InfoBytes Blog

Obama Administration Announces New Mortgage-Related and Financial Fraud Programs

On January 27, the U.S. Attorney General officially introduced a 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 Securities and Exchange Commission (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.

The announcement follows President Obama's January 24 State of the Union Address during which he announced this and other mortgage-related and financial fraud initiatives. In his speech, 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.”  The President also 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. 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)

State Attorney General RMBS

CFPB, DOD, FTC, and State AGs Partner to Develop Enforcement Action Database

On January 25, the CFPB, the Department of Defense, the FTC, and the New York Attorney General announced a partnership to develop the Repeat Offenders Against Military (ROAM) Database to track enforcement actions against entities or individuals engaged in consumer financial frauds against military personnel, veterans, and their families. The database, which should be available by mid-February, will compile publicly available information about completed civil and criminal legal actions and will be accessible and searchable by state attorneys general, U.S. Attorneys, and Judge Advocates from all branches of the armed services. The Consumer Protection Committee of the National Association of Attorneys General already has sent a letter to state attorneys general asking them to populate the new database with their enforcement action information. The FTC noted that the ROAM database will complement its Consumer Sentinel Network, which collects and provides wide access to consumer complaints, including those related to the frauds against servicemembers and their families.

CFPB FTC Servicemembers State Attorney General

WEBINAR: An Insider's View of Dealing with State Attorneys General - Insights for Financial Services Firms

Please Join Us for STAGE Network's First Webinar of 2012: An Insider's View of Dealing with State Attorneys General - Insights for Financial Services Firms

Special Guest: Hon. Patrick C. Lynch, former Rhode Island Attorney General and former President of the National Association of Attorneys General.

This webinar will feature a discussion, led by Mr. Lynch, on how to proactively interact with State Attorney General offices to build relationships and open up effective channels of communication.

It will also include practical advice on responding to Civil Investigative Demands. This discussion will be led by Benjamin Klubes of BuckleySandler LLP and Raymond Banoun of Cadwalader, Wickersham & Taft LLP, both of whom have extensive experience dealing with state and federal law enforcement and regulatory agencies on behalf of clients.

When: January 18, 2012 at 2:30 ET

Click here to view the full announcement and agenda.

State Attorney General