Downgrades Coming for Some Resecuritized MBS?

Moody's Investors Service has placed 40 RMBS resecuritization tranches with a current outstanding balance of $500 million on watch for possible downgrade. The ratings changes affecting these resecuritizations of mortgage-backed securities originally issued from 2005 to 2008 stem from a reconsideration of loss projections on the underlying MBS whose collateral includes: payment option ARMs, alt-A, jumbo and subprime-related loans. Moody's believes the increased loss projections on the underlying certificates are likely to affect not only principal recovery on junior resecuritization bonds but probably on senior resecuritization bonds as well. In December and January, thousands of resecuritized RMBS tranches from the 2005-2008 vintages were placed on watch for possible downgrade as a result of the loss projections.