S&P Takes Action on Over $500 Billion in Mortgage Securities

January 30, 2008 No Comments »

Standard and Poor’s said late today that it downgraded or put on negative watch $270.1 billion worth of mortgage-backed securities and did the same with $263.9 billion in CDOs.

The securities in question are 6,389 classes of residential MBS tied to first-lien subprime loans originated in 2006 and the first half of 2007 and 1,953 ratings from 572 global CDOs.

S&P cut ratings on $34.7 billion of RMBS originated in 2006 and placed $136 billion under review for potential downgrade.

Additionally, the credit rating agency cut $15.4 billion of RMBS securities from 2007, while placing $34.8 billion on review for downgrade.

S&P also affirmed the ratings on 1,735 RMBS classes from 2006 and 691 RMBS tranches from 2007.

“Today’s rating actions incorporate our most recent economic assumptions and reflect our expectation of further defaults and losses on the underlying mortgage loans,” S&P said in a statement.

“The housing market, especially the subprime sector, will continue to decline before it improves and housing prices will come under stress,” the company added.

“We expect losses to continue to increase with borrowers experiencing rising loan payments as adjustable rate mortgages reset.”

Roughly $342 billion worth of mortgages are expected to reset this year, the rating agency said.

Despite all the negative action, S&P doesn’t anticipate any further major rating action on 2006 subprime RMBS or securities issued in the first half of 2007.

In the next two months, it should release data related to RMBS transactions supported by Alt-A and prime mortgage loans.

Leave A Response