Wave of Moody's Downgrades Hits Synthetic Jumbo RMBS

Moody's Investors Service's has downgraded $35 billion of synthetic jumbo residential mortgage-backed securities issued between 2005 and 2007 due to recent updated loss expectations for jumbo loans originated between 2005 and 2008. Moody's has downgraded ratings on nine tranches issued by Armor MCP 2005-1 LP, four tranches issued by EASI Finance Limited Partnership 2007-1, 11 tranches from SASI Finance Limited Partnership 2006-A, 81 tranches from nine deals issued by RESI Finance Limited Partnership, and 12 tranches from five deals issued by RESIX Finance Limited Credit-Linked Notes. Prime jumbo synthetic transactions provide the owner of a sizable pool of mortgages with credit protection through a credit default swap with the issuer of the notes. Through this agreement, the protection buyer or owner of the loan pool pays a fee to the issuer or protection seller in return for the transfer of a portion of the reference portfolio credit risk. The reference portfolios of these transactions include prime conforming and nonconforming fixed-rate and adjustable-rate mortgages purchased from various originators, according to Moody's.