http://www.housingwi...ult-to-receive/
S&P Makes High Ratings ‘More Difficult’ to Receive
Recent changes among ratings criteria at Standard & Poor’s represent “significant” repercussions for collateralized debt obligations (CDOs) and residential mortgage-backed securities (RMBS), according to the ratings agency.
The changes will make high ratings on securities in sectors troubled by poor credit performance “more difficult” to receive, S&P said. The changes aim to enhance the comparability of ratings on these securities with ratings on credits in other sectors.
“More than any other kind of institutional change, changes to criteria directly affect our credit analysis and our ratings that result from that analysis,” S&P said. “Indeed, criteria is the exact spot where the rubber meets the road for a rating agency. By reading our criteria, investors can gain a deep understanding of the nature and levels of risk expressed in our rating opinions.”
The ratings agency recently adopted stress scenarios for use as a tool to calibrate criteria, meaning assigned ratings ought to be able to withstand higher levels of economic stress without defaulting. The recent weak performance of CDOs and RMBS prompted S&P to revise its criteria in order to improve rating performance and comparability.
The new US RMBS criteria establish a 7.5% credit enhancement level for a security backed by an “archetypical” prime mortgage pool in the triple-A rating category, a “substantially higher” level than previously established. The ratings agency said some RMBS risk features like low borrower credit scores or slim home equity not accounted for in the “archetypical” scenario could trigger adjustment mechanisms in the criteria to allow for higher credit enhancement levels.
S&P indicated the implementation of the new RMBS criteria resulted in few downgrades, since many outstanding RMBS deals already faced downgrades over poor performance.
The ratings agency also updated the corporate CDO criteria to add both qualitative and quantitative tests to a default simulation model already in place. The model addresses the loans or bonds backing a CDO from a mathematical framework, calculating probably behaviors and statistics. The tests added to the model addresses the “model risk” inherent in a probability-based model, S&P said.
“In addition, we recalibrated the simulation model to achieve stresses based on Depression-era experience,” S&P added. “The calibration method that we used makes it easier and more transparent for investors to understand our ratings and to relate them to their investment objectives.”
Just When It Looked Like Housing was getting better
Started by
SemiBizz
, Nov 12 2009 10:56 AM
6 replies to this topic
#1
SemiBizz
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Volume Dynamics Specialist
Posted 12 November 2009 - 10:56 AM
Price and Volume Forensics Specialist
Richard Wyckoff - "Whenever you find hope or fear warping judgment, close out your position"
Volume is the only vote that matters... the ultimate sentiment poll.
http://twitter.com/VolumeDynamics http://parler.com/Volumedynamics
Richard Wyckoff - "Whenever you find hope or fear warping judgment, close out your position"
Volume is the only vote that matters... the ultimate sentiment poll.
http://twitter.com/VolumeDynamics http://parler.com/Volumedynamics
#2
NAV
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Posted 12 November 2009 - 11:05 AM
These ratings agencies are scum. When the securities markets were at their riskiest, they relaxed their rating standards. When the markets are in distress, they set the bar high.
#3
SemiBizz
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Posted 12 November 2009 - 11:08 AM
That may be true NAV, but they still swing a big bat.
If securitization of housing isn't coming back.
You can forget the rest of this stuff.
GOING TO ZERO.
Price and Volume Forensics Specialist
Richard Wyckoff - "Whenever you find hope or fear warping judgment, close out your position"
Volume is the only vote that matters... the ultimate sentiment poll.
http://twitter.com/VolumeDynamics http://parler.com/Volumedynamics
Richard Wyckoff - "Whenever you find hope or fear warping judgment, close out your position"
Volume is the only vote that matters... the ultimate sentiment poll.
http://twitter.com/VolumeDynamics http://parler.com/Volumedynamics
#4
goldswinger
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Posted 12 November 2009 - 11:18 AM
That may be true NAV, but they still swing a big bat.
If securitization of housing isn't coming back.
You can forget the rest of this stuff.
GOING TO ZERO.
I would never buy a CDO. They killed the golden goose...!
#5
SemiBizz
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Volume Dynamics Specialist
Posted 12 November 2009 - 11:21 AM
That may be true NAV, but they still swing a big bat.
If securitization of housing isn't coming back.
You can forget the rest of this stuff.
GOING TO ZERO.
I would never buy a CDO. They killed the golden goose...!
You made my point, no one is going to buy CDOs or RMBS...
Price and Volume Forensics Specialist
Richard Wyckoff - "Whenever you find hope or fear warping judgment, close out your position"
Volume is the only vote that matters... the ultimate sentiment poll.
http://twitter.com/VolumeDynamics http://parler.com/Volumedynamics
Richard Wyckoff - "Whenever you find hope or fear warping judgment, close out your position"
Volume is the only vote that matters... the ultimate sentiment poll.
http://twitter.com/VolumeDynamics http://parler.com/Volumedynamics
#6
dasein
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Posted 12 November 2009 - 01:20 PM
also govt acct rules require originator keep a bigger slice, making securitization more costly to the originator.
anyone else surprised byTOLLs good numbers yesterday?
http://www.bloomberg...6...GUS34&pos=7
anyone else surprised byTOLLs good numbers yesterday?
http://www.bloomberg...6...GUS34&pos=7
best,
klh
klh
#7
SemiBizz
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Volume Dynamics Specialist
Posted 12 November 2009 - 02:13 PM
Here's a different take on this from Fitch Ratings...
They see opportunity in discounted bonds with lower ratings.
Seems to me if there are going to be few AAA RMBS.
Then financing is going to be pretty tough, isn't it?
So the underlying portfolio in these CCC rated would crumble over time.
You decide.
Low Ratings, High Recoveries
(Webinar)
They see opportunity in discounted bonds with lower ratings.
Seems to me if there are going to be few AAA RMBS.
Then financing is going to be pretty tough, isn't it?
So the underlying portfolio in these CCC rated would crumble over time.
You decide.
Low Ratings, High Recoveries
(Webinar)
Price and Volume Forensics Specialist
Richard Wyckoff - "Whenever you find hope or fear warping judgment, close out your position"
Volume is the only vote that matters... the ultimate sentiment poll.
http://twitter.com/VolumeDynamics http://parler.com/Volumedynamics
Richard Wyckoff - "Whenever you find hope or fear warping judgment, close out your position"
Volume is the only vote that matters... the ultimate sentiment poll.
http://twitter.com/VolumeDynamics http://parler.com/Volumedynamics
