Moody's Investors Service has revised its loss projections for U.S. Alt-A RMBS issued in 2006 and 2007.
On average, the rating agency is currently estimating cumulative losses of about 20% for 2006 securitization deals and about 24% for 2007 transactions.
Average losses will as a whole be lower for loan securitizations made early in 2006 and become progressively higher into the two-year period.
Meanwhile, the best-performing pools from 2006 have average estimated losses of roughly 7.5%, while the worst performers from 2007 average around 29% projected losses.
In 2008, the loans backing 2006 and 2007 Alt-A securitizations have had considerable rises creases in serious delinquencies as well as decreases in prepay rates that are unprecedented for the asset class, Moody's said.
Cumulative losses are already many times higher than for pools in earlier Alt-A vintages, which have historically been well below 1% in typical deals, the rating agency said.
As a result of the changed loss projections, the rating agency concluded that in most cases, subordinate securities are likely to be completely written down. Moody's is likely to downgrade the ratings of these securities to 'Ca'[ or 'C'.
The agency also said that credit protection from structural features should provide most senior bond holders with fairly high recovery rates, although approximately 80% to 85% of all senior securities are likely to experience recoveries consistent with ratings lower than 'B3'.
Also, senior securities that support super senior classes will take losses in a majority of Alt-A deals, and will likely be downgraded to 'Caa' or 'Ca', according to Moody's.