The Attorney General of New York, Eric Schneiderman, has requested more information from a number of financial institutions as part of an ongoing investigation into the way mortgages were sold to investors.
Eric Schneiderman’s office has requested documents from the Bank of New York Mellon Corp and Deutsche Bank, as it continues to look into mortgage practices and the sale of loans to investors. These banks act as trustees for mortgage bond trusts.
The investigation has already included JP Morgan Chase & Co, Bank of America Corp and bond insurers MBIA Inc., and there is at least one law firm who has come under close scrutiny for handling foreclosures on the behalf of lenders.
The states of New York and Delaware have agreed to share information gained from trustees, and are particularly interested in the way mortgages were pooled and scrutinized, and the trustee Banks role in this process.
One issue of particular importance is whether the loan documents were properly transferred to the trusts, while another is whether accurate representations were made to investors and due diligence on the quality of the loans.
Attorney Generals from all states and federal agencies are currently investigating the way banks handle foreclosures and mortgage loans, with settlement talks already being conducted with Wells Fargo & Co, Bank of America and three other major mortgage providers. As part of any deal made, state and federal officials are requesting that the banks fund loan principal reductions for borrowers.
According to a 2010 report by the Congressional Oversight Panel “Mortgage securitization requires several publicly executed transfers, and if the required legal steps aren’t followed ‘to the letter,’ ownership of the mortgage loans may come into question.” The report went on to say that the outcomes could be severe, as clear and uncontested property rights are at the very foundation of any housing market.