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Fitch Downgrades FGIC-Insured Debt
Associated Press 02.26.08, 5:18 PM ET

NEW YORK - Fitch Ratings on Tuesday cut its rating on 24 classes of mortgage bonds insured by Financial Guaranty Insurance Co., the bond insurer Fitch downgraded last month, because the bonds are no longer supported by FGIC's top-notch rating.

In late January, Fitch Ratings slashed its financial strength rating on FGIC, a bond insurer owned by PMI Group Inc. and a handful of investment funds.

FGIC, which insures $315 billion in bonds, does not have access to enough cash to warrant a top-notch financial strength rating, Fitch said.

FGIC write insurance policies promising to repay bondholders when bond issuers default. Fitch cut FGIC's rating to "AA" to "AAA."

A bond that is insured typically is granted the same rating as the insurer that protects it. With FGIC now carrying a worse rating, Fitch downgraded 24 classes of bonds that rely on the insurer to guarantee payments.

The downgraded debt is residential mortgage-backed securities, or bonds that funnel payments from pools of home loans to investors. Fitch downgraded bonds issued by or funneling payments from Morgan Stanley (nyse: MS), Ameriquest and GMAC (nyse: GJM1`).

Fitch did not specify the market value of the downgraded debt.

Like FGIC, the downgraded bonds now carry ratings implying "high quality," whereas the previous ratings implied "maximum safety."

http://www.forbes.com/feeds/ap/2008/02/26/ap4700188.html

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