Thursday, July 12, 2007

Rating Agency Miscellany

by Tanta on 7/12/2007 07:19:00 PM

I thought you might be interested in this little tidbit from Moody's. According to Moody's, the average serious delinquency rate for 2006-vintage subprime securities at 10 months of seasoning is 9.2%. But some originators are more average than others:



S&P also released information on actions taken on the 612 securities it put on "watch negative" on July 10:
Regarding the July 10, 2007, CreditWatch actions affecting 612 classes of RMBS backed by first-lien subprime mortgage collateral, 498 classes were downgraded, 26 classes remain on CreditWatch, and the ratings on 74 classes were affirmed and removed from CreditWatch. Additionally, the ratings on nine other classes were affirmed and removed from CreditWatch because they involve Alternative A mortgage collateral and were not intended to be included in July 10, 2007, action. These nine classes are from the following deals: GSAA Home Equity Loan Trust 2006-5, Lehman XS Trust 2006-7, and Luminent Mortgage Trust 2005-1, and will be addressed when Standard & Poor's reviews transactions backed by Alternative A mortgage collateral.

The ratings on 26 classes remain on CreditWatch because the issuer has appealed the decision based on the presence of mortgage insurance in those transactions. We are currently reviewing this appeal. In addition, the ratings on five other classes remain on CreditWatch because they are backed by closed-end second-lien mortgage collateral and will be addressed when Standard & Poor's reviews transactions backed by closed-end second-lien mortgage collateral.

Regarding the 70 classes placed on CreditWatch before July 10, 2007, 64 were downgraded and six remain on CreditWatch. Three classes remain on CreditWatch because the issuer is appealing the decision based on the presence of mortgage insurance and we are reviewing this appeal. Three classes remain on CreditWatch because they were placed on CreditWatch before July 10, 2007, and involve either closed-end second-lien or Alternative A mortgage collateral. They will be addressed when Standard & Poor's reviews transactions backed by closed-end second-lien and Alternative A mortgage collateral.

Ooops. We didn't notice the mortgage insurance coverage? We can't tell the difference between subprime and Alt-A? Some second liens snuck in when we weren't looking? It has not been a stellar week for S&P.
Of the 612 classes placed on CreditWatch on July 10, 2007, the 498 downgraded classes total approximately $5.69 billion in rated securities, which represents 1.01% of the $565.3 billion in U.S. RMBS first-lien subprime mortgage collateral rated by Standard & Poor's between the fourth quarter of 2005 and the fourth quarter of 2006. The 64 downgraded classes that were placed on CreditWatch before July 10, 2007, total approximately $700.9 million, which represents 0.12% in RMBS first-lien subprime mortgage collateral rated between the fourth quarter of 2005 and the fourth quarter of 2006. The combined impact of these 562 downgrades total approximately $6.39 billion in rated securities, or 1.13% of all RMBS first-lien subprime mortgage
collateral rated by Standard & Poor's between the fourth quarter of 2005 and the fourth quarter of 2006. The ratings associated with the downgraded classes, as a percentage of the total $6.39 billion in downgraded securities, are as follows:

Rating Percent
-- AA 0.07%
-- AA- 0.22%
-- A+ 1.66%
-- A 4.61%
-- A- 6.79%
-- BBB+ 14.01%
-- BBB 17.96%
-- BBB- 24.49%
-- BB+ 16.58%
-- BB 11.24%
-- BB- 1.06%
-- B 1.31%


And finally, Fitch is getting into the game:
Fitch Ratings-New York-12 July 2007: Following its monthly surveillance review, Fitch Ratings identified 170 U.S. subprime transactions among its $428 billion rated universe of subprime transactions as 'Under Analysis', indicating that Fitch will be issuing a rating action over the next several weeks. The total amount of bonds rated in the BBB category and below, which are the ones most likely to face rating actions, is $7.1 billion, representing 1.7% of Fitch's rated subprime portfolio.