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Q2 Subprime Upgrades Outnumber Downgrades at S&P

Q2 Subprime Upgrades Outnumber Downgrades at S&P

Recent subprime RMBS ratings actions, news

August 11, 2003


The subprime sector had more positive ratings adjustments than negative adjustments during the second quarter as well, according to Standard & Poor’s Ratings Services’ most recent Structured Finance Global Ratings Roundup Quarterly report. There were 14 upgrades and 10 downgrades in the subprime residential mortgage market during the quarter, and total rating change activity affected 23 classes of certificates of transactions from eight issuers, said Ernestine Warner, a director in S&P’s Structured Finance Surveillance Group.S&P has revised its criteria applied to manufactured housing mortgage loans in residential mortgage backed securities (RMBS). As of July 1 S&P said it expanded the data requirements and devised loan-level loss coverage assumptions for manufactured loans. The following types of loans are no longer allowed in S&P-rated RMBS collateral pools: repossessed units; manufactured housing loans with simultaneous seconds; second lien loans; land-in-lieu, or no cash downpayments; low-side overrides; 60-plus day delinquencies; Chattel paper, which has never been included because loans must be considered on real property for inclusion in RMBS transactions. Issuers seeking to include the loans in RMBS transactions must provide the following loan-level details for the manufactured housing collateral, in addition to standing requirements: New versus used units; number of units; current delinquency status; debt-to-income ratio; buydown loans; and points financed on buydown loans.

The $212.2 million of senior certificates in Structured Asset Securities Corp.’s 2003-18XS securitization of Alternative A mortgage loans have been rated ‘Aaa’ by Moody’s Investors Service, which also assigned ratings of ‘Aa2’ to Class M1 and ‘A2’ to Class M2. The ratings are based on the intrinsic quality of the mortgage collateral, level of subordination and excess spread. The pool carries a weighted-average loan-to-value (LTV) of approximately 80.5%, with nearly half of the loans having LTVs greater than 80%. The weighted-average FICO score came in at 688. Moody’s described the loans as “average” for Alt A quality mortgages.

Moody’s has assigned a rating of ‘Aaa’ to the $698.9 million senior certificates in ABN-AMRO’s 2003-6 fixed-rate jumbo A securitization due to credit quality of the underlying loans, credit support and subordination. The fixed rate loans were split into two groups: Group 1, 30-year term jumbo A loans with a weighted-average FICO of 740 and a weighted-average LTV of 68%; and Group II, 15-year term jumbo A loans with a weighted-average FICO of 746 and a weighted-average LTV of 60%.

CWMBS Inc.’s $948.6 million mortgage pass-through certificates CHL Mortgage Pass-Through Trust 2003-26 Classes 1-A-1 through 1-A-6, 2-A-1 through 2-A-4, A-R and PO have been rated ‘AAA’ by Fitch Ratings. In addition, Fitch has rated Class M ‘AA’, Class B-1 ‘A’, Class B-2 ‘BBB’, Class B-3 ‘BB’ and Class B-4 ‘B’. The ratings reflect level of subordination, credit enhancement and quality of collateral. The 30-year fixed-rate mortgage loans in Group 1 have an approximate weighted-average LTV ratio of 69.25% and a weighted average FICO score of approximately 740. Group 2 has an approximate weighted-average LTV ratio of 60.15% and a weighted average FICO of 748. CWMBS purchased the loans from Countrywide Home Loans.

A rating of ‘AAA’ has been assigned by Fitch to various classes in the $400.9 million Residential Funding Mortgage Securities Inc.’s mortgage pass-through certificates series 2003-S13. Rated were classes A-1 through A-7, A-P, A-V and R-I and R-II. The ratings reflect level of subordination, collateral quality and credit enhancement. The 30-year fixed-rate mortgage loans secured by first liens on one- to -four-family residential properties carry a weighted-average FICO score of 745 and original LTV ratio of 65.05%.

The $1.2 billion Class A Certificates in CSFB Home Equity Asset Trust 2003-4 subprime home equity loan securitization have been rated ‘Aaa’ by Moody’s, which also assigned a rating of ‘Aa2’ to Class M-1, ‘A2’ to Class M-2, ‘A3’ to Class M-3, ‘Baa1’ to Class B-1, ‘Baa2’ to Class B-2 and ‘Baa3’ to Class B-3. The ratings reflect credit support, overcollateralization level of subordination and excess spread. The loan pool consists of two groups of fixed and adjustable rate mortgages. Group 1 have a weighted average LTV ratio of 80.05% and a weighted average FICO score of 621. Group 2 has weighted average FICO of 620 and a weighted-average LTV ratio of 80.17%.

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

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