S&P Downgrades More U.S. Prime Jumbo RMBS

Standard & Poor’s has reviewed 101 RMBS transactions backed by U.S. prime jumbo mortgage loan collateral issued in 2005, 2006, and 2007 and downgraded almost all of them: S&P downgraded 956 classes from 93 of these transactions and affirmed ratings on 246 classes from 40 transactions.

The downgrades reflect our belief that credit enhancement for the affected classes will be insufficient to cover projected losses due to increased delinquencies and the current condition of the housing market.

Details of the downgrades can be found here. S&P applied the assumptions discussed in Assumptions: Standard & Poor’s Revises U.S. Prime Jumbo RMBS Lifetime Loss Projections For Transactions Issued In 2005, 2006, And 2007, published June 16, 2009.

In that report S&P raised its estimate of projected losses for U.S. RMBS transactions backed by prime jumbo collateral issued in 2005, 2006, and 2007.

This increase in our projections resulted from growth in the number of delinquent and defaulted loans beyond what we had previously projected based on our default curves for these vintages. Over the past six months, total delinquencies (as a percent of the current pool balances) for the 2005, 2006, and 2007 vintages have increased by approximately 53%, 71%, and 81%, respectively.

The effects of these changes to the projected losses on the collateral securing outstanding prime jumbo transactions are as follows:

• 2005 vintage losses increase to approximately 2.82% from 2.71%;
• 2006 vintage losses increase to approximately 5.08% from 3.65%; and
• 2007 vintage losses increase to approximately 6.97% from just under 4.5%.

Comments

[conceptwizard:]

There is no credibility in these rating agencies anymore. They simply cany be trusted. They should have been charged with conspiracy to defraud the American people. The result of the irresponsibility and inaccuracy of these AAA rating to begin with have opened the door for this complete drain of wealth from the American people. The fact that the Obama Administration has done nothing to address this speaks volumes. They are not included in his new regulation package. Without these entities this new DEPRESSION could not gave happened.

Jun 23 07:01 AM

[AndrewBaker:]

I agree that the rating agencies have not been made to shoulder their share of the blame for the credit crisis which sparked off this recession , possibly leading to depression, in the real world. The mathematical genii who constructed the bonds that took in the debts that were then sold off around the world, and chopped, diced and sliced in the process, were not all ignorant of the possibility of black swan happenings. However, the lure of profit and bonus was too great for the banks' masters, and the rating agencies were not about to cast doubt on these wonderful new products that brought in big bucks and bonuses to them also in giving out their ratings.

"He who pays the piper..." comes to mind. Don't pay, and watch while you get downgraded; but offer up a fee to have your offerings classified, and, whoops, you've got an "A."

Is there a lesson to be learned?

Jun 23 11:12 AM

[Old Trader:]

While there's no doubt that more than a bit of the blame for the credit market meltdown/lockup can be laid at the feet of the major rating agencies, it DOES appear that they've gotten "religion" and are belatedly doing what they SHOULD have done in the first place. Having said that, as I was reading the information presented in the article, it struck me that this is the type of thing that goes unsung/unnoticed by Joe 6pack, retail investor.....until it suddenly blows up and becomes "headline news"....by which time, its too late, of course.

Jun 23 10:08 PM