Ratings on more than $33 billion in junior-lien residential mortgage-backed securities were lowered by one ratings agency during the past year. Another ratings agency reported that HELOC transactions tend to be better performers than closed-end seconds.
Fitch Ratings reported that it downgraded 48 classes of 75 RMBS filled with subprime fixed-rate second liens and adjustable-rate home-equity lines-of-credit issued between 2005 and 2007.
Fitch said some transactions experienced faster-than-expected deterioration which resulted in rating downgrades. Furthermore, weak performance of the closed-end second lien transactions relative to the HELOC transactions can be explained by the credit profile of the borrowers, the announcement said.
Fitch noted that the closed-end second liens performed better than the HELOCs because HELOC borrowers had weighted-average credit scores of between above 700 while closed-end borrowers had scores between 640 and 700. In addition, weighted-average loan-to-values were around 85 percent on HELOCs versus closed-end LTVs near 100 percent.
The bulk of the actions came from Moody’s Investors Service and impacted vintages from 1999 to 2007. Moody’s said the ratings actions reflected its “updated loss expectations on second lien pools.”
The New York-based ratings agency the following downgrades of closed-end second RMBS classes to “continued performance deterioration in second lien pools in conjunction with home price and unemployment conditions that remain under duress.”
| Amount | Tranches | Transactions | Issuer | Years | Type |
| $2,800,000,000 | 26 | 8 | CWHEQ Home Equity Loan Trust | 2006 | CES |
| $1,800,000,000 | 57 | 29 | SACO I Trust | 2004, 2005, 2006, 2007 | CES |
| $1,100,000,000 | 30 | 14 | First Franklin Mortgage Loan Trust | 2003, 2004, 2005, 2006, 2007 | CES |
| $1,000,000,000 | 77 | 32 | RFMSII Home Loan Trust | 2000 to 2007 | CES |
| $870,000,000 | 33 | 14 | Structured Asset Securities Corp. | 2003, 2004, 2005, 2006 | CES |
| $645,000,000 | 13 | 8 | ACE Securities Corp Home Equity Loan Trust | 2005, 2006, 2007 | CES |
| $622,000,000 | 10 | 5 | RFMSII Home Loan Trust | 2006, 2007 | CES |
| $520,700,000 | 8 | 6 | Morgan Stanley Mortgage Loan Trust | 2005, 2006, 2007 | CES |
| $272,000,000 | 6 | 10 | Merrill Lynch Mortgage Investors Trust | 2004, 2005, 2006, 2007 | CES |
| $193,000,000 | 3 | 1 | Long Beach Mortgage Loan Trust 2006-A | 2006 | CES |
| $168,000,000 | 6 | 3 | C-Bass Mortgage Loan Asset Backed Notes, C-Bass Mortgage Loan Asset-Backed Certificates | 2001, 2006, 2007 | CES |
| $163,000,000 | 3 | 3 | Soundview Home Loan Trusts | 2005, 2006 | CES |
| $153,000,000 | 1 | 1 | Ownit Mortgage Trust | 2006 | CES |
| $100,000,000 | 23 | 10 | GSAMP Trust and GSAA Home Equity Trust | 2005, 2006, 2007 | CES |
| $98,000,000 | 1 | 1 | Fieldstone Mortgage Investment Trust 2006-S1 | 2006 | CES |
| $83,000,000 | 1 | 2 | MASTR Second Lien Trust | 2005, 2006 | CES |
| $62,000,000 | 4 | 1 | PHH Mortgage Trust | 2007 | CES |
| $49,000,000 | 3 | 1 | Alliance Bancorp Trust 2007-S1 | 2007 | CES |
| $49,000,000 | 10 | 2 | HomeBanc Mortgage Trust | 2005, 2007 | CES |
| $47,000,000 | 11 | 4 | CSFB Home Equity Trusts | 2001, 2002, 2004 | CES |
| $38,000,000 | 6 | 2 | Home Loan Trust | 2000, 2003 | CES |
| $25,000,000 | 2 | 1 | GRMT Mortgage Pass-Through Certificates, Series 2001-1 | 2001 | CES |
| $16,000,000 | 1 | 2 | Conseco Finance Home Loan Trust | 1999, 2000 | CES |
| $16,000,000 | 3 | 1 | Home Equity Mortgage-Backed Pass-Through Certificates, Series 2004-3 | 2004 | CES |
| $3,400,000 | 1 | 1 | Bond Securitization Asset-Backed Certificates, Series 2003-1 | 2003 | CES |
| $2,000,000 | 3 | 1 | DLJ ABS Trust Series 2000-6 | 2000 | CES |
These pools downgraded by Moody’s were backed by both closed-end seconds and HELOCs. Moody’s cited the same reasons for the downgrades.
| Amount | Tranches | Transactions | Issuer | Years | Type |
| $3,700,000,000 | 12 | 9 | Wachovia Asset Securitization | 2002 to 2006 | CES, HELOC |
| $1,800,000,000 | 29 | 27 | GMACM | 2001, 2202, 2003, 2004, 2005, 2006 | CES, HELOC |
| $1,600,000,000 | 36 | 21 | CWABS | 2004, 2005, 2006 | CES, HELOC |
| $1,600,000,000 | 24 | 26 | Terwin Mortgage Trust | 2003, 2004, 2005, 2006, 2007 | CES, HELOC |
| $1,200,000,000 | 15 | 11 | Bear Stearns Home Loan Owner Trust, Bear Stearns Mortgage Funding Trust, and Bear Stearns Second Lien Trust | 2001, 2006-2007 | CES, HELOC |
| $1,200,000,000 | 32 | 19 | CSFB Home Equity Mortgage Trust | 2003 to 2007 | CES, HELOC |
| $1,200,000,000 | 36 | 18 | RFMSII Home Equity Loan Trust | 2001, 2002, 2003, 2004, 2005, 2006 | CES, HELOC |
| $1,000,000,000 | 60 | 17 | Irwin Trusts | 2002 to 2007 | CES, HELOC |
| $951,000,000 | 5 | 8 | IndyMac Home Equity Mortgage Loan Asset-Backed Trust | 2004, 2006 | CES, HELOC |
| $416,000,000 | 11 | 9 | GreenPoint Home Equity Loan Trust and Greenpoint Mortgage Funding Trust | 2004, 2005, 2006 | CES, HELOC |
| $370,000,000 | 7 | 8 | American Home Mortgage Investment Trust | 2005, 2006, 2007 | CES, HELOC |
| $27,000,000 | 2 | 2 | Lehman ABS Corporation Home Equity Loan Asset-Backed Notes | 2004, 2005 | CES, HELOC |
| $24,000,000 | 4 | 1 | Irwin Whole Loan Home Equity Trust | 2004 | CES, HELOC |
The following HELOC RMBS were additionally downgraded by Moody’s based on the same logic.
| Amount | Tranches | Transactions | Issuer | Years | Type |
| $4,700,000,000 | 13 | 13 | CWHEQ Revolving Home Equity Loan Trust | 2005, 2006, 2007 | HELOC |
| $867,000,000 | 4 | 1 | Summitt PELs Trust | 2002 | HELOC |
| $811,000,000 | 4 | 4 | MSDWCC HELOC Trusts | 2003, 2005, 2007 | HELOC |
| $192,000,000 | 8 | 8 | CWABS Master Trust | 2002, 2003 | HELOC |
| $142,000,000 | 1 | 1 | Fifth Third Home Equity Loan Trust 2003-1 | 2003 | HELOC |
| $49,000,000 | 1 | 1 | Sequoia HELOC Trust 2004-1 | 2004 | HELOC |
Moody’s downgraded $71 million first and second lien HELOCs issued by First Citizens HELOC Trust 2005-1 even though there was stable performance in this second lien pool despite home price and unemployment conditions that remain under duress. And, for exactly the same reason, Moody’s raised ratings on one $327 million tranche of HELOC RMBS issued by Citigroup HELOC Trust in 2006.
In addition, $622 million high LTV closed-end second lien residential mortgage loans to prime borrowers were downgraded due to higher than expected pool losses in relation to available credit enhancement.
