Because of increased loss expectations, Fitch Ratings has moved $139 billion subprime RMBS to Watch Negative due to losses from the 2006 and 2007 subprime vintages that are expected to range from 21 to 26 percent. Hat tip to Housing Wire.
[photopress:fitch.jpg,thumb,alignleft]All throughout 2007 and now again in 2008 we continue to read stories from the ratings agencies about enhancements made to their default and loss models.
Read: We should plan on more increases in loss expectations.
In Fitch’s opinion the contraction in the mortgage markets has contributed to an acceleration and deepening of home price declines, and has eliminated the option to sell or refinance a home to avoid foreclosure for many borrowers. Additionally, the apparent willingness of borrowers to ‘walk away’ from mortgage debt has contributed to extraordinarily high levels of early default, which is particularly noticeable in the 2007 vintage mortgages. As Fitch has described in recent research reports, this behavior appears to be largely attributable to the use of high risk mortgage products such as ‘piggy-back’ second liens and stated-income documentation programs, which in many instances were poorly underwritten and susceptible to borrower/broker fraud.
Fitch said it expected the 2007 classes under review (report due out in February) would be subject to “widespread and significant downgrades