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HAMP, Servicer Activity Will Continue to Determine RMBS Rating

FEB 27, 2013 12:57pm ET
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Moody's Investors Service has downgraded 16 of roughly 130 tranches backed by $2 billion in subprime mortgage loans.

Ratings reflect recent performance reviews and Moody's updated loss expectations on these pools are based only on credit-related interest shortfall risks.

More specifically, these ratings take into consideration the effect of loan modifications resulting from an extension of the Home Affordable Modification Program to 2013 and an increased use of private modifications, Moody's said.

Moody's expects the performance of RMBS will continue “to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions,” along with change resulting from servicing transfers or other policy or regulatory change that ultimately impact the performance of these transactions.

Moody’s upgraded the rating of 13 tranches, affirmed the rating of 99 tranches, and confirmed the rating of one tranche from various issuers.

For example, ratings for Citigroup Mortgage Loan Trust, Series 2005-OPT3, include Cl. M-1, downgraded to A3 (sf) after being placed under possible downgrade review from Aa1 (sf) on Jan. 10. Nine other tranches in this pool that were initially downgraded in 2009, 2010 and 2011 were affirmed.

Two trenches from the Citigroup Mortgage Loan Trust Series 2005-OPT4 issuance also were downgraded after being placed under review: Cl. M-1, downgraded to A3 (sf) and Cl. M-2, downgraded to A3 (sf).

Ratings for IndyMac Home Equity Mortgage Loan Asset-Backed Trust, INABS 2005-A, were another example. It includes Cl. M-1, downgraded to A3 (sf), which was rated Aa1 (sf) on Jan. 10 and placed under review for possible downgrade; Cl. M-2, downgraded to A3 (sf) following an Aa3 (sf) rate on Jan. 10 and also under review.

Also, after being downgraded on Sep 15, 2010 Cl. M-5 was affirmed at Caa2 (sf) while Cl. M-6 was affirmed at C (sf). Similarly, Cl. M-7, affirmed C (sf); Cl. M-8, affirmed C (sf); Cl. M-9, affirmed C (sf); Cl. M-10, affirmed C (sf) after being downgraded on March 17, 2009.

Rated issuers include MASTR Asset Backed Securities Trust 2005-HE1, Long Beach Mortgage Loan Trust 2005-1, Fremont Home Loan Trust 2005-2, Equifirst Mortgage Loan Trust 2005-1, ACE Securities Corp. Home Equity Loan Trust, Series 2005-HE4, Asset Backed Securities Corp. Home Equity Loan Trust, 2005-HE6 and Carrington Mortgage Loan Trust, Series 2005-NC1.

While housing prices will continue to rise in 2013 and also Moody's forecasts the unemployment rate will range anywhere from 7% to 8% this year, the primary sources of uncertainty are “macroeconomic forecast and performance volatility” deriving from servicer-related activity such as modification analysts note.

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