Moody's Investors Service upgraded two lower investment-grade tranches of a Redwood Trust (RWT) jumbo residential mortgage-backed security issued in 2010.
One tranche of the Sequoia Mortgage Trust 2010-H1 bond originally rated A2 was upgraded to A1. Another previously rated Baa2 was upgraded to A3.
Moody's said the pools reflected a strong performance and a "faster-than-expected paydown."
No delinquencies occurred on any of the loans, Moody's said. And the prepayment rate averaged roughly 40% annually, leaving just 61 loans in the pool. Originally, 225 loans backed the bond.
But with smaller loans in the pool, the threat of losses increases. Moody's expects losses for the pool to reach 1% of the current balance as opposed to just 0.22% of the original balance.
"The projected loss reflects the volatility due to the small number of loans remaining, but accounts for the strong performance of the pool to date," Moody's said.
Redwood selected Moody's to rate its latest deal, which contains more originators and less collateral concentration in California. It's the first Redwood deal Moody's will grade since the two firms disputed the earthquake risk on an issuance in February 2011.