SEC Goes Deeper in Foreclosure Fraud Examination - FDL [View All]

[WillyT]

SEC Goes Deeper in Foreclosure Fraud Examination
By: David Dayen
Friday December 17, 2010 1:05 pm

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The Securities and Exchange Commission has issued additional subpoenas for documents from the big banks in a growing probe over servicer behavior and foreclosure fraud. They seem particularly interested in securitization, and whether the assets, i.e. the mortgage and the note, were ever properly conveyed to the trusts.

U.S. regulators have opened a new line of inquiry in their mortgage foreclosure probe and are asking big Wall Street banks about the beginning stages of mortgage securitization, two sources familiar with the probe said.

The Securities and Exchange Commission launched the new phase of its investigation by sending out a fresh round of subpoenas last week to big banks like Bank of America Corp (BAC.N), Citigroup Inc (C.N), JPMorgan Chase & Co (JPM.N), Goldman Sachs Group Inc (GS.N) and Wells Fargo & Co (WFC.N), the sources said.

The subpoenas focus on the earliest stage of the mortgage securitization process, said the sources, who requested anonymity because the probe is not public.

The sources said the SEC is asking for information about the role of so-called “master servicers” — specialized firms that oversee the selection and maintenance of the large pool of home loans that go into every mortgage-backed bond.

This is a very important development. The failure of the trustees to convey the loans to the trusts would mean that the mortgage-backed securities are backed by nothing. It would mean that the banks committed outright fraud on the investors. And it would make the trustees liable for taking back all the MBS from investors at par.

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And...

UPDATE: There’s an amazing graphic in the Pro Publica story. Banks who own the loan outright reduce principal about 29% of the time. Private investors? 0.3% (632 principal mods out of 191,885 modifications). Fannie & Freddie? 0.0% (141 principal mods out of 287,171 modifications).





More: http://news.firedoglake.com/2010/12/17/sec-goes-deeper-in-foreclosure-fraud-examination/

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