S&P facing fraud charges of mortgage bond ratings

Standard and Poor’s is facing some serious charges from the SEC.   Accusations of fraud over the companies mortgage bond ratings are at the heart of the charges.  After the mortgage meltdown of 2007/2008 many people believed the rating agencies played a large roll in creating the real estate bubble.  Sub prime loans were rates AAA and thus investors bought these mortgage bonds believing they were high quality.  Once the bubble began to burst many of these loans defaulted and thus the bonds became nearly worthless.   However despite that the ratings agencies have faced little scrutiny and thus (according to the SEC) they continued with potential problematic ratings for commercial mortgage bonds in 2011.

So yesterday S&P said  that it had received a letter from the SEC that it intended to recommend pursuing civil charges against the rating agency. The potential lawsuit would be over six ratings S&P issued for commercial mortgage-backed securities in 2011, according to a CNBC report.