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| Securitizations backed by prime jumbo loans and second liens saw several classes downgraded, while nearly $9 billion in collateralized debt obligations were impacted by downgrades on subprime residential mortgage-backed securities. Meanwhile, ratings were mixed on commercial MBS, which performed well last year but may deteriorate this year.
On deals issued on or after April 1, Standard & Poor’s Ratings Services warned ratings on RMBS may suffer if loan-level performance data is not provided up front. S&P said it lowered ratings on five classes from seven prime jumbo RMBS transactions issued between 2001 and 2004 by Credit Suisse First Boston Mortgage Securities Corp., Structured Adjustable Rate Mortgage Loan Trust and Structured Asset Securities Corp. The actions were based on the deterioration of available credit support provided by the senior-subordinate structure, as most of the deals experienced a negative relationship between recent realized losses and the level of delinquencies in their delinquency pipelines over the past six months. Fitch Ratings Services downgraded $511.0 million in classes from two second lien Credit-Based Asset Servicing & Securitization mortgage pass-through certificates issued in 2006 and 2007 based on deterioration in the relationship between credit enhancement and expected losses and reflect continued poor loan performance and home price weakness. In addition, $359.9 million in classes were placed or remain on Rating Watch Negative. Similar reasoning was used in Fitch’s downgrade of $398.9 million in classes from two Countrywide Asset Backed Securities second lien deals from 2006. S&P announced downgrades to 94 tranches for nearly $9.0 billion from 17 cash flow and hybrid CDO transactions, reflecting credit deterioration and recent negative rating actions on subprime RMBS securities. S&P reported commercial mortgage-backed securities had strong credit performance as a result of healthy commercial real estate fundamentals and relatively low delinquency rates in 2007. But reduced liquidity and an increase in delinquencies, especially among recent-vintage transactions, could hurt the sector’s performance this year. The agency said there were 697 upgrades on $16.6 billion in CMBS, though there were 130 downgrades on $3.0 billion in transactions last year — the first increase since 2003. Defaults of traditional CMBS dropped to 13 in 2007 from 14 in 2006. “Looking ahead, next year’s transition study could look quite different,” the report said. “Our future transition studies will likely show fewer upgrades and more downgrades and defaults, the result of tighter liquidity, the relaxed underwriting standards of the past few years, and current economic conditions.” Moody’s announced it upgraded four classes for $55.8 million of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through, Series 2002-C2, due to defeasance, increased credit support and overall stable pool performance. Three classes for $26.1 million of LB-UBS Commercial Mortgage Trust 2000-C3, Commercial Mortgage Pass-Through Certificates, Series 2000-C3 were downgraded by Moody’s, which cited projected losses from the specially serviced loans and increased loan-to-value dispersion. |
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Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com. e-mail:Â [email protected] |
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