Moody's: WaMu unaffected

Moody's Investors Service said its ratings on Washington Mutual, Inc. (Baa2/stable) were not affected by the announcement of a $1.9 billion loss for the fourth quarter of 2007.

The loss was consistent with an earnings warning that WaMu announced in December, and the agency incorporated expected fourth-quarter results into its downgrades of the company in November and December.

Moody's expects WaMu's loan-loss provisions to be elevated over a two-year period given WaMu's $18.6 billion subprime mortgage portfolio, $61 billion home-equity portfolio, of which nearly 74% is second lien, and $57 billion option-adjustable-rate-mortgage portfolio.

The agency said that going forward it will be comparing core earnings to provision needs, and if Moody's thinks core earnings will be less than provisions, then WaMu faces possible downgrades.

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