Moody's downgrades Countrywide scratch and dent RMBS tranches
Moody's Investors Service (MCO) downgraded ratings on 17 tranches of mortgage-backed securities within seven "scratch and dent" deals as collateral backing the underlying Countrywide Financial Corp. loans continued to deteriorate. Analysts also confirmed the rating of one tranche included in the $196 million worth of RMBS issued by Countrywide Home Loan Trust 2003-SD2. Many of the tranches were initially rated triple-A and now carry ratings in the junk status. Scratch and dent deals are those outside the standard categories of RMBS: prime, jumbo, subprime, option adjustable-rate mortgages and Alt-A. The impacted deals are backed by first-lien, fixed and adjustable rate scratch and dent home mortgages. Moody's has been adjusting ratings on numerous RMBS deals all year after revising the criteria for these securities issued before 2005. Analysts said the loans may have been originated outside a lender's guidelines or in arrears. "These pools may also include loans with document defects at origination that were since rectified," analysts said. "Due to the varied content of scratch and dent mortgage pools, which can range from seasoned prime-like loans to non-prime loans that were seriously delinquent at the time of securitization, credit quality of these pools varies considerably." Write to: Kerri Panchuk.