Moody's Investors Service released the first in a series of supplements regarding its rating methodologies for RMBS transactions in Latin America.
The report is a general overview of how Moody's rates RMBS deals in Latin America and draws upon several differences between U.S. RMBS deals and Latin American RMBS transactions.
"There are certain things in the U.S. that are analyzed one way and in Latin America it may have a different significance," said one Moody's analyst. "A factor that may be negative in the U.S. could be considered positive in Latin America."
For example, one of the main differences between the U.S. and Latin American deals, according to Moody's analysts, is the concentration of MBS pools. While cities in the U.S. may have higher concentrations of residents than the suburban areas, the general population is divided up among the various states and therefore, MBS pools are not always found in the major cities. However, in Latin America, MBS pools are generally concentrated in large, metropolitan areas since that is where most people live. "In Latin America, the major cities are the areas that are more economically developed, so generally we prefer to see loans from those areas rather than from other areas in the country or regions that are not as economically developed," said the Moody's analyst.
The current supplement is considered a general guideline, encompassing the entire Latin American RMBS market. Going forward, the rating agency intends add supplements country by country. The economies and the laws are quite different among the Latin American countries and, according to the Moody's analyst, it is important to distinguish the similarities and differences that are taken into account when rating a deal. "If there is an interest from U.S. investors for a Mexican deal, it would be [easier] for them to understand if they [can refer to the] Mexican supplement," the analyst said. Although the analyst warned it will take quite awhile to release each forthcoming addition.
Moody's released the report in response to various questions from issuers and bankers that have been presented to analysts regarding their methodologies. "There are many participants who would like us to outline the differences between the U.S. analysis and Latin America," said the analyst. "It's an educational piece." For more information on the report, visit Moody's Web site at www.moodys.com.