("=S&P Cuts Ratings On $30.9B In Prime Jumbo RMBS,"
published at 11:13 a.m. EST and a subsequent update, published at
1:33 p.m. EST, misstated the number of downgraded transactions in
the third paragraph. A corrected version follows.)
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 ratings 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 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 ratings 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;
john.kell@dowjones.com
(Prabha Natarajan contributed to this report.)