DOW JONES NEWSWIRES
Standard & Poor's Ratings Service placed its ratings on a
host of U.S. prime jumbo residential mortgage-backed securities
issued in 2006 and 2007 on watch for downgrade, citing big
projected losses on high-priced homes.
The affected classes, which total 3,279 from 209 transactions,
affect about $172.02 billion of original par amount, but have a
current principal balance of $139.96 billion.
The latest action by S&P follows Moody's cut on Monday on
its ratings of about $30.9 billion of U.S. prime jumbo RMBS
transactions issued in 2007.
Jumbo loans, which were at least $417,000 in the affected years,
generally carry higher interest rates because they are too big to
be guaranteed by Fannie Mae (FNM) or Freddie Mac (FRE). S&P has
said it expects a 40% loss severity on prime jumbo collateral
originated in 2006 and 2007.
Earlier Thursday, Moody's Investors Service said more than seven
in 10 U.S. subprime home loans bundled into securities in 2006
could go bust. The new estimate of loss rates, which Moody's
upgraded for 2005 and 2007 as well, cast a harsh light on the
condition of housing finance and means more bad news for the banks
and other institutions that bought mortgage-backed securities in
those years.
S&P, meanwhile, said it believes continued foreclosures,
distressed sales, an increase in carrying costs for properties in
inventory and more declines in home sales will further depress
prices and lead to higher losses.
-By John Kell, Dow Jones Newswires; 201-938-5285;
john.kell@dowjones.com