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Panelists Say RMBS Party is Over

Panelists Say RMBS Party is Over

Recent residential mortgage ratings activity

June 2, 2003


After a good run of record growth in the U.S. Residential Mortgage Backed Securities (RMBS) market the party is about to end, according to panelists at the recent Standard & Poor’s (S&Ps) Structured Finance Seminar in Orlando. “It is unusual to have such a significant drop in interest rates and appreciation of real estate prices simultaneously,” said Rob Dubitsky, director of Mortgage ABS Research at Credit Suisse First Boston. “I do not believe we will continue to see those same conditions going forward. Volume will be strong but not as strong as we have seen.” Issuance of nonconforming mortgage products surged 42% in the first quarter compared to last year, marking the fifth consecutive quarter of growth. Low interest rates, refinancing and other factors have fueled the growth, said Thomas Zimmerman, executive director at UBS Warburg. “It is difficult to sort out exactly whether the explosion in volume over the past few years is because of the decline in rates or from a broadening of the product in the subprime market,” Zimmerman said. “It may also be because of the general credit decline by consumers in the U.S. that has pushed them back into the subprime area.”Fitch Ratings has assigned the following ratings to the $501.4 million Equity One Mortgage Pass-Through Trust series 2003-2. Classes AF-1 through AF-5 and AV-1, ‘AAA’; class M-1, ‘AA’, Class M-2, ‘A’; and Class M-3 ‘BBB+’. The ratings reflects the level of subordination and monthly excess interest. The weighted average loan-to-value (LTV) ratios range from 83.49% to 84.96%.

The $307.1 million Residential Accredit Loan’s mortgage pass-through certificates series 2003-QS7 classes A-1 through A-5, A-P, A-V, R-I and R-II senior certificates have been rated ‘AAA’ by Fitch reflecting the level of subordination and collateral quality.

Moody’s Investors Service has assigned ratings ranging from ‘Aaa’ to ‘Baa2’ to the Classes A, B-1, B-2 and B-3 certificates offered to investors under Bear Stearns Structured Products Inc. $59.7 million mortgage pass-through certificates series 2003-1 reflecting the credit quality of the mortgage loans backing the underlying securities, level of subordination, excess spread and cash flow.

The PNC Mortgage Securities Corp. mortgage pass-through certificate Series 2000-6 has been rated by Fitch – three classes were upgraded to ‘AAA’, ‘AA’ and ‘BB+’ and two were affirmed at ‘AAA’ reflecting low delinquencies and losses and increased credit support.

Fitch has upgraded three classes and affirmed two others in Merrill Lynch Mortgage Loans Inc. mortgage pass-through Certificates Series 2001-A1. The upgrades came in at ‘AAA’, ‘AA’ and ‘BB+’ while two ‘AAA’ ratings were affirmed. Low delinquencies and losses and increased credit support fueled the action.

The Salomon Brothers Mortgage Securities VII Inc. mortgage pass-through certificate Series 2000-2UST1 has been rated by Fitch. Five classes were upgraded to ratings ranging from ‘AAA’, to ‘B’. The action came about due to low delinquencies and losses and increased credit support.

Fitch has upgraded 33 classes and affirmed one class of the following issues: CWMBS In. mortgage pass-through certificates series 1998-J Group 1 and Group 2; Wells Fargo Asset Securities Corp. mortgage pass-through certificates series 2001-3 to 2001-7. The ratings reflect low delinquencies and increased credit support.

Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at:

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