Moody's Upgrades Ratings of 36 US Residential Mortgage-backed Transactions

Moody's Investors Service has taken a notable step in the recovery of the US residential mortgage-backed market, upgrading the ratings of 36 bonds from 14 transactions backed by subprime, Alt-A, and prime jumbo mortgages. This move reflects a more optimistic outlook on the current credit enhancement levels, recent performance, and updated loss expectations on the underlying pools. The upgrades are a result of improved credit conditions and declining expected losses, which have led Moody's to re-evaluate the creditworthiness of these bonds.

Key Takeaways:

• Moody's upgraded the ratings of 36 bonds from 14 US residential mortgage-backed transactions, backed by subprime, Alt-A, and prime jumbo mortgages.
• The upgrades are the result of improved credit conditions, declining expected losses, and a comprehensive review of all credit ratings for the respective transactions.
• The rating actions reflect the current levels of credit enhancement available to the bonds, recent performance, and analysis of the transaction structures.
• The upgrades are specific to the bonds experiencing a rating change, which have either incurred a missed or delayed disbursement of an interest payment or are currently, or expected to become, undercollateralized.
• Moody's expectation of loss-given-default assesses losses experienced and expected future losses as a percent of the original bond balance.
• No actions were taken on the other rated classes in these deals because their expected losses remain commensurate with their current ratings.

Statistics:

• 36 bonds from 14 US residential mortgage-backed transactions were upgraded by Moody's.
• The bonds are backed by subprime, Alt-A, and prime jumbo mortgages.
• The upgrades reflect improved credit conditions, declining expected losses, and a comprehensive review of all credit ratings for the respective transactions.

Sources:

• Moody's Investors Service
• "US Residential Mortgage-backed Securitizations: Surveillance" published in December 2024
• "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in April 2024