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Moody's Downgrades 181 US RMBS Bonds, Cites Government of the United States Downgrade

Strategic Insights

— 1 min read

Moody's Investors Service has announced the downgrade of 181 US residential mortgage-backed securities (RMBS) bonds from 111 transactions, citing the recent downgrade of the Government of the United States of America (US) to Aa1 stable from Aaa negative. The affected bonds include Agency Risk Transfer, Agency Guaranteed, Resecuritized Agency Guarantee, Resecuritized MBS, FHA/VA, Alt-A, Option ARM, Scratch & Dent, Subprime RMBS, Reperforming & Reverse Mortgage asset types.

Key Takeaways:

  • Moody's downgraded 181 US RMBS bonds from 111 transactions, citing the downgrade of the Government of the United States (US) to Aa1 stable from Aaa negative.
  • The affected bonds include Agency Risk Transfer, Agency Guaranteed, Resecuritized Agency Guarantee, Resecuritized MBS, FHA/VA, Alt-A, Option ARM, Scratch & Dent, Subprime RMBS, Reperforming & Reverse Mortgage asset types.
  • 46 Agency Risk Transfer bonds were downgraded due to their unsecured status, dependent on the credit quality of the associated GSE (Fannie Mae and Freddie Mac).
  • Three Resecuritized Agency Guarantee bonds saw their ratings lowered due to underlying support from the GSEs.
  • 129 additional bonds were downgraded as they benefit from guarantees of both principal and interest payments from the GSEs.
  • Three resecuritized agency guarantee bonds saw their ratings lowered as principal is expected to be paid from underlying Treasury Strips.
  • Two bonds, Finance of America HECM Buyout 2024-HB1 and CSMC 2017-FHA1 Trust, were placed on review for downgrade to assess the impact on the FHA insurance.

Statistics:

  • 181 US RMBS bonds were downgraded by Moody's.
  • The downgrades affect bonds from 111 transactions.
  • 46 Agency Risk Transfer bonds were downgraded.
  • 3 Resecuritized Agency Guarantee bonds were downgraded.
  • 129 bonds benefiting from guarantees of principal and interest payments from the GSEs were downgraded.
  • 3 resecuritized agency guarantee bonds had their ratings lowered due to payment from underlying Treasury Strips.
  • 2 bonds, Finance of America HECM Buyout 2024-HB1 and CSMC 2017-FHA1 Trust, are on review for downgrade.

Sources:

  • Moody's Investors Service, press release: "Moody's Ratings" [Accessed online via https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL507229]
  • Moody's Ratings Methodologies page [Accessed online via https://ratings.moodys.com]

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