SEC, FBI Investigate Subprime Lending
WASHINGTON -- The Securities and Exchange Commission has launched 50 investigations across a wide swath of the subprime lending industry. SEC Chairman Christopher Cox recently told Capitol Hill lawmakers that investigation targets include subprime lenders, securitizers including investment banks and credit rating agencies as well as the banks and broker-dealers who sold mortgage-backed investments to the public.
The agency is looking into whether mortgage lenders properly accounted for the loans in their portfolios, whether they established appropriate loan-loss reserves and whether lenders adequately disclosed the risk profiles of loans in connection with the sale of mortgage-backed securities and collateralized debt obligations.
The SEC isn't the only government agency looking at the mortgage market. FBI Director Robert Mueller told the House Judiciary Committee late last week that his agency is investigating 26 companies for mortgage fraud. The FBI declined to provide further details.
Mass. Accuses Mortgage Lenders
BOSTON -- Massachusetts regulators have issued cease and desist orders against four reverse mortgage companies. The lenders were accused of mortgage fraud, deceptive advertising and failing to submit a reverse mortgage program to banking officials for prior approval.
First Call Mortgage Company Inc., Sun West Mortgage Company Inc., and Gold Reverse Inc. were accused of not submitting their programs to the commissioner of banks for approval.
Massachusetts' reverse mortgage law prohibits lenders from making reverse mortgages if their program has not been approved by state officials. Even banks and credit unions that are exempt from licensing are required to submit a lending plan for making home equity conversion mortgages.
First Call Mortgage was also cited for unfair and deceptive practices stemming from accusations of misrepresenting applicants' incomes.
All three companies have been prohibited from accepting new mortgage applications and must place all pending applications with a qualified lender at no cost to the consumer. In addition, American Advisors Group was cited for engaging in deceptive advertising.