Exact To Prove Building Societies Credit Worthy.
Posted on April 28th 2009
Exact Mortgage Experts are offering building societies the chance to prove Moody’s wrong about their ratings. Several building societies tipped for a downgrade have reportedly been given a month to prove their credit worthiness in an opportunity to retain their good rating. Exact is offering to perform credit asset quality assessment on the affected building societies’ mortgage books, at cost, to prove that Moody’s has got it wrong.
72%, the largest proportion of brokers surveyed, think house prices will continue on a downward path for the next six to twelve months. When asked about their clients’ sentiment, 57% of brokers said borrowers believed house prices had not troughed yet.
Alan Cleary, managing director of Exact Mortgage Experts, said, “If the societies are rated according to their ability to absorb upcoming losses, it stands to reason they should understand exactly what those losses will be. But Moody’s doesn’t drill down to loan level when doing mortgage credit assessment – they consider future credit worthiness through trend analysis of asset classes rather than through specific, up-to-date credit data by loan. Moody’s has damned a sector by relying too heavily on averages and aggregated risk.”
Moody’s credit assessment methods have been criticised by the mutual sector as being too high level to reflect the building societies’ credit worthiness accurately. Exact assesses each loan independently, using up to date credit bureau data on each borrower. The loss severity is ascertained using real data, specific to each building society’s mortgage book.
Alan Cleary continued, “The mutual sector has traditionally been a bastion of stability in the UK mortgage market. Given the reputations at stake, building societies should be given the opportunity to subject their mortgage books to more detailed granular analysis before being written off. Exact can offer a more accurate assessment of the particular risk inherent within a specific mortgage portfolio than Moody’s, who have done a broad based approximation of the potential downside. Exact is prepared to do asset quality assessment on building society mortgage books at cost to prove this sector is credit worthy and has good prospects for the future.”
Exact is offering building societies the opportunity to assess their own credit risk by running mortgage books through Exact’s unique service, Asset Quality Assessment (AQA). AQA looks at each loan separately, assessing current loan to value and current credit quality based on up to date bureau information on each borrower. Their credit assessment uses a suite of scorecards adapted according to the type of loan – outputs are then stressed according to current economic trends and specific data supplied by the credit bureau. Cleary concluded, “The mutual sector was up in arms when Moody’s announced its mass downgrade – its reputation for sensible lending and low gearing has been badly damaged by their decision. Exact is giving the building society sector the chance to prove they are credit worthy and regain people’s trust.”
