Our firm is investigating potential litigation against securities ratings agencies that have failed to properly rate mortgage backed securities. The failure of agencies like Standard & Poor’s and Moody’s to accurately rate mortgage bonds was one of the main factors behind the 2008 financial collapse. Now, it appears that these same rating agencies are still failing to properly rate these securities.
Our mortgage backed securities fraud lawyers want to hear from investors who purchased mortgage bonds in amounts of $100,000, $500,000, $1 million, and $10 Million. We are particularly interested in talking to investors that purchased re-remics – mortgage bonds that had collapsed in the housing meltdown that have since been rebundled into new securities by Wall Street. Evidence is building that, as they did prior to the financial meltdown, Standard & Poor’s and other ratings agencies “rubber-stamped” these offerings, and assigned many inappropriate ratings.
Our mortgage backed securities fraud lawyers are offering free consultations to investors who relied on the ratings of Standard & Poor’s and other ratings agency’s when deciding to invest in complex mortgage bonds. If you or an organization you represent lost money because of the shady way the ratings agencies operate, we urge you to contact one of our mortgage backed securities fraud lawyers today.
Ratings Agencies and Mortgage Bonds
Following the 2008 financial collapse, it was revealed that ratings agencies like Standard & Poor’s and Moody’s had assigned many worthless mortgage backed securities their highest ratings. Induced by these ratings which indicated the bonds were safe investments, investors lined up to purchase the securities. In the end, these investors lost billions of dollars.
This occurred for a number of reasons. Pre-crises, bankers knew more about their bonds than the ratings agencies did and took advantage to get the good ratings. It also seems that banks issuing the securities sought out ratings agencies they knew to be more lenient – something known as ratings shopping. Pre-crisis, Standard & Poor’s, for example, was slower to lower ratings on mortgage bonds than Moody’s.
It was believed that the recently-passed Dodd-Frank financial reform bill would put an end to the ratings agencies’ shoddy practices. While the law does include provisions that would hold the agencies liable for material errors and omissions in their ratings, those provisions are in limbo. According to report from ProPublica, the agencies revolted against the new rules, and refused to allow their ratings to be used in offering circulars, freezing up the markets.
The Securities and Exchange Commission (SEC) gave in to the blackmail, suspending the rules for six months, pending more study. Then in late November 2010, the agency extended the delay indefinitely. A month later, the SEC announced it didn’t have the funds to implement some of the Dodd-Frank provisions, including the formation of the “Office of Credit Ratings,” which would have overseen the ratings agencies. Now, with Republicans controlling the House of Representatives, it’s highly unlikely that the SEC will have the budget it needs to ever go forward with many of the Dodd-Frank reforms, including the “Office of Credit Ratings.”
Unfortunately, this lack of regulation has allowed Standard & Poor’s and the other ratings agencies to operate in much the same way they had prior to the financial crisis. And once again, the consequences have proven costly for investors in mortgage backed securities. In late 2010, Standard & Poor’s announced it would be downgrading its ratings on almost 1,200 complex mortgage securities, two thirds of which it only rated last year. According to ProPublica, of the more than $85 billion of re-remics issued since 2009, an estimated $30 billion may be under review by Standard & Poor’s. Since the financial crises, re-remics have been defaulting at an alarming rate. That includes bonds rated Triple-A – a designation that supposedly indicates they are “exceedingly safe.”