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Excerpt from Federal Issues
President Obama Announces New Mortgage-Related and Financial Fraud Programs. On January 24, during the State of the Union Address, President Obama announced two mortgage-related initiatives, and a broader financial fraud effort. First, the President outlined a plan he will submit to Congress to expand government support for mortgage refinancing. The costs of the program would be covered by a fee imposed on large financial institutions. Second, the President publicly asked the U.S. Attorney General to create a special investigative unit comprised of federal prosecutors and state attorneys general to expand existing government investigations of "the abusive lending and packaging of risky mortgages that led to the housing crisis." Finally, the President announced his intention to establish a "Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud," and called for Congress to enhance statutory penalties for financial fraud. Previously, Securities and Exchange Commission (SEC) Chairman Mary Shapiro wrote to Congress seeking higher fraud penalties (see InfoBytes, December 2, 2011). Click here for a copy of the President's remarks.
On January 27, the U.S. Attorney General officially introduced the special unit that will coordinate federal and state government investigations into residential mortgage-backed securities (RMBS). The unit is being co-chaired by multiple senior officials from the Department of Justice (DOJ) and the SEC, as well as New York Attorney General Eric Schneiderman. It will consist of at least fifty-five DOJ attorneys and other investigative staff, and will include the active participation by numerous additional federal and state entities, including the Consumer Financial Protection Bureau. According to a memorandum issued by Attorney General Holder, the working group will focus on, among other things, (i) alleged misrepresentations concerning the quality of mortgages backing the RMBS; (ii) alleged failures by trustees to manage adequately the assets within securitized pools of loans; and (iii) alleged failures by RMBS sponsors to repurchase problematic loans or remit loan proceeds to RMBS trusts. In his remarks introducing the new unit, Attorney General Holder noted that civil subpoenas recently have been issued to eleven financial institutions in connection with this new group's efforts. Click here for a copy the DOJ press release with a link to the Attorney General's memorandum.
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