Justice Department Establishes Residential Mortgage-Backed Securities Working Group

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At a press conference on January 27, 2012, Attorney General Eric Holder, accompanied by the SEC Director of Enforcement, the Secretary for the Department of Housing and Urban Development, the Assistant Attorney General for the Civil Division, and the New York Attorney General, among others, announced that the formation of a new Residential Mortgage-Backed Securities Working Group ("Working Group") within the current Financial Fraud Enforcement Task Force ("Task Force"). The Working Group’s task will be to "streamline and strengthen current and future efforts to identify, investigate, and prosecute instances of wrongdoing in the packaging, selling, and valuing of residential mortgage-backed securities."

SEC Director of Enforcement Robert Khuzami noted in his remarks at the press conference that "mortgage products were in many ways ground zero for the financial crisis. The collapse in value of mortgage-backed securities resulted in unprecedented losses, and all of us in law enforcement are dedicated to holding accountable financial institutions that lied and cheated and misled investors." Attorney General Holder noted that the Working Group would include 15 attorneys at Department headquarters and at United States Attorney’s Offices, and 10 Federal Bureau of Investigation special agents and analysts, with additional staffing to be added in the coming weeks. Recognizing that not all reckless or unethical conduct in the RMBS industry is criminal in nature, Attorney General Holder also emphasized the availability of civil sanctions and announced that the Department had recently issued civil subpoenas related to the market for RMBS to 11 financial institutions. He promised that "more will follow."

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Published In: Administrative Agency Updates, Criminal Law Updates, Finance & Banking Updates, Residential Real Estate Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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