After coming under fire for their blessing of risky mortgage-backed securities in the lead-up to the financial crisis, credit rating agencies are again facing criticism – this time for misjudging the impact of the rebound in the US housing market.
Rising house prices in almost all US cities mean that many mortgage-backed securities once judged close to worthless may now be fit for an investment grade credit rating that would allow traditional investors such as pension or mutual funds to buy them. However a growing number of investors who do not rely on such ratings said that the agencies such as Standard & Poor’s, Moody’s and Fitch Ratings have not kept up with improving fundamentals.
S&P said that a recent review of the groups rating criteria has led to large numbers of upgrades and downgrades, and that better fundamentals such as stabilising delinquencies do not necessarily translate into upgrades for some securities.
Moody’s said that has it upgraded many ratings last year and this year, but that risks remain related to the actions of loan servicers, the potential for higher interest rates, and the dwindling number of mortgages backing some securities.
Full article (FT subscription required)
© Financial Times
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article