S&P cuts Washington Mutual

Standard & Poor's said it lowered the counterparty credit rating on Washington Mutual Inc. to BBB-/A-3 from BBB/A-2 and removed all ratings from CreditWatch negative where they were placed March 6.

The outlook is stable.

According to S&P, the downgrade reflects a higher-than-expected second-quarter loss of $3.3 billion and the higher loss severities on option adjustable-rate mortgages located in the most troubling housing markets -California and Florida.

Lower ratings reflect the concentration of residential mortgage-related loans that are on track to reach a new high peak-of-cycle loss, the agency said.

The depth and diversification of WaMu's deposit base and the sold liquidity position of the holding company also are factored into ratings, S&P noted.

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