Moody’s to pay $864M to settle claims it inflated ratings

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Housing Market Trends

NEW YORK (AP) — Moody’s Corp. has agreed to pay nearly $864 million to settle federal and state claims it gave inflated ratings to risky mortgage investments in the years leading up to the financial crisis.

The deal announced Friday was struck among the New York-based rating agency, the Justice Department and the attorneys general for 21 states and the District of Columbia.

It calls for $437.5 million to go to the Justice Department and $426.3 million to be divided among the states and the District of Columbia.

Moody’s — along with the other two major rating agencies, Standard & Poor’s and Fitch — were widely criticized for giving low-risk ratings to the risky mortgage securities being sold ahead of the crisis, while they reaped lucrative fees.

Iowa will be paid approximately $9 million.

“The 2008 housing collapse was amplified by Moody’s putting its own profits ahead of the interests of investors it claimed to serve. We are holding Moody’s accountable for harming investors and our economy,” said Attorney General Tom Miller.

In addition to the monetary settlement, Moody’s has agreed to a detailed statement of facts in connection with the way it rated certain structured finance securities leading up to the financial crisis. Moody’s also agrees to additional requirements, including certifying its settlement compliance annually for four years.