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.