S&P To Pay $77 Million To Resolve Suits Over Mortgage-Backed Securities

Posted by Patrick Barnard on January 21, 2015 No Comments
Categories : Residential Mortgage

Standard & Poor's (S&P) will pay $77 million to the federal government and two states to resolve allegations that it misled investors as to how it went about rating mortgage-backed securities (MBS) in 2011 and 2012.

Under the terms of the settlement announced Wednesday, S&P will pay $58 million to the Securities and Exchange Commission (SEC) and $19 million to the states of New York and Massachusetts. The settlement resolves suits brought by the SEC and the attorneys general of the two states.

In what some might consider a more substantive punitive measure, the ratings agency also agreed to abstain from issuing ratings on certain types of MBS for a year.

The settlement marks the first time one of the Big Three ratings agencies has been sued over how it went about rating MBS.

In a statement, S&P officials say the settlements ‘do not affect any outstanding S&P Ratings credit ratings or the manner in which S&P Ratings conducts credit analysis under the relevant criteria.’

‘S&P Ratings is pleased to have concluded these matters,’ the firm says, adding that it takes ‘compliance with regulatory obligations very seriously and continues to make investments in people and technology to strengthen its controls and risk management throughout the organization.’

S&P still faces an even bigger lawsuit brought by the federal government alleging that the firm over-rated certain MBS in the run-up to the financial crisis.

As reported by Reuters, S&P is close to resolving that suit for as much as $1.375 billion; however, some sources say the settlement could be closer to $1.5 billion.

The U.S. Department of Justice sued S&P in February 2013, claiming more than $5 billion in losses from agency-rated securities during the 2007-2009 financial crisis, Reuters reports.

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