Another wave of pre-crisis private-label residential mortgage-backed securities is coming to the end of the line with substantial losses, according to a Standard & Poor’s report Tuesday.

S&P said it has withdrawn ratings on 2,905 classes of RMBS from 193 transactions issued between 1999 and 2007.

“All of the classes within each of the affected transactions previously carried a rating of D (sf),” the company noted, a rating that generally indicates that the bonds involved have taken a principal writedown.

“Many of the classes are part of transactions that have taken a substantial amount of realized losses, including some where their outstanding balance is currently zero,” S&P said in its report. “Further, we do not expect some of these classes to receive any payments in the future.”

While the company views the RMBS outlook as “stable” given that it views current housing fundamentals as positive, it noted that fundamentals in the sector “still hinge on additional factors, such as the ultimate fate of modified loans, the propensity of servicers to advance on delinquent loans, and liquidation timelines.

“Under our baseline economic assumptions, we expect RMBS collateral quality to improve mildly. However, if a downside scenario were to occur in the U.S. in line with Standard & Poor's forecast, we believe that the credit quality of U.S. RMBS would weaken,” said S&P.

In a “downside scenario,” according to the company, higher defaults, additional shadow inventory and a decline in home purchase activity would push home prices lower again, employment would plateau and then weaken, gross domestic product growth would slow, and 30-year mortgage rates would drop back to 3.5% before stabilizing.

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