Fitch Watches 60 Minutes, Downgrades Alt-A Mortgages: Pathetic $$

As if the ratings agencies did not need any more bad press. This action could not have been more ill-timed…

The day after 60 minutes aired this piece of the coming Alt-A disaster,

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Ficth took the following action:
From Housing Wire

Citing “a rapid deterioration of U.S. Alt-A RMBS performance,” Fitch Ratings again took the hatchet to its previous assumptions for Alt-A mortgages on Monday morning, revising its surveillance methodology and updating loss projections for all U.S. Alt-A RMBS.

Fitch said it now expects losses on all Alt-A collateral to far exceed the estimates of its ‘moderate stress’ scenario in its late ratings update earlier this year. “Market developments, ongoing home-price declines and loan performance trends in the Alt-A sector over the prior six months have effectively eliminated the possibility of this stress scenario,” said Fitch in a statement.

The rating agency said it now expects average cumulative losses om 2005, 2006 and 2007 vintage Alt-A transactions to hit 2.72, 6.78 and 9.58 percent, respectively, up dramatically from expectations at the agency earlier this year.

Fitch cited a “rapid increase in 60+ day delinquencies experienced over the past six months,” despite servicers’ collective efforts to hold off on actual foreclosure sales — likely implying that a halt to foreclosures is having little effect in resolving borrower delinquencies. Between May and October 2008, Fitch said that 60+ day delinquencies for the 2007 vintage increased from 8.80 percent to 14.65 percent; 2006 and 2005 vintages also experienced steep increases rising from 10.30 percent to 14.24 percent and 6.57 percent to 8.79 percent, respectively.

While delinquencies are continuing to pile up, cumulative losses are not — at least, not yet.. “The small increase in cumulative losses relative to the rising level of 60+ day delinquencies reflects, in part, the lengthening foreclosure/liquidation timeline being experienced throughout all vintages,” analysts at the agency wrote.

All of which means that it’s time to get ready for a whole new slew of downgrades to Alt-A in the coming few weeks. Fitch warned in its note Monday that it expects that it will downgrade many senior bonds to below investment grade — just in time for fourth quarter earnings.

Now here is the really sad part, in October I reported the same information from Tilson from the Value Investing Congress. This information was first presented by Tilson in the spring of 2008 (I believe, it may have been earlier).

So, where has Fitch been? Why are they only now taking action on it? Were they hoping and praying for a miracle to avoid more AAA ratings of their’s and their compatriots at S&P and Moody’s (MDO) turning into the garbage most folks know them to be?

It is really sad this stuff is still going on..

Although, if you are looking for that summer home, 2009 and 2010 and i have said here several times will be prime picking for them..happy hunting..

Disclosure (“none” means no position):none
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