More than 600 classes of securities backed by subprime residential mortgages have been placed on CreditWatch with negative implications by Standard & Poor's Ratings Services, and S&P said a majority are expected to be downgraded.The rating agency reported that the 612 affected classes total approximately $12.08 billion in residential mortgage-backed securities, representing 2.13% of the $565.3 billion in U.S. RMBS rated by S&P from the fourth quarter of 2005 through the fourth quarter of 2006. The negative rating actions were attributed to "poor collateral performance, our expectation of increasing losses on the underlying collateral pools, the consequent reduction of credit support, and changes that will be implemented with respect to the methodology for rating new transactions." Among the changes in rating methodology are an increase in the "severity of the surveillance assumptions" (from 33% to 40%) used to evaluate creditworthiness and a greater likelihood that senior classes will be downgraded in transactions containing subordinate classes that have been downgraded, S&P said. The rating agency can be found online at http://www.standardandpoors.com.

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