Split ratings in ABS are not entirely unheard of. The hyper-tranching trend in mortgage ABS, however, has magnified the differences in methodologies, as enhancement is spread thinly out over the entire deal. In some cases, tranches are exhibiting rating variances up to four notches.

"The presence of a split rating on a very thin tranche is arguably the least alarming thing in the world - it is exactly where you would expect the philosophical or ideological difference between probability of default and frequency and severity paradigms to clash," said Nomura Securities researcher Mark Adelson.

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