Though structurers may deny it, Moody's Investors Service was left off some recent home-equity ABS, as well as home-equity focused CDOs, because of its more conservative ratings methodology on deeply subordinated classes of hyper-tranched transactions, market sources report. The hyper-tranching has led to split ratings on some down-in-credit tranches (see ASR 2/16/04), which Moody's has rated lower than its competitors - and as a result, Moody's has not rated two home equity transactions, or two other recent home equity-focused CDOs.

Moody's, which has a greater than 95% market share in the subprime MBS market and CDO market, may be seeing resistance for some recently implemented practices aimed at taking a more conservative approach than its competitors. In particular, the agency has increased credit enhancement levels for pools with heavy exposure to interest-only loans, as well as its well-documented concerns of basis risk, as interest rates rise.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.