On January 21, 2015, the SEC suspended Standard & Poor’s Rating Services (S&P) from rating conduit/fusion CMBS for one year as part of a settlement between McGraw-Hill Financial Inc., S&P’s parent company, and the SEC. The settlement stems from S&P’s disclosures in 2011 that it would utilize a certain methodology to rate six CMBS transactions and provide a preliminary rating for two others, when it actually used a different methodology, forcing S&P to pull a rating on a $1.5 billion bond that same year. In addition, S&P agreed to retract an allegedly untrue and misleading article that it published in 2012 and settled another claim that it failed to maintain and enforce internal controls regarding changes to its monitoring standards for certain RMBS. S&P further agreed to parallel settlements with New York Attorney General Eric Schneiderman and Massachusetts Attorney General Maura Healey. The rating agency has also agreed to pay more than $77 million to settle these claims with the federal and state regulators ($58 million to the SEC and another $19 million to New York and Massachusetts). SEC Settlement Order 1. SEC Settlement Order 2. SEC Settlement Order 3.
New York Attorney General Eric Schneiderman
New York Attorney General Again Seeks to Intervene in $8.5 Billion Bank of America MBS Settlement
On April 10, 2012, New York Attorney General Eric Schneiderman filed an amended pleading in intervention in the Article 77 settlement approval proceeding concerning Countrywide RMBS that is currently pending New York state court. The Attorney General challenges the fairness and adequacy of Bank of America’s $8.5 billion proposed settlement addressing representation and warranty claims against Countrywide, claiming that the $8.5 billion settlement does not adequately cover investors’ losses, which are alleged to be $242 billion. The Attorney General also points out that only 22 investors directly participated in the settlement negotiations. The Attorney General’s earlier motion to intervene, filed last August, was determined to be moot when the case was removed to federal court. Pleading.
Challenges Mount to Bank of America’s Proposed $8.5 Billion Settlement
Numerous investor groups, regulators and politicians have challenged Bank of America’s June 29, 2011 announcement proposing an $8.5 billion settlement of claims based on representations and warranties made by Countrywide in RMBS securitizations. Between July 5 and July 13, four separate groups of investors each moved to intervene in the Article 77 proceeding brought by Bank of New York Mellon, as Trustee or Indenture Trustee of the various securitization trusts, seeking judicial approval of the settlement. Potential objections have been voiced to the size of the settlement, potential conflicts of interest, and a failure to provide sufficient information to evaluate the settlement terms. On July 12, New York Attorney General Eric Schneiderman reportedly sent letters to investors that participated in the settlement negotiations seeking additional information, suggesting that the Attorney General’s office may object to the settlement. Representative Brad Miller, a North Carolina Democrat, raised additional questions about the terms of the settlement in a July 8 letter to the Federal Housing Finance Agency. Walnut Place Motion to Intervene. Pension Fund Motion to Intervene. TM1 Motion to Intervene. FHLB Motion to Intervene. Miller Letter.