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Moody's analysts defended the timing of their recent rating actions with respect to subprime residential mortgage-backed securities and collateralized debt obligations during a July 12 teleconference and Web cast.
The event occurred two days after Moody's issued 451 downgrades of first- and second-lien RMBS and one day after it placed 184 tranches of 91 CDOs backed primarily by subprime RMBS on review for possible downgrade.
The rating agency announced July 12 that it would increase its loss expectations for subprime mortgages with loan-to-value and combined loan-to-value ratios of 90% or more as well as low- and stated-documentation loans. Moody's had implemented increased loss expectations for certain subprime loans such as closed-end seconds, stated income, and first-time homebuyers earlier in recent months.
Of the July 10 subprime RMBS downgrades, 399 were for first-lien tranches issued in 2006 and 52 were for second-lien tranches issued in 2005. The rating agency also placed a total of 55 first- and...