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Moody’s reaches $864 million settlement over RMBS credit ratings

Settlement dates back to financial crisis

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Moody’s Corp. agreed to pay nearly $864 million to settle claims for its role providing credit ratings for Residential Mortgage-Backed Securities and Collateralized Debt Obligations that contributed to the financial crisis.

On Friday, the Department of Justice, 21 states, and the District of Columbia announced the settlement agreement with Moody’s Investors Service Inc., Moody’s Analytics Inc., and their parent, Moody’s Corporation, resolving pending state court lawsuits in Connecticut, Mississippi, and South Carolina, as well as potential claims by the Justice Department, 18 states and the District of Columbia.

In order to prevent the situation from happening again, the settlement included a Statement of Facts in which Moody’s acknowledges key aspects of its conduct, and a compliance agreement.

"Moody’s failed to adhere to its own credit rating standards and fell short on its pledge of transparency in the run-up to the Great Recession," said Principal Deputy Associate Attorney General Bill Baer. 

"Today’s settlement contains not only a significant penalty and factual admissions of its conduct, but also a commitment by Moody’s to new and continued compliance measures designed to ensure the integrity of credit ratings going forward," said Baer. 

“After careful consideration, Moody’s determined that the agreement, which removes significant legacy legal risk and avoids costs and uncertainty associated with continued investigations and litigations, is in the best interest of the company and its shareholders. Moody’s stands behind the integrity of its ratings, methodologies and processes, and the settlement contains no finding of any violation of law, nor any admission of liability,” Moody's stated in its press release on the settlement. 

 

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