Moody's stresses again too

Philip Bayley
Moody's has expanded its study on the impact of LMI downgrades on prime RMBS, the results of which were published in mid-June. Again Moody's considers the impact of downgrades to QBE Lenders' Mortgage Insurance Limited (Aa3) and Genworth Financial Mortgage Insurance Pty Ltd., (A1) but this time looks at senior and mezzanine notes and not just those rated 'Aaa'. Moody's concludes that if the downgrades are limited to two and one notch respectively, then the ratings on all senior and mezzanine tranches will be unaffected.

Moody's also found in its analysis of 271 prime RMBS tranches that the ratings on 207 tranches are independent of the ratings on both QBE LMI and Genworth.

However, 45 tranches are dependent on the ratings of both LMI providers and the remainder are dependent on the ratings of just one.