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Royal Bank of Scotland, through its subsidiary Greenwich Capital, may have misrepresented the underlying credit quality of mortgages in the mortgage pass-through certificates issued by Harborview Mortgage Loan Trust.
Investigation Source (Case #08-cv-05093)
- Nationwide
Investigation Scope
Category Information
Investigation Topics
- Investments
- Registration Statement
- Mortgage-Backed Securities
- Rating Agency
Product or Service
- Mortgage Pass-Through Certificates
Injury Type
- Monetary Loss
Investigation Details
This is a securities class action lawsuit against Royal Bank of Scotland; Greenwich Capital; Fitch Ratings; Moody's Investors Services; The McGraw-Hill Companies (operating through its Standard & Poors Ratings Services division-S&P) among others.
Harborview Mortgage Loan Trust is an affiliate of Royal Bank of Scotland. Harborview issued to investors mortgage pass-through certificates created by Royal Bank of Scotland's subsidiaries, Greenwich Capital, and collateralized with loans underwritten by Countrywide Home Loan.
The class action complaint alleges that the Registration Statement issued in connection with the offerings failed to disclose "the true impaired and defective quality of the loans collateralizing the Bonds" and that the "loans were not originated pursuant to the underwriting guidelines stated in the Registration Statement."
The class action complaint also alleges that the rating agency defendants "failed to conduct due diligence and willingly assigned the highest ratings to such impaired instruments since they received substantial fees from the issuer."
The complaint alleges further that the rating agencies "issued the ratings based on an outdated methodology designed in about 2002." The ratings were alleged to be misleading because the rating agencies "presumed that the loans were of high credit quality issues in compliance with the stated underwriting guidelines, when, in fact, Countrywide had systematically disregarded its stated Underwriting Guidelines."
Harborview Mortgage Loan Trust is an affiliate of Royal Bank of Scotland. Harborview issued to investors mortgage pass-through certificates created by Royal Bank of Scotland's subsidiaries, Greenwich Capital, and collateralized with loans underwritten by Countrywide Home Loan.
The class action complaint alleges that the Registration Statement issued in connection with the offerings failed to disclose "the true impaired and defective quality of the loans collateralizing the Bonds" and that the "loans were not originated pursuant to the underwriting guidelines stated in the Registration Statement."
The class action complaint also alleges that the rating agency defendants "failed to conduct due diligence and willingly assigned the highest ratings to such impaired instruments since they received substantial fees from the issuer."
The complaint alleges further that the rating agencies "issued the ratings based on an outdated methodology designed in about 2002." The ratings were alleged to be misleading because the rating agencies "presumed that the loans were of high credit quality issues in compliance with the stated underwriting guidelines, when, in fact, Countrywide had systematically disregarded its stated Underwriting Guidelines."
Defendant Details
| Name (Stock Symbol) | Brief Description |
|---|---|
| McGraw-Hill Companies, Inc., The (MHP) | The McGraw-Hill Companies, Inc. provides information services and products to the financial services, education, and business information markets. It operates under the Standard & Poors brand, which provides investment research, market indices, credit ratings, financial data, and fixed income research and analysis to investors, corporations, governments, financial institutions, investment managers, and advisors. |
| Moodys Investor Services | Moodys Investor Services, a subsidiary of Moodys Corporation, publishes credit ratings on a range of debt obligations, including various corporate and governmental obligations, structured finance securities, and commercial paper programs, as well as the entities that issue such obligations. |
| Royal Bank of Scotland (RBS) | The Royal Bank of Scotland is a full service BRitish bank, now majority owned by the British government. |
| Greenwich Capital Markets, Inc. | Greenwich Capital Markets, Inc. has renamed itself RBS Securities Inc.Greenwich Capital Markets, Inc. is a broker/dealer. |
| Fitch Ratings Ltd. | Fitch Ratings rates the credit quality of financial instruments. Fitch Ratings is a majority-owned subsidiary of Fimalac, S.A. |