Standard & Poor's Ratings Services has announced a revision of its outlook on Washington Mutual Inc. and its subsidiaries from stable to negative.S&P also affirmed its A-minus/A-2 counterparty credit rating on WaMu. The outlook revision was based on lower earnings from WaMu's core mortgage banking business and "the negative trends in the national housing and mortgage markets that will depress earnings in the next year," said S&P credit analyst Victoria Wagner. WaMu's projections for higher credit provisions through the first quarter of 2008 are "quite sizable and reflect not only the weak housing markets, but the significant increase in subprime-related credit losses, the rise in second-lien home equity loans," the rating agency said. WaMu's other core retail banking businesses are seeing "good and stable performance," and its mortgage banking business has significant geographic diversification and "a significant reduction in subprime mortgage risk," S&P said. The current investigation by the New York attorney general into WaMu's appraisal practices with eAppraiseIT is not a consideration in the outlook revision, S&P said.

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