the adviser logo

RMBS ratings under threat

by Staff Reporter8 minute read

Staff Reporter

Standard & Poor's Ratings Services has said its ratings on some residential mortgage-backed securities (RMBS) could be affected by the outcome of a criteria review.

On May 7 2013, Standard & Poor's published Insurers: Rating Methodology, in which it revised criteria for rating insurance companies, and at the same time placed "Under Criteria Observation" on a number of credit ratings that could be affected by the criteria.

The credits under review include some lenders' mortgage insurance (LMI) providers and reinsurers that play a role in providing LMI cover for housing loans underlying Australian and New Zealand prime residential mortgage-backed securities.

If the review outcome results in changes in the ratings of any of the LMI providers, there may be an effect on the ratings of some rated RMBS, depending on the amount of the exposure and other support available.

The LMI providers or reinsurers under observation that may affect Australian RMBS include AIA International Ltd, Genworth Financial Mortgage Indemnity Ltd, Genworth Financial Mortgage Insurance Pty Ltd, MGIC Australia Pty Ltd, Mortgage Risk Management Pty Ltd, QBE Lenders Mortgage Insurance Ltd and Westpac Lenders Mortgage Insurance Ltd.

The "Under Criteria Observation" rating identifier identifies which issuer and issue ratings could be affected by a criteria change, and it will be appended to potentially affected ratings, pending Standard & Poor's review of such ratings under the relevant changed criteria.

The review could result in Standard & Poor's affirming, raising, or lowering the ratings, and therefore could affect RMBS ratings.

Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more