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Ohio Mortgage Market Probe Gains Steam

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Michael Tipton

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NEW YORK (Reuters) - A few months into his investigation into the subprime mortgage industry, Ohio Attorney General Marc Dann sees early signs Wall Street underwriters were not just participants in a mortgage boom- turned-bust, but potentially its key leaders.
Prompted by a rash of homeowner defaults and foreclosures rocking Ohio communities, Dann this summer launched an investigation that questions whether mortgage lenders, investment banks and rating agencies created a system that sold homes and loans to families who could not afford them.
Email and other evidence gathered in recent months is raising "disturbing" questions about the role of Wall Street.
"I've gone from saying, 'They must have known,' to it's possible the investment banks were directive of the mortgage companies who were directive of mortgage brokers," Dann told Reuters on Friday.
Queries have been sent to at least 13 companies so far. Ohio is starting with mortgage brokers and housing companies and working its way up the chain, he said.

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MULTI-STATE EFFORT
Ohio has one of the highest foreclosure rates in the United States, said Dann, who suspects some borrowers were manipulated into taking out loans they could not afford.
Dann said Ohio, New York and other states will band together more formally. To date, Dann says he has cooperated with five states to tackle the enormous mortgage industry.
Ohio has five attorneys working on the probe. The state has also retained three outside law firms partly on contingency to help provide staffing needed to conduct the probe.
"We issued the first set of civil investigative demands. We're working our way up from the bottom to the top, from defrauded home owners to the investment banks, the bond rating agencies and everyone else,"
Some critics contend underwriters, who generated windfall gains when the mortgage business was booming, pushed lenders and brokers to produce loans that could be packaged into securities.
"It's potentially more than just negligence" on the part of underwriters, he said. "The reward was so high. The demand to purchase this paper on Wall Street was so insatiable that it led people to be very aggressive about acquiring it, without regard to whether or not those signing the mortgage notes were defrauded."

http://www.reuters.com/article/bank...7320071207?pageNumber=1&virtualBrandChannel=0
 
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While Florida's AG does nothing in the state counted as #1 in mortgage fraud.

:new_2gunsfiring_v1: :new_2gunsfiring_v1: :new_2gunsfiring_v1:
 

Michael Tipton

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Senior Member
Joined
Sep 25, 2005
Professional Status
Certified Residential Appraiser
State
Florida
In this related issue, I am also surprised by the lack of information coming from Florida AG McCollum's office.

Dec. 5 (Bloomberg) -- Much of the debt held by a $14 billion Florida investment fund for schools and local governments is worth less than face value and the value of the rest can't be determined, according to an official at the Wall Street firm hired to turn around the fund.
``I don't think there are very many securities in this market we can liquidate at par,'' or 100 cents on the dollar, Chris Stavrakos, co-managing head of cash management for New York-based BlackRock Inc., said in an interview yesterday.
The more than $2 billion of the worst securities that state officials agreed yesterday to spin off into a second investment pool have an ``indeterminate value,'' he said. Of that, about $867 million is in default, or 6 percent.
Coleman Stipanovich, the executive director of the agency that oversees the fund, resigned yesterday and BlackRock, which invests more than $1.3 trillion in fixed-income and other assets, was named interim pool manager.

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Crist, state Chief Financial Officer Alex Sink and Attorney General Bill McCollum are the state board's trustees. BlackRock, hired by the state Nov. 30 to review the fund, had at least six bankers going through its holdings last weekend to develop the plan presented yesterday, Stavrakos said.
The fund owns $175 million of debt issued by Axon Financial, a structured investment vehicle that has defaulted. It also holds $180 million of debt sold by Ottimo Funding, an SIV that had its credit rating slashed to D from C by Standard & Poor's on Nov. 9.
``Nobody will buy that paper,'' Stavrakos said. The fund owns $168 million of short-term debt issued by KKR Atlantic Funding Trust and $356 million from KKR Pacific Funding Trust, securities whose values aren't ``transparent,'' he said.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_QaMkHBWz6I
 
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