MBS Downgrades Accelerate

Fitch Ratings downgraded $736.6 million in classes from several subprime Structured Asset Securities Corp. issuances from 2005 and 2006 due to a deterioration in the relationship between credit enhancement and expected losses. In addition, $38.5 million in classes were on Rating Watch Negative.

Fitch cited the same logic for its downgrade of $209.1 million in classes from ACE 2006 Subprime Second Lien Deal with originations from Long Beach Mortgage Co. and its downgrade of $51.4 million in classes from UBS Mortgage Asset Securitization Transaction Inc. Second Lien Trust mortgage pass-through certificates from 2005 with originations from Accredited, Ownit and IndyMac.

Moody’s Investors Service took negative ratings actions on a number of subprime deals because of credit enhancement, overcollateralization and excess spread relative to expected losses.

Among the downgraded classes and classes placed on review were 10 certificates from two Securitized Asset Backed Receivables Trust deals issued in 2004. The underlying loans were originated by Decision One Mortgage Co. Seven certificates of three Soundview Home Loan Trust deals issued in 2001 and 2005 backed by first and second liens were also downgraded, while one certificate from Specialty Underwriting and Residential Finance deals from 2005 was downgraded and nine certificates placed on review.

Moody’s also cited the same reasons for downgrades to two classes of Alt-A deal Structured Adjustable Rate Mortgage Loan Trust 2005-10, one class from second lien deal One SACO I Trust 2004-2 and three certificates from home equity loan backed Saxon Asset Securities Trust 2001-3.

Moody’s warned it is revising loss assumptions for structured finance collateralized debt obligations in line with recent changes to its assumptions for 2006 vintage subprime RMBS as a result of continued performance deterioration.

Seven classes of Ridgeway Court Funding I Ltd. for $1,982.0 million were downgraded by Moody’s — with three of the classes left on watch for further downgrades. The moves reflect credit quality deterioration and a default on an underlying class. The CDO is backed primarily by a portfolio of RMBS and CDOs.

Standard & Poor’s Ratings Services reported recent revisions to its assumptions for RMBS ratings will impact CDOs backed by Alt-A, subprime, prime, HEL and tax lien RMBS issued during or after the fourth quarter of 2005 — though CDOs backed by deals issued before that period could also be impacted.

Moody’s Investors Service announced Option One Mortgage Corp.’s servicer ratings remain on review for a possible downgrade, reflecting the uncertain future for the servicing operations. The company’s parent ended origination operations in December and plans to sell the servicing unit.

Two classes for $19.4 million of GMAC commercial mortgage pass-through certificates, series 2002-C3, were downgraded by Fitch, reflecting increased credit enhancement due to loan payoffs, scheduled amortization and the additional defeasance of 4 loans.

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: mtgsam@aol.com