Standard & Poor's will rate subprime mortgages higher than the U.S. government, which lost its AAA rating Aug. 5.
The ratings agency will give AAA grades to 59 percent of Springleaf Mortgage Loan Trust 2011-1, bonds tied to $497 million lent to homeowners with below-average credit scores and virtually no equity in their properties. S&P has awarded AAA to more than $36 billion of securities in the U.S. this year.
The Bank of America Merrill Lynch indexes showed treasuries gained about 1.95 percent and U.S. borrowing costs have fallen since the S&P downgrade.
Securities backed by subprime mortgages were largely responsible for the recent financial crisis, Bloomberg News reports. Bankers continue gather the loans, bundle them into bonds of varying risk and pay ratings firms a fee to assign credit rankings.
“Everybody has been led to believe over the years that AAA means AAA means AAA across the board,” Gregory W. Smith, the general counsel for the Public Employees’ Retirement Association of Colorado, told Bloomberg News. “Anybody that didn’t learn in the 2008 crisis that doesn’t apply should find another line of work.”
