S&P Cuts to Junk Certain Mortgage Bonds Issued From Late 2005 Through 2009

Standard & Poor’s, a unit of McGraw-Hill Cos (MHP), said Friday that it reduced to junk status certain mortgage bonds it rated triple-A when they were structured last year by Credit Suisse (CS), Jefferies Group (JEF) and Royal Bank of Scotland (RBS).

According to Bloomberg, the ratings agency lowered the credit rating on 308 classes of re-securitizations, created from 2005 through 2009.

“The downgrades reflect our assessment of the significant deterioration in performance of the loans backing the underlying certificates,” S&P analysts Cesar Romero and Terry G. Osterweil said in a statment.

Bloomberg also notes that residential re-securitizations, or real estate mortgage investment conduits, exceeded $40 billion last year.

From triple-A to junk?!!!! Clearly, there is an underlying incentive here for rating agencies to pass out top ratings in order to get repeat business from Wall Street.

One can’t help but feel sorry for those investors who saw a high rating and felt comfortable putting their money in investments which were apparently full of securitized toxic assets.

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