Wall Street is casting a colder eye on the Resolution Trust Corp.'s mortgage securities program after two ratings agencies criticized a 1991 issue. But for now, most analysts say they retain their overall confidence in the RTC'S securities.

Fitch Investors Service Inc. Sept. 16 slapped an alert with negative implications on one of the agency's 1991 triple-A rated mortgage-backed securities, the second such alert for that RTC issue since July.

Citing high original appraisals leading to larger-than-expected losses and a rising delinquency rate, Fitch placed on three-month watch the RTC's Series 1991-9 mortgage pass-through certificates, consisting of a $196.3 million triple-A Class-A piece (the agency's highest quality rating) and a $15.3 million double-A Class-B (a lower quality rating). During that time, the agency will monitor the pool's performance, the RTC's repurchase obligations and the servicing of Ryland Mortgage Co., the agency's pool servicer.

Fitch, which followed a similar downgrade of the same security by Standard & Poor's Corp. in July, visited Ryland to review collection efforts and real estate-owned properties. It found that the differences between original and current appraisals averaged from 30% to 35%, much higher than the average decline in median home prices for California of 6.2% from third quarter 1989 to December 1992.

The issue's loan delinquency rates totaled 11.44%, 4.55% and 35.52%, in the 30-, 60- and 90-day plus categories, respectively. as a percent of the current balance - all significantly higher than original estimates. Higher-than-anticipated default levels from B and C borrowers (borrowers with blemished credit histories) also played a role in the decision to issue the warning, Fitch said. As a result, the RTC may have to ante up to repurchase 42% of the 602 delinquent loans to offset expected losses.

California proved to be the scene of the crime for real estate misfortune. All the loans in the pool, each originated or acquired by the now-closed Guardian Savings and Loan Association, Huntington, Calif., were located in the Golden State. Of those, 74% were in depressed Southern California. But while poor location may seem the culprit, the location of the pool's loans isn't as important as how the security was constructed.

While RTC is responsible for selling more than $36 billion in mortgage-backed securities since 1991, it has fallen under more scrutiny of late. Its job of liquidating the troubled assets of failed thrifts is sometimes a tough sell. To make it work, it must heavily front-load many loans it wants to issue with credit enhancement to score a triple-A rating - the 1991-9 issue had 26.7% front-loaded. The combination has created an environment some investors find too risky.

Standard & Poor's now has a policy of reviewing RTC mortgage-backed securities on a quarterly basis," said Ray Galkowski, director of structured finance, referring to a policy S&P began after it downgraded the 1991-9 issue in July.

S&P dropped the triple-A Class-A tranche to double-A, and the double-A Class-B tranche to single-A. Usually, S&P conducts annual inspections on most MBS, and, although "RTC's securities are all performing as expected and each has a double-A or triple-A rating, many still have high delinquency rates," he said.

But some rating agency analysts say that one troubled pool of securities isn't indicative of all RTC issues.

"Each transaction is different," said Joe Franzetti, senior vice president, commercial mortgage group at Duff & Phelps Credit Rating Co. "And the ones we're looking at are performing as expected."

Others agreed, but with exceptions. "This won't affect other [RTC] transactions unless they have similar product and origination standards," said Kevin Duignan, assistant vice president, residential mortgage group at Fitch.

"If they do, you can expect similar performance results,' he added.

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