NEW YORK (Reuters) - Credit rating company Moody’s Investors Service on Thursday said it raised its assumptions for losses on loans backing subprime mortgages as much as 85 percent in response to deteriorating performance.
Average losses for loans made in 2006 — as underwriting standards were loosened more — will likely fall between 12 percent and 24 percent, depending on variables such as house price depreciation and the impact of rising payments on adjustable-rate loans, Moody’s said.
Moody’s projection for losses in 2006 subprime loans ranges between 14 percent and 18 percent, between the extremes. In October, Moody’s projected losses would fall between 6.5 percent and 15 percent.
“We see delinquencies still going up, not having reached a plateau,” Moody’s Chief Credit Officer Nicolas Weill said.
“There are also more concerns by the Moody’s economists on the potential for higher unemployment and recession” and home price declines, he added.
The revised estimates will likely result in more negative ratings actions on 2006 subprime RMBS.
Reporting by Al Yoon and Richard Barley; Editing by James Dalgleish