Bank of America, Morgan Stanley and Goldman Sachs are Being Scrutinized for Mortgage Loan Packaging
New York Attorney General Eric Schneiderman has requested information from Bank of America, Morgan Stanley and Goldman Sachs requesting information in a continuing investigation into what caused the mortgage crisis in 2008, according to a report in Investment News. Schneiderman who was appointed attorney general last November has been focused and successful in his continued crackdown on Wall Street firms for their part in the financial crisis. He recently reached a $91 million deal with UBS over the allegedly fraudulent and anti-competitive sale of municipal bonds. In a related crackdown by the Securities and Exchange Commission (SEC), Goldman Sachs was hit with the largest fine ever in 2010, $550 million for misleading investors in the marketing and sale of collateralized debt obligations (CDO) which were linked to subprime mortgages.
The focus of the continued scrutiny by the New York AG is the securitization or packaging of home loans into bonds known as mortgage backed securities (MBS), which were sold to investors during the housing boom. Notwithstanding the fact that these bonds were given stellar ratings by the credit rating agencies saying the investments were safe, they were backed by extremely high risk loans that the banks allegedly knew were junk. Nevertheless, the bonds were marketed and sold to investors as being safe investments that had a greater return than could be gotten elsewhere. The collapse of the real estate market resulted in the decimation of the value of the bonds, often to junk status.
If you have suffered losses in any of the complex securitized investment products, please contact our securities law firm for a confidential consultation at 1-800-259-9010.