades, while another $15 million was placed on Rating Watch negative. Delinquency of at least 60 days ranges from 20 percent to 34 percent with cumulative losses of 2.4 percent to 3.3 percent.

Morgan Stanley subprime transactions issued in 2002, 2003 and 2004 also saw classes downgraded by Fitch totaling $120 million. The deals, with paper originated by Aames Capital Corp., New Century Capital Corp. and other various sellers, have 60-day delinquencies ranging from 8 percent to 50 percent.

A 2004 transaction from Structured Asset Investment Loan was downgraded, with actions on $190 million in classes — the most as a result deterioration. Another $87 million was placed on Rating Watch Negative. About 20 percent of the loans are 60 days late.

Changes to Fitch’s subprime loss forecasting assumptions led to negative ratings actions on several 2005 deals, including SASCO deals with originations from Option One, Wells Fargo and WMC having $39 million in classes downgraded and another $46 million placed on negative watch. Delinquency of at least 60 days ranged from 20 percent to 34 percent.

Merrill Lynch Mortgage Investors classes for $62 million were downgraded as a result of the changes. Sixty-day delinquency ranged from 33 percent to 31 percent. Terwin Mortgage Trust also had $62 million in classes downgraded. Delinquency on those deals was 20 percent to 22 percent and realized losses were from 1.0 percent to 1.35 percent.

People’s Choice classes for $144 million were downgraded because of Fitch’s assumption adjustments. Realized losses went from 0.7 percent to 1.2 percent, and 60-day delinquency was from 33 percent to 36 percent. Downgraded classes totaled $149 million from Long Beach deals with 60-day delinquency ranging from 31 percent to 35 percent and realized losses bouncing between 0.58 percent to 1.12 percent.

Certificates from J.P. Morgan Mortgage Acquisition Corp. for $157 million, also issued in 2005, saw downgrades while another $20 million was placed on Rating Watch Negative. Delinquency from those deals, originated by Fieldstone Mortgage Co., Option One and WMC Mortgage, have 60-day delinquency rates ranging from 15 percent to 29 percent.

Classes amounting to $169 million issued by Securitized Asset Backed Receivables, or SABR, were downgraded as part of the 2005 deal downgrading by Fitch. Delinquency on the deals, with Fremont, New Century and WMC originations, was from 32 percent to 38 percent and realized losses were from 1.3 percent to 1.5 percent.

Classes of two Option One deals totaling $185 million were downgraded while $44 million in classes were placed on watch — also part of the wide scale adjustments by Fitch. Delinquency on the vintage 2005 transaction ranges from 24 percent 30 percent and realized losses are 1.2 percent.

NovaStar had $192 million in classes downgraded and another $88 million placed on negative watch. Late pays of at least 60 days ranged from 16 percent to 18 percent and realized losses were at between 1.0 percent to 1.6 percent.

Fremont Investment & Loan classes valued at $310 million were downgraded. Delinquency of at least 60 days is nearing 30 percent while realized losses have surpassed 1.5 percent.

Classes of Ameriquest, Argent and Park Place totaling $775 million were downgraded. The certificates are at between 11 percent and 25 percent 60-day delinquency.

Structured Asset Investment Loans, which was the biggest of the 2005 deals downgraded by Fitch because of the assumption changes, saw classes for $873 million downgraded from deals with originations from Ameriquest, BNC, Finance America, Option One and OwnIt. The 60-day rate ranged from 23 percent to 34 percent and the realized losses ranged from 1.2 percent to 2.4 percent.

Fitch also cited changes to its subprime assumptions in downgrading $157 million in classes from New Century 2006-S1. That deal has 27 percent delinquency and 15.6 percent realized losses to date.

Even 2007 asset-backed certificates from WaMu saw $783 million in classes downgraded because of Fitch’s changes. Sixty day delinquency is 9 percent and realized losses are 0.1 percent.

Moody’s Investors Service placed tranches of Bayview Financial Mortgage Pass-Through Trusts from 2004 and 2005 on review for possible upgrades based on the analysis of the credit enhancement provided by subordination, overcollateralization and excess spread relative to the expected loss. The deal is backed by a mix of subprime, Alt-A and commercial mortgages.

Fitch bumped Bank of America N.A.’s primary residential servicer rating for home equity and home equity line-of-credit product to RPS1 from RPS1- because of improvements to investor accounting, better servicing administration and the acquisition completion of Seattle Mortgage Co.’s reverse mortgage business.

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


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