S&P Slashes Ratings on 37 RMBS Classes

Standard & Poor’s on Friday slashed ratings of 37 classes of residential mortgage-backed securities (RMBS), citing delinquencies and an overall weakness of the housing market. After a review of three RMBS transactions backed by US prime jumbo, Alt-A and subprime mortgages issued in 2004 and 2006, the ratings agency downgraded 37 classes, 22 of which previously bore negative watches. Two of the downgraded classes moved from triple-A to triple-B, but most slipped from triple-A to double-B. The ratings agency also affirmed ratings on 11 triple-A classes, one double-A class and one triple-C class, indicating the performance of these classes is likely to continue much as it has. The downgrades, on the other hand, indicate the current level of credit enhancement will likely prove insufficient to cover projected losses as the housing market remains weak overall. “Although cumulative losses were generally low compared with our projected lifetime losses for the transactions reviewed, we are projecting an increase in losses due to increases in delinquencies and the current negative condition of the US housing market,” S&P said in a corporate statement. The mortgages backing the RMBS involved reside in a 2004-vintage CHL Mortgage Pass-Through Trust, a 2004-vintage Citigroup Mortgage Loan Trust and and a 2006-vintage Fieldstone Mortgage Investment Trust. S&P dealt the majority of downgrades to the CHL Mortgage Pass-Through, while the majority of affirmations split almost evenly between CHL Mortgage Pass-Through and Citigroup Mortgage Loan Trust. Write to Diana Golobay.