Fitch Ratings has downgraded seven classes from six different Home Equity Conversion Mortgage securitizations believing there is an increased risk of uninsured loss on the underlying loans. The Federal Housing Administration insures all HECMs.
Five of the transactions representing six classes had their ratings cut to Asf from AAAsf with the outlook remaining at "stable." But RiverView HECM Trust 2007-1 was dropped to BBBsf from AAAsf and the outlook was revised to negative.
Based on current credit enhancement and excess spread, the bonds are protected against approximately 1140 basis points of uninsured loss on average.
Fitch said, "The credit enhancement provided in the RiverView HECM 2007-1 was determined to be less than provided in the other transactions. The 2007-1 required funding account amount has resulted to date in a weaker assets-to-liabilities relationship. Consequently the class was assigned a lower rating than those in the other transactions."
The other downgraded bonds involve transactions from Mortgage Equity Conversion Asset Corp.: 2006-SFG1, 2006-SFG2, 2006-SFG3, 2007-FF1 and 2007-FF3.
In a related move, four classes of a re-REMIC, RiverView HECM Trust 2008-1 were cut to Asf from AAAsf with the outlook remaining at "stable."
Fitch said the classes downgraded represent a beneficial ownership interest in separate trust funds which include the above downgraded bonds.
