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THE LATEST SECONDARY MARKET Downgrades Rise as Moody's Goes After Several Banks Economic issues in Europe prompt the ratings agency to cut credit ratings for the nation's large financial institutions. C tions: The biggest banks face too much risk from debt-saddled Europe, earnings volatility, and still-faulty mortgages stateside. "All of the banks affected by Bauer, global managing director for Moody's, said in a statement. He said the institutions "also " Greg rized the downgraded institu- tions into three groups. The first, which includes engage in other, often market- leading business activities that are central to Moody's assess- ment of their credit profiles," adding that the "activities can provide important 'shock absorbers' that mitigate the potential volatility of capital markets operations." The ratings agency catego- Chase and several foreign banks, saw their credit assessments drop to 93 or better, with the same for deposit ratings. Senior debt ratings for their holding companies now hover at any- where between Aa3 and A2. Moody's acknowledged significant risks from capital Investors Service has slashed credit ratings for 15 major fi- nancial institutions, including Bank of America, Citigroup, JPMorgan Chase, and Morgan Stanley, among others. The reason for Moody's ac- ount another major downgrade against the global financial community. Moody's markets operations for these firms but nodded at their "stronger buffers," stable struc- tural liquidity, and sound risk management. The second group includes Goldman Sachs and several other foreign banks. A combi- nation of "sometimes adverse factors, today's actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities, weak with regard to structural liquidity or reliance on whole- sale funding," Moody's said of the group. Many other U.S.-based es of many of these firms have been affected by problems in risk management or have a history of high volatility, while their shock absorbers are in some cases thin- ner or less reliable than those of higher-rated peers, financial institutions fell into the third category. Bank of America, Citigroup, Morgan Stanley, and others saw their credit assess- ments fall to baa3. Deposit rat- ings sank to A3 and senior debt ratings fell to a range between Baa1 and Baa2. "The capital markets franchis- affected financial institutions by the end of the day, helping tilt the Dow Jones Industrial Average in a 251-point plunge, the second largest drop this year, according to the Associated Press. Stocks slid for many of the " Moody's said. crisis in Europe, led the ratings agency to slash credit assess- ments for these institutions to baa1 or baa2. Deposit ratings fell to a range between A1 and A2. "Some firms are relatively " including the debt Improving Markets Index Shows Volatility The NAHB has unveiled analysis that demonstrates declines among the number of regions displaying growth. A kets fell to 80 in June, according to the National Association of Home Builders (NAHB)/First American Improving Market Index (IMI). While the number of metros on the index dropped, a closer look shows high volatility, not a straightforward decline in improving markets. About half of May's improving markets—52 metros—maintained their im- proving status in June. The other 48 metros listed as improving markets in May fell off the list, and 28 new markets made their way onto the index. The Improving Markets Index fter reaching 100 in May, the list of met- ropolitan areas with improving housing mar- conditions in some of our na- tion's individual markets," said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company. "The fact remains, however, that real estate funda- mentals are still improving in many areas across the country." NAHB's chief economist, David Crowe, agrees that the fact new markets are making their way onto the list is "encourag- ing, and highlights the degree to which local and economic condi- tions are what drive individual housing markets." The 80 metros listed in the measures three major indicators and considers a metro "improving" if it shows growth in all three areas for at least six months from each category's respective trough. The three indicators consid- index are dispersed throughout 31 different states, including the District of Columbia. "Though today's IMI reflects a ered are housing permit growth, measured by the U.S. Census Bureau; house price appreciation, measured by Freddie Mac; and employment growth, measured by the Bureau of Labor Statistics. "The volatility of this index mirrors the uncertain economic decline in the number of improv- ing markets from May, the list continues to show significant geographic diversity, with 31 states represented and roughly one- quarter of all U.S. metros included, said NAHB chairman and Florida homebuilder Barry Rutenberg. The state with the highest " number of metros considered im- proving is Texas, with 10 metros on the index. The second-highest was Florida, with seven metros on the index. "The volatility of this index mirrors the uncertain economic conditions in some of our nation's individual markets." — Kurt Pfotenhauer, First American Title Insurance Company. 72 | THE M REPORT SECONDARY MARKET ANALYTICS SERVICING ORIGINATION