S&P Mulls Ratings Cuts On RMBS By '06-'07 Jumbo Mortgages

   DOW JONES NEWSWIRES 
 

Standard & Poor's Ratings Service placed its ratings on a host of U.S. prime jumbo residential mortgage-backed securities issued in 2006 and 2007 on watch for downgrade, citing big projected losses on high-priced homes.

The affected classes, which total 3,279 from 209 transactions, affect about $172.02 billion of original par amount, but have a current principal balance of $139.96 billion.

The latest action by S&P follows Moody's cut on Monday on its ratings of about $30.9 billion of U.S. prime jumbo RMBS transactions issued in 2007.

Jumbo loans, which were at least $417,000 in the affected years, generally carry higher interest rates because they are too big to be guaranteed by Fannie Mae (FNM) or Freddie Mac (FRE). S&P has said it expects a 40% loss severity on prime jumbo collateral originated in 2006 and 2007.

Earlier Thursday, Moody's Investors Service said more than seven in 10 U.S. subprime home loans bundled into securities in 2006 could go bust. The new estimate of loss rates, which Moody's upgraded for 2005 and 2007 as well, cast a harsh light on the condition of housing finance and means more bad news for the banks and other institutions that bought mortgage-backed securities in those years.

S&P, meanwhile, said it believes continued foreclosures, distressed sales, an increase in carrying costs for properties in inventory and more declines in home sales will further depress prices and lead to higher losses.

-By John Kell, Dow Jones Newswires; 201-938-5285; [e-mail]