* U.S. SEC expands mortgage foreclosure probe-sources
* New round of subpoenas sent to Wall St banks-sources
* SEC taking harder look at securitization process-sources
By Matthew Goldstein and Rachelle Younglai
NEW YORK/WASHINGTON, Dec 17 U.S. regulators
have opened a new line of inquiry in their mortgage foreclosure
probe and are asking big Wall Street banks about the beginning
stages of mortgage securitization, two sources familiar with
the probe said.
The Securities and Exchange Commission launched the new
phase of its investigation by sending out a fresh round of
subpoenas last week to big banks like Bank of America Corp
(BAC.N), Citigroup Inc (C.N), JPMorgan Chase & Co (JPM.N),
Goldman Sachs Group Inc (GS.N) and Wells Fargo & Co (WFC.N),
the sources said.
The subpoenas focus on the earliest stage of the mortgage
securitization process, said the sources, who requested
anonymity because the probe is not public.
The sources said the SEC is asking for information about
the role of so-called "master servicers" -- specialized firms
that oversee the selection and maintenance of the large pool of
home loans that go into every mortgage-backed bond.
In many cases, Wall Street banks that underwrite
mortgage-backed securities either own their own master
servicing firms or are closely aligned with one.
In the fall, the SEC began looking into the banks'
foreclosure practices following allegations that mortgage
servicers like Bank of America were using shoddy paperwork to
evict delinquent borrowers from their homes.
The Justice Department, banking regulators and the
attorneys general in all 50 U.S. states are also probing
potential wrongdoing. [ID:nN11106777]
One of the sources said the SEC is seeking information
about the role banks had in mortgage securitization. The
regulator is also looking at the role trustees for the trusts
that issued the mortgage-backed securities had in monitoring
the performance of the underlying loans.
The SEC is looking at whether loans were properly
transferred to the trusts that issued the securities, the
The renewed look at the securitization process is an
extension of the SEC's preliminary probe into the mortgage
mess. The SEC's regional offices are all looking at some aspect
of the foreclosure crisis.
The SEC had no comment.
Separately, the SEC is still investigating banks, credit
rating agencies and individuals in connection with the 2007-09
subprime crisis. Those investigations center around potential
misrepresentations to investors about the value of the
mortgage-backed securities that helped fuel the crisis.
The agency has filed some high-profile cases, including one
against former Countrywide Financial chief Angelo Mozilo and
another against Goldman Sachs.
Banking regulators, including the Federal Reserve, are
feverishly reviewing lenders' foreclosure practices and are
expected to reveal their findings in January.
In particular, the Fed is concerned about investors
accusing lenders of misrepresenting the loans that underpin
mortgage securities, and demanding repayment.
That has already happened with Bank of America, which has
started negotiating with a group of angry mortgage investors,
including BlackRock Inc (BLK.N).
Bank of America, Citigroup, JPMorgan and Goldman had no
comment. Wells Fargo said it is "always working with regulators
and others who are interested in its servicing business" but
declined to comment on whether the bank had received a
(Additional reporting by Elinor Comlay and Joe Rauch; editing
by John Wallace)