HedgeCo.Net (West Palm Beach) The FBI has targeted 14 corporations in a blitz of investigations on improper subprime mortgage lending, officials said Thursday. The crackdown, which includes mortgage lenders, investment banks, and subprime lenders, was initiated to sniff out fraud amongst loan originators.
“Some of the loan origination cases are spurred by individuals lying to qualify for mortgages, but about 80 percent of the cases involved fraud for profit,” said Neil Powers, head of the FBI’s economic crimes unit.
These investigations coincide with similar ones brought on by the Securities and Exchange Commission. The SEC launched their internal subprime mortgage task force to see how financial firms priced their mortgage-based securities, and whether they were up front with investors about the possible declining value of those securities. Some of the firms under fire from the SEC are Morgan Stanley, Merrill Lynch, Bear Stearns and MBIA.
The FBI is also looking to expose accounting fraud, insider trading, and other criminal violations, though criminal charges will probably not be pressed, said an official. Due to the overlap of investigations, coupled with separate state investigations, there is no set time line for completion.
"Like any white-collar crime investigation, these are very complicated, time-consuming investigations involving the examination of numerous records and interviews of various people. They don’t happen in a short period of time," said one FBI official.
Firms in Florida and California are expected to feel the heat, due to the high number of foreclosures in both states, but the investigations are spanning the country. Currently the SEC has about 1,200 open cases involving subprime lending.
Julie Scuderi
Contributing Editor for HedgeCo.Net
Email: [email protected]
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