Attorney General Cuomo announced an agreement with Wall Street’s three major credit-rating agencies yesterday that would overhaul how they evaluate investments backed by risky mortgage debt.

Mr. Cuomo, flanked at a news conference in New York City by executives from Moody’s Investors Service, Fitch Ratings, and Standard & Poor’s, said the new guidelines will have “a dramatic effect on the industry.” An investigation was launched in February to determine how mortgage-backed securities, home loans that are pooled together and sold as investments, carried high ratings yet still collapsed during the subprime crisis.

The deal applies only to riskier, non-prime loans in America, and is designed to end what the industry calls “ratings shopping” that pits credit-rating agencies against one another. The $5 billion rating agency industry has been accused of issuing favorable ratings to secure business with leading Wall Street investment banks.

Investment banks looking to issue mortgage-backed bonds previously went to all three agencies for a review, but banks would only use, and pay for, the most optimistic rating. The agencies will now get paid up front regardless if they are hired to assign a rating, a move expected to avoid any conflict of interest.

“The economic benefits for the ratings agency was to see the transaction close,” Mr. Cuomo said. “If the investment bank didn’t like where the process was going, they would just go to another rating agency. The rating agencies will now undertake new standards.”

The overhaul is reminiscent of Eliot Spitzer’s rein as attorney general six years ago, when he reached a settlement with investment banks over how they conduct stock research. The banks were accused of pressuring analysts to put out favorable reviews of stocks to help maintain and attract investment banking business.

The three ratings agencies also signed a letter of agreement to work with Mr. Cuomo to pursue further reforms for the mortgage industry. The attorney general said his probe into the entire mortgage industry, including loan originators and big banks, is ongoing.

“We continue to believe that the more our customers, investors and other market participants know about how we do our work, the better,” the president of Standard & Poor’s, Deven Sharma, said. “We continue to work with the attorney general and policymakers to support effective operations of the world’s capital markets.”