Mortgage groups oppose rating agency proposals

NEW YORK, April 21 (Reuters) - Proposals to differentiate the ratings of structured finance products from other assets such as corporate and municipal debt would make it more difficult to take out mortgages and auto and student loans, trade groups said on Monday.

The Real Estate Roundtable, the Mortgage Bankers Association, the Commercial Mortgage Securities Association and the National Association of Realtors sent a letter to Senators Christopher Dodd and Richard Shelby opposing proposals to separate ratings, ahead of a Senate Banking committee hearing on the role of credit rating agencies in the credit crisis.

Dodd, a Connecticut Democrat, is the chairman of the Senate Banking Committee, and Shelby is the committee's ranking Republican.

Ratings agencies have come under fire from regulators and investors who say they helped precipitate the U.S. subprime mortgage crisis and credit tightening that began in 2007.

The agencies, which had initially assigned high ratings to low-quality assets, have since come out with plans to toughen their ratings processes for structured assets.

"We are concerned that differentiating structured asset-backed bonds from corporate and municipal bonds will serve to further undermine, rather than restore, liquidity that is a key factor in a borrower's access to credit -- from cars and student loans, to homes and commercial real estate, and beyond," the trade groups said.

"We believe educating investors about the inherent risk factors associated with all categories of securities (both structured and non-structured) would garner greater long-term liquidity than isolating structured securities for a separate rating scale in such a broad and simplistic manner," they added. (Reporting by Karen Brettell; Editing by Leslie Adler)