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NEW YORK (Standard & Poor's) Nov. 16, 2007--Standard & Poor's Ratings Services
today placed its ratings on 803 classes of U.S. residential mortgage-backed
securities (RMBS) backed by U.S. closed-end second-lien mortgage loans issued
from the beginning of 2004 through the end of 2006 on CreditWatch with
negative implications. Although transactions issued in 2004 are performing at
historical norms, the 2004 transactions included in this review were
identified as requiring additional credit analysis. We do not anticipate a
need to expand this analysis to include 2004 vintage RMBS backed by subprime
and Alt-A collateral.
The complete ratings list for the U.S. closed-end second-lien CreditWatch
placements is included in "U.S. Closed-End Second-Lien RMBS Classes Affected
By Nov. 16, 2007, CreditWatch Negative Placements,? available on
RatingsDirect, the real-time Web-based source for Standard & Poor's credit
ratings, research, and risk analysis, at www.ratingsdirect.com. The list can
also be found on Standard & Poor's Web site at www.standardandpoors.com by
clicking on "S&P's Views on Subprime and Related Mortgage Markets."
Today's closed-end second-lien RMBS CreditWatch actions affect a total of 116
U.S. closed-end second-lien RMBS transactions. The 803 classes from the
closed-end second-lien transactions had an original total principal balance of
approximately $21.53 billion, which represents 29.85% of the approximately
$72.12 billion in U.S. RMBS backed by closed-end second-lien mortgage loans
rated by Standard & Poor's from the beginning of 2004 through the end of 2006.
During the same period, the total balance of U.S. RMBS securities backed by
all types of residential mortgage loans issued in the non-agency market was
more than $2.97 trillion.
These actions reflect an increase in the level of delinquencies and the
resulting level of monthly charge-offs among the closed-end second-lien
mortgage loans supporting these transactions. As of the October 2007
distribution, total delinquencies and severe delinquencies (90-plus days,
foreclosures, and real-estate-owned {REO}) for the transactions with ratings
placed on CreditWatch were 7.55% and 4.01% for the 2004 vintage, 12.28% and
6.27% for the 2005 vintage, and 10.78% and 5.76% for the 2006 vintage,
respectively. The total delinquency percentages have increased from the July
2007 distribution by about 9% for the 2004 origination, 33% for the 2005
origination, and 11% for the 2006 origination.
Furthermore, cumulative charge-offs have increased to 2.62% as of October 2007
from 2.49% in July 2007 for those deals issued in 2004. For those transactions
issued in 2005, cumulative realized losses have increased to 5.97% in October
2007 from 4.48% in July 2007. Likewise, for those transactions issued in 2006,
cumulative realized losses have increased to 5.58% in October 2007 from 3.84%
in July 2007.
IMPACT ON CURRENT RATINGS
The CreditWatch actions on the 803 classes of U.S. RMBS backed by closed-end
second-lien mortgage loans are spread across the various rating categories:
44.73% are from the 'AAA' rating category; 23.53% are from the 'AA' rating
category; 14.36% are from the 'A' rating category; 8.64% are from the 'BBB'
rating category; 4.07% are from the 'BB' rating category; and 4.67% are from
the 'B' rating category.
Rating No. of Cur. cert. % of total
category Watch actions bal. ($) actions by bal.
AAA 86 7,331,206,456 44.73
AA+ 44 1,036,690,000 6.33
AA 83 2,195,925,237 13.4
AA- 64 622,582,331 3.80
A+ 51 741,120,635 4.52
A 69 1,012,939,124 6.18
A- 71 600,215,928 3.66
BBB+ 56 663,716,084 4.05
BBB 50 496,770,773 3.03
BBB- 39 255,624,689 1.56
BB+ 51 446,264,308 2.72
BB 25 157,741,533 0.97
BB- 12 62,684,032 0.38
B+ 13 117,523,000 0.72
B 81 594,015,636 3.62
B- 8 53,739,276 0.33
Total 803 16,388,759,042 100
'AAA' RATED BONDS AFFECTED
Eighty-six 'AAA' rated classes from 46 U.S. RMBS transactions backed by
closed-end second-lien mortgage loans are placed on CreditWatch negative due
to the anticipated reduction in available credit support when the enhanced
stresses are applied to each transaction, along with the increase in
delinquencies and charge-offs.
The closed-end second-lien RMBS classes with ratings placed on CreditWatch
negative evidence high current delinquencies and increasing realized losses or
charge-offs relative to available credit support. We expect to resolve these
CreditWatch placements within the next several weeks. We will further analyze
the performance of these transactions to determine what, if any, rating
actions will be taken. It is possible that the ratings on classes not included
in this CreditWatch action could be adversely affected at the conclusion of
our analysis. We will take rating actions on the transactions in which our
loss assumptions indicate further reduction in the available credit support.
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