Moody's: Another Wave of Alt-A Downgrades Coming

Moody's Investors Service says hundreds of billions of dollars of Alternative-A residential mortgage-backed securities from 2005-2007 could face another wave of downgrades in the second half of this year. The ratings on 10,330 tranches of RMBS with a current balance of $330.1 billion and an original balance of $572.7 billion are being reviewed to see if they need to be downgraded due to revised loss projections, Moody's said. The rating agency now projects 2007 securitizations in this category will see cumulative losses of 35%, 2006 bonds of this type will experience losses of 29% and 2005 alt-A RMBS will see losses of 14%. The outlook for these bonds is considered worse due to deterioration seen in their performance to date as well as "macroeconomic conditions that remain under duress," Moody's said. While there have been signs of eventual recovery, the rating agency's Economy.com unit said the drop in home prices and employment is expected to persist and not peak until the second half of this year, after which there could be a slow rebound.