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MBS, Servicer Upgrades and Downgrades

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MBS, Servicer Upgrades and DowngradesRecent MBS ratings activity

March 10, 2008


Subprime, Alt-A and commercial mortgage-backed securities saw classes downgraded while one servicer and one CMBS saw ratings upgrades.

Moody’s Investors Service upgraded the primary subprime servicer quality ratings of Litton Loan Servicing LP to SQ1- from SQ2 as a Primary Servicer of subprime residential mortgage loans as a result of Goldman Sachs’ acquisition of the company. Its primary second lien servicer ratings was raised to SQ2+ from SQ2, while its special servicer rating was bumped to SQ1- from SQ2 and its primary manufactured housing loan servicer rating was improved to SQ2- from SQ3.

But Moody’s downgraded the servicer quality rating of Home Loan Services Inc. to SQ2 from SQ1- as a primary subprime servicer because parent Merrill Lynch announced it would explore the sale of the unit. The company’s primary second lien servicer ratings was lowered to SQ3+ from SQ2, while is primary prime servicer ratings was cut to SQ2- from SQ2 and its special servicer ratings was lowered to SQ2 from SQ2+. The ratings remain on review.

Five classes issued by Structured Asset Investment Loan Trust in 2003 and 38 tranches from five 2005 transactions were downgraded by Moody’s. The subprime first and second lien-backed deals were downgraded based on the analysis of the credit enhancement provided by subordination, overcollateralization and excess spread relative to the projected pipeline losses of the underlying pool.

Fitch Ratings downgraded classes totaling $3.4 billion from Home Loan Trust mortgage pass-through certificate transactions issued in 2007 on Rating Watch Negative as a result of changes to its subprime loss forecasting assumptions. Another $1.8 billion in classes remain on Rating Watch Negative. The deals have 60-day delinquency of between 6.53 percent and 32.39 percent while cumulative losses are expected to be from 16.49 percent to 36.66 percent.

Higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to credit enhancement levels prompted Moody’s to downgrade 163 tranches from 15 transactions issued by Bear Stearns ALT-A Trust between 2005 and 2007. The deals, backed by Alt-A loans, had 78 tranches left on review for downgrade and another 155 tranches placed on review.

Six RAMP deals from 2004 saw 18 tranches downgraded by Moody’s because of an increasing proportion of severely delinquent loans. The loans backing the deals were acquired by Residential Funding Corp. and do not comply with some of the criteria of RFC’s standard programs.

EMC Mortgage Loan Trust transactions from 2002 to 2006 had 25 classes for $0.1 billion downgraded and less than $0.1 billion in classes left on ratings watch, reflecting deterioration in the relationship of CE to future loss expectations. The loans backing the deals are reperforming loans that had previously defaulted.

Fitch upgraded a $33.7 million class of Nomura Asset Securities Corp.’s commercial mortgage pass-through certificates, series 1996-MDV, due to the payoff of one loan.

Moody’s downgraded 12 classes for $30.2 million of two LaSalle Commercial Mortgage Securities Inc. transactions from 2006.


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


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