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Major Ratings Firm Leaves Door Open for Reverse Mortgage Analysis

One major credit ratings agency recently expanded its ability to rate more financial institutions, and it hasn’t entirely ruled out reverse mortgage market players from future analysis consideration.

This week, the Securities and Exchange Commission authorized Morningstar Credit Ratings LLC, a subsidiary of Morningstar, Inc. (NASDAQ: MORN), to begin rating corporate issuers and financial institutions under its nationally recognized statistical rating organization (NRSRO) registration.

The 13-member corporate credit analyst team of Morningstar, Inc. will now move to Morningstar Credit Ratings, and Morningstar’s corporate and financial institution credit ratings will be recognized as NRSRO credit ratings, as of August 24, 2016. The corporate credit analyst team will continue to provide research, ratings and analysis for corporate entities.

The company will also pursue ratings assignments for security-specific corporate debt offerings, unsecured real estate investment trust debt and financial institutions.

While Morningstar has the ability to rate reverse mortgages, the company has not yet rated them to date. Up to this point, Morningstar tells RMD that h as been focused on building out its analytics for single-family rental(SFR) and residential mortgage-backed securities (RMBS).

“We are frequently talking to investors and issuers in the structured finance market to determine new types of transactions where we can create value with our unique ratings abilities,” said Brian Grow, managing director ABS and RMBS at Morningstar Credit Ratings, in a statement emailed to RMD. “If we are approached with a non-agency reverse mortgage pool proposal, we would use our knowledge and experience to provide the required analysis.”

Morningstar Credit Ratings is currently licensed to assign ratings to reverse mortgage institutions, but has not been approached to rate these entities.

“If there is demand in the market for a Morningstar rating on either a reverse mortgage securitization or a corporate rating on a reverse mortgage issuer, Morningstar Credit Ratings will determine whether or not it has enough information to assign a rating,” Grow said.

Morningstar, Inc. launched corporate credit ratings and research in December 2009, issuing entity-level non-NRSRO ratings and analysis. Since then, Morningstar Credit Ratings has rated more than 260 structured finance transactions representing approximately $170 billion of securities across various types of commercial mortgage-backed securities (CMBS), asset-backed securities (ABS) and RMBS.

Written by Jason Oliva