Seven classes of notes issued by ACA ABS 2003-1 Ltd. and ACA ABS 2003-2 Ltd. have been downgraded by Fitch Ratings as a result of deterioration in subprime residential mortgage-backed securities.The downgrades were as follows: series 2003-1, class C, from A-plus to BBB, and class D, from BBB to B-plus and removed from Rating Watch Negative; and series 2003-2, class A-2, from AA to A, class A-3, from A to BBB-minus, class B-F, from BBB to B-plus and removed from Rating Watch Negative, class B-V, from BBB to B-plus and removed from Rating Watch Negative, and class C, from BB to B and removed from Rating Watch Negative. Fitch also affirmed the ratings on eight classes in the two deals. Citing "the significant collateral deterioration" in the portfolios, especially of subprime RMBS, Fitch said they contain a significant exposure to subprime closed-end second lien RMBS assets, including underperforming 2006 vintage bonds. Since the beginning of 2007, approximately 20% of the portfolio assets have been downgraded, and approximately 10% are on Rating Watch Negative, Fitch said. The majority of the actions have occurred in the last three months, driven by credit deterioration in subprime RMBS bonds from the 2005 and 2006 vintages, including subprime closed-end second lien RMBS bonds, the rating agency said.

Subscribe Now

Authoritative analysis and perspective for every segment of the mortgage industry

30-Day Free Trial

Authoritative analysis and perspective for every segment of the mortgage industry