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Reply #83: How is this not big news? S&P will no longer rate mortgage back securities. [View All]

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Robbien Donating Member (1000+ posts) Send PM | Profile | Ignore Fri May-02-08 03:27 PM
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83. How is this not big news? S&P will no longer rate mortgage back securities.
Or at least the ones based on second mortgages. Not one word on CNBC. Not a peep.: /

Standard & Poors Rating Services on Thursday did something that very few market participants expected: the agency said it would stop rating RMBS backed by so-called closed-end seconds altogether, whether prime or subprime.

Home-equity loans, as closed-end seconds are more commonly referred to outside the Street, were a huge part of the recent housing market run-up. HELs were a huge boost to consumer spending during the housing boom, and also made it possible for many homeowners to skirt private mortgage insurance by piggy-backing a second lien that covered up to 20 percent of a homes purchase price.

After reviewing and analyzing the performance data available for U.S. closed-end second-lien (CES) mortgage loans and the related residential mortgage-backed securities (RMBS), Standard & Poors Ratings Services believes that this market segment does not allow for a meaningful analysis of new issuance and securitization, the agency said in a press statement late Thursday.

No kidding. Most second lien holders finding loss severity to be at least 100 percent, if not greater. And with price declines showing no sign of letting up, S&P said that an unprecedented level of loan performance deterioration has essentially made it impossible to rate second-lien RMBS going forward.

Apparently, there simply isnt enough credit enhancement in the world to account for losses that reach that high
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