Moody’s Investors Service has downgraded 131 investment securities backed by subprime, second-lien mortgage loans, saying loans of that type securitized in 2006 are “defaulting at a rate materially higher than original expectations.”

The loans were “originated in an environment of aggressive underwriting and lack protection from homeowner equity,” Moody’s said in a press release. “The combination of this risk layering with slowing home-price appreciation has caused significant loan performance deterioration and is the primary factor in these rating actions.”

Ratings on 131 securities were downgraded, with 111 remaining on review for possible further downgrade. An additional 136 securities had their ratings placed on review for possible downgrade.

Companies that issued the downgraded securities or originated the mortgages backing them include Bear Stearns Cos., Merrill Lynch & Co., IndyMac Bancorp Inc., Terwin Mortgage Trust, Credit Suisse Group, First Franklin Corp., Fremont Investment & Loans, Long Beach Mortgage Co. and New Century Mortgage Co.

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