$33 Billion in Junior Lien Downgrades

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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.

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Mortgage Daily Staff

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