Moody's Upgrades Ratings of Eight Bonds from US Residential Mortgage-Backed Transactions

Strategic Insights -

Moody's Investors Service has upgraded the ratings of eight bonds from three US residential mortgage-backed transactions (RMBS) backed by option ARM and subprime mortgages issued by multiple issuers. The upgraded ratings range from Caa1 to Ca, reflecting the current levels of credit enhancement available to the bonds, recent performance, and updated loss expectations on the underlying pools.

Key Takeaways:

  • The eight bonds upgraded by Moody's were issued by IndyMac INDX Mortgage Loan Trust 2007-FLX6, Morgan Stanley ABS Capital I Inc. Trust 2004-NC8, and New Century Home Equity Loan Trust, Series 2004-A.
  • The upgraded ratings range from Caa1 to Ca, indicating a moderate to high level of credit risk.
  • The upgrades reflect the current levels of credit enhancement available to the bonds, recent performance, and updated loss expectations on the underlying pools.
  • The bonds experiencing a rating change have either incurred a missed or delayed disbursement of an interest payment or are currently, or expected to become, undercollateralized.
  • The expected losses of the bonds remain commensurate with their current ratings, after taking into account the updated performance information and credit enhancement.
  • The principal methodology used in these ratings was "US Residential Mortgage-backed Securitizations: Surveillance" published in December 2024.

Statistics:

  • Eight bonds upgraded by Moody's, with ratings ranging from Caa1 to Ca.
  • The upgraded bonds were issued by IndyMac INDX Mortgage Loan Trust 2007-FLX6, Morgan Stanley ABS Capital I Inc. Trust 2004-NC8, and New Century Home Equity Loan Trust, Series 2004-A.
  • The bonds experiencing a rating change have either incurred a missed or delayed disbursement of an interest payment or are currently, or expected to become, undercollateralized.
  • The expected losses of the bonds range from 15% to 30% of the original bond balance.
  • The principal methodology used in these ratings was "US Residential Mortgage-backed Securitizations: Surveillance" published in December 2024.

Sources:

  • Moody's Press Release, "Moody's Upgrades Ratings of Eight Bonds from US Residential Mortgage-Backed Transactions" (no date provided)
  • Moody's Methodology, "US Residential Mortgage-backed Securitizations: Surveillance" (published December 2024)
  • Moody's Website, https://www.moodys.com (no date provided)