As investors anxiously waited last week for Standard & Poor's conference call about rating methodology alterations to closed-end second-lien RMBS, Starship's 1987 hit "Nothing's Gonna Stop Us Now" played over the conference call lines. The song seems very appropriate in light of the endless amount of rating activities and methodology alterations that have hit the market from S&P, Moody's Investors Service and Fitch Ratings. Whether these rating adjustments are sufficient, however, remains to be seen as market players cite little to no activity in the second-lien market.
"Right now, the rating changes and tightening criteria will have more of an effect on the existing deals in the pipeline that have some second-lien concentration," said Wen Zhang in ABS research at Credit Suisse. These deals will basically have to double their credit enhancement levels on the second-lien portion, which will have a noticeable impact on deal execution, she said. But in terms of standalone subprime second-lien deals, "that market is basically dead right now," Zhang said.