MBS, or mortgage-backed securities, rating agencies under renewed squeeze

Reblogger Gabe Sanders
Real Estate Agent with Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales 3090099

 

Good information about some of the turmoil currently happening in the lending arena, and possibly more to come:

 

Original content by Esko Kiuru

MBS rating agencies under renewed squeezeThe unprecedented real estate bubble the nation just experienced was partly created by the credit rating shops that were tasked to value mortgage-backed securities, or MBS. The three large agencies doing that are Fitch Ratings, Moody's Investors Service and Standard & Poor's. The ratings the three arrived at were then attached to MBS issued by Wall Street firms and subsequently offered to investors who were seeking to invest money based on their own risk preferences. Obviously what the large investors world over were seeing made them confident that MBS were sound and worth acquiring, so they bought boatloads of them, stoking the fire under the housing bubble even more.

Las Vegas mortgage recipients, like those in the other seriously mauled areas of Arizona, California and Florida, were caught up in this frenzy and are now paying dearly for it.

Ever since the home loan and real estate market implosion there has been talk about how these ratings actually were sugar-coated and inaccurate, giving investors false impressions on their true value. Naturally the three agencies under scrutiny are adamantly defending their business practices.

Ohio attorney general has now filed a lawsuit against these three agencies on behalf of five Ohio public employee pension and retirement funds, claiming that the MBS ratings were inflated, often giving triple-A scores to mortgage-backed securities that in fact were rather risky. Moreover, the issuers of these bonds themselves, the lovable Wall Street crowd, were paying hefty fees for the ratings, creating an apparent conflict of interest issue. Conceivably the more fees a Wall Street issuer paid, the better an MBS rating would be.

The lawsuit seems to have decent merit now that the housing market has largely tanked and those MBS have lost most of their value, showing that in fact they were not quite triple-A vehicles but rather the high-risk variety. The Ohio attorney general has already filed seven other lawsuits against financial and investment companies since the economy turned sour and has collected thus far $2 billion in damages. This then isn't his first rodeo, so evidently he's onto something everybody should be paying attention to.

It just makes people wonder why Washington mortgage industry regulators are still sitting on the sidelines. This appears to be what they should be keeping an eye on and taking corrective action when needed. Does Wall Street have too much influence there? Well, at least some of the states have taken the initiative seeking to make the marketplace more responsible for its greedy and deceptive actions.

 

_______________________________________________________________________________

Provided by: 

Esko Kiuru
Mortgage Consultant, Father, Golfer, Skier, Beer Aficionado

www.eskokiuru.com - complete mortgage platform
www.BluefoxToday.com - syndicated mortgage and real estate blog

esko@eskokiuru.com
My cell: 702-499-1006

Home loans in Southern Nevada - including Las Vegas, Summerlin, Henderson, Green Valley, Mountains Edge, North Las Vegas, Southern Highlands, Anthem, Boulder City, Pahrump and Mesquite - and all of Nevada.

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Mortgage / Finance
Tags:
mortgage backed securities

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainmaker
4,797,386
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thank you for stopping by and taking the time to read my re-blog.

May 29, 2015 06:53 AM #1
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
4,797,386

Gabe Sanders

Stuart Florida Real Estate
Ask me about Stuart FL real estate
*
*
*
*
Spam prevention

Additional Information