Fitch Ratings on Wednesday warned that it may downgrade the ratings of 205 RMBS classes wrapped by four different guarantors, underscoring the stress now facing the secondary markets surrounding mortgage-backed securities. All RMBS deals backed by a financial guaranty from any of MBIA, Ambac, FGIC and XL Capital were put on negative watch by the rating agency — 87 insured by MBIA, 64 insured by Ambac, 35 insured by FGIC, and 19 insured by XL Capital. The warning came as the four guarantors each face a potential downgrade of their Insurer Financial Strength (IFS) ratings, which assess the insurer’s ability to pay claims. Click here to see a list of all affected securities. The move comes as Fitch is assessing the capital adequacy of each of the four guarantors. MBIA was surprisingly included on the list of potential downgrades at Fitch; the rating agency’s move followed MBIA’s bombshell last week that it may be exposed to a type of structured security — CDOs squared — that have rapidly been losing value as the subprime mortgage crisis has continued unabated in the back half of 2007. The rating agency said it will review each affected RMBS class to determine which will be able to maintain their ‘AAA’ ratings independent of a financial guaranty; any bonds determined to be dependent on a guaranty due to insufficient additional credit enhancement will remain on negative watch pending any ratings action on the relevant insurer. For more information, visit http://www.fitchratings.com. Disclosure: The author holds no positions in any bond insurer.