Mortgage Investigations Gain Momentum

Task Force May Widen Federal and State Investigation into Mortgage Irregularities

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Investigations into events surrounding the virtual collapse of the mortgage lending industry are expanding on a number of levels.

Various investigative agencies have formed a task force to look into the granting of mortgages which may have been made with little proof of the borrowers' income or assets and, on a broader scale, how those loans may have been bundled and sold on the secondary market.

The task force, which originated in the office of the prosecutors in the Eastern District of New York (Brooklyn) was formed in January, and has become more active recently as write-downs from bad mortgage investments have spread from company to company. According to articles in The New York Times and The Wall Street Journal the task force involves federal prosecutors in New York, Los Angeles, Philadelphia, Dallas, and Atlanta and officials and agents from the FBI's financial institutions fraud unit, the U.S. Postal Inspection Services, the U.S. Secret Service, the New York State Banking Department, the New York City Department of Investigation and the Federal Deposit Insurance Corporation.

14 mortgage companies

The Times quoted an anonymous government official as saying that the task force "is a look at the mortgage industry across the board, and it has gotten a lot more momentum in recent weeks because of the banks' earnings shortfalls."

In addition to examining the general poor underwriting that appears to have formed the basis of the subprime crisis such as ignoring poor credit or inflating or failing to document income, prosecutors are also investigating how lenders may have defrauded Wall Street banks. For instance, did some lenders lie to Wall Street firms about the status of loans they sold directly to investors such as Freddie Mac and then fail to pay back the firms after the lenders sold the loans?

According to the Journal, prosecutors also are investigating whether brokers at Wall Street firms lied to investors, orally or otherwise, by stating that their investments in vehicles known as collateralized-debt obligations were backed by, for example, corporate debt rather than assets such as subprime-mortgage loans.

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It looks like the Real Estate Market is now in the hands of banks and lawyers, that's starting to look like realtors will not be needed anymore.

Above Posted By: Elfie | Thu, 8 May 2008 04:24:21 EST

In the next to the last paragraph, the author mentions that these lenders may have "defrauded Wall Street banks" by not fully disclosing practices to the banks. They also "defrauded" individual investors, purchasers of properties, who put money down in good faith that what they were buying was a worthy investment. These individuals were never told that the remainder of the loans (millions of them) were being given to people who never intended to even make 1 payment much less make good on the mortgage. Now, my "investments" are, in some cases in developments where short sales are bringing the values down by almost 50%. I want to know, if this investigation proves correct, what happens. The mortgage companies pay a fine? Short sales continue, and investors like myself lose our property to someone who gets it for about $0.50 on the dollar? Why are we, the initial purchasers of the properties the ones who get punished while the mortgage people just collect another commission by writing another loan?

Above Posted By: mike | Tue, 6 May 2008 06:54:57 EST

investigate the crooked STATES as they make the rules/guidelines

Above Posted By: nipigon | Mon, 5 May 2008 16:38:20 EST

So, I paid $210,000 for a condo. There are now over 30 units for sale in the place. The only recent sales have been foreclosures and short sales for about $119,000. Let's see, that is $91,000 less than I paid. So, why won't the mortgage company just let me keep it for that amount or, what the heck, split the difference and lower my payment?

Above Posted By: tom morrissey | Mon, 5 May 2008 15:51:44 EST

I could SO totally enlighten the government on mortgage lenders, their M.O. and liklihood of NOT eporting mortgage misrepresentation.

Above Posted By: Debra Jordan | Mon, 5 May 2008 15:29:11 EST

This is just the tip of the iceberg, AHM exec's are now running Indymac's Mortgage division and are not fairing well originators are dropping like flies and a dyscrimination investigation looms over Indy's reputation. The Fed investigation is a farse just like corruption investigations, american's need mortgages and the Feds need jobs so why would they put all mortgage companies out of business, they will do just enough to quiet the storm. From what I have seen in my 15 plus years in the mortgage business and the types of loans that were made and the deception practices that have taken place if the Fed's wanted to do a thorough investigation, we would have to build more jails. Lets get Real People

Above Posted By: anonymous | Mon, 5 May 2008 13:09:20 EST

I sincerely hope they investigate the NUMBER ONE PROMOTER OF PAWNBROKER STYLE LENDING BASED ON CREDIT SCORE & LTV EXCLUSIVELY- this would be FNMAsay no more,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Above Posted By: UW of the day | Mon, 5 May 2008 11:06:12 EST

Task Force May Widen Federal and State Investigation into Mortgage Irregularities

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