Junior Lien RMBS Downgraded

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2 · 20 · 09

More than 175 residential mortgage-backed securities backed by second-liens, home-equity loans and home-equity lines-of-credit saw tranches recently downgraded by all three major ratings agencies. One of the agencies noted surging losses on junior lien collateral.

Standard & Poor’s Ratings Services said earlier this month that it lowered ratings on 11 classes of seven securitizations from various issuers because of principal write-downs. Two of the deals are backed by HELOC collateral.

Another 89 classes from 68 closed-end second-lien RMBS saw ratings lowered by S&P this month. Principal write-downs were cited for the downgrades.

A Jan. 14 announcement from Fitch Ratings indicated it had taken various rating actions on 62 second-lien securitizations. The action reflected Fitch’s expectation for defaults and losses as well as a cash-flow analysis for each class.

Fitch said average cumulative losses are expected to reach 22 percent on the 2005 vintage and 53 percent on the 2006 vintage second-lien RMBS. As realized losses have surged, average loss expectations on the remaining balances are projected at 42 percent on 2005 transactions and 58 percent for 2006 issuances.

Moody’s Investors Service downgraded tranches of the following second-lien, HELOC and closed-end HEL transactions. The agency noted that the it evaluated several factors in its decision to downgrade — including historical performance, collateral composition and pool credit performance. Among other factors analyzed were the transactions capital structures.

  • 35 classes of 14 RFMSII Home Equity Loan Trust securitizations issued from 2001 through 2004;
  • 23 certificates from nine Terwin Mortgage Trust RMBS issued in 2003 and 2004;
  • 23 tranches from six Home Equity Mortgage Trust issuances from 2003 and 2004;
  • nine certificates from four GMACM Home Equity Loan Trust transactions issued in 2000, 2001 and 2004;
  • 17 classes of Structured Asset Securities Corp 2003-S2, 2004-S3 and 2004-S4;
  • seven tranches from Irwin Whole Loan Home Equity Trust 2002-A, 2003-B and 2003-D;
  • three classes of IndyMac Residential Asset-Backed Trust 2004-LH1;
  • one tranche from Irwin Home Equity Loan Trust 2002-1; and
  • one certificate from Wachovia Asset Securitization Issuance, LLC 2004-HEMM2.


Mortgage Daily Staff


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