Moody’s Takes Action on $22.7bn Prime Jumbo, Subprime and Alt-A RMBS

Moody’s Investors Service late last week adjusted ratings on more than $22.7bn of residential mortgage-backed securities (RMBS) secured by subprime, Alt-A and Jumbo loans. As the credit-rating agency’s loss expectations on pools of loans issued from 2005 to 2008 continues to change, the firm took action on $11.502bn of jumbo RMBS, $5.6bn of subprime RMBS and $5.6bn of Alt-A RMBS. Moody’s downgraded 312 tranches, upgraded five tranches and confirmed ratings on 10 tranches within 11 prime jumbo RMBS deals worth $7.5bn and issued by Banc of America (a Bank of America (BAC) subsidiary) from 2006 to 2008. The credit-rating agency also downgraded 217 tranches, upgraded one tranche and confirmed ratings of three tranches within 14 prime jumbo RMBS worth $3.7bn and issued by BofA in 2005. The firm also downgraded 23 tranches from three prime jumbo RMBS worth $302m and issued by Prime Mortgage Trust from 2005 to 2007. The ratings actions on jumbo RMBS reflect Moody’s updated loss expectations on prime jumbo pools issued from 2005 to 2008. The changing loss expectations on prime jumbo pools comes after a prime jumbo RMBS, Sequoia Mortgage Trust 2010-H1, is emerging as the first deal to break the frozen securitization landscape since 2008. Moody’s assigned the deal triple-A ratings despite inherent credit risks. HousingWire‘s sources say the second RMBS to heat up the market will likely by jumbo, as well. At the same time, Moody’s downgraded ratings on 55 tranches of 19 subprime RMBS deals worth $5.6bn and issued by Long Beach in 2005. It marks an ongoing update of Moody’s loss expectations subprime pools issued from 2005 to 2007. The credit-rating agency downgraded the ratings of 133 tranches within 19 Alt-A RMBS worth $4.3bn and issued by IndyMac. It also downgraded the ratings of 79 tranches and upgraded the ratings of 2 tranches within 8 Alt-A RMBS deals worth $1.3bn and issued by Bear Stearns Asset Backed Securities I Trust in 2005. Moody’s said these downgrades were the result of “rapidly deteriorating performance of Alt-A pools” that affected the company’s loss expectations of Alt-A pools issued from 2005 to 2007. Write to Diana Golobay. The author holds no relevant investments.

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