Alliance to bolster home loans probe
By Shahien Nasiripour in New York
The collaboration between New York’s top prosecutor and the federal auditor overseeing half of the US home loan Findings from the New York market raises the spectre of criminal probes and increased scrutiny of Wall Street’s once-lucrative role in packaging mortgages into securities.
Eric Schneiderman, New York attorney-general, has the power to file criminal charges as part of his investigation into banks’ role in packaging mortgages into securities for sale to investors, who have suffered hundreds of billions of dollars worth of losses.
The partnership is bolstered by Mr Schneiderman’s ability to use the Martin Act, a 1921 state law that allows him to bring misdemeanour and felony criminal charges against alleged wrongdoers doing business in New York. The prosecutor can operate across state lines, essentially acting on behalf of investors across the US.
In court filings, Mr Schneiderman has alleged that Bank of America fabricated documents when foreclosing on mortgages of delinquent borrowers. He has also argued that some mortgage-backed securities were not properly constructed, and thus may not be securities at all – an explosive allegation that experts say could result in big losses for financial institutions that pooled the loans into securities and
The joint effort also creates an easier path for Mr Schneiderman to obtain documents from national banks and depose their current and former employees without running into objections from federal bank regulators. Federal regulators can stifle state probes against national banks by arguing that state officials lack authority, a legal principle known as pre-emption.
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NY AG Schneiderman (1-800-771-7755) and,
FHFA IG Linick (800-793-7724, email to: OIGHOTLINE@FHFA.GOV ).