When Redwood Trust [stock RWT][/stock] launched it's latest residential mortgage-backed securitization vehicle, HousingWire reporter Jon Prior noted the absence of Standard & Poor's from the pool of credit ratings agencies.

Moody's Investors Service [stock MCO][/stock], after all, had rejoined the party after a much-aired disagreement of the concentration risk of the earlier deals.

"I wonder what happened and when will S&P re-join the fray," Prior said to me.

Today's filing with the Securities and Exchange Commission offers a brief explanation.

"With respect to S&P, the sponsor subsequently terminated its engagement letter because the sponsor disagreed with S&P’s preliminary assessment of the risks attributable to the mortgage loans," the filing states.

"S&P’s preliminary assessment of the risks attributable to the mortgage loans contributed to a preliminary determination by S&P that the initial subordination level needed to support any offered certificates rated in the highest rating category would be approximately 7.5%," it continued.

Fitch granted the senior tranche AAA based on credit enhancement of 7.3%. This gave an idea of how close Redwood is to the S&P idea of what earns AAA. But more importantly it shows how little either firm is willing to bend.

A breakdown of the ratings are below.


ClassFitch, Inc.Kroll Bond Rating
Agency, Inc.
Moody’s Investors