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July 12, 2007 at 08:00 PM
On the heels of more and more news about the implosion of the mortgage backed securities and junk bond markets come three news items of interest: guiding principles from a consortium of industary groups for using structured products for retail, and word from Moody’s, and Standard & Poor’s, which has put “612 U.S. Subprime RMBS Classes” on their negative watch list, “with negative implications,” while at the same time announcing changes in their methodology for rating and tracking this type of security.
S&P says it expects that “the majority of the ratings on the classes that have been placed on CreditWatch negative will be downgraded.” Approximately $12.78 billion in securities is included, or 2.13% of $565 billion in U.S. mortgage backed securities S&P rated from “the fourth quarter of 2005 and the fourth quarter of 2006.”
Meanwhile, on June 15 Moody’s downgraded 131 subprime securities and put on its own negative review list 136 others. Of the 267 securities, most had been rated A or lower, “but a small portion was Aa or Aaa.”
