By Jody Shenn
Moody’s Investors Service placed $143 billion of jumbo-mortgage bonds under review for downgrades because of higher loss projections as stock-market losses and pay cuts squeeze wealthy borrowers.
Grades of senior securities issued in 2005 will be most affected by the new loan-loss projections, the New York-based ratings company said in a statement dated yesterday. It now expects losses of 3.8 percent on loans underlying 2005 prime- jumbo bonds, with estimates of 8 percent for 2006 securitizations, 10.9 percent for 2007 debt and 12.3 percent for 2008 securities.
The revisions were prompted by “the rapidly deteriorating performance of jumbo pools in conjunction with macroeconomic conditions that remain under duress,” Moody’s said.
Recent jumps in “serious delinquencies” among jumbo loans will be compounded by weakness in the housing market and economy, the company said. An “overhang of impending foreclosures will impact home pricesnegatively,” with values likely to decline 9 percent more before bottoming in the second half of 2010, Moody’s said. At the same time, U.S. unemploymentwill rise to peak at about 10.6 percent, said the firm, which had earlier forecast the jobless rate cresting at 9.8 percent.
Moody’s also said it expects the U.S. government’s effort to curb foreclosures to be less effective than it previously expected because the programs have “failed to gain traction.”
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