House panel's probe targets big mortgage lenders

By MARCY GORDON

posted: 35 DAYS 1 HOUR AGO

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WASHINGTON -A House panel is investigating the role of mortgage lenders in the financial crisis and is seeking information from some of the biggest U.S. companies to determine if they used deceptive practices to lure borrowers into the housing boom.

Rep. Edolphus Towns, D-N.Y., chairman of the House Oversight and Government Reform Committee, said Friday the panel also is issuing a subpoena to Countrywide Financial Corp. — now owned by Bank of America Corp. — for records related to its so-called "VIP" program that provided mortgages to several senators and other officials with preferential terms. Documents provided in response to the subpoena will go to the House ethics committee.

Lawrence Di Rita, a spokesman for Charlotte, N.C.-based Bank of America, declined comment Friday afternoon because the bank hadn't yet received the subpoena.

A wave of defaults starting in 2007 on high-risk subprime mortgages for borrowers with blemished credit histories touched off the financial crisis that engulfed Wall Street and the global economy, and plunged the U.S. into the Great Recession. Consumer advocates and lawmakers have denounced what they said were predatory practices by mortgage lenders to woo unsophisticated borrowers who couldn't keep up payments after the housing slide began.

Towns said the probe is exploring "whether mortgage companies employed deceptive and predatory lending practices or improper tactics to thwart regulation, and the impact of those activities on the current crisis."

Subprime mortgages, some adjustable-rate loans and so-called option-ARM mortgages, which allow borrowers to choose from multiple payment options, are among the types of loans cited by Towns as possibly predatory.

Towns sent letters seeking information on their mortgage programs from 2000-2008 to Bank of America, Citigroup Inc., Wells Fargo, JPMorgan Chase & Co., Residential Capital (owned by GMAC) and U.S. Bank Home Mortgage. He set a Nov. 13 deadline to receive the records.

California-based Countrywide was a major player in the subprime mortgage market and became the biggest U.S. mortgage lender overall before it spiraled into disaster when the mortgage bust hit. It was bought by Bank of America in July 2008.

2009-10-23 16:04:33