Moody's Investors Service has announced refinements to its methodology for rating residential mortgage securitizations backed by alternative-A mortgage loans.The rating agency said the revisions address the poor performance of subprime-like loans, low- and no-equity loans, and low- and no-documentation loans present in certain alt-A transactions securitized in 2006. Moody's said its increases in loss estimates are projected to range from 10% for stronger alt-A pools to more than 100% for weaker ones. Higher loss estimates for the weakest 5% to 10% of alt-A loans are projected to account for 25% to 50% of the increase in loss estimates. "Actual performance of weaker alt-A loans has in many cases been comparable to stronger subprime performance, signaling that underwriting standards were likely closer to subprime guidelines," said Moody's senior credit officer Marjan Riggi. "Absent strong compensating factors, we will model these loans as subprime loans." Moody's can be found online at http://www.moodys.com.
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