Feb. 16 (Bloomberg) -- State and federal officials will aggressively investigate misconduct in the bundling of mortgages into securities following a settlement with banks over foreclosure abuses, the New York and Delaware attorneys general said.
The $25 billion agreement announced last week was crafted to allow further probes of banks to proceed by states and federal agencies, including inquiries into possible criminal violations, New York Attorney General Eric Schneiderman and Delaware’s Beau Biden said today.
“We are all committed to pursuing real investigations for all the areas that we are still able to investigate, specifically and most importantly on the securitization side,” Biden said in an interview. “You’re going to see a real effort on our part and the New York attorney general to pursue the securitization pieces of this to wherever it takes us.”
The Justice Department in January announced the formation of a joint state-federal group that will investigate misconduct that led to the financial crisis through the bundling of mortgage loans into securities sold to investors. The group is led by officials from the Justice Department, the Securities and Exchange Commission and Schneiderman.
The group will share resources and information, Schneiderman said in a remarks today at a breakfast sponsored by Crain’s New York Business. Schneiderman and Biden have been cooperating in an investigation of bank mortgage practices.
“Our goal is to cut through a lot of confusion, identify what the misconduct out there was -- criminal or subject to civil liability -- and come up with a comprehensive solution,” Schneiderman said.
The $25 billion settlement reached with Charlotte, North Carolina-based Bank of America Corp., New York-based JPMorgan Chase & Co., New York-based Citigroup Inc., San Francisco-based Wells Fargo & Co. and Detroit-based Ally Financial Inc. will provide mortgage relief to homeowners and sets requirements for how the banks conduct foreclosure and service loans.
The banks in return were granted liability releases protecting them from certain claims. Biden and Schneiderman said the releases are narrowly tailored to allow further investigations of bank practices.
Biden said officials haven’t taken an aggressive enough stance against banks to convince them that they are “going to pursue the facts where they take us.” He’s “increasingly hopeful” the federal-state group investigating mortgage securitization will have enough resources to do its work.
“Many more people went to jail in the S&L crisis than have been held accountable in this crisis,” Biden said. “And this crisis makes the S&L crisis look like a walk in the park.”
--With assistance from Phil Milford in Wilmington, Delaware and Dawn McCarty in Wilmington. Editors: Peter Blumberg, David Glovin
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