S&P Downgrades 120 Classes of Alt-A RMBS

After a review of 13 US residential mortgage-backed securities (RMBS) transactions, Standard and Poor’s lowered its ratings on 120 of the securities’ classes last week. The collateral backing the vintage 2005-2007 securities are primarily Alt-A, first-lien residential mortgages. S&P said it made the downgrades after reviewing the mortgage loan collateral in the securities and believes the investments will lose value because of an increase in delinquencies and the current negative condition of the housing market. In one of the securities, American Home Mortgage Investment Trust 2007-2, S&P slashed one class from triple-A to triple-C. Classes in other securities also took similar hits, including one from GSAA Home Equity Trust 2006-3, which went from triple-A on watch negative to triple-C. S&P affirmed its triple-A rating of seven classes in four of the transactions. Other bank originators whose securitizations faced review include Bank of America, Lehman Brothers, Harborview Mortgage, Morgan Stanley, IndyMac and its Residential Accredit Loan Inc. (RALI) subsidiary. The announcement came the day after S&P lowered its ratings on 86 classes from 10 RMBS securities backed by US prime jumbo, Alt-A, subprime and scratch-and-dent loans. Market observers for months have kept an eye out for continuing pain in the Alt-A market as mortgage performance declines. Write to Austin Kilgore.