Fitch Ratings has placed 7.5% of all prime, Alt-A, subprime and Re-REMIC RMBS classes that it rates on negative ratings watch.
The ratings giant expects most of the downgrades to occur within the next 180 days. The changes follow Fitch’s release of new, updated loan loss model criteria.
The ratings model changes allow for more enhancements in the forecasting of servicer advancing and liquidation timelines and improved consistency of ratings across the prime, Alt-A and subprime sectors.
In addition, 39 RMBS classes that are already on ratings watch will remain there, Fitch said.
“Fitch’s model enhancements did not significantly affect loan loss projections on average for the prime sector. However, Fitch placed more seasoned prime classes on watch negative than in other sectors,” the ratings giant pointed out.
Fitch noted ratings on prime classes issued before 2005 are going to be more sensitive to changes in loan loss modeling because of the “higher number of remaining investment-grade ratings and the lower credit enhancement levels.”
The ratings giant added that “prime pre-2005 performance trends have recently been weaker on a relative basis than other RMBS cohorts and are therefore increasing negative rating pressure.”
