States Could Unite in Subprime Lending ProbeBy Reuters - | Posted 2008-02-05 Email Print
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State attorneys general are talking to each
other and could join their separate investigations over the subprime
mortgage meltdown, Iowa Attorney General Tom Miller said.
CHICAGO (Reuters) - State attorneys general are talking to each other and could join their separate investigations over the subprime mortgage meltdown, Iowa Attorney General Tom Miller said.
"There's been no movement to consolidate any of the cases, but nothing's been ruled out either," Miller said in a telephone interview on Monday with Reuters.
Miller, who took a lead role on previous nationwide settlements over questionable lending practices that netted hundreds of millions of dollars from Ameriquest Mortgage Co. and Household Financial, said attorneys general are talking to each other about subprime mortgages.
"We understand the value of that and it's never far from our minds that we can accomplish things together that we can't individually," Miller said, referring to the previous settlements. "But having said that, I think states are looking at different aspects of this whole incredible scenario and mess of subprime and the consequences of it, and we're keeping in touch with each other. It's unclear where that's going to lead."
He added that multistate legal efforts demand enormous resources for investigations, negotiations and litigation.
"There are only so many we can do and we have to be careful to pick ones that accomplish the most good for our citizens," Miller said. "One challenge here is to find litigation that would help the borrower."
Almost all the states banded together to reach the so-called Master Settlement Agreement in 1998 with U.S. tobacco companies, which are expected to pay states $206 billion over a number of years. The agreement with 46 states ended lawsuits against cigarette makers over recovering the cost of treating smoking-related illnesses.
Miller said companies that repackaged risky mortgage loans would traditionally face a securities case for failure to disclose or for inaccurately disclosing the risk. However, he pointed out that would benefit investors and not homeowners, who remain the primary focus.
In the meantime, Miller has organized a multistate task force to meet with mortgage servicing companies and investors to try to come up with ways to avoid foreclosures.
"We've had meetings with the top 20 servicers and we're getting data from them and we'll come out with a report sometime soon," he said, adding that a similar concept helped with a wave of farm foreclosures that hit Iowa in the 1980s and produced useful results for borrowers and lenders.
While the group was concentrating on modifying loans to prevent foreclosures, potential litigation was not being ignored, Miller said. With mortgage delinquencies causing unprecedented losses, many financial institutions have said they are willing to modify loans and ease terms for borrowers.
As foreclosure rates have skyrocketed, attorneys general in states such as New York, Ohio, Florida, Illinois and Connecticut have sent out subpoenas as they investigate companies and banks involved in subprime mortgages that went bad or bond insurers that backed risky subprime mortgage-related securities. States are also scrutinizing Wall Street credit agencies for their role in rating the securities.
(Editing by Tom Hals)
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