UPDATE 1-New York sets rating agency fee reforms

(Rewrites, adds NEW YORK dateline)

NEW YORK, June 5 (Reuters) - New York Attorney General Andrew Cuomo on Thursday reached agreements with Moody's Investors Service, Standard & Poor's and Fitch Ratings that will change the way credit rating agencies are paid by investment banks for reviewing mortgage-backed securities.

The pacts, which include a number of other reforms, "will dramatically increase the independence of the ratings agencies, ensure that crucial loan data is provided to the agencies before they rate loan pools, and increase transparency in the (residential mortgage-backed securities) market," Cuomo's office said.

In addition, ratings firms will require investment banks to provide more detailed data on loan pools for reviews prior to the issuance of ratings.

"The mortgage crisis currently facing this nation was caused in part by misrepresentations and misunderstanding of the true value of mortgage securities," Cuomo said in a statement.

Cuomo said that under the old system, rating agencies had a financial incentive to assign high ratings because they only received fees if a deal was completed. Under the new agreements, Fitch; S&P, a unit of McGraw-Hill Cos (MHP.N); and Moody's Corp (MCO.N) will receive payments for service even if a deal is not completed.

The investigation into the mortgage industry, including an investigation into the secondary market, is continuing, Cuomo said. (Reporting by Joseph A. Giannone; Editing by Lisa Von Ahn)