The bull market in residential mortgage-backed securities in recent years appears to have run its course, according to a new report published by Standard & Poor's Ratings Services.As evidence, S&P pointed to slowing home price appreciation, diminished profitability for mortgage lenders, widening credit spreads, and an acceleration of negative rating actions. Issuance will decline in 2007 by as much as 10%-15%, bringing the dollar amount to $900 billion-$950 billion, S&P said. However, the rating agency said RMBS issuance will still be significantly higher than in 2003 and 2004, when it totaled $586 billion and $864 billion, respectively. "We foresee further compression of the upgrade-to-downgrade ratio because fewer outstanding transactions are now collateralized by prime mortgage loans, and the recent trend in securitization is toward structures with fewer speculative-grade ratings," the rating agency said. S&P said it expects more downgrades and fewer upgrades this year. The report is titled, "For U.S. RMBS, 2007 Will Be a Year of Transition for Issuance and Performance Concerns." S&P can be found online at http://www.standardandpoors.com.

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