Standard & Poor's Corp. is significantly increasing credit enhancement levels for U.S. residential mortgage-backed securities receiving its top AAA rating. In an effort to update its criteria so an RMBS pool can withstand an extreme economic downturn without defaulting going forward, S&P is establishing a 7.5% credit enhancement level for the archetypical, AAA-rated prime credit quality RMBS pool. S&P also said that, although it is difficult to say what "typical" alternative-A and subprime credit loans might look like in the future, it expects that "an archetypical pool that has similar characteristics to alt-A and subprime would have AAA credit enhancement levels of 18% and 30%, respectively."
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