Doug Kass: example of deteriorating MBS

[c1ue]

Here is an example of the relaxed behavior of the agencies. This week's Grants Interest Rate Observer calls attention to a 13-month-old, $350 million asset-backed pool of mortgages, MABS 2006-FRE1. Foreclosures now stand at 9%, delinquencies at 10.5% and real estate owned at 3.5%. In other words, about 23% of the loans are problematic -- and neither Fitch nor S&P has downgraded the issue. No doubt investors in MABS 2006-FRE1 (hedge funds, brokerages, institutions, etc.) mark the issuance to par (since it has not been downgraded).

From: http://www.thestreet.com/_yahoo/newsanalysis/investing/10337841.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Doug Kass' main point is that the ratings agencies are not expeditiously downgrading bonds which are clearly showing signs of deterioration.

[jk]

the sluggishness of the rating agencies helps this wylie coyote market stay airborne. just don't look down!

[DemonD]

I wonder if the ratings agencies are getting kickbacks from mortgage lenders to keep their ratings high?

I think that's the first conspiracy theory I've ever posted on itulip, btw. So proud of myself right now. :)

[Spartacus]

It's nothing new.

There were lots of complaints against the rating agencies that Enron bonds were downrated only weeks or months after the collapse.