Standard & Poor's is asking mortgage-related bond issuers to abide by its deadlines for providing the agency with deal documents. The rating agency recently sent letters to sub-prime mortgage issuers reminding them it must have deal documents such as pooling and servicing agreements two full business days prior to the closing of the deal. While S&P is only reiterating a long-standing position, that it was forced to do so indicates how explosive the growth in residential mortgage-backed securities sales has been this year and that at least one rating agency was having trouble keeping up with the pace, according to one ABS pro. As of the end of November, roughly $470 billion had been sold in home equities in the U.S., versus $310 billion for all of last year, according to Deutsche Bank research.
"We were getting stuff too close to closing, which was putting incredible pressure on being able to finish these rating documents prior to closing," explained Michael Stock, director in RMBS ratings at S&P in New York. He added: "With the tremendous volumes, some of the timelines were being pushed. We saw the trend and we're stopping it."
Stock stressed no deal's ratings were affected by a lack of adequate time for the rating agency to evaluate it prior to closing.