Sub Prime Debt Rating Debacle?
The Nattering One wonders what will happen to derivative debt that contains credit card & automotive debt?
Let alone the Alt-A & Prime lender no doc, no down, interest only mortgages??
From Bloomberg: About $179 billion of structured-finance CDOs were created in 2006.
Subprime mortgage securities made up about 45 % of the holdings of structured-finance CDOs, or those owning asset-backed debt, issued last year, Moody's said today.
Structured-finance CDOs also may contain bonds backed by auto loans and credit card payments as well as the securities issued by other CDOs.
The amount of subprime mortgage-backed securities on Dec. 31 in structured-finance CDOs issued before last year totaled 47 percent for ones issued in 2005, 49 percent for ones issued in 2004 and 41 percent for ones issued in 2003.
If 80 percent of the collateral are subprime bonds and are downgraded by four levels, even ``super-senior'' AAA bonds, the least-risky portion, would be lowered by two levels, and the other AAA bonds would be cut by six.
Assuming 40 percent of the assets of a structured- finance CDOs are subprime bonds and all were downgraded by four levels, the credit ratings on some of the CDO's AAA securities would be lowered by two levels, Moody's said.
Let alone the Alt-A & Prime lender no doc, no down, interest only mortgages??
From Bloomberg: About $179 billion of structured-finance CDOs were created in 2006.
Subprime mortgage securities made up about 45 % of the holdings of structured-finance CDOs, or those owning asset-backed debt, issued last year, Moody's said today.
Structured-finance CDOs also may contain bonds backed by auto loans and credit card payments as well as the securities issued by other CDOs.
The amount of subprime mortgage-backed securities on Dec. 31 in structured-finance CDOs issued before last year totaled 47 percent for ones issued in 2005, 49 percent for ones issued in 2004 and 41 percent for ones issued in 2003.
If 80 percent of the collateral are subprime bonds and are downgraded by four levels, even ``super-senior'' AAA bonds, the least-risky portion, would be lowered by two levels, and the other AAA bonds would be cut by six.
Assuming 40 percent of the assets of a structured- finance CDOs are subprime bonds and all were downgraded by four levels, the credit ratings on some of the CDO's AAA securities would be lowered by two levels, Moody's said.
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