This excerpt taken from the ALL 10-Q filed Oct 31, 2007.
ABS RMBS portfolio includes securities that are collateralized by mortgage loans issued to borrowers that cannot qualify for prime or alternative financing terms due in part to an impaired or limited credit history. It also includes securities that are collateralized by certain second lien mortgages regardless of the borrowers credit profile. As of September 30, 2007, the ABS RMBS portfolio had net unrealized losses of $225 million, which were comprised of $1 million of unrealized gains and $226 million of unrealized losses. This is compared to net unrealized losses of $37 million, which were comprised of $4 million of unrealized gains and $41 million of unrealized losses at June 30, 2007. During the third quarter of 2007, five second lien ABS RMBS with a value of $84 million were downgraded within the investment grade ratings. Since September 30, 2007, two tranches with a value of $21 million were downgraded within the investment grade ratings, one tranche with a value of $2 million was downgraded from A to Ba and one tranche with a value of $1 million was downgraded from Baa to Ba. During the third quarter of 2007, we acquired $145 million of ABS RMBS, and separately sold $48 million of ABS RMBS, recognizing a loss of $4 million. We also collected $247 million of principal repayments consistent with the expected cash flows. These repayments represent more than 5% of the amortized cost of our outstanding ABS RMBS portfolio at June 30, 2007.
At September 30, 2007, $964 million or 30.7% of the total ABS RMBS securities that are rated Aaa are currently insured by 6 bond insurers. $2.66 billion or 60.2% of the portfolio consisted of securities that were issued during 2006 and 2007. At September 30, 2007, 85.4% of these securities were rated Aaa, 12.9% rated Aa and 1.7% rated A. The expected weighted average life of our 2006 and 2007 ABS RMBS portfolio was estimated to be approximately 3.25 to 3.75 years at origination. As the underlying mortgages are repaid, the weighted average life at origination of the remaining positions will lengthen.