Another ratings rethink on lenders' mortgage insurance

Fitch last week lowered the rating assigned to the Class B tranche of SMHL Series 2008-1 Fund to 'A+/Negative' from 'AA-'. The move brings the rating into line with those of the 53 subordinated tranches of Australian RMBS downgraded to 'A+' from 'AA-' in August, when Fitch revised its internal view on Genworth Financial Mortgage Insurance Pty Ltd (Genworth Australia). Fitch ceased publicly rating Genworth Australia in November last year when it withdrew the 'AA-' insurer financial strength rating assigned.

Moody's has again updated its analysis of the impact of any downgrade of LMI providers Genworth Australia (rated A1) and QBE Lenders' Mortgage Insurance Limited (Aa3) on the senior and mezzanine tranches of Australian prime residential mortgage-backed securities. The last analysis was undertaken only two months ago.

Moody's analysis shows that only one tranche of mortgage-backed securities from one issuer would be a candidate for potential downgrade if QBE LMI were downgraded three notches, and only four tranches would be candidates for potential downgrade if Genworth were downgraded three notches.

Importantly, under no circumstances would any tranche be a potential candidate for downgrade to below investment grade, even if both Genworth and QBE LMI were downgraded to below investment grade, said Moody's.