Moody's Investors Service said today that it has placed under review for possible downgrade 66 tranches from 33 RMBS deals issued in 2005 and 2006. The collateral backing these classes are made up mainly of first-lien, fixed- and adjustable-rate, Alt-A mortgages. These rating actions affect securities with an original face value of about $318 million, the rating agency said in a release. The majority of rating actions taken today impacted securities that are now rated 'Baa' or lower. No action was taken on securities rated triple-A or double-A.
These 66 securities have been placed on review for possible downgrade due to the higher than expected loan delinquency rates as well as higher than expected pool losses versus the current level of credit enhancement. Although these deals have not felt considerable significant actual pool losses as of yet, the credit enhancement may be low compared with the amount of loans in foreclosure and held as "real estate owned" (REO), said Moody's.
The has noted a negative trend in delinquencies for first-lien, Alt-A mortgage in the late 2005 and 2006 vintages. Recent data reflects these first-lien, Alt-A mortgage loans have delinquency rates that are more than first expected. The rating agency said that a number of deals may, in light of their current rating levels, not be protected enough against the greater-than-expectedl osses implied by such high delinquency levels. These loans were originated under a scenario withaggressive underwriting, which along with prolonged home price pressure has resulted in significant loan performance deterioration and is the primary factor in these reviews, said the rating agency in report released late today.