Fitch Downgrades WaMu Covered Bonds

Three series of bonds issued by the WM Covered Bond Program have been downgraded from AAA to AA by Fitch Ratings. Series 1, 2, and 3 were downgraded as a result of the current BBB/F2 rating of Washington Mutual Bank and "the risk posed to the continuity of payments on the covered bonds in the event of a default by [WaMu Bank]," the rating agency said. Under the program, covered bonds are ultimately secured over an $11.7 billion portfolio of U.S. residential mortgage loans held by the bank, Fitch explained. Noting the recent issuance of criteria for U.S. covered bonds by the Federal Deposit Insurance Corp., the rating agency said WaMu Bank's mortgage loans "do not meet the new criteria." As a result, a 90-day stay period is required in case the bank becomes insolvent, "which could delay access to the pledged collateral if a sale were required to repay the covered bonds before the end of their maturity extension period," Fitch said. Fitch can be found on the Web at http://www.fitchratings.com.