In the State of the Union address on January 24, 2012, President Barack Obama announced the creation of a special unit within the Financial Fraud Enforcement Taskforce to deal with mortgage origination and securitization abuses:
And tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.
This new unit will hold accountable those who broke the law,
speed assistance to homeowners, and help turn the page on an
era of recklessness that hurt so many Americans.
The members of the new Mortgage Securitization Abuses Unit were
identified as New York Attorney General Eric Schneiderman; Assistant
U.S. Attorney General Lanny Breuer, who currently heads the Criminal
Division at the Department of Justice; Robert Khuzami, Director of
Enforcement at the SEC; John Walsh, U.S. Attorney, District of
Colorado; and Tony West, Assistant Attorney General, Civil Division,
Department of Justice.
Later in the evening, New York Attorney General Eric Schneiderman
released the following statement:
I would like to thank President Obama for his leadership in the
creation of a coordinated investigation that marshals state and
federal resources to bring justice for the victims of the
misconduct that caused the mortgage crisis.In coordination with our federal partners, our office will
continue its steadfast commitment to holding those responsible
for the economic crisis accountable, providing meaningful relief
for homeowners commensurate with the scale of the
misconduct, and getting our economy moving again.The American people deserve a robust and comprehensive
investigation into the global financial meltdown to ensure
nothing like it ever happens again, and today’s announcement
is a major step in the right direction.
New York Attorney General Schneiderman and Delaware Attorney
General Beau Biden have been among the most outspoken of those in
law enforcement regarding the prosecution of crimes relating to
mortgage securitization. In May, 2011, Attorney General
Schneiderman’s office announced probes of two Florida firms, Lender
Processing Services and Nationwide Title Clearing. This office also
announced probes into the mortgage securitization practices of major
investment banks Goldman Sachs, Morgan Stanley, Deutsche Bank
and UBS.
Attorneys General Schneiderman and Biden have repeatedly
announced their opposition to any grant of immunity from criminal
prosecution to those involved in illegal acts involving mortgage
securitization.
Fabrication of mortgage documents is one of the major
unaddressed crimes involving mortgage securitization. False
documents were created to convince homeowners that mortgagebacked
trusts owned their homes and had the legal right to foreclose.
Based on these documents, hundreds of thousands of homeowners
forfeited their homes. Every day, tens of thousands of homeowners
lose their battle to get local foreclosure judges to recognize that the
documents presented by the banks and mortgage companies are
fraudulent.
Those few County Recorders who have conducted in-depth
examinations of the documents have found widespread abuses that
occurred over at least seven years. County Recorders John O’Brien of
Massachusetts and Jeff Thigpen of North Carolina have declared their
offices as “crime scenes.”
These documents were created in large part because the mortgage
securitizers never obtained the mortgage documents they promised to
obtain. Investors and the SEC believed that the securitizers had
obtained properly endorsed mortgage notes and mortgage
assignments and had recorded every change of ownership on the
MERS system as promised.
“Providing meaningful relief for homeowners commensurate with
the scale of the misconduct” is a tremendous, but achievable goal.
Congratulations to Attorney General Schneiderman for setting this goal.
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