Released: November 29, 2008

Lawsuit charges mortgage raters enriched themselves

Source: Kenneth Harney, Washington Post (Free Registration)

In what appears to be 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 ratings agencies, charging that their inflated ratings on subprime mortgage bonds disproportionately caused financial harm to African American and Latino home buyers.

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.”

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