S&P Downgrades More Alt-A, Subprime RMBS

by: Research Recap

Standard & Poor’s lowered its ratings to ‘D’ on 864 classes of mortgage pass-through certificates from 797 U.S. residential mortgage-backed securities (RMBS) transactions from various issuers.

S&P removed 90 of the lowered ratings from 85 of the downgraded transactions from CreditWatch with negative implications. and placed 434 ratings from 60 of the affected transactions on CreditWatch with negative implications. The ratings on 673 additional classes from 85 of these transactions remain on CreditWatch with negative implications.

The complete rating list is available in U.S. RMBS Classes Affected By July 20, 2009, Rating Actions.

Approximately 88.08% of the defaults affected Alternative-A (Alt-A) or subprime collateral. The 864 classes that defaulted consisted of 451 classes from Alt-A transactions (52.20% of all defaults), 310 from subprime transactions (35.88% of all defaults), 61 from prime jumbo transactions, 18 from closed-end second-lien transactions, 10 from re-performing transactions, seven from outside-the-guidelines transactions, two from document-deficient transactions, two from risk-transfer deals, one from a home equity line of credit (HELOC) transaction, one from an RMBS “other” transaction, and one from a re-REMIC (re-securitized real estate mortgage investment conduit) transaction.

The downgrades reflect our assessment of principal write-downs on the affected classes during recent remittance periods.

The CreditWatch placements reflect the fact that the affected classes are within a group that includes a class that defaulted from a ‘B-’ rating or higher. We lowered approximately 85.53% of the ratings on the 864 defaulted classes from the ‘CCC’ or ‘CC’ rating categories, and we lowered approximately 95.61% of the ratings from a speculative-grade category.