Boston, MA 10/06/2014 (wallstreetpr) – According to reports, New York Attorney General is investigating Standard and Poor’s of McGraw Hill Financial Inc (NYSE:MHFI) over mortgage bonds issue. As per the information provided by two people close to this matter, NYAG wants to find out whether S&P failed to practice commercial-mortgage rating methodology in a right way or not. One probable reason behind this could be its temptation of winning more and more businesses from banks.
Insights of the matter:
S&P is facing Attorney General’s scrutiny on at least six transactions/ deals that it rated in 2011. It was disclosed by two people, who refused to disclose their identity as this matter was too private to be disclosed at present. Reporters tried to get in touch with S&P’s representatives in order to get inputs on this matter. Eventually Ed Sweeney, a spokeswoman of the company decided to break the silence, but declined to comment on this issue. Same was the case with a spokesman for Schneiderman named Matt Mittenthal, who also chose to remain silent on this issue.
It is probably the third time when a government agency has decided to inquire S&P’s rating practices over mortgage-backed securities. Under these securities, banks provide loans on large commercial properties like shopping malls, skyscrapers and hotels. Banks create a pool of such loans and then issue securities backed by those loans. These are highly risky securities as default practiced by any borrower can turn into a huge loss.
S&P, for the first time, announced in the month of July about first regulatory action taken against it. It revealed that U.S. Securities and Exchange Commission might take action against CMBS rating transaction executed by S&P in 2011. Those two people said that apart from NYAG and SEC, Massachusetts Attorney General, Martha Coakley, was also showing interest S&P’s business practices in regard with mortgage backed loan ratings.
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