Tuesday, July 17, 2007

Fitch: Actual Downgrades of Alt-A Trusts

by Tanta on 7/17/2007 07:33:00 PM

From Fitch:

Fitch Ratings-New York-17 July 2007: Fitch Ratings takes rating actions on the following First Horizon Home Loan Mortgage Trust issues:
Series 2006-AA3:
--Class A affirmed at 'AAA';
--Class B1 affirmed at 'AA';
--Class B2 affirmed at 'A';
--Class B3 rated 'BBB' is placed on Rating Watch Negative;
--Class B4 downgraded to 'B+' from 'BB';
--Class B5 downgraded to 'CCC' from 'B' and assigned distressed recovery (DR) rating of 'DR1'.

Series 2006-FA2:
--Class A affirmed at 'AAA';
--Class B1 affirmed at 'AA';
--Class B2 affirmed at 'A';
--Class B3 rated 'BBB' is placed on Rating Watch Negative;
--Class B4 downgraded to 'B+' from 'BB' and placed on Rating Watch Negative;
--Class B5 downgraded to 'CCC' from 'B' and assigned distressed recovery rating of 'DR2'.

The mortgage loans consist of conventional, fully amortizing, adjustable-rate, as well as conventional, fully amortizing, fixed-rate mortgage loans secured by first liens on single-family residential properties. As of the June 2007 distribution date, the transactions are 13 and 15 months seasoned and the pool factors (i.e., current mortgage loans outstanding as a percentage of the initial pool) are 0.73% and 0.81%, respectively. These transactions are serviced by First Horizon Home Loan Corporation, rated 'RPS2' by Fitch.

The affirmations reflect credit enhancement (CE) consistent with future loss expectations and affect approximately $554 million of outstanding certificates. All classes in the transactions detailed above have experienced small to moderate growth in CE since closing. The negative rating actions, affecting approximately $10.8 million of outstanding certificates, reflect deterioration in the relationship between CE and expected losses.

Approximately 4.76% of the current collateral balance for series 2006-AA3 is more than 60 days delinquent. This includes bankruptcy, foreclosures and real estate owned (REO) of 0.51%, 2.10% and 0.38%, respectively. The credit enhancement for the B-3, B-4 and B-5 classes is 1.60%, 0.92% and 0.37%, respectively.

For series 2006-FA2, approximately 2.71% of the current collateral balance is more than 60 days delinquent. This includes foreclosures and real estate owned (REO) of 1.70% and 0.30%, respectively. The credit enhancement for the B-3, B-4 and B-4 classes is 1.22%, 0.73% and 0.37%, respectively.

So what are these loans? Well, according to the prospectus for 2006-AA3:
Substantially all the mortgage loans were underwritten pursuant to the seller’s “Super Expanded Underwriting Guidelines,” which guidelines generally allow for FICO scores, loan-to-value ratios and debt-to-income ratios that are less restrictive than the seller’s standard full/alternative documentation loan programs.

And 2006-FA2? You guessed it: "Super Expanded."