Affected are the ratings of 87 RMBS insured by MBIA Inc., 64 by Ambac Financial Group Inc., 35 by Financial Insurance Guaranty Co. and 19 by Security Capital Assurance Ltd.
Just last week, Fitch put the AAA ratings of Ambac, the second-largest U.S. bond insurer, and its larger competitor MBIA on watch for a one-notch downgrade to AA+ in the event each insurer is unable to secure about $1 billion in additional capital or reinsurance within the next four to six weeks.
All three ratings agencies are reviewing FGIC for a downgrade. Moody's and Fitch have put SCA, parent of XL Capital Assurance, on review for downgrade but S&P affirmed its AAA rating with a negative outlook.
According to Fitch, the RMBS ratings will remain on rating watch negative while it determines whether they offer sufficient protection -- beyond insurance -- that investors will be paid. Those protections include seniority to other claims on underlying cash flows and the level of excess cash flows beyond those needed to make payments to holders of the affected tranches.
The ratings of bonds that rely on insurance to maintain their AAA ratings will stay on watch for a downgrade until Fitch acts on the insurers' ratings.
Also this week, Fitch placed eight classes of AAA-rated CDOs insured by MBIA on review for a possible downgrade, and also put one AAA-rated CDO insured by SCA on downgrade review.