Moody's Investors Service Downgrades Nearly $70 Billion in Residential Mortgage Backed Securities (RMBS)

According to Dow Jones Newswires, Moody’s Investors Services downgraded nearly $70 billion of residential mortgage backed securities (RMBS) during the last three weeks as credit raters have steadily increased their loss expectations on them due to continuing low home prices and high unemployment. The latest downgrades covered most of three sets of residential mortgage backed securities for loans issued between 2005 and 2007 due to “rapidly deteriorating performance of Alt-A and Option-ARM pools.” Alt-A loans were those given to prime rated borrowers who failed to document assets and income. Option-ARM loans were those that allowed the borrower to pay less than what the normal interest cost would be, with the shortfall made up at a later point in time.

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