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