Prime RMBS tranches immune to agency downgrades, says RBA


Falling home prices in the US and turmoil surrounding the financial viability of US government-sponsored entities Fannie Mae and Freddie Mac, which buy mortgage assets in the secondary market, have yet to cause major concerns for investors in Australian residential mortgage-backed securities (RMBSs).

One reason for this is that almost all prime RMBSs issued in Australia are covered by lenders' mortgage insurance (LMI). However, earnings issues at the parents of the two companies that dominate the

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