S&P: Conseco-Linked RMBS Led Downgrades

Nearly all the residential mortgage-backed securities deals downgraded in the third quarter related to a limited guarantee from Conseco Finance rather than the performance of the transactions, according to Standard & Poor's Ratings Services.Only two downgrades resulted from poor collateral performance, while the other 73 occurred on Aug. 9 and Sept. 19 as a result of two downgrades involving Conseco Finance, which provides the limited guarantee for the deals. "Standard & Poor's believes the uncertainty created by Conseco Inc.'s difficulties, and the fact that Conseco Finance does not enjoy regulatory protection, leaves its creditors significantly vulnerable," said Ernestine Warner, a director in S&P's Structured Finance Surveillance group. "Additionally, without the use of the limited guarantee, the monthly excess spread may be insufficient to protect against losses during the life of the transactions."