S&P raises loss expectations for risky US mortgages

NEW YORK, July 6 (Reuters) - Standard & Poor's on Monday boosted its expectations for losses on U.S. mortgage securities backed by risky home loans, suggesting a darkened outlook for the troubled housing market.

Increased assumptions for total losses on subprime and so-called Alt-A residential mortgage-backed securities come amid declines in market value of the debt and a surge in the inventory of bank-owned properties, S&P said in a statement.

The securities have already suffered a drubbing of downgrades over the past two years as the housing crisis worsened to the weakest levels since the 1930s. Many are trading for cents on the dollar as investors value them based only on remaining interest payments that may be received.

Rating companies, including S&P, have frequently revised expectations for losses on subprime, Alt-A and prime loans to reflect the deteriorating environment since 2006. Alt-A mortgages are made to borrowers who were allowed to provide less proof that they are able to repay the loan.

S&P now projects defaults on subprime loans issued in 2005, 2006 and 2007 at 11 percent, 30 percent and 49 percent, respectively. (Reporting by Al Yoon; Editing by Dan Grebler)