Moody's Investors Service, a US credit ratings agency, has predicted further downgrades of securities tied to sub-prime loans as it blamed mortgage servicing companies for failing to engage with borrowers to help reduce defaults and limit losses.

The New York-based rating agency conducted a survey of 16 sub-prime servicers, which oversee $950bn (€673bn) in mortgages, or 80% of the sub-prime market. The survey found these companies are not acting quickly enough to modify the terms of loans when they expire and are reset at higher rates of interest. This is will impact negatively on packaged debt instruments such as residential-backed mortgage securities, according to Moody's.