Moody’s Investors Service has increased its projections for losses on residential mortgage-backed securities, a move that could result in “multi-notch” credit rating downgrades for bond insurers such as Ambac and MBIA which have exposure to these securities.

In its latest update on losses expected on mortgages made in 2006, Moody’s said it had increased its projections for cumulative losses to an average of 22 per cent. The losses are expected to increase in every quarter, averaging 17 per cent for the first quarter of 2006 and 26 per cent for the fourth quarter of that year.