UPDATE: S&P Cuts Ratings On $30.9 Billion In Prime Jumbo RMBS

(Update with more context and additional details.)

 
   DOW JONES NEWSWIRES 
 

Standard & Poor's cut its ratings on about $30.9 billion of U.S. prime jumbo residential mortgage-backed securities transactions issued in 2007 because of higher projected losses on high-priced homes.

The rating agency said economic factors prompted an increase in loss projections from these loans, and as a result lower ratings on 620 classes from 49 transactions and removal of 85 of them from watch for possible downgrade. Many were lowered from AAA status.

S&P affirmed its ratings on 186 classes from 28 of the downgraded transactions issued between 2006 and 2007, including 23 downgraded deals. It also removed three of the affirmed ratings from watch for downgrade.

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

The rating agency said the current credit support to the affected classes was insufficient to maintain their ratings, given the increase in projected losses.

S&P has said it expects loan losses to mirror 1999, which before 2005 was the worst year in the past decade in terms of foreclosures on homes with jumbo loans. The ratings agency expects the 2007 losses to top the losses on the 1999 loans, but expects the losses' timing to be more similar to that year than any other.

The collateral on the downgraded deals includes both prime jumbo fixed-rate and adjustable-rate mortgages on one- to four-family residential properties. The downgraded transactions were part of deals put together by Bank of America, Bear Stearns and Continental Home Loans.

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

(Prabha Natarajan contributed to this report.)