Thursday, 18 October 2007

S & P downgrades 1,713 classes of RMBS

Standard & Poor's Ratings Services Reviews Ratings on Certain U.S. Residential Mortgage-Backed Securities Issued in 2007

Standard & Poor's Ratings Services announced today that it had downgraded 1713 classes of U.S. residential mortgage-backed securities (RMBS) backed by first-lien loans, first-lien Alternative-A (Alt-A) mortgage loans, and closed-end second-lien mortgage loans issued from January 1, 2007, through June 30, 2007. The downgraded securities had an original par value of $23.35 billion, which represents 6.28% of the $371.9 billion U.S. RMBS backed by these three types of collateral and rated by S&P during this period. This also represents 4.71% of the $495 billion original par value of all U.S. RMBS rated during this period. S&P also affirmed its ratings on securities representing $245.1 billion original par value of U.S. RMBS backed by these three types of collateral.

In addition, S&P placed on CreditWatch negative the ratings on 646 other classes, representing $3.3 billion original par value of U.S. RMBS backed by first-lien subprimemortgage loans and first-lien Alt-A mortgage loans issued during this same period.

Of the 1713 securities downgraded, approximately 48% were rated in the 'BBB' category and below. Thirty-nine 'AAA' rated securities were downgraded, constituting roughly 2% of all downgraded securities, and no rating was lowered below 'A'.

On that note let's check out the ABX indexes to see how they reacted to the news. In the last few weeks it has been the BBB rated indexes plumbing new lows. However now the A and even AA tranches are getting in on the act.

Ugly stuff,