Alt-A Mortgage Backed Securities Downgraded

Alt-A Mortgage Backed Securities Downgraded


Remember when I highlighted a 60 Minutes piece back in December that talked about this?

Well, now it’s happening.

From WSJ via Calculated Risk:

Standard & Poor’s Ratings Service on Monday placed its ratings on $552.8 billion worth of U.S. first-lien Alt-A residential mortgage-backed securities issued between 2005 and 2007 on watch for downgrade, saying it sees an increase in losses from the transactions issued in those years.

S&P said it believes continued foreclosures, distressed sales, an increase in carrying costs for properties in inventory and more declines in home sales will further depress prices and lead to higher losses.

And you know what’s next after this? The Option ARMs. And then the commercial real estate market is up to bat.

All told, we’re looking at another trillions more in potential losses.

Yes, trillions.

Get ready for a lot more pain folks. It’s coming.

  • Snoop-Diggity-DANG-Dawg

    …and commercial real estate….and the bond market…


  • kranky kritter

    Highly-rated investment grade bonds are supposed to be low-risk, low-yield investment vehicles that you buy and hold. If you decide to trade them instead, you get what you get: the risk that comes from guessing.

    Wall street found ways to package low risk alongside high risk, and to get ratings firms to go along with ratings that suggested the risk was far greater than circumstances have proven.

    So it’s some consolation if ratings firms are doing their jobs and rating risky debt as risky. But it would be even better if these frauds were found liable.