By Joseph A. Giannone
NEW YORK (Reuters) - Ohio Attorney General Marc Dann on Wednesday said he would issue more than 15 new subpoenas to a range of mortgage companies, expanding his investigation into boom-time industry practices that are now causing pain for struggling homeowners and investors.
Last year, Dann said, he issued about 15 subpoenas probing a range of players in the mortgage industry -- from mortgage brokers and appraisers to rating agencies and Wall Street investment banks that created asset-backed bonds. Dann argues that industry players knowingly sold loans to inappropriate customers as others passed on risky loans to investors.
"We're going to issue our next wave of subpoenas in the next couple of weeks. We're working our way up the ladder," he said at the Reuters Housing Summit in New York.
Dann plans to issue more than 15 new subpoenas. He declined to identify the companies except to say they include "household-name companies everybody would know," and some in New York.
Surging home prices across the United States had fueled a mania in real estate and mortgages. Wall Street in particular enjoyed record profits fueled by a rising flow of new loans that could be packaged and sold to bond investors.
"The market was so insatiable, folks buying the paper from the wholesalers became more and more aggressive. They were more and more willing to accept worse and worse paper," he said.
But by the peak of the mortgage boom in 2005 and 2006, the loan-hungry machine had pushed people to borrow beyond their means, Dann told the Summit. It also created poor quality loans that have fueled tens of billions of dollars of investor losses as housing and mortgage markets tumbled last year.
"At some point it became obvious that there was something dramatically wrong," Dann said. "We're going to find out who knew. We've got to bring some justice and some equity." Continued...
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