A federal appeals court has ruled in favor of major credit agencies in a case that involves a lawsuit filed by five pension funds that sought to recoup millions of dollars in losses on risky mortgage debt.
The pension fund groups, led by the Ohio Police & Fire Pension Fund, said they lost $457 million on 308 investments in mortgage debt between Jan. 1, 2005, and July 8, 2008, because they relied on ‘triple-A’ ratings that proved “unfounded and unjustified.” The agencies in the suit — Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings — have said their ratings were protected opinions under the First Amendment to the U.S. Constitution.
The three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati unanimously ruled that the pension funds failed to show that the credit agencies should be held liable under state law, or for acting negligently in misrepresenting their ratings.
Source: “Credit Agencies Win U.S. Legal Victory on Mortgage Ratings” Reuters (12/03/12)
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Reprinted from REALTOR® Magazine Online, November 2012, with permission of the NATIONAL ASSOCIATION OF REALTORS®.Copyright 2012. All rights reserved.