Tuesday, April 22, 2008

Stick a Fork in It: Moody’s Downgrades 1,923 Subprime RMBS Classes — In Just Two Days

(Housing Wire) Cue more write-downs, as if there weren’t enough to begin with.

Moody’s Investors Service has decided that it’s finally time to downgrade investment grade subprime RMBS — you know, the Aaa-rated stuff? Between Monday and Tuesday, calculations by Housing Wire show that the rating agency has slashed ratings on 1,923 tranches from 232 seperate subprime RMBS deals from 2005-2007 vintages.

That total includes hundreds of formerly Aaa-rated securities, as Moody’s embarked on its largest investment grade subprime downgrading activity since the credit crisis began.

A little over one month ago, HW covered a Bloomberg special report that suggested that both Standard and Poor’s and Moody were holding back on downgrades to the most senior RMBS bonds. Moody’s, at least, is no longer content to hold off.

The agency said it downgraded the ratings over increasing delinquency, foreclosure and REO levels, although it did not provide details of the total dollar amount affected. The downgrades surely tally into the multiple of billions worth of subprime debt, and portend additional earnings pain for many market participants — most are not forced to write-down the value of RMBS in a portfolio until a downgrade takes place.

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