On Friday, the ratings agency Fitch made massive downgrades on various subprime residential mortgage backed securities, our friends at Housing Wire point out. Probably the only surprise here is that there is still room to downgrade subprime MBS from that era.
Unfortunately, there is still room for downgrades, indicating that we haven’t yet hit rock bottom on the pricing of these securities. Which means there could still be more writedowns in the future.
From Housing Wire:
The rating agency slashed hundreds of RMBS ratings further into junk territory. Handfuls of Wells Fargo Home Equity RMBS saw ratings drop to single-C from double-C and to single-D from single-C. A variety of JPMAC RMBS fell to double-C from triple-B and many from double- and triple-C to single-C. A handful of CitiGroup RMBS fell to single-C from double- and triple-C and others to single-D from single-C.
Fitch said the actions reflect updated expectations of default and loss from the relevant collateral pool. In terms of losses, the agency expects 17% of the original pool balance of the ’05 vintage, 39% of the ’06 vintage and 47% of the ’07 vintage.
“The home price declines to date have resulted in negative equity for approximately 50% of the remaining performing borrowers in the 2005-2007 vintages,” Fitch says in a media statement today. “In addition to continued home price deterioration, unemployment has risen significantly since the third quarter of last year, particularly in California where the unemployment rate has jumped from 7.8% to 11%.”