(Updates with more downgrades throughout)

Dow Jones NEWSWIRES

Moody's Investors Service on Friday largely downgraded $7.25 billion of subprime residential mortgage-backed securities issued prior to 2005, as the credit-ratings agency continues to lower its expectations on underlying loans.

The firm has downgraded billions of the RMBS because of loss expectations as the housing market remains weak and unemployment stays elevated.

Moody's cut the ratings on 42 tranches and confirmed the ratings on one tranche from seven subprime deals issued by Park Place Securities Inc. before 2005--in total worth $1.9 billion. Later, it mostly downgraded $1.8 billion of RMBS issued by New Century Home Equity Loan Trust, cutting the ratings on 97 tranches from 16 deals. Moody's also downgraded $1.8 billion of RMBS issued by Argent Securities Inc., lowering the ratings on 131 tranches and confirming the ratings of five tranches from 22 deals.

From another 16 deals issued by Option One Mortgage Loan Trust, it downgraded 92 tranches and confirmed the ratings of three. It also withdrew the ratings of three tranches from two deals, for a total value of $893 million in RMBS.

For $858 million of RMBS issued by ABFS, it cut the ratings of 91 tranches and confirmed the ratings of 4 from 11 deals.

Moody's also downgraded smaller deals issued by Arc Mortgage Trust, CDC Mortgage Capital Trust, Ownit Mortgage Loan Trust and People's Choice Home Loan Securities Trust, also prior to 2005.

The collateral backing these deals primarily consists of first-lien, fixed and adjustable-rate subprime residential mortgages.

Moody's said although most of the subprime pools securitized before 2005 have been paid down significantly, the remaining loans are under pressure from housing and wider economic stress.

RMBS helped fuel the housing boom and wound up in the hands of investment funds or in more complicated pools known as collateralized debt obligations, in which underlying mortgage pools were further sliced into tranches according to their perceived risk and sold.

-By Tess Stynes and Joan E. Solsman, Dow Jones Newswires; 212-416-2291; joan.solsman@dowjones.com

--John Kell contributed to this article.