Rating Agency Turns Cautious.

NEW YORK -- Standard & Poor's said it is examining the credit enhancement requirements, cash-flow assumptions and "possible revisions to its LEVELS and SPIRE models," given that reports about early payment defaults on 2006 U.S. RMBS vintage for many product types "continue to abound."

At the same time, S&P said that all-time record levels of customer debt reported at the end of the third quarter of 2006 feature a positive development: Most of America's debt is good, appreciating mortgage debt.

S&P is monitoring customer borrowing trends and debt evaluations, and expects American customers to "continue to run up record debt both in absolute terms and relative to income," as shown by a recent report.

It found that although the pace of borrowing has slowed down since the 2001 recession, "average household debt hit yet another record: 136% of after-tax income in third quarter of 2006." One positive development, however, is the household financial environment, S&P said, since a record 76% of household borrowing is mortgage debt and that is considered good debt "because it's used to acquire a ...