Moody’s cuts $39.4m of US of Alt-a RMBS

The Pak Banker - - Front Page -

NEW YORK

Global rat­ing agency Moody’s has down­graded the rat­ing of four tranches from RALI Se­ries 2003-QS19 Trust, backed by Alt-A loans.

The downgrades are a re­sult of de­te­ri­o­rat­ing per­for­mance of the un­der­ly­ing pools re­sult­ing in higher than expected losses for the bonds than pre­vi­ously an­tic­i­pated. In ad­di­tion, the down­grade of Class NB-5 re­flects cor­rec­tion of a prior er­ror. Class NB-5 is an In­ter­est-Only tranche that is linked to the Class NB-4 no­tional bal­ance. On May 31, 2012 Class NB-4 was down­graded to Baa3 (sf), and Class NB-5 was in­ad­ver­tently not in­cluded in the rat­ing ac­tion. Class NB-5 has now been down­graded to Baa3 (sf) and now car­ries the same rat­ing as Class NB-4.

Global rat­ing agency Moody’s ad­justs the method­olo­gies noted above for 1) Moody’s cur­rent view on loan mod­i­fi­ca­tions 2) small pool volatil­ity. As a re­sult of an ex­ten­sion of the Home Af­ford­able Mod­i­fi­ca­tion Pro­gram (HAMP) to 2013 and an in­creased use of pri­vate mod­i­fi­ca­tions, Moody’s is ex­tend­ing its pre­vi­ous view that loan mod­i­fi­ca­tions will only oc­cur through the end of 2012. It is now as­sum­ing that the loan mod­i­fi­ca­tions will continue at cur­rent lev­els un­til the end of 2013.

For pools with loans less than 100, Moody’s ad­justs its pro­jec­tions of loss to ac­count for the higher loss volatil­ity of such pools. For small pools, a few loans be­com­ing delin­quent would greatly in­crease the pools’ delin­quency rate. To project losses on Alt-A pools with fewer than 100 loans, Moody’s first cal­cu­lates an an­nu­al­ized delin­quency rate based on vin­tage, num­ber of loans re­main­ing in the pool and the level of cur­rent delin­quen­cies in the pool.

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