The changes affect the loan data required for rating residential mortgage backed security (RMBS) asset pools, as well as the fee structure charged by the rating agencies.
Previously, rating agencies were not paid for initial reviews of portfolios or for negotiations related to the structuring for those pools. As a result of extended discussions with Cuomo, the agencies have now agreed a "fee for service" structure, whereby they receive a fee for initial reviews, regardless of whether they are ultimately selected to rate the transaction.
In addition, rating agencies will now disclose information to any interested party about deals submitted for their initial review before a final rating is agreed.
There will also be a change in the amount of assurance required by the agencies to rate RMBS, with an as yet undefined "series of representation and warranties" required from investment banks on the underlying loan pool backing transactions.
"Moody's has been a strong supporter of increased disclosure and stronger due diligence in the US mortgage market, and we are pleased that, with this agreement, these measures will be adopted even more broadly across the industry," said Michael Madelain, chief operating officer of Moody's in a statement released by Cuomo's office on June 5.
The week on Risk.net,October 14-20, 2016Receive this by email