Moody’s Investors Service is taking a more upbeat view of legacy deals backed by subprime residential mortgages.

In a release the agency said it upgraded 85 tranches and downgraded four from 32 deals issued by various issuers.

Among the transactions enjoying upgrades were a number of trusts under the RAMP Series issued in 2005 and 2006 and multiple trusts under the RASC Series issued in 2005 and  2006. Most remained well below investment grade but there were exceptions, such as RASC Series 2005-KS5 CI. M-3, which was hoisted to ‘Baa1 (sf)’ from its previous upgrade to ‘Baa2 (sf)’ on Nov. 13, 2013; and RASC Series 2005-KS7 CI. M-3, breaching investment grade as it rose from ‘Ba1 (sf)’ to ‘Baa2 (sf).’

The upgrades were prompted by better-than-expected collateral performance and/or an accelerated amortization of the bonds thanks to higher prepayments or faster liquidations.

The catalyst for the four downgrades was “deteriorating performance and/or structural features resulting in higher expected losses for the bonds than previously anticipated.”

Moody’s pointed out that RMBS ratings performance is shaped by both the unemployment rate and housing prices. The agency projects a jobless rate ranging between 6.5% and 7.5% for the full year 2014 as well as a continued increase in housing prices. Deviations from these expectations could lead to ratings actions in the sector. 

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