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 lowered ratings on 620 classes from 49
transactions and removed 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.
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.
- By John Kell, Dow Jones Newswires; 201-938-5285;
john.kell@dowjones.com