Thursday, January 31, 2008
New York State Attorney General Andrew Cuomo is using the state's Martin Act (made famous by his predecessor Eliot Spitzer's investigations into analysts' conflicts) in the investigation into whether Wall St. firms failed to disclose adequately that loans it was packaging for sale included "exception" loans, or loans that did not meet minimum lending standards. Under the Martin Act, which has both civil and criminal remedies, securities fraud is easier to prove. Clayton Holdings, a company that provides due diligence on mortgage pools for Wall St., is cooperating in the investigation. WSJ, State Subprime Probe Takes a New Tack.
Meanwhile, again like his predecessor, Mr. Cuomo is engaged with a turf war with federal regulators, in this case, the Office of Federal Housing Enterprise Oversight, which oversees Freddie Mac and Fannie Mae. Both are investigating allegations of mortgage fraud and fraudulent appraisals. WSJ, Tensions Rise in Lending Probes.