Moody's Investors Service's downgrade of the financial strength ratings of lenders' mortgage insurance companies will percolate through to reduced credit ratings on some senior mortgage-backed bonds issued by Bendigo Bank, Heritage Bank, ING Direct, Interstar, National Australia Bank and Westpac.Moody's said yesterday that it would reduce credit ratings on one senior tranche of bonds issued by Westpac (via St George Bank) in 2005 and on 13 mezzanine tranches issued by Bendigo, Heritage, ING, and National Australia Bank (under that bank's Interstar and Challenger programs).Moody's cut the ratings from Aaa to Aa1 in the case of the St George senior RMBS and from Aa1 to Aa2 or Aa3 for the mezzanine debt.It also cut the ratings on 71 junior tranches.Moody's said the downgrades were needed because the subordination levels were "no longer commensurate with their previous ratings, after incorporating the benefit from Lenders Mortgage Insurance policies with Australian mortgage insurers."Earlier this week, Moody's downgraded the insurance financial strength ratings of Genworth Financial Mortgage Insurance to A3, from A1. It also cut the rating of QBE Lenders' Mortgage Insurance to A2, from Aa3.Moody's maintained its rating on Westpac Lenders Mortgage Insurance at Aa3.