NEW YORK, March 19 In a move reflecting
widening stress in the U.S. housing market, Moody's Investors
Service on Thursday said it may downgrade $240.7 billion of
securities backed by prime-quality "jumbo" U.S. residential
mortgages because defaults will be higher than they expected.
Jumbo mortgages are typically larger than $417,000, and go
to borrowers with good credit. But Moody's said in the last six
months, there have been "substantial increases in serious
delinquencies and decreases in prepayment rates, levels that
are unprecedented in this asset class."
Moody's put on review for downgrade 4,988 tranches of jumbo
residential mortgage-backed securities with a current
outstanding balance of $173.3 billion, and an original balance
of $240.7 billion. The securities are backed by mortgages
issued between 2005 and 2008.
The credit rating agency said it now expects losses of 1.7
percent for 2005 securitizations, 3.55 percent for 2006, 5.05
percent for 2007 and 6.20 percent for 2008.
It said 70 percent of the 2005 senior securities will
likely remain investment-grade, with the rest falling to
"junk." Securities issued later may suffer deeper downgrades.
Moody's also said subordinated securities from 2006, 2007 and
2008 transactions "will likely be completely written down."
The credit rating agency said its forecast takes into
account falling home prices, rising unemployment and "limited"
Moody's said home prices have already fallen 25 percent
from their peaks and could drop another 11 percent by year end,
when prices in many parts of the United States may bottom out.
Thornburg Mortgage Inc THMR.PK, a large U.S. jumbo
mortgage specialist, on Tuesday said it might file for Chapter
11 bankruptcy protection, and was in talks with its lenders to
renegotiate various agreements.
(Reporting by Jonathan Stempel; Editing by Kenneth Barry)