Ohio Sending Civil Subpoenas to Subprime Companies

CHICAGO (Reuters) - Ohio Attorney General Marc Dann said Thursday that more than a dozen civil investigative demand subpoenas will be sent shortly to companies in the subprime mortgage industry.

He said information from the subpoenas will be used to explore possible anti-trust and civil rights law violations, as well as violations of Ohio's consumer sales practices act. He did not identify the recipients of the subpoenas.

The action followed the lack of support by loan servicers in the state for Gov. Ted Strickland's compact that would require them to step up efforts to help borrowers avoid foreclosure. Dann said no servicer agreed to sign the compact, which was unveiled last month.

In the anti-trust area, Dann said he planned to take his probe beyond frontline lenders to parties that funded or profited from subprime mortgage schemes.

"We're taking steps to determine whether the groups of either warehouse lenders or the investment banks that securitized many of these subprime mortgages were involved in any kind of concerted action," Dann said.

Ohio's move came as New York stepped up its efforts to police mortgage lenders. New York Attorney General Andrew Cuomo announced on Wednesday that subpoenas were issued to housing finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N) as part of New York's probe of the mortgage industry.

Dann said the number of Ohio subpoenas could mushroom to the hundreds over the next several years.

In July, Dann said he would be looking at lenders, investment banks, lawyers, accountants and Wall Street rating agencies as the state attempted to root out problems that resulted in a slew of mortgage foreclosures.

Ohio had the fifth highest foreclosure rate among states in the third quarter with 46,818 filings -- a 137 percent increase from the same period in 2006, according to RealtyTrac.

Strickland, who held a new conference with Dann and other state officials, said he still hoped loan servicers would agree to work with the state and sign the compact.

"I continue to believe the provisions we asked for in the compact were reasonable," he said. "If we can prevent foreclosures I think everyone is benefiting, including the lenders."

Under the compact, servicers would increase outreach efforts to borrowers, providing them with information about loan modifications and interest rate changes, while stepping up efforts to increase loan workouts.

Officials at the Ohio Mortgage Bankers Association, which proposed an alternative plan that the governor's office said was not substantial enough, were not immediately available for comment.

Kim Zurz, Ohio's commerce director, said her department will be recommending new rules reflecting aspects of the governor's compact.

(Reporting by Karen Pierog, Editing by Leslie Adler)