The downgrades indicate that the bonds have incurred a principal write-down or are interest-only classes that have a notional balance off of a class that incurred a principal write-down, according to the company.
“Of the bonds downgraded to 'Dsf', all classes were previously rated 'Csf' or 'CCsf,’” Fitch said in a press release. “All ratings below 'Bsf' indicate a default is expected.”
Of the 704 classes affected by these downgrades, 428 are alternative-A credit, 249 are prime credit, and 15 are subprime credit. Approximately, 36% of the bonds have a recovery estimate of 50%-100%, which indicates that the bonds will recover 50%-100% of the current outstanding balance. 53% have a recovery estimate of 0%.
Almost half of the affected classes are interest-only classes that have a notional balance off of a class that has incurred a principal write-down. All of these classes previously had a Csf rating.