Concerns that housing and employment woes will persist into the second half of next year have contributed to a rating criteria change at Moody's Investors Service that leaves thousands of prime jumbo RMBS on review for possible downgrade.

Moody's has placed 4,474 tranches of jumbo RMBS with an original balance of $234 billion and a current outstanding balance of $143 billion on review. The rating agency said the move "will have the greatest impact on senior securities issued in 2005."

At 3.8%, this vintage's new projected cumulative losses are much less than for 2006 securitizations of this type (8%) as well as 2007 and 2008 jumbo RMBS (10.9% and 12.3%, respectively).

"Even though the Case-Shiller index in recent months has reported very modest home price gains, Moody's believes the overhang of impending foreclosures will impact home prices negatively in the coming months," the rating agency said. "Adding to borrowers' financial pressure, unemployment is now projected to peak at around 10.6% from previous projections of 9.8% from the first quarter of this year. Both measures are expected to reach their peaks some time in the second half of 2010, after which recovery is expected to be slow."

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