The White House revealed yesterday that US President Barack Obama is to launch a new task force with the job of investigating alleged mortgage fraud. The new initiative will be jointly operated with New York attorney-general Eric Schneiderman, who has long been interested in untangling alleged fraud cases involving mortgage-backed securities and general household mortgages. President Obama urged the US Department of Justice, Securities and Exchange Commission and an array of federal investigators and prosecutors to work together, combining their resources and forming a new team to look into financial institutions accused of mortgage misconduct, the Financial Times reported. Some of the cases to be investigated involve allegations of misconduct as regards the sale of mortgages and the “bundling” of various mortgage-based debts to sell on to investors. It is these packages of “toxic” debt that of course led to the credit crunch which precipitated the international global economic crisis of the present day. A similar initiative was launched by the US President back in 2009, with the formation of the Financial Fraud Enforcement Task Force. So far, however, this has limited its investigations and prosecutions to fairly small-scale mortgage brokers and mortgage customers, shying away from the big lenders and shelving probes into subprime lenders into the likes of Washington Mutual and Countrywide Financial, citing a lack of evidence. However, Mr Schneiderman has the backing of New York state’s Martin Act, which gives him more powers than many others in his position across other states of the US, and even in the federal government. This has led him to begin looking into whether top US banks took due care and diligence when constructing the hundreds of billions of dollars worth of mortgage bonds and whether investors who bought these bonds were misled.
Published on 15 May 2020
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