Moody’s Downgrades $38.7bn of Subprime Mortgage-Backed Securities

Moody’s Investors Service downgraded nearly $39bn of subprime residential mortgage-backed securities (RMBS). The downgrades come this week as a series of hearings on the origins of the subprime mortgage market crisis are underway at the Financial Crisis Inquiry Commission (FCIC) beginning today. Moody’s downgraded the ratings of 18 RMBS tranches worth $1.826bn, and confirmed the ratings of an additional three tranches from within five RMBS deals issued by BNC Mortgage Loan Trust, the credit-rating agency announced Tuesday. The collateral involved in the round of downgrades includes first lien fixed and adjustable rate subprime RMBS. Moody’s downgraded the ratings of 151 RMBS tranches worth $13.2bn within 39 transactions issued by First Franklin. It also downgraded 125 tranches worth$8bn, confirmed ratings of 23 tranches and upgraded the ratings of another six tranches within 29 RMBS deals issued by Citigroup Mortgage Loan Trust. Moody’s downgraded 209 tranches worth $7.6bn within 43 RMBS deals issued by RASC. It also downgraded 130 tranches worth $5.2bn within 30 RMBS deals issued by RAMP. It downgraded the ratings of 46 tranches worth $2.1bn, and confirmed the ratings of an additional 21 tranches within 8 RMBS deals issued by Park Place. The credit-rating agency downgraded the ratings of 27 tranches worth $814m within five RMBS transactions issued by First NLC. Moody’s said the actions are a result of the continued performance deterioration in subprime pools in conjunction with home price and unemployment conditions that remain under duress. The actions reflect Moody’s updated loss expectations on subprime pools issued from 2005 to 2007. Write to Diana Golobay.

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