The Real Deal New York

SEC cracks down with new loan-backed securities rules

Financial firms must now disclose borrowers’ credit record details to clarify risks
August 27, 2014 04:20PM

The Securities and Exchange Commission adopted a new rule today that requires financial firms selling securities backed by mortgages and auto loans to disclose details on borrowers’ credit records.

The credit disclosure rule, which aims to enable investors to better assess the risks of loans underlying securities, was adopted with a 5-to-0 vote. The SEC’s imposition of new conflict-of-interest rules on agencies that rate company debt, government debt and issues of securities, meanwhile, split 3 to 2 along party lines, the Associated Press reported.

“These reforms will make a real difference to investors and to our financial markets,” SEC Chair Mary Jo White said before the vote.

Implementation of the new rules follows Bank of America’s $17 billion mortgage-fraud case settlement with the Justice Department, of which New York state will receive $800 million; Morgan Stanley’s $1.25 billion and Credit Suisse’s $885 million payouts, both to settle their respective Fannie Mae and Freddie Mae mortgage suits and JPMorgan’s $13 billion settlement with federal and state regulators over the bank’s toxic mortgage-backed securities. [AP]Julie Strickland