Three tranches issued by Merrill Lynch Mortgage Investors Trust series 2006-SD1, which is collateralized mainly by "scratch-and-dent" mortgage loans, have been downgraded by Moody's Investors Service. The downgrades were as follows: class M-2, from A2 to B2; class M-3, from Baa2 to Caa1; and class B, from Ba2 to C. Moody's said the actions are part of a wider review of all residential mortgage-backed securities transactions "in light of the deteriorating housing market and rising delinquencies and foreclosures." Many scratch-and-dent pools originated since 2004 are experiencing higher-than-expected rates of delinquency, foreclosure, and real estate owned, the rating agency said. Moody's can be found on the Web at http://www.moodys.com.
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