Monday, February 4, 2008

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Moody's Adjusts CDO Loss Assumptions

Moody's Investors Service Alters Its Expected Loss Assumptions for CDOs Originated in 2006

NEW YORK (AP) -- Credit rating agency Moody's Investors Service said Monday it revised its loss assumptions for collateralized debt obligations originated in 2006.
So-called CDOs are complex financial instruments that combine slices of debt and are sold to investors. Many CDOs are backed by mortgages, especially subprime mortgages given to customers with poor credit history.
As those mortgages have increasingly defaulted in recent months, ratings agencies have worried the CDOs will also default. That has also forced banks to reduce the value of the securities.
Moody's said it will use the new loss assumptions when reviewing CDO ratings on deals originated in 2006.
Shares of Moody's fell 43 cents to $35.55 in afternoon trading.

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