December 4, 2007 / 8:47 PM / 12 years ago

Subprime bond losses to climb to 20 pct -analysts

DANA POINT, Calif., Dec 4 (Reuters) - Expected losses for troubled mortgages known as Alt-A loans are now more than double earlier forecasts and losses for subprime bonds originated in 2006 may climb to 20 percent or more, analysts said on Tuesday.

Moody’s Investors Service on Tuesday raised its forecast for expected losses for U.S. mortgages known as “Alt-A” residential mortgage debt. Loss estimates for Alt-A bonds reviewed by Moody’s increased by an average of 110 percent from initial expectations, with some loss estimates up by as much as 270 percent, Moody’s said in a report.

Alt-A mortgages are made to borrowers with credit scores above subprime but who have other risky attributes, such as no proof of income or lack of an equity stake in the property.

“Alt-A performance has not been very good,” said Jonathan Polansky, a managing director at Moody’s Investors Service, during a panel discussion at a bond conference on Tuesday.

For subprime bonds, losses for those underlying securities for collateralized debt obligations, or CDOs, are expected to be “well over 20 percent,” said Kevin Kendra, managing director for structured credit at Derivative Fitch.

UBS AG has raised its expectations for subprime bond losses to about 20 percent, said Douglas Lucas, an executive director at UBS. As recently as this summer those losses were expected to be 16 percent, versus 11 percent at the beginning of the year, he said during a panel discussion on Tuesday at the Opal Financial Group CDO Summit.

Other financial firms have estimates of between 18 percent and about 23 percent, Lucas said. UBS last month said the U.S. subprime crisis could result in losses totaling between $380 billion to $480 billion, including $85 billion in losses due to the collapse of CDOs. (Editing by Leslie Adler)

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