Mortgage Settlement and New Investigation

[ProSense]

Mortgage Settlement and New Investigation

by CalculatedRisk

Last week President Obama announced a new task force to investigate abuses related to the origination and securitization of mortgages during the housing bubble: "I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis."

Some people have argued that his will derail the proposed mortgage settlement.

Even though Eric Schneiderman, the New York attorney general will be a co-chair, it sounds like this will be a federal investigation and will be focused on origination and securtization abuses.

Loren Berlin at the HuffPo noted:

Senior officials at the Department of Justice were quick to emphasize that the fate of the settlement talks is unrelated to the new unit. "We have certainly heard criticisms that the settlement would give immunity for all (the mortgage-related misconduct), but that's simply not true ...This (unit) is addressing a very different problem than the servicing settlement," said one official.

I've seen several commentaries that lump servicing and origination abuses together. Obviously the banks wanted broad immunity in any mortgage settlement, and the state attorneys general wanted narrower releases.

<...>

Since the new task force is a federal investigation, my guess is this is intended to address complaints from some attorneys general about origination and securitization, since the states were being asked to release the banks on origination claims. So this new investigation doesn't sound like it will derail the mortgage servicer settlement - it might even lead to more states joining the settlement (although the banks may not like it).

http://www.calculatedriskblog.com/2012/01/mortgage-settlement-and-new.html

New Fraud Investigation Group Issues Subpoenas to Financial Companies

By EDWARD WYATT

WASHINGTON — A new law enforcement group examining securities fraud from the housing bubble and financial crisis has already issued civil subpoenas to 11 financial companies for information related to their actions in the market for residential mortgage-backed securities, Attorney General Eric H. Holder Jr. said Friday.

<...>

“We are wasting no time in aggressively pursuing any and all leads,” Mr. Holder said. “In sending out those subpoenas, we consulted with the S.E.C. in making a determination as to where they should go.” Officials would not say which companies received the subpoenas.

<...>

Eric Schneiderman, the New York attorney general, who is a co-chairman of the working group, said that having many different law enforcement groups working together “enables us to go places where each of us individually could not go.” For example, he said, “having the I.R.S. on the team opens up the possibility of looking into tax issues that hadn’t existed before.”

In addition, the New York State Martin Act, which gives the attorney general broad powers to elicit information during investigations, “is more flexible than federal securities laws,” Mr. Schneiderman said. The New York and Delaware attorneys general also have jurisdiction over the trusts that hold the mortgages that underlie the mortgage-backed securities, making them “the bricks and mortar of this entire structure.”

- more -

http://www.nytimes.com/2012/01/28/business/justice-department-unit-issues-subpoenas-in-mortgage-fraud-inquiry.html

[ProSense]

1. Kick n/t