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January 13, 2017

Posted  January 13, 2017

Illinois, the Department of Justice, and 21 other states announced an $864 million settlement with Moody’s Corporation, Moody’s Investors Service Inc. and Moody’s Analytics Inc. to resolve allegations that the credit ratings agency compromised its independence and objectivity in assigning its highest ratings to risky mortgage-backed securities and other structured finance securities in the lead up to the 2008 economic collapse. According to the settlement, Moody’s consistently made misrepresentations about the processes it used to assign credit ratings to structured finance securities. While publicly promising independent, objective analyses, the company privately relaxed its ratings criteria to ensure its clients’ residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs) would achieve higher ratings than the actual quality of the assets supported. Structured finance securities, including RMBS and CDOs, derive their value from the monthly payments consumers make on their mortgages. The alleged misconduct began as early as 2001 and became particularly rampant between 2004 and 2007. IL, CA, PA, MA

Tagged in: Financial Institution Fraud, Housing and Mortgage Fraud, Securities Fraud,