Moody\'s issues upbeat announcement
By MortgageDaily.com staff
2/4/2005

The performance of residential mortgage-backed securities improved to the highest level in nine years, according to Moody's Investors Service.

In its announced study of global structured finance ratings transitions over time and by asset class, Moody's found that there were roughly an equal number of upgrades and downgrades last year. The number of upgrades jumped to 973 in 2004 from the prior year's total of 549 upgrades. The number of downgrades decreased to 1,008, compared to 1,265 in 2003.

Most of the year's downgrades were caused by weaker-than-expected pool performance and higher-than-expected losses on defaulted securities in collateral pools, according to Moody's research director Jian Hu. A small proportion of rating changes were triggered by a change in a third-party rating.

Overall ratings stability improved as 91.2% of structured finance ratings went unchanged over the course of the year, edging up from 89.8% the previous year, Moody's said.

In the U.S. RMBS sector, the upgrade rate ascended last year to 7.9% -- the highest level since 1996, while the downgrade rate dropped to less than 0.1%, the ratings agency reported.

The RMBS market showed "outstanding performance in 2004 thanks to better-than-expected collateral performance and high prepayment rates," Moody's said in the announcement.

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