Moody's Investors Services downgraded some of the debt of Prudential Insurance of America's home mortgage business last week, intensifying pressure for a quick sale.
Some $198 million of securities that are linked to 30-year, fixed-rate residential mortgages are affected by the downgrade. The New York rating agency cited high delinquency rates and high losses on liquidated loans. Moody's action dropped one class of shares to Ba2 from Ba3 and another class to Caa from B3.
The downgrade comes as Prudential, which has been trying to sell the giant mortgage unit since March, is said to be close to striking a sale with Norwest Mortgage.
Representatives at Prudential and Norwest declined to comment. But an analyst said the downgrade, by publicly illuminating how a segment of Prudential's debt is doing, could expedite a deal to a willing buyer.
"If you have your debt lowered it tells the world how much trouble you're in," said Gareth Plank, mortgage company analyst at Rodman & Renshaw, San Francisco.
Mr. Plank said the downgrade, while coming at a critical time, should not affect the price that is paid for the mortgage unit. Prospective buyers that conducted thorough due diligence should already know what the portfolio looks like, he said.
The downgrade is the latest wrinkle in Prudential's efforts to sell the unit - the largest mortgage company ever to be put on the auction block.
Norwest this month emerged as the top candidate for almost all of the business, according to executives close to the negotiations.
The operations include $660 million of assets from Prudential, including servicing rights on $40 billion of loans, two servicing sites, and a jumbo conduit, executives said.
At the same time, banking technology firms are said to be interested in two of the mortgage company's support units - Residential Information Services and Mortgage Guarantee Insurance Corp.