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Eric Schneiderman, FHFA IG To Collaborate In Mortgage Probe

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A new collaboration may help to turn up the heat on Wall Street firms accused of mortgage fraud.

New York Attorney General Eric Schneiderman and Steve Linick, the inspector general that oversees the Federal Housing Finance Authority as well as government-owned lenders Fannie Mae and Freddie Mac, is joining forces with Steve Linick, the inspector general responsible for the two lenders to investigate banks' mortgage securitization practices, the Financial Times reports.

The agreement, which was signed in recent weeks, will allow the partners to share documents, findings and other resources.

(A correction has been upended to this post).

The agreement boosts Schneiderman's ongoing investigation into banks' and lenders' loan bundling practices in the lead up to the financial crisis. Schneiderman has the Martin Act at his disposal, a provision that allows him to bring cases against businesses in his state without showing that they intended to commit fraud.

The collaboration is one of many recent efforts to hold lenders accountable for their practices leading up to the foreclosure crisis. The Securities and Exchange Commission said Friday that it would be suing top executives from Fannie and Freddie for misleading the public about their exposure to risky subprime mortgage loans as the housing bubble began to burst.

Earlier this month, three top Washington Mutual executives paid $64 million to settle a lawsuit with the Federal Deposit Insurance Corporation over their practices during the subprime lending disaster.

Schneiderman has been one of the most outspoken critics of Wall Street's lending practices before the housing bust. He's derided an agreement Obama administration officials, states’ attorneys general and the five biggest lenders have been negotiating to settle allegations that the banks illegally foreclosed on homeowners, arguing that the settlement doesn’t hold the lenders accountable.

Schneiderman also recently launched an investigation into possibly illegal foreclosures on homes owned by members of the military and their families.

Other state's attorneys general are also pursuing charges against mortgage lenders outside of the nationwide settlement. California and Nevada announced earlier this month that they are joining forces to prosecute mortgage fraud in their respective jurisdictions, two of the states hit hardest by the foreclosure crisis.

CORRECTION: An earlier version of this post misidentified the partners in the mortgage probe agreement. They are New York Attorney General Eric Schneiderman and Steve Linick, the inspector general that oversees the Federal Housing Finance Authority as well as Fannie Mae and Freddie Mac.

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