S&P Eyes '06 Vintage MBS Classes

The ratings on 18 subordinate classes from 11 residential mortgage-backed securities transactions issued in 2006 have been placed on CreditWatch with negative implications by Standard & Poor's Ratings Services.The actions reflect "early signs of poor performance" of the collateral backing the transactions, which consists of subprime, alternative-A, and closed-end second-lien loans, S&P said. The percentage of loans in the pools that are severely delinquent (delinquent more than 90 days, in foreclosure, or real estate owned) ranges from 2.77% to 13.46%, S&P reported. Placing ratings on negative CreditWatch when a transaction has not incurred a loss represents something new, according to S&P. "The combination of early high delinquencies and minimal or no loss experience had not been seen in the performance exhibited by prior vintages," the rating agency said. "Many of the 2006 transactions may be showing weakness because of origination issues, such as aggressive residential mortgage loan underwriting, first-time homebuyer programs, piggyback second-lien mortgages, speculative borrowing for investor properties, and the concentration of affordability loans." S&P can be found online at http://www.standardandpoors.com.