Two weeks ago, Moody’s downgraded nine of the top building societies en masse. But Exact, which offers mortgage book assessments, says this was an unfair judgement and is willing to help the accused mutuals clear their name.
Exact managing director Alan Cleary says: “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.”
Exact says that 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. It says it will 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 says it will look at each loan within the loan book separately, assessing current loan-to-value and current credit quality based on up to date bureau information on each borrower.
Cleary says: “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.”