Moody's Investors Service has downgraded 179 MBIA Insurance Corp.-wrapped U.S. structured finance securities. The action affected roughly $9.33 billion of these securities, according to a release from the agency this morning.
The affected securities are backed by first- or second-lien residential mortgages, private student loans, RMBS, CMBS and ABS, the agency said.
This action was only driven by the agency's Nov. 19 announcement that it has downgraded the insurance financial strength rating of MBIA Insurance to 'Caa2' from 'B3'.
The agency said that its ratings on structured finance securities wrapped by a financial guarantor are usually maintained at a level equal to the higher of the following: the rating of the guarantor if rated at the investment grade level or the published or unpublished underlying rating.
The rating agency's approach to rating these guaranteed deals is outlined in its special comment titled Assignment of Wrapped Ratings When Financial Guarantor Falls Below Investment Grade" in May, 2008 and its November 10, 2008 announcement titled Moody's Modifies Approach to Rating Structured Finance Securities Wrapped by Financial Guarantors.
The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty and are listed in the link noted below.
This action is driven only by the downgrade of MBIA's rating and is not because of a change in key assumptions, expected losses, cash flows and stress scenarios on the underlying assets.