SEC Involved in 36 Subprime Mortgage Industry Probes

The Securities and Exchange Commission is conducting three dozen open investigations into misconduct in the subprime mortgage industry. The probe is taking a look at possible misconduct involving:

• The origination process • Insider trading • Securitization and sales of mortgage-backed securities
According to SEC Division of Enforcement Associate Director Cheryl Scarboro, the SEC wants to know who may have been involved, who knew about any misconduct, and who acted inappropriately. Scarboro also directs the SEC Subprime Working Group, which coordinates these probes with other SEC divisions.

In SEC v. Doral Financial Corp., Doral settled claims that it overstated income on nonconforming loans for $25 million. The primary issues pertaining to this case included valuation of the future income stream, valuation of interest-only STRP’s, and applying a flat rate to value investments.

These issues are of major significance in pending cases involving the subprime mortgage industry. Other issues of focus in the SEC investigations include ownership transfer and booking the gain on sale.

The SEC has met with the companies it is investigating is helping to streamline the process.

In a recent article, Keefe, Bruyette & Woods Inc. Bose George estimated potential losses from the subprime mortgage crisis at around $250 billion. Columbia University professor Charles Calomiris estimates the losses at over $300 billion but under $400 billion. $1 trillion outstanding subprime mortgages currently exist.

Please contact Shepherd Smith and Edwards to discuss your case. We have helped thousands of investors recoup their losses.

Related Web Resources:

How Bad Will the Mortgage Crisis Get?,, February 19, 2008
SEC probing three dozen subprime cases, Reuters, December 21, 2007
Why a U.S. Subprime Mortgage Crisis Is Felt Around the World, New York Times, August 21, 2007

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