Class M-3 of Residential Accredit Loans Inc. 2004-QA2 has been placed under review for possible downgrade by Moody's Investors Service.The rating action was attributed to relatively low credit enhancement levels in relation to projected losses. The alternative-A deal consists of first-lien adjustable-rate residential mortgage loans. The majority of the hybrid collateral loans are still paying at a fixed rate, while the interest rate of the certificates has been increasing monthly, according to the rating agency. "As a result, the excess spread has significantly declined, causing the overcollateralization and subordinate tranches to be more vulnerable for defaults," Moody's said.
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