S&P says the current AA+ rating enjoyed by the GSEs is a function of their government support. Because of their capital shortfalls, both GSEs have a B- standalone credit profile rating.
Moody’s proposed using two home-price forecasts when assessing loans in residential MBS. Currently, the rating service uses one fairly conservative forecast for home prices.
A proposal from S&P would have a wide-ranging impact on ratings of commercial MBS. Fitch is also considering allowing data center ABS to carry additional leverage.
The debate over how to end the conservatorships of Fannie Mae and Freddie Mac hinges on whether rating services would downgrade the GSEs if they exit without an explicit government guarantee.
The new model used for rating securitizations of closed-end second liens will be more lenient than the previous model, thanks to improvements to underwriting standards following the financial crisis.
The rating service made the update following a review that found that CES loans originated pre-crisis had notably worse characteristics compared with originations in recent years.
The rating service proposed more closely aligning its criteria for rating U.S. residential MBS with how it assesses residential MBS in other countries. The likely result: no downgrades and many upgrades.