S&P Gives Sub Prime Mortgage Backed Securities a AAA Rating

October 25, 2011 by · Leave a Comment
Filed under: S&P, The Rating Agencies 

Bloomberg News reports that Standard & Poor’s is prepared to give an upcoming bond issue by Springleaf Finance Corporation a AAA rating. Hoover’s describes Springleaf Finance Corporation as an originator and servicer of first and second real estate mortgages. Most of these “are categorized as subprime or nonprime loans.”

Bloomberg writes, “S&P is poised to provide AAA grades to 59 percent of Springleaf Mortgage Loan Trust 2011-1, a set of bonds tied to $497 million lent to homeowners with below-average credit scores and almost no equity in their properties.”

Subprime mortgage-backed securities that were rated AAA and then later failed spectacularly are considered by many to be a key contributing factor to the financial crisis in ’08 and the subsequent recession.

What is old is new again. However, what S&P rates and what investors buy is a private matter. Let’s go back to caveat emptor.

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