RATINGS AGENCY Moody’s yesterday downgraded the ratings on two tranches of Irish residential mortgage-backed securities (RMBS).

About €2.6 billion of debt is affected.

It also placed 16 senior notes in six other Irish RMBS on review for downgrade in a move that could affect a further €17.3 billion of bonds.

Moody’s said securities issued by Celtic Residential Irish Mortgage Securitisation No 12 and Fastnet Securities 2 were performing worse than it had predicted at its most recent review in July last year.

“As of April 2012, loans more than 90 days in arrears have increased to 16.8 per cent of current balance in Celtic 12 and 13.2 per cent in Fastnet 2, which constitutes an approximately 30 per cent and 50 per cent increase, respectively, compared to the levels as of June 2011,” the agency said in a statement.

The 16 bonds placed under review are issued by Celtic Residential Irish Mortgage Securitisation 14, 15 and 16 and by Fastnet Securities 3 and 6. They also include notes issued by Phoenix Funding 2 Ltd.

Moody’s said that, during the review, it would assess if the current credit enhancement levels are sufficient to support the ratings of these notes under stressed scenarios.

Moody’s said it was “particularly concerned that exposure to negative equity in the mortgage pools backing the notes could lead to high loss severities”.

“Today’s announcement takes into account the amount of negative equity loans in the mortgage pools backing the notes and the amount of available credit enhancement in the transactions.”

Moody’s said the six affected tranches of bonds were among the most exposed.

Moody’s also warned that the Government’s proposed personal insolvency legislation would have a negative effect on rating of RMBS.