Moody’s Downgrades $7.6bn of Jumbo RMBS

[Update 1 reflects downgrades of BofA and RFMSI RMBS tranches]

Moody’s Investor Service took the red pen to 344 tranches of 61 residential mortgage-backed securities (RMBS) backed by jumbo loans in excess of the conforming loan limit ($729,750).

Together the relevant downgraded RMBS totals $7.59bn.

Moody’s downgraded $4.25bn of jumbo RMBS issued by Wells Fargo. The ratings agency downgraded ratings of 104 tranches from 21 RMBS transactions backed by prime jumbo loans issued by Wells in 2004. It also downgraded 98 tranches of 18 jumbo RMBS — worth $2bn — issued from 2002 to 2004 by Banc of America.

Moody’s downgraded $362m of jumbo RMBS issued by GMACM Mortgage Trust in 2003 and 2004. The agency downgraded ratings of 31 tranches from five GMACM Mortgage Trust RMBS transactions backed by prime jumbo loans. It also downgraded $115m of jumbo RMBS — nine tranches from three transactions — issued by RFMSI in 2002 and 2004.

Moody’s downgraded $75m of jumbo RMBS issued by ABN AMRO Mortgage Corp. The downgrades occured in just four tranches of a single RMBS transaction backed by prime jumbo mortgages issued in 2003. Moody’s bumped the four ABN AMRO RMBS tranches to “Aa3″ from “Aaa.”

The rating agency also downgraded $786m of jumbo RMBS issued by Bear Stearns ARM Trust from 2002 through 2004. The agency downgraded ratings of 98 tranches from 13 Bear Stearns ARM Trust RMBS transactions. Downgrades to jumbo RMBS issued by a firm long defunct speaks to the depth of the pain unwinding in the space.

“These actions are a result of Moody’s updated loss expectations on the underlying collateral relative to available credit enhancement,” the rating agency says in a press statement today.

The sweeping downgrades are part of an ongoing effort by the major rating agencies to account for the increasingly poor performance of the jumbo mortgage market. Moody’s actions come weeks after Standard & Poor’s similarly downgraded ratings on 102 classes from 33 US prime jumbo RMBS transactions issued from 1998 through 2004, indicating the jumbo pain resonates from well before the height of the housing boom.

Write to Diana Golobay.