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NEW YORK (Standard & Poor's) April 29, 2008--Standard & Poor's Ratings
Services today lowered its ratings on 2,183 classes of U.S. residential
mortgage-backed securities (RMBS) from 334 transactions backed by
Alternative-A (Alt-A) loan collateral issued in 2006. We removed 810 of the
lowered ratings from CreditWatch with negative implications. In addition, we
placed 487 ratings on CreditWatch negative. Finally, we affirmed our ratings
on 144 classes and removed them from CreditWatch negative. All of the ratings
that were removed from CreditWatch were placed on CreditWatch on Feb. 29,
2008. The classes affected by the negative rating actions represent an
issuance amount of approximately $41.05 billion, or about 6.10% of the par
amount of U.S. RMBS transactions backed by Alt-A mortgage loans rated by
Standard & Poor's in 2006.
The complete rating lists for the affected U.S. Alt-A RMBS are included in "
U.S. Alt-A RMBS Classes Affected By April 29, 2008, Rating Actions," 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 www.spviews.com, Standard & Poor's special Web site for
subprime RMBS and related mortgage matters.
2006 ALT-A RATING ACTIONS
The downgrades and CreditWatch placements reflect our opinion that projected
credit support for the affected classes is insufficient to maintain the
ratings at their previous levels, given our current projected losses. We
calculated our current projected losses using the 2006 Alt-A default curves
described in "Standard & Poor’s Revised Default And Loss Curves For U.S. Alt-A
RMBS," published Dec. 19, 2007, on RatingsDirect. Due to current market
conditions, we are assuming that it will take approximately 15 months to
liquidate loans in foreclosure and approximately eight months to liquidate
loans categorized as real estate owned (REO). In addition, we are assuming a
loss severity of 34% for U.S. Alt-A RMBS transactions backed by fixed-rate and
long-reset hybrid collateral (loans with fixed-rate periods of at least five
years) issued in 2006; we are assuming a loss severity of 35% for transactions
issued in 2006 backed by mortgage loans that have a negative amortization
feature; and we are assuming a loss severity of 35% for transactions secured
by adjustable-rate collateral and short-reset hybrid collateral (loans with
fixed-rate periods less than five years).
The lowered ratings reflect our assessment of credit support under one or more
scenarios that use a constant prepayment rate (CPR), including one equal to
the lower of the lifetime or 12-month CPR. To assess the creditworthiness of
each class, we reviewed the individual delinquency and loss trends of each
transaction to find changes, if any, in risk characteristics, and the ability
to withstand additional credit deterioration. Each class that has an affirmed
'AAA' rating generally can withstand approximately 150% of our projected loss
assumptions under our analysis, subject to individual caps assumed on specific
transactions. We determined the caps by limiting the amount of remaining
defaults to 85% of the current pool balances.
The rating actions announced today resolve all of the CreditWatch placements
on the 2006 vintage U.S. Alt-A RMBS taken on Feb. 29, 2008. All of today's
CreditWatch actions affect 'AAA' rated certificates. Standard & Poor's will
analyze these certificates to assess whether further rating actions are
warranted by analyzing available credit enhancement to the projected losses
during the timeframe we expect the certificates to be outstanding.
Standard & Poor's will continue to monitor the RMBS transactions it rates and
take rating actions, including CreditWatch placements, when appropriate. For
additional information and updates on Standard & Poor's residential
mortgage-related rating actions, please visit RatingsDirect, at
www.ratingsdirect.com, or www.spviews.com.
FACTORS DRIVING RMBS RATING ACTIONS
Mortgage Pool Performance
Monthly performance data reveals that delinquencies and foreclosures continue
to accumulate at an increasing rate for the 2006 vintage. As of the March 25,
2008, distribution date, serious delinquencies (90-plus days, foreclosures,
and REOs) on all U.S. Alt-A RMBS transactions issued during 2006 were 10.57%,
up 54.99% since December 2007. During the same time period, cumulative
realized losses have increased to 0.25% from 0.10%.
This delinquency trend, together with loan-level risk characteristics and
continuing deterioration in the macroeconomic outlook, have caused us to
increase our lifetime loss projections. For the transactions with negative
amortizing collateral, we project aggregate lifetime losses between 7.00% and
7.50% of the original balance. For the transactions backed by fixed- and
long-reset hybrid collateral, we project aggregate lifetime losses between
4.50% and 5.00%. Finally, we project aggregate lifetime losses between 6.00%
and 6.50% for transactions backed by adjustable-rate and short-reset hybrid
collateral. A list of deal-specific projected losses can be found in "S&P
Provides Projected Losses For U.S. Alt-A RMBS Issued In 2006," published April
29, 2008, on RatingsDirect and on www.spviews.com.
In reviewing the 2006 Alt-A transactions, we employed the surveillance
assumptions announced on Jan. 15, 2008, and described in "U.S. RMBS
Surveillance, CDO Of ABS Assumptions Revised Amid Defaults, Negative Housing
Outlook." We believe that the application of expected lifetime losses has
become appropriate as the depth and duration of the housing downturn continues
to increase. We lowered the ratings on those classes that had expected
lifetime losses greater than credit enhancement to 'CCC'.
In addition, we lowered our ratings on many of the 2006 vintage certificates
previously rated 'B' and 'CCC' and various ratings from pools with
extraordinarily high levels of severely delinquent loans to 'CC', as our
analysis revealed that these classes have a greater likelihood of default in
the near future. The extent to which we adjusted the ratings was based on our
view of each class' ability to withstand losses in excess of our projections.
The table below details the classes with ratings lowered and ratings placed on
CreditWatch negative as a percentage of the original balance of the total
issuance amount affected ($41.05 billion).
2006 Vintage
Total actions (%)
Rating Downgrades CreditWatch negative
AAA 5.86 58.16
AA+ 4.65 0.00
AA 8.09 0.00
AA- 2.12 0.00
A+ 2.72 0.00
A 4.35 0.00
A- 1.46 0.00
BBB+ 1.51 0.00
BBB 2.61 0.00
BBB- 1.07 0.00
BB+ 0.41 0.00
BB 2.17 0.00
BB- 0.27 0.00
B+ 0.15 0.00
B 2.80 0.00
B- 0.16 0.00
CCC 2.43 0.00
Total 42.81 58.16
Standard & Poor's considers today's actions, except for the CreditWatch
placements, to be our last major changes to our ratings on U.S. RMBS Alt-A
issued during 2006. We anticipate reviewing the 2007 Alt-A vintage next and
expect to announce the results of our analysis in the next few weeks.
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