Moody's Eyes Doral Ratings

The ratings of Doral Financial Corp., San Juan, Puerto Rico, have been placed under review for possible downgrade by Moody's Investors Service.Doral's senior debt is currently rated Baa2. The rating action came in the wake of Doral's announcement that it will restate past earnings to reflect impairments on its floating-rate interest-only strips. Moody's said Doral also intends to change its business model to retain a larger portion of its mortgage production and reduce its reliance on gains on the sale of floating-rate IOs. Moody's said it will assess the effect of such changes on earnings, evaluate Doral's interest-rate-risk management policies and practices, and review the company's revised IO evaluation methodology. The rating agency said it will also assess the potential impact of a recently announced regulatory investigation and a recently filed class action suit. Moody's said it "could not rule out the possibility of a multiple-notch downgrade because of the combination of challenges facing Doral." Moody's can be found online at http://www.moodys.com.