Moody's Eyes 'Scratch&Dent' Classes

Twenty-five tranches from five "scratch-and-dent" mortgage transactions have been placed on review for possible downgrade by Moody's Investors Service. The transactions include two by American Home Mortgage issued in 2007, one by Truman Capital Mortgage Loan Trust issued in 2006, one by Ace Securities Corp. Home Equity Loan Trust issued in 2006, and one by Bear Stearns Asset Backed Securities I Trust issued in 2004. Many scratch-and-dent pools originated since 2004 are exhibiting higher-than-expected rates of delinquency, foreclosure, and real estate owned, the rating agency said. 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." The collateral in all the deals consists primarily of first-lien, fixed- and adjustable-rate, scratch-and-dent mortgage loans.