Subprime Investigation Targets Wall Street Lenders
A 15-member task force composed of local, state, and federal investigators is scrutinizing mortgage lenders and Wall Street firms involved in the subprime mortgage crisis. The probe, initiated by federal prosecutors from New York’s Eastern District, will look for potential crimes like insider trading, mortgage fraud by brokers, and securities and accounting fraud.
Prosecutors will examine questions affecting investors such as:
• Did lenders change credit histories or other facts about borrowers before issuing loans and selling the loans to Wall Street firms or banks, who packaged them into securities to sell to investors?
• Did mortgage lenders misrepresent their firms’ quality of mortgage loans, growing number of loan defaults, or financial position in securities filings? Did they use questionable accounting methods to cover up losses?
• Did Wall Street brokers mislead investors about their collateralized-debt obligations? Did some say their obligations were backed by corporate debt instead of shaky subprime mortgage loans?
• How did lenders originating loans potentially deceive or violate agreements with the Wall Street banks that funded them? For instance, investigators will examine whether selected lenders lied about the status of their loans, neglecting to repay Wall Street firms after selling their loans directly to companies like Freddie Mac and Fannie Mae.
This task force is just one of many investigations taking place, including one looking at the circumstances that led to the collapse of two of Bear Stearns’ hedge funds last summer after losses linked to mortgage-backed securities. In addition, prosecutors are examining whether the country’s tenth-largest mortgage lender, American Home Mortgage Investment, filed false statements and committed accounting fraud prior to its 2007 collapse and whether UBS AG inappropriately valued its mortgage-securities holdings. These findings may affect investors’ ability to recover lost assets.
Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.Â
