Moody’s Investors Service today provided a report updating a recent reveiw of all outstanding non-Option ARM Alt-A RMBS rated in Q4 2005 and in 2006 — and what did the rating agency find? In a nutshell:

The review was prompted by deteriorating mortgage performance in pools backing transactions issued during this period, resulting from aggressive underwriting combined with a tightened lending market and prolonged home price weakness that is expected to continue … … Moody’s lifetime loss estimates on the pools included in the review increased by as much as 270% over initial expectations, with an average increase of 110%.

These days, taking a closer look at the mortgage market seems to lead to an inevitable “it’s worse than we thought” moment — especially for the rating agencies. As a result of its review, Moody’s said that a total of 222 securities issued in 2005 and 1,247 securities issued in 2006 were downgraded and/or placed under review for possible downgrade. The affected tranches issued in 2005 have an original balance of $1.5 billion, representing 0.4 percent of the original dollar volume of Alt-A RMBS rated by Moody’s in 2005. The original balance on affected tranches issued in 2006 totals $10.2 billion, or 2.5 percent of Moody’s-rated Alt-A RMBS from that year. For more information, visit http://www.moodys.com.