Following up on a July 10 warning, Standard & Poor’s Ratings Services said Thursday it had downgraded $6.39 billion in mortgage-backed securities backed by subprime loans.

The ratings agency said the downgrades involve 562 classes of mortgage-backed securities (MBS), including the majority of the 612 classes placed on “CreditWatch” Tuesday for possible downgrade.

Of the 612 securities placed on CreditWatch Tuesday, 498 classes totaling $5.69 billion were downgraded Thursday, while 26 classes were left on CreditWatch. The ratings of 74 classes were affirmed and the securities removed from CreditWatch.

Standard & Poor’s also announced that it had downgraded 64 of 70 subprime MBS classes placed on CreditWatch before July 10, with a total value of $700.9 million.

A complete list of the affected classes was posted on the Standard & Poor’s Web site.

The $6.39 billion combined value of all 562 downgraded classes represents 1.13 percent of all first-lien subprime mortgage collateral rated by Standard & Poor’s between the fourth quarter of 2005 and the fourth quarter of 2006.

The ratings agency also said the 612 classes placed on CreditWatch Tuesday represented $7.35 billion in rated securities, not $12 billion as first reported.

Altogether, 30 classes remain on CreditWatch, some of which are pending appeals by their issuers because of the presence of mortgage insurance.

Moody’s Investors Service this week also downgraded 399 securities backed by first-lien subprime mortgage loans with an original face value of more than $5.2 billion.

About 60 percent of the securities were backed by loans originated by Fremont Investment & Loan, Long Beach Mortgage Co., New Century Mortgage Corp. and WMC Mortgage Corp., which have been performing below average other loans made in 2006, Moody’s said.

On Thursday, Fitch Ratings said it is weighing downgrades on 170 securities backed by subprime mortgages valued at $7.1 billion, and also 19 collateralized debt obligations (CDOs) due to their subprime exposure.


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