Moody's Investors Service Tuesday afternoon downgraded its ratings on 272 tranches of payment option ARM MBS issued by Countrywide Financial Corp. In total, $19.1 billion of securities are affected.
In taking action, the rating agency cited "rapidly deteriorating
performance of option arm pools in conjunction with macroeconomic
conditions that remain under duress." (It confirmed ratings on 15 tranches.)
The POA MBS pools were issued between 2005 to 2007, at the height of the housing boom.
Moody's had marked down some of the tranches earlier in the year but on Tuesday some were rated as low 'Caa3.'
The agency said it now sees an increasing potential for a double-dip recession, which could cause a further 20% decline in home prices, versus its baseline assumption of a 5% further decline. "Overall, Moody's assumes a further 5% decline in home prices with stabilization in early 2011, accompanied by continued stress in national employment levels through that timeframe," it said.
CFC was bought by Bank of America in August 2008. Bond investors are contemplating suing B of A, holding it responsible for what they say is poor master servicing done by CFC on the bonds.
