S&P criticized for easing standards on mortgage bond ratings
When pushed to the edge in the summer of 2012, Standard & Poor's chose to ease its ratings standards for mortgage bonds in order to boost the firm's bottom line through new business, the DealBook claims in a new article. The ratings agency reportedly introduced modified standards that made it easier to give bonds higher ratings, the publication alleges. The DealBook explains added that:
Since S&P eased its standards last year, its market share has risen to 69% from the 18% it had in the first years after the crisis.
But the upswing in business has drawn a certain level of criticism:
Fitch, the market leader in rating new mortgage bonds, has issued three reports since 2011 criticizing bonds that it believed were rated too kindly. All three of the deals had been rated by S&P, the most recent in July.
Jim Nadler, president of the relatively new Kroll Bond Rating Agency, said that S.& P. had been more aggressive than the other big agencies in changing its standards to win business rating bonds backed by mortgages.