Bonds News

S&P may cut $140 bln of prime jumbo mortgage deals

NEW YORK, Feb 26 (Reuters) - Standard & Poor’s said on Thursday it may downgrade 3,279 prime tranches of jumbo residential mortgage-backed deals with a market value of around $140 billion, after increasing its loss expectations for deals issued in 2006 and 2007.

“Our revised loss projections reflect an increase in our loss severity assumption to 40 percent from 30 percent for prime jumbo transactions issued in 2006 and 2007,” S&P said in a statement.

“This change is based on our belief that the influence of continued foreclosures, distressed sales, an increase in carrying costs for properties in inventory, costs associated with foreclosures, and more declines in home sales will depress prices further and lead loss severities higher than we had previously assumed,” S&P said.

The tranches under review are from 209 transactions, which originally had a par value of around $172 billion, S&P said.

Around 4.42 percent of jumbo loans in the pool were severely delinquent in January, meaning they were more than 90-days due, in foreclosure or real estate owned, S&P said.

Severe delinquencies have increased by 45.60 percent in the past three months, it added. (Reporting by Karen Brettell;Editing by Diane Craft)