Mortgage insurance ratings wobbly

Philip Bayley
Moody's released a report last week that again looks at the thorny issue of the impact of rating downgrades of LMI insurance providers on the senior 'Aaa' rated tranches of Australian RMBS. In this instance, Moody's considered a downgrade to Genworth Financial Mortgage Insurance Pty Ltd., (Genworth Australia) 'A1' and QBE Lenders' Mortgage Insurance Ltd., (QBE LMI) 'Aa3'.

A one notch downgrade to Genworth Australia while QBE LMI remains unchanged could result in two senior tranches being downgraded. However, if QBE LMI was downgraded while Genworth Australia was not, QBE LMI's ratings would have to fall by three notches to have the same impact.