SEC Sends More Subpoenas In Mortgage Probe, Big Banks Targeted

NEW YORK/WASHINGTON (By Matthew Goldstein and Rachelle Younglai) - U.S. regulators have opened a new line of inquiry in their mortgage foreclosure probe and are asking big Wall Street banks about the beginning stages of mortgage securitization, two sources familiar with the probe said.

The Securities and Exchange Commission launched the new phase of its investigation by sending out a fresh round of subpoenas last week to big banks like Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Goldman Sachs Group Inc and Wells Fargo & Co, the sources said.

The SEC's subpoenas focus on the earliest stage of the mortgage securitization process, said the sources, who requested anonymity because the probe is not public.

The sources said the SEC is asking for information about the role of so-called "master servicers" -- specialized firms that oversee the selection and maintenance of the large pool of home loans that go into every mortgage-backed bond.

In many cases, Wall Street banks that underwrite mortgage-backed securities either own their own master servicing firms or are closely aligned with one.

In the fall, the SEC began looking into the banks' foreclosure practices following allegations that mortgage servicers like Bank of America were using shoddy paperwork to evict delinquent borrowers from their homes.

The Justice Department, banking regulators and the attorneys general in all 50 U.S. states are also probing potential wrongdoing.

The state of Arizona sued Bank of America on Friday, accusing the bank of misleading consumers about its home loan modification process.

One of the sources said the SEC is seeking information about the role banks had in mortgage securitization. The regulator is also looking at the role trustees for the trusts that issued the mortgage-backed securities had in monitoring the performance of the underlying loans.

The SEC is looking at whether loans were properly transferred to the trusts that issued the securities, the source said.

The renewed look at the securitization process is an extension of the SEC's preliminary probe into the mortgage mess. The SEC's regional offices are all looking at some aspect of the foreclosure crisis.

The SEC had no comment.

Separately, the SEC is still investigating banks, credit rating agencies and individuals in connection with the 2007-09 subprime crisis. Those investigations center around potential misrepresentations to investors about the value of the mortgage-backed securities that helped fuel the crisis.

The agency has filed some high-profile cases, including one against former Countrywide Financial chief Angelo Mozilo and another against Goldman Sachs.

Banking regulators, including the Federal Reserve, are feverishly reviewing lenders' foreclosure practices and are expected to reveal their findings in January.

In particular, the Fed is concerned about investors accusing lenders of misrepresenting the loans that underpin mortgage securities, and demanding repayment.

That has already happened with Bank of America, which has started negotiating with a group of angry mortgage investors, including BlackRock Inc.

Bank of America, Citigroup, JPMorgan and Goldman had no comment. Wells Fargo said it is "always working with regulators and others who are interested in its servicing business" but declined to comment on whether the bank had received a subpoena.

(Additional reporting by Elinor Comlay and Joe Rauch; editing by John Wallace)

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[avg american]

11:18 PM on 12/20/2010

Good.

[Spaceport]

03:58 PM on 12/20/2010

The answer is ROBO indictments, ROBO trials, and ROBO transport to jail for all of the Wall Street bankers involved in this fraud on the American people.
Next, lets go after the banksters, appraisers, credit agencies, and Realtors that profited from this planned attack on America.
Give us justice.

[IreneNH]

09:19 AM on 12/19/2010

What is clearly needed is more regulation. With the Republicans and Tea-Baggers coming in this January, I think we will see the just the opposite.

People should move their money to local or regional banks or credit unions (no, I don't work for one or have any personal interest in one). First advantage to that is that you are investing in the betterment of your own community because these smaller banks lend locally. And, secondly, you will likely have all the advantages of larger banks (on-line banking, ATM's, and direct deposit for example) and feel that you are as important to them as they are to you.

[AZreb]

08:40 AM on 12/19/2010

Dare we hope for some "justice" to come from this for the homeowners? What will it mean for those who have aleady lost their homes due to fraudulent practices of the big banks? Or will it be just a slap on the wrist for the big banks?

Why all the secrecy by the SEC?

[SteveDenver]

02:10 AM on 12/19/2010

"Robo signers" should be hauled into court and charged with fraud, perjury and contempt. The documents they "sign" bear stamps indicating that they have examined the elements and confirm they are correct. It has already been made clear that they didn't examine or confirm, which is a lie presented to the courts.

Throw those dishonest swindlers in jail!

[UberdanSounds]

12:35 PM on 12/20/2010

I completely agree! Then I read Matt Taibbi's article (http://www.rollingstone.com/politics/news/matt-taibbi-courts-helping-banks-screw-over-homeowners-20101110) about this process & the Kangaroo Courts that are set up so the Bank's can get caught outright lying, committing fraud, in court, in front of the judge, & the judge will just dismiss it for the Defendant (Homeowner). But also, they'll let the Bank come back & RE-FILE that same foreclosure with different data. So, I applaud the SEC for finally doing something, but I donno it could be too late for most people already kicked out for nothing.

[worker beenumbed]

07:32 PM on 12/18/2010

Subpoeanas allow investigators to see original bank statements of the firms under investigation.The SEC missed the Madoff Ponzi because Chairman COX never requested a subpoena to gain access to the Madoff bank statements when the firm was first investigated.Bank statements would have revealed that THERE WERE NO DEPOSITS FOR THE DIVIDENDS MADOFF CLAIMED TO BE RECEIVING.Cox requested few subpoenas---Could be the Bush administration told him not too Subpoenas are the best first step-up there with wires..

[vippy]

06:59 PM on 12/18/2010

Just for show, nothing will happen.  Sick of these type of headlines that never have any action behind it unless they find some loner like Madoff, who did not share his fortune or Stanford, then they bring down the law but otherwise, all these crooks on Wall Street and the Banksters are buddy-buddy with congress and you see how rich these people got during the last two years when the country fell apart. 

[SteveDenver]

02:13 AM on 12/19/2010

Now that it is clear that foreclosure servicers have been skrewing mortgage servicers as well as consumers, the heat is on: 5.1 million was just awarded to a group of mortgage servicers. Apparently some of the foreclosure servicers have been found to hold second mortgages which they don't want to write off in restructuring, so they advance foreclosures.

[fortressfountain]

05:09 PM on 12/18/2010

Keep your paperwork. Anytime a mortgage company charges an extra fee or penalty-you can be 99% sure it is usually a con to get more money.
There was a time your monthly mortgage payment was good enough for the banks. Who allowed this kind of rape of the american public.
Do they really think anyone will sign up for these kinds of mortgages.
Amazing-we have a jobless, homeless, no inflation recovery.
Humm, only if you drive around in a space ship.

[Eve PurvisAllen]

01:29 PM on 12/18/2010

The Rethugicans can try to stop the possible prosecution of guilty banks, but I hope that the Progressive/Liberal out them for supporting such thuggery against Americans. The only way the Rethugicans can stop this, is by persuading the local Federal Circuit court judge (in which 60% or more have been appointed by the Bush administration) to either dismiss the cases, or rule against the D.A. or prosecuting authority....either way it's excellent mud for the Dem's to sling if they are in the slinging mood.

[vippy]

07:01 PM on 12/18/2010

We still point only at Republicans but please after 2 years and no end in sight I think we should realize that the DEMS are at fault here, too.  Plenty to go around.  They vote themselves pay raises or tax breaks but forget to give an increase to Social Security Recipients, etc.  And you think it is not both of their fault?

[Sundialsvc4]

11:51 AM on 12/18/2010

"Will someone please send another $100 million in gold to Mary Schapiro and tell her to get her goons off our back? Thank you."

[vippy]

07:02 PM on 12/18/2010

That woman can get on TV and tell a straight faced lie! 

[oneyippie]

11:27 AM on 12/18/2010

The Republicans have stated that when they take over the House they will stop investigations like this. What do ppl think about that?

[Klarsonent]

01:04 PM on 12/19/2010

The problem is that people don't "think." They just vote based on fear and hate mongering by the far right. Sad, but true. We've got a rocky road ahead of us now that the Republicans have gained a huge advantage in the house.

[Opinionated Lady]

10:34 AM on 12/30/2010

"People" don't realize the connection between their vote and policy. This demonstrates the complete failure of civics education in our schools.

[jo smith456]

09:24 AM on 12/18/2010

Big Banks targeted... yeah right. Banks will just pay fees (out of their created money). Their executives will still have jobs and high bonuses...

[Main Street Blues]

09:08 AM on 12/18/2010

I'ts great that we have all these investigations going on..now two States file suit against Bank of America for modification fraud....all good stuff..but....in the meantime...Homeowners are drowning...It's Katrina, it's the Gulf Oil Spill...It's the Housing Crisis....enough talk! Start taking action!!!

[vippy]

07:04 PM on 12/18/2010

All for show!  They are knee-deep in doo-doo but they won't take action, bet on it!  Or they will fine them, pocket the money and move on.  Like the proposal of the SEC to go after speculators, then the speculators said they will move to Dubai or wherever they can't be touched but the robbery will continue.  Looks like we are helpless in this global economy anymore, since we need global rules.
What a mess.

[Progressive not Dem]

08:32 AM on 12/18/2010

You need to read between the lines to understand this story, but basically the SEC is conducting a quiet investigation into the securities mess on behalf of "investors" who lost money. It's an attempt to satisfy some of the wealthy folks who lost on these securities deals and to get them back some of their money. Here's what I mean. I took this from the story:

"In particular, the Fed is concerned about investors accusing lenders of misrepresenting the loans that underpin mortgage securities, and demanding repayment.

That has already happened with Bank of America, which has started negotiating with a group of angry mortgage investors, including BlackRock Inc."

My guess is that BlackRock Inc. is not just your average work-a-day type of investors. Did you ever wonder why Madoff was the guy singled out for a high profile court case? It's because Madoff specialized in taking from the rich. If you take from the poor, you probably won't even get investigated. But take from the rich, and you'll get your hide nailed to the wall.

BTW, we wouldn't have even known about this investigation if it had not been leaked. I'd say the timing of the leak was pretty good.

[PragmaticStatistic]

09:16 AM on 12/18/2010

Agreed. According to a Matt Taibbi Rollingstone article, foreclosure cases in Florida appear to have a phoney documentation in regard to investor ownership of the mortgage because the foreclosing bank can't prove who owns these mortgage backed securities when they were sold from one bank to another, then repackaged with other loans, and then sold from wealthy investor to another wealthy investor. Thus, the foreclosing bank may not even own the mortgage, but is simply servicing the foreclosure process for a fee. But, for who? This is one of the reasons the banks are so unwilling to modify the mortgage. Also, because of this problem, the title insurance companies have a big concern as to whether their title insurance coverage is any good. So, if you are one of those looking to buy a foreclosed home, you better be sure it has a clear title, because years from now some wealthy investor may be knocking on your door and demanding payment. Welcome the the United States of Goldman Sachs and Peers.

[hellboundtrain]

05:01 AM on 12/18/2010

If the SEC went after the naked short fraudsters the penalties and fees awarded could fill the coffers of the Dept. of the Treasury once again. Why has this not been done? Because, in my estimation, these people are some of the many multi millionaires and billionaires that rode the economy down to the depths and they made huge money all the way down. Naked shorting! Can anything be more outrageous and fraudulent than selling what you never owned, never had the intention of owning and were involved ONLY to destroy the value of the instrument, as well as the lives of the hangers-on that invested as people most often do, with their attention toward growth? Business, lives, and faith in the markets all destroyed!

[vippy]

07:06 PM on 12/18/2010

You hit the nail on the head!  Nothing but nothing will be done.  They are blatantly ripping us off and wrecking this country and years from now our off-spring will ask, why did we let this happen?

[hellboundtrain]

01:14 AM on 12/19/2010

The longer that time passes that nothing gets done the more irritated I become. It sure isn't good for my blood pressure. It is up to us to try to educate everyone, particularly younger people about the enormousness of the many crimes that have been, and are being committed. I have tried to get some justice as my investment fund was totally wiped out in '08, it wasn't huge, but it turned to 0. There has been NO JUSTICE for me from the SEC. I think most all investors in same circumstance.