A week after downgrading $6.39 billion in mortgage-backed securities backed by first-lien subprime loans, Standard & Poor’s Ratings Services says it’s downgrading $3.8 billion in securities backed by second mortgages.

The downgrades of 418 classes of MBS represent 6.1 percent of the $62 billion in ratings issues on second-lien collateral for the two years ending in January 2007, Standard & Poor’s said. During that time, the ratings agency noted for perspective, private-label mortgage lenders issued $2.5 trillion in MBS.

Last week, Moody’s Investors Service downgraded 399 securities backed by first-lien subprime mortgage loans with an original face value of more than $5.2 billion. Fitch Ratings said it was weighing downgrades on 170 securities backed by subprime mortgages valued at $7.1 billion.

Federal Reserve Chairman Ben Bernanke told members of the Senate Banking Committee today that according to some estimates, credit losses associated with subprime mortgages could total between $50 billion and $100 billion.

As was the case when Standard & Poor’s issued its downgrades on 562 classes of first-lien mortgages July 12, the ratings agency said it is also changing the assumptions it uses when evaluating the risk of such investments.

Standard & Poor’s said it believes losses on residential MBS backed by closed-end, second-lien collateral “will significantly exceed historical precedent and our original assumptions.”

Closed-end, second-lien mortgages “can go from being current on their monthly payments to a loss within six months or less,” the ratings agency said in a press release. “Therefore, a pool’s credit quality can deteriorate over a very short time period.”

The worse-than-expected performance of the securities downgraded today was tied to looser underwriting standards, pressure on home prices, speculative borrowing, “very high” combined loan-to-values (CLTVs), pressure on borrowers from payment increases on first mortgages, and questionable data quality.

Also, while borrowers who had trouble making their mortgage payments were once able to refinance into more affordable loans, tighter underwriting standards, an increase in interest rates, and home-price erosion is making it more difficult to refinance, “and this will result in further delinquencies and defaults,” Standard & Poor’s said.

Standard & Poor’s said it has changed its assumptions on such securities to better account for current losses to date, losses assumed on currently delinquent loans, and future losses for borrowers who are still current on their loan payments.

After adjusting upward its prepayment speed and default assumptions for second loans in May 2007, there was a “significant increase” in credit protection in deals rated by Standard & Poor’s, the company said.

Now the company is increasing default and loss assumptions for purchase-money loans, loans with 95 percent or greater loan-to-value ratios, and loans to borrowers with FICO scores at or below 660.

“These are the loan characteristics we currently believe are most predictive of the higher defaults and losses in the transactions being downgraded,” Standard & Poor’s said.

The 418 classes of downgraded MBS included securities issued by ACE Securities Corp., Bear Stearns, New Century, GSAMP, Merrill Lynch, Nomura Asset Acceptance Corp., SACO, and Terwin Mortgage Trust. A complete list of the securities affected was posted on the Standard & Poor’s Web site.

Of the 418 classes subject to downgrades, 297 are now rated at “B” or lower, meaning they are highly speculative or in poor standing. That includes 186 classes downgraded to CCC or less because they are expected to experience a principal write-down or shortfall within sixth months regardless of their previous rating.

Standard & Poor’s also said it had lowered its ratings on 93 tranches from 75 collateralized debt obligations (CDOs) that have exposure to the recently downgraded MBS.

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