Several societies tipped for downgrades have reportedly been given a month to prove their credit-worthiness in an opportunity to retain their good ratings.
Exact is offering to perform credit asset quality assessments on affected societies’ mortgage books at cost price, to prove that Moody’s has got it wrong.
Alan Cleary, managing director of Exact, said: “If societies are rated according to their ability to absorb upcoming losses it stands to reason they should know what those losses will be.
“The trouble is that Moody’s does not drill down to loan level when doing mortgage credit assessments. It considers future credit-worthiness by trend analysis of asset classes rather than up-to-date credit data by loan.”
He added: “The agency has condemned an entire 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 societies’ creditworthiness accurately.
Exact will assess each loan independently, using up-to-date credit bureau data on each borrower. Loss severity can then be ascertained using information specific to each society’s mortgage book.
The company believes the mutual sector has traditionally been a bastion of stability in the mortgage market and, given the corporate reputations at stake societies should have the chance to subject their mortgage books to detailed analysis before they are written off.
Exact maintains that it can offer a more accurate assessment of the risks inherent in mortgage portfolios than can Moody’s.
Cleary added: “We are prepared to do asset quality assessments on societies’ mortgage books at cost price, to prove the sector is creditworthy and has good prospects.”
The firm is also offering societies the opportunity to assess their own credit risk by running their mortgage books through its Asset Quality Assessment system.
AQA looks at each loan separately, assessing current LTV and credit quality based on bureau information on each borrower.
The system uses a suite of scorecards according to the types of loans involved. Outputs are then stressed according to economic trends and data supplied by a credit bureau.
NAB has no plan to offload profitable UK subsidiaries
National Australia Bank has no plans to sell subsidiaries Clydesdale Bank and Yorkshire Bank after reporting a £70m profit for the businesses in the six months to March.
The banks did £1.9bn of new business and mortgage lending in the period, with average gross loans increasing by 9.5% to £33.5bn.
Average retail deposit volumes were up 15% at £20.1bn – almost five times the industry average – while mortgage balances of three months in arrears were 40% of the industry average, which is 1.9%.
There had been rumours that NAB was looking to offload its subsidiaries but it issued a trading update last month in which chief executive officer Cameron Clyne confirmed that this would not be the interests of shareholders.
Lynne Peacock, chief executive of NAB UK, said: “We have an enduring commitment to supporting our customers in these challenging times. Almost £2bn of new lending has been advanced to our business and mortgage customers at a time when they have needed it most.”