Late yesterday, Nathaniel Popper and Alejandro Lazo of the Los Angeles Times reported that California Attorney General Kamala Harris may join the attorneys general of New York and Delaware in an investigation into potential mortgage origination, securitization, and foreclosure practices.  The article says that Kamala met with New York Attorney General Eric Schneiderman to discuss the matter and the possibility of some form cooperation in the investigation. Schneiderman made headlines a few weeks ago when he announced he would take the hardest line against the currently proposed quick, cheap 50-state foreclosure settlement.  According to the article:

New York and Delaware have more than a dozen attorneys working full time on the effort and have subpoenaed or requested information from 13 financial firms, including Goldman Sachs and JPMorgan Chase & Co., according to people familiar with the investigation. The people spoke on condition of anonymity because of the sensitivity of the investigation.

In late May, Harris announced her own investigation into mortgages and said that the investigation would look into three areas:

  • Corporate fraud, including instances in which bundled mortgages were sold as securities to the state or its pension funds under false pretenses.
  • Scams, including instances in which consultants, lawyers and other took fees from people in foreclosure, saying they would help the homeowners get loan modifications or other remedies, but delivered nothing.
  • Fraudulent lending practices, including deceptive marketing, failure to fully disclose loan terms and qualifying people for loans who couldnt afford the terms.

This is yet another signal that the 50-state attorney general investigation will likely fall apart as another key AG opts to pursue their own case.  The investigation has come under considerable criticism for its distinct lack of actual investigation as well as its failure to bring about any criminal charges against those who may have committed fraud contributing to the economic meltdown.

California was hit especially hard by the housing crisis.  More than 500,000 homes in California were in some stage of foreclosure in 2010, and home values are down by more than a third since the market peaked in 2007.  More than 2 million homeowners with mortgages in California are underwater.

Theres no telling where this investigation may go, and if it will actually have teeth, but it is a situation worth monitoring, and I will be sure to follow up as the story develops.

 

 

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