A change in the view of the "tail risks" if there were to be a steep fall in house prices and a sharp rise in home loan defaults in Australia lies behind the likelihood of lower credit ratings for mortgage insurance companies and some mortgage-backed securities from Moody's Investors Service. Banking Day reported on the highlights of this new view on Friday.While stating that the outlook for residential property in Australia is stable, Moody's also said the resilience of household balance sheets to a serious economic downturn has not been tested. Moreover, the extreme falls in residential property prices seen in other countries around the world have not been factored into its analysis of Australian RMBS to date. This will be remedied by increasing the default frequency assumption for the standard Australian mortgage by 50 per cent, increasing weighted-average house price stress to 46 per cent and introducing a minimum credit enhancement level. But why has Moody's decided to act now? It may be that Genworth's first quarter loss (announced in April) spurred it into action. Or it may be the imminent bail-out of Spain, brought on by the need for a €24 billion recapitalisation of Bankia.Bankia has massive exposure to Spain's collapsed property market, and Moody's assesses the risks to Australian residential property as being on a par with Spain's risk. This point brings into question the outlook for the ratings Moody's assigns to Australian ADIs.Moody's says there should be no impact arising from these actions on the ratings assigned to ADIs, though the credit ratings agency allows that institutions with regional concentrations of mortgage exposures could be impacted. Perhaps smaller ADIs should expect their Moody's rating to be lowered sometime during the next few months.But, then again, Moody's is just the next rating agency to make such changes. Fitch made the same changes to its RMBS rating methodology and the use of lenders' mortgage insurance last August. It subsequently downgraded a number of tranches of RMBS notes in February.