New York Attorney General Cuomo announces agreements with credit rating agenciesMortgagePress.comAndrew Cuomo, Standard and Poors, Moodys Investors Service, Fitch, RMBS
New York Attorney General Andrew Cuomo has announced that he
reached agreements with the three principal credit rating agencies,
Standard and Poor's, Moody's Investors Service, Inc. and Fitch
Inc., to reduce their incentive to give favorable ratings on the
residential mortgage-backed securities (RMBS).
The agreements will establish a fee-for-service structure, where
the rating agencies will be compensated regardless of whether the
investment bank ultimately selects them to rate a RMBS. In
addition, the three rating agencies have agreed to implement the
following changes:
• Credit rating agencies will disclose information about
all securitizations submitted for their initial review, which is
intended to enable investors to determine whether issuers sought,
but subsequently decided not to use, ratings from a credit rating
agency;
• Credit rating agencies will review and evaluate
individual mortgage lenders and disclose their evaluations on their
Web sites;
• Credit rating agencies will receive loan level results
of due diligence and review those results prior to issuing
ratings;
• Credit rating agencies will perform an annual review of
their RMBS businesses to identify practices that could compromise
their independent ratings; and
• Credit rating agencies will require a series of
representations and warranties from investment banks and other
financially responsible parties about the loans underlying the
RMBS.
"Today's announcement stands as an excellent example of how
state and federal authorities can work together in a complementary
manner," said Securities and Exchange Commission Chairman
Christopher Cox. "I am most appreciative of the efforts of Attorney
General Cuomo and his staff to consult with the Commission and
coordinate their efforts in a way that is consistent with the
Commission's pending rulemaking for credit rating agencies. The
Attorney General's actions, as well as the comprehensive new rules
for all nationally registered credit rating agencies that the
Commission will consider next week, are motivated by our mutual
desire to promote ratings with integrity and curb the questionable
practices that contributed to the credit market turmoil."
