by Calculated Risk on 1/15/2008 11:51:00 PM

From Housing Wire: Get Ready For More Downgrades: S&P Revises RMBS Ratings Assumptions (Again)

S&P said it has revised the assumptions it uses for the surveillance of U.S. residential mortgage-backed securities (RMBS) — chief among them, the rating agency said it has bumped up expected lifetime losses for the 2006 subprime vintage to 19 percent. The agency had previously forecast losses at 14 percent.

Beyond the 2006 vintage, S&P also said it will “recalculate lifetime loss expectations for all vintages of U.S. RMBS” — that means not just subprime, and not just 2006.

And Housing Wire concludes:

There’s also some very serious discussion about the fact that cumulative losses thus far have been far below expectations, while foreclosure volume is strongly outstripping projections — which means there is a whole lot of REO out there that isn’t getting sold. Losses don’t get recorded until they’re actually losses, meaning the REO inventory is sold off and losses start to get real.

Standard & Poor’s last put its RMBS criteria through a major revision in July 2007 (see HW’s coverage here), which lead to wide-scale downgrades of numerous subprime RMBS. I’d expect to see more in the wake of today’s announcement.