Moody's Plans Security-Level RMBS Recovery Projections
Moody's Investors Service will begin in coming months to release estimated recoveries on most of the residential mortgage-backed securities (RMBS) it rated issued from 2005 through 2008, the rating agency announced today. Moody's said it intends to publish bond recovery estimates for every security or tranche of all US subprime, prime jumbo, Alt-A and pay-option adjustable-rate mortgage RMBS transactions issued during that time. The rating agency expects write-downs on the principal within "many" securities. "The timing and the extent of the write-downs, however, will vary significantly across securities, driven primarily by the magnitude of losses on the underlying collateral, transaction structures, and loss mitigation practices adopted by servicers," said Moody's senior vice president Debash Chatterjee, in a statement e-mailed to HousingWire. Chatterjee added: "Therefore it is important to provide investors with expected recovery estimations that are at the level of the individual security." Moody's bases the recovery estimates — the first 35,000 of which are expected in "the next few months — on a baseline loss expectation on the underlying mortgage pool. The rating agency said it also factors in an additional projected 7-10% house price decline and a 10.5% peak in unemployment in the second half of 2010. But estimated bond recoveries are subject to volatility as losses change, Moody's said. The rating agency will therefore start reporting tranche recoveries under two stressed scenarios in which collateral losses exceed Moody's base expectations. Moody's will also update its current pool expected loss publication with both estimated future loss severity and the proportion of under-60-day delinquencies that is expected to default in the future. Write to Diana Golobay.