Top News

Showa Shell Surges 29% After Idemitsu Acquisition Report

Fitch May Lower Ratings on 15% of U.S. Prime Mortgage Securities

Fitch Ratings said that it may lower about 15 percent of its credit grades on securities backed by U.S. prime mortgages, typically those too large for government- tied programs when they were issued.

More than 90 percent of the bonds under review were created in 2005 or earlier, the New York-based ratings firm said today in a statement. In a report earlier today, Fitch said that such debt is being made riskier by “adverse selection” after better-quality borrowers refinanced their portion of the underlying loans. The securities have “historically performed well,” with 93 percent of the roughly $650 billion issued already repaid, Fitch said.

Downgraded senior-ranked securities are “still generally expected to retain investment-grade ratings and thus are expected to recover full principal,” Fitch said. Ratings cuts are likely to be one to two categories, it said.

So-called jumbo mortgages issued in 2005 were smaller than $359,650 for single-family properties, with the limits lower in earlier years. Ratings companies such as Fitch generally don’t assess the creditworthiness of debt in the larger market for government-backed mortgage bonds.

To contact the reporter on this story: Jody Shenn in New York at

To contact the editor responsible for this story: Alan Goldstein at

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.