S&P Eyes FHLBank's ABS Investments

Standard & Poor's Ratings Services is raising concerns about the Federal Home Loan Bank of New York's investments in asset-backed securities secured by manufactured homes, but it has affirmed the government-sponsored enterprise's overall credit rating of AAA/A-1-plus.The rating agency lowered its outlook for the FHLBank from "stable" to "negative," noting that the ABS "have proven to contain larger portions of credit risk than the bank and Standard & Poor's expected." Originally rated AAA, the ABS have been downgraded in recent months. But they are still investment-grade and represent less than 1% of the bank's total assets, according to the FHLBank's chief credit officer, Paul Heroux. "Management is assessing various strategies to address this matter," Mr. Heroux said. "We do not expect any action the bank might take to have a material adverse effect on our ability to meet our financial obligations or on our ability to meet our regulatory capital requirements."