S&P faces civil lawsuit for selling bad mortgage loan bonds, a result of risky loans from mortgage lenders. This was a huge impetus for the housing market crisis. And as usual, providing personal finance advice, real estate advice and consumer advice on the Ilyce Glink Show on February 10, 2013 at 11:00am Eastern Time on WSB Radio.
If you’re listening to us in the Northeast today, you’re trying to dig out of all kinds of craziness. My thoughts are with everyone there. My son Alex is is Andover, MA where that town got over two feet of snow. The headmaster of the school he attends actually felt it necessary to tell the kids there would be no jumping out of windows into snow banks, which is sort of funny, but apparently necessary.
Jumping off a roof seems like an appropriate metaphor for what happened in the housing market crisis. I want to talk about what happened this week with the credit rating companies and how Standard & Poor’s (S&P) received notice from the Justice Department that they’d be filing a civil suit. S&P is one of the two biggest credit rating agencies and so central to the fallout caused by the housing market crisis. It’s nearly six years later and most people seem stunned that only now S&P faces civil lawsuit.
Some prosecutors are apparently still looking at a criminal action, but this is really such a piece from the past. If these guys hadn’t been driving so hard for profits and had taken a step back and actually looked at the mortgage loans they were rating as “A,” we may never have gone down this path. A lot of bad mortgage loan securities were easily marketed and sold on the basis of these ratings. Things that have to be secure, like teacher pension funds, purchased these mortgage loans, only to find that those offerings really should have been rated a “D-.”
Ratings agencies are supposed to be there as an independent voice, a balance to the claims of mortgage lenders. They failed. Callers and I discuss the potential impact of this week’s news.
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