From the WSJ:
S&P Ramps Up Mortgage Downgrades
By AARON LUCCHETTI and SERENA NG
January 31, 2008
Standard & Poor’s downgraded or threatened to downgrade more than 8,000 mortgage investments and projected a widening array of financial institutions would ultimately face mortgage-securities losses totaling more than $265 billion.
The new sweep of downgrades — the largest of several during the past few months — threatens to create new turmoil in a market already shell-shocked by write-downs of about $100 billion at big financial firms and declines in housing values that have put the economy on the brink of a recession.
“Banks are bracing for another chapter in the unfolding story of their mortgage-market problems,” wrote Tanya Azarchs, an S&P analyst, in a report released yesterday after the market closed.
MBIA Inc., the world’s largest bond insurer, posted its biggest-ever quarterly loss and said it is considering new ways to raise capital after a slump in the value of subprime-mortgage securities the company guaranteed.
The fourth-quarter net loss was $2.3 billion, or $18.61 a share, raising concern the Armonk, New York-based company will lose its top credit ratings. The loss came a day after FGIC Corp.’s insurance unit became the third company to be stripped of its AAA grade.
From the WSJ:
Derivatives Write-Downs Hit MBIA
By LAVONNE KUYKENDALL
January 31, 2008 4:29 a.m.
MBIA’s fourth quarter derivatives write-down is more than 10 times as large as the $352.4 million write-down it reported in the third quarter, an indication of the rapidly worsening U.S. housing market and its effect on securities backed by loans made to credit-challenged customers.
Of the $3.5 billion charge, MBIA estimated it would realize $200 million of credit impairment or actual claims payments on the portfolio. In addition to the credit impairment on its derivatives portfolio, MBIA also set aside $713.5 million of pretax loss and loss-adjustment expense due to an expected loss of $613.5 million on its guarantees, and a special addition of $100 million to the unallocated loss reserve for MBIA’s prime, second-lien mortgage exposure.
Second lien, or home-equity loans, have shown rising losses as home values plunge in some parts of the country.
From the WSJ:
More Subprime Pain in Store
UBS Write-Downs, Insurer Downgrades Point to More Unraveling
By DAVID ENRICH and PETER EAVIS
January 31, 2008; Page C2
After racking up more than $100 billion in mortgage-related losses in recent months, banks and their investors had hoped they were out of the woods. They aren’t.
“When it becomes clear [as we think it will] that more charges are on the horizon, we believe the market will take another turn for the worse,” Ms. Whitney wrote.
Fueling the concerns, Standard & Poor’s predicted yesterday that the carnage might spread to a wider range of financial institutions, with total losses potentially exceeding $265 billion.