12/07/2008

Moody's Investors Service and Fitch Ratings sued by the National Community Reinvestment Coalition

There doesn't seem to be anyway to keep some people happy. If these two firms had given low ratings to these securities in the past, they could have been sued (in theory) for making it difficult for certain people to get loans. Now they are being sued for giving "too high" of a rating. Here is the story from the LA Times:

In what is apparently the first legal action of its kind, an association of community-based organizations has filed a federal civil rights complaint against two of the three largest Wall Street rating firms, charging that their inflated ratings on subprime mortgage bonds disproportionately caused financial harm to African American and Latino home buyers across the country.

The complaint, filed by the National Community Reinvestment Coalition, alleges that Moody's Investors Service and Fitch Ratings enriched themselves by assigning high ratings to bonds backed by mortgages "that were designed to fail" because of "unfair payment terms and insufficient borrower income levels."

The firms "knew or should have known" that subprime loans disproportionately were marketed to minority consumers -- a process known as "reverse redlining" -- and that those borrowers would ultimately default and go into foreclosure at high rates, according to the coalition's complaint.

Fitch Managing Director David Weinfurter said the NCRC's filing "is fully without merit, and Fitch intends to defend itself vigorously." Moody's had no immediate comment. . . .

Labels:

2 Comments:

Blogger juandos said...

You just got to love this nonsense from the L.A. Times: 'The firms "knew or should have known" that subprime loans disproportionately were marketed to minority consumers -- a process known as "reverse redlining" -- and that those borrowers would ultimately default and go into foreclosure at high rates, according to the coalition's complaint'...

LOL! Yet the people signing up for these home loans should've what? Play stupid? Pretend how they couldn't read simple English?

'The filing cites multiple studies that found that African Americans and Latinos received a disproportionate share of subprime loans during the housing boom years. A Federal Reserve study in 2006 estimated that 45% of mortgages extended to Latinos and 55% of loans to African Americans were subprime -- a utilization rate "three to four times that of non-Hispanic whites."'...

Hence the reason for Steve Sailer's The Diversity Recession, or How Affirmative Action Helped Cause the Housing Crisis

Heck! Even the New York Times in their painfully idiotic way understood the problem: Pressured to Take More Risk, Fannie Reached Tipping Point

12/08/2008 11:22 PM  
Blogger Martin G. Schalz said...

The NCRC pushes for affirmative action, gets it, keeps pushing it until everything collapses, and has the guts to file suit against Wall Street firms?

"Subprime loan: Lenders may make subprime loans to borrowers who would not ordinarily qualify for credit if customary underwriting standards were applied. To offset the increased risk that these borrowers might default, lenders charge higher interest rates than they offer to creditworthy borrowers and assess additional fees." Source: http://financial-dictionary.thefreedictionary.com/Subprime+Loan

Where praytell was the NCRC when the above took place? why did they not combat subprime loans in the beginning? If, in fact the NCRC was aware of predatory lending, why did they not take action?

Wall Street did not create the risky affirmative action loan debacle, they merely took advantage of the situation as they always do. That in and of itself, is not a civil rights issue by any stretch of the imagination. It was a very bad business move which of course failed.

Here's a nice one...

"Washington, D.C., January 22nd, 2002 – For Immediate Release:Washington D.C. – Today, the National Community Reinvestment Coalition (NCRC) filed a federal lawsuit challenging the National Credit Union Administration’s (NCUA) withdrawal of critical regulations which ensured that credit unions all over the nation would have to address the needs of every segment of the communities in which they serve, especially low-income and minority communities." Source:http://209.85.173.132/search?q=cache:zlw5B7SsyosJ:www.lawyerscomm.org/2005website/projects/housing/housingpics/NCRCpress.pdf+NCRC+lawsuit&hl=en&ct=clnk&cd=1&gl=us

Hoist by their own petard...

12/09/2008 6:03 PM  

Post a Comment

<< Home