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More US sub prime losses on way, says S&P

Standard & Poor’s has increased its loss projections for U.S. residential mortgage-backed securities backed by sub prime loans issued between 2005 and 2007.

It says the weighted average projected loss for the 2006 transactions are currently around 32 per cent but could rise to as much as 59.34 per cent.

The weighted average projected loss for the 2007 transactions is approximately 40 per cent, but could rise to 66.70 per cent.

In February 2009, S&P said the losses would total an average of 25 per cent for 2006 bonds and 31 per cent for 2007 securities.

According to US fund manager TCW Group chief investment officer Jeffrey Gundlach, in late 2007 there were $2.1 trillion, or 80 per cent of all US RMBS rated at AAA, but by May 2009 there were only 16 per cent, or $313bn of US securities with a top rating.

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