Moody's continues vintage RMBS downgrades
Moody's Investors Service continued downgrading its ratings on tranches of loans underlying residential mortgage-backed securities this week as the quality of the underlying mortgages continued to deteriorate. This trend is inline with Moody's announcement in January that it adjusted its criteria for rating RMBS issued before 2005 due to expected weaknesses in securitized pools created at the time. The billions of dollars worth of transactions impacted by the agencies' most recent downgrades is tied to loss expectations on mortgages backing the underlying certificates, according to Moody's. The slashed ratings resulted from bonds not having sufficient credit enhancement to maintain their current ratings. The RMBS were issued between 2001 and 2005. Moody's also downgraded the ratings of 74 tranches issued by 23 resecuritizations of RMBS transactions and confirmed the ratings of 15 RMBS transactions. The entire action impacts $1.98 billion of resecuritized RMBS issued between 2005 and 2008. The issuers included Bear Stearns and Lehman Brothers legacy securitizations. Additionally Moody's downgraded the ratings on $59.7 million of resecuritized RMBS issued by Banc of America Funding 2006-R1. "The actions are a result of the bonds not having sufficient credit enhancement to maintain the current ratings when compared to the revised loss expectations on the pools of mortgages backing the underlying certificates," Moody's wrote. More downgrades are likely to come as Moody's continues its review. Write to: Kerri Panchuk.