RPT-UPDATE 2-Fitch, Moody's cut WaMu on mortgage exposures

(Repeats to fix "cuts" in headline) (Adds action by Moody's Investors Service)

NEW YORK, Dec 10 (Reuters) - Moody's Investors Service and Fitch Ratings on Monday cut their ratings on Washington Mutual Inc (WM.N) after the savings and loan said it expects to report a net loss in the fourth quarter after recording non-cash write-downs.

WaMu also said it would slash its dividend, cut more than 3,000 jobs and announced a $2.5 billion capital infusion. For details, see [ID:nN10437504]

Moody's said that it does not expect WaMu's profitability to recover until 2010.

Credit losses from WaMu's mortgage operations "will be noticeably higher than previously estimated," Moody's said in a statement.

"Of particular concern is WaMu's approximately $43 billion second-lien-home-equity portfolio," Moody's said. "Higher provisions are likely to lead to poor reported results throughout 2008 and 2009."

Moody's cut WaMu's rating two notches to "Baa2," the second-lowest investment grade, from "A3." The outlook is stable, indicating an additional cut is not anticipated over the next 12-to-18 months.

The cost to insure WaMu's debt with credit default swaps fell around 20 basis points to 310 basis points, or $310,000 per year for five years to insure $10 million in debt, according to broker Phoenix Partners Group. The swaps had initially tightened to 285 basis points on the news,

WaMu management said that "they are bracing for a continuation of the extremely challenging conditions in the U.S. residential mortgage market and are focusing their efforts on fortifying the balance sheet and dealing with potential ramifications swiftly and directly," Fitch said in a statement.

"WaMu also indicated that worsening asset quality metrics will prompt them to boost provisions further than anticipated early last month," Fitch said.

Fitch cut WaMu one notch to "A-minus," the seventh-highest ranking, from "A." The outlook is negative, indicating an additional cut it likely over the next one-to-two years.

The current rating incorporates an expectation "for further, meaningful asset quality deterioration in the residential mortgage portfolio and moderate softening in other consumer exposures, including credit card," Fitch added.

An additional downgrade would be likely, however, if WaMu reports substantial or sustained losses, Fitch said. (Reporting by Karen Brettell; Editing by Dan Grebler)