Release date:
1/13/2017
North Carolina joins USDOJ and 21 States in Settlement to Address Mortgage-Backed Securities
(RALEIGH) Attorney General Josh Stein today announced that North Carolina will receive $16 million of a settlement of more than $863 million with Moody’s Corporation, Moody’s Investors Service, Inc., and Moody’s Analytics, Inc. (Moody’s). North Carolina joined the U.S. Department of Justice, 21 states and the District of Columbia to reach this settlement, which is the culmination of an investigation into Moody’s conduct and representations of independence in the rating of mortgage-backed securities. This type of activity, specifically structured finance securities backed by subprime mortgages, was at the center of the 2008 financial crisis.
“Moody’s put earning higher fees from investment bank clients over providing fact-based, objective analysis,” said AG Stein. “These practices helped cause the financial meltdown that wreaked havoc on our economy and people’s lives. This settlement will cost Moody’s nearly $900 million and will prevent the company from doing this again.”
Moody’s altered its rating process so that the Aaa ratings it assigned to structured finance securities made up of residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs) did not accurately convey the risk of those securities. As a result, Moody’s assigned inflated credit ratings to toxic assets the Wall Street investment banks packaged and sold between 2001 and 2007. In addition to the monetary settlement, Moody’s has agreed to a statement of facts here and significant compliance terms here, including, for the next four years, an annual certification by its CEO that Moody’s has maintained the compliance measures.
Together with the similar settlement against Standard & Poor’s in 2015, the North Carolina Attorney General’s Office has recovered more than $37.5 million from the credit rating agencies. This is one of the largest settlements the North Carolina Department of Justice’s Consumer Protection Division has won. AG Stein will recommend that the General Assembly direct a portion of North Carolina’s share to fund professionals who work on behalf of borrowers and homeowners in distress.
Other states involved in this bi-partisan settlement include Arizona, California, Connecticut, Delaware, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Mississippi, Missouri, New Hampshire, New Jersey, Oregon, Pennsylvania, South Carolina, and Washington as well as the District of Columbia. The entire settlement package can be accessed via this link.
Contact:
Laura Brewer (919) 716-6484
###