RMBS Market Faces Minimal Exposure to Katrina Damage.

Standard & Poor's executives Ernestine Warner and Robert Pollsen authored a report, "For U.S. RMBS, Minimal Exposure Provides Shelter From Katrina." This viewpoint is an excerpt from the full report.

Despite the devastating impact of Hurricane Katrina on thousands of residents living along the Gulf Coast, the effect on residential mortgage-backed securities rated by Standard & Poor's remains benign. Given the relatively limited exposure of Standard & Poor's RMBS portfolio to the affected areas, overall ratings performance has remained strong during the months since Katrina and last year's other severe storms.

Immediately following Katrina, Standard & Poor's identified just over 3,600 transactions that had loans in the affected ZIP codes throughout Alabama, Florida, Louisiana and Mississippi. Since that time, our Katrina-specific monitoring has focused on transactions that initially had at least 1% of their loans in FEMA-designated federal disaster areas. At the time of our initial report in September 2005, we identified approximately 400 transactions that originally had more than 1% of loans in the affected areas. Throughout our monitoring, our analytical focus has been on delinquencies and loss performance, credit-enhancement structure, and actual and projected credit support. While we have seen increased delinquencies in many of the pools, this upward trend has not yet translated into losses in the individual mortgage pools. As of April 2006, we have taken no negative rating actions on the 400 transactions determined to have increased risk due to property concentrations in the affected areas.

Since our initial report last September, 478 of the potentially affected transactions have paid in full. To assess the number of outstanding transactions issued between January 2000 and September 2005 with exposure to Katrina-affected areas, we ran an updated query of the original files using Standard & Poor's Trends database, which identified 3,151 transactions. Of these 3,151 transactions, many had loans in Florida, but none that were in FEMA-designated disaster areas. As such, this review does not cover those transactions.

Loans from the remaining three states continue to appear in a significant number of the transactions, but they generally represent less than 1% of the original cutoff date principal balances.

On average, transactions with loans from disaster areas in Alabama had only a 0.08% concentration of loans from the affected ZIP codes. Additionally, only 10 had more than a 1% concentration. On average, ...