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FBI opens subprime inquiry

 
Niccolò
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User ID: 348129
United States
01/31/2008 04:14 AM
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FBI opens subprime inquiry
The Federal Bureau of Investigation has opened criminal inquiries into 14 companies as part of a wide-ranging investigation of the troubled mortgage industry, FBI officials said Tuesday.

The FBI said it was looking into possible accounting fraud, insider trading or other violations in connection with loans made to borrowers with weak, or subprime, credit.

The agency declined to identify the companies under investigation but said the inquiry, which began last spring, involves companies across the financial industry, including mortgage lenders, loan brokers and Wall Street banks that packaged home loans into securities. It is unclear when charges, if any, might be filed.

As part of its investigation, the FBI is cooperating with the Securities and Exchange Commission, which is conducting about three dozen civil investigations into how subprime loans were made and packaged, and how securities backed by them were valued. State prosecutors are also investigating various areas of the mortgage industry.

"It's significant firepower, depending on how far along the investigation is," Carl Tobias, a professor at the University of Richmond Law School, said about the FBI investigation.

The FBI has been warning for years that mortgage fraud is a significant and growing problem. In the 2006 fiscal year, it documented 35,600 suspicious-activity reports related to mortgage fraud, up from 22,000 the year before and as few as 7,000 in 2003.

Many of the cases the FBI has brought so far have focused on local or regional mortgage fraud rings that involve speculators, loan officers, brokers and other housing professionals.

State officials have been active in bringing mortgage cases. The New York attorney general, Andrew Cuomo, is investigating whether Wall Street banks withheld damaging information about the loans they were packaging. Prosecutors in Ohio, Massachusetts, Illinois and Connecticut have also been looking into the industry.

Earlier this decade, a group of attorneys general reached settlements totaling more than $800 million with two large lenders: Household International, now part of HSBC, and Ameriquest.

State and federal officials share jurisdiction over the mortgage industry and have often squabbled over who should police it. Many lenders that specialize in making loans to people with blemished credit have state charters, but some of them are owned by or affiliated with federally regulated banks.

Mortgage companies and Wall Street banks have said they are cooperating with numerous federal and state investigations. The firms have also sued each other and have been accused of various infractions by investors and borrowers in numerous cases.

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"As nightfall does not come at once, neither does oppression. In both instances there is a twilight where everything remains seemingly unchanged. And it is in such twilight that we all must be aware of change in the air--however slight--lest we become unwitting victims of the darkness."
--Justice William O. Douglas

"There are three kinds of intelligence: one kind understands things for itself, the other appreciates what others can understand, the third understands neither for itself nor through others. This first is excellent, the second good, and the third useless."
--Niccolò Machiavelli

"I have promises to keep,
And miles to go before I sleep"
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Niccolò (OP)

User ID: 348129
United States
01/31/2008 08:17 AM
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Re: FBI opens subprime inquiry
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"As nightfall does not come at once, neither does oppression. In both instances there is a twilight where everything remains seemingly unchanged. And it is in such twilight that we all must be aware of change in the air--however slight--lest we become unwitting victims of the darkness."
--Justice William O. Douglas

"There are three kinds of intelligence: one kind understands things for itself, the other appreciates what others can understand, the third understands neither for itself nor through others. This first is excellent, the second good, and the third useless."
--Niccolò Machiavelli

"I have promises to keep,
And miles to go before I sleep"
--Robert Frost

:phamask:
_Storm_

User ID: 362931
United States
01/31/2008 08:57 AM

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