In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Tuesday, July 10, 2007

MarketWatch: New S&P Methodology is "Death Warrant" for Subprime Industry

by Calculated Risk on 7/10/2007 04:08:00 PM

Rex Nutting at MarketWatch comments on the new S&P rating change: New methodology is death knell for the troubled industry

Standard & Poor's just drove a huge harpoon into the heart of the mortgage credit bubble, and it's going to take a long time to clean up the mess once the beast finally dies.

... S&P isn't going along with the charade anymore. S&P said it would change its methodology for rating hundreds of billions of dollars in residential-mortgage-backed securities. And it would review its ratings on hundreds of billions of dollars in the more complex collateralized debt obligations based on those subprime loans.

A lot of debt will be downgraded to junk status. ...

S&P's announcement is a death warrant for the subprime industry.
I'm looking forward to Tanta's further comments on the new S&P methodology.