FBI List Subprime Lenders On The Hot Seat
The FBI most wanted list used to ask for help finding thugs, murderers, and others of that kind. Today, it could soon show some of the world’s wealthiest banks and mortgage lenders. Fourteen companies in the mortgage finance industry, along with some of the biggest banks in the world, are being investigated for accounting fraud, insider trading, and improperly securing loans during the sub-prime mortgage scandal.
Head of the FBI economic crimes unit, Neil Power, said that the probe would include those companies that securitized the mortgage loans as well as investment banks that bought those loans, and developers and sub-prime lenders.
The FBI refused to divulge who these companies are, but several of the largest world banks revealed they will cooperate with the investigations. Those who announced that they will turn over requested information about their sub-prime lending practices are Bear Stearns, Goldman Sachs, and Morgan Stanley. UBS, a Swiss bank, is also being called into the investigation.
In 2007, when the sub-prime crisis broke, people with poor credit history and little income were offered teaser rates to get them to buy a home. Available at low rates, that soon ended when those borrowers realized they couldn’t keep up with the payments. These loans were bundled with other types of loans and sold to various financial institutions; sometimes many times over with high credit ratings. The lenders evidently forgot about what would happen when their customers could no longer afford the increased interest rates on such little income and bad credit. It is estimated that more than $100 billion has been wiped off the balance sheets across the financial sector, in losses and asset write-downs.
Watch that FBI Most Wanted list. Your lender’s photo might show up.
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