Oct. 29 (Bloomberg) -- Moody’s Investors Service said it’s planning a review of U.S. home-loan securities that will likely lead to another round of rating changes based on a new view that property prices won’t bottom until next year’s third quarter.

The firm will boost its loss projections by “significant” amounts for prime-jumbo, Alt-A, option adjustable-rate and subprime mortgages backing bonds issued between 2005 and 2008, also after seeing higher losses per foreclosure than expected, Moody’s said today in a statement. Recent data showing rising home prices doesn’t prove the slump is over, the company said.

“The overhang of impending foreclosures and the continued rise in unemployment rates will impact home prices negatively in the coming months,” New York-based Moody’s said. Since the first quarter, the company has assumed in its mortgage-bond ratings that housing prices would bottom at the end of this year.

Ratings reductions typically boost the capital needs of bondholders such as banks and insurers and force some investors to sell debt. Moody’s and Standard & Poor’s, criticized by lawmakers for assigning top grades to mortgage debt proven too high by later defaults, have already cut ratings on hundreds of billions of dollars of notes in the $1.7 trillion market for so- called non-agency mortgage bonds, which lack government backing, lowering many securities multiple times.

Appropriate Categories

While Moody’s update will result in a “significant” change in the amount of losses it projects for the underlying loans, in “many cases” the securities have already been lowered into rating categories appropriate for a range of expected shortfalls to bond investors, so the grades may not change much, Debashish Chatterjee, a senior vice president, said. That’s particularly true for Alt-A debt, he said. The company has been continuously reviewing individual bonds based on the worsening performance of their loans.

Moody’s will begin taking ratings actions on securities this quarter and continue through March, according to the statement. Bonds from 2005 will be most affected, with subprime securities generally less vulnerable, the company said.

Jumbo mortgages are larger than Fannie Mae or Freddie Mac, the U.S. government-supported mortgage companies, can finance. Their limits are $417,000 in most areas and as much as $729,750 in expensive regions.

Subprime mortgages were offered to borrowers with the worst credit records. Alt-A loans, a step above, were given to borrowers seeking atypical terms, such as a lack of income verification.

Option ARMs offer initial minimum payments that fall below the interest borrowers owe, creating growing balances and potential spikes in monthly bills.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net.

Last Updated: October 29, 2009 15:37 EDT