S&P to stop rating home equity mortgage-backed securities

NEW YORK—Credit ratings agency Standard & Poor's said Thursday it will stop rating new securities backed by home equity loans because such rapid deterioration in the market has made it nearly impossible to accurately rate potential performance.

"The magnitude of our recent rating actions and projected losses on the 2007 U.S. (home equity loan) vintage transactions reflect an unprecedented level of loan performance deterioration," S&P said in a statement.

In April, S&P cut the ratings on 184 securities backed by home equity loans. It cut ratings on more than 400 deals in the middle of 2007 and has been adjusting its ratings criteria since the beginning of the collapse of the mortgage lending market last year.

A home equity loan is a close-end second-lien loan secured by property. If a customer defaults on the loan, it is only paid off after the first mortgage on the property is repaid.

S&P said it will continue to review outstanding deals based on current methods used for reviewing deals, including looking at historical performance of the securities and projected losses.