The attorneys general of New York and Delaware have said that they are working to wrap up the first part of their joint investigation into the mortgage crisis that caused the Great Recession before the year's end.
In an op-ed published Sunday evening in Politico, New York's Eric Schneiderman and Delaware's Beau Biden, both Democrats, detailed their four-pronged investigation into the mortgage bubble and crash.
We're working hard to complete the first-and most critical-phase of our investigation before the end of 2011, the attorneys general wrote.
Schneiderman was an early critic of settlement negotiations between the 50 states and five major banks over improper foreclosure practices, such as robo-signing documents. Schneiderman was booted from a top committee of state attorneys general after he objected to a provision that would provide banks with blanket immunity from future legal action.
The two top state prosecutors are now investigating other aspects of the mortgage crisis.
Servicing abuses did not create the mortgage bubble. Robo-signing did not blow up the U.S. economy, they wrote. Rather, these are symptoms of a more far-reaching and insidious problem.
Schneiderman and Biden break down the investigation into four distinct, but interdependent, areas. In addition to foreclosure practices, the probes include the conduct of loan originators, banks that pooled and securitized mortgages for investors to buy, and the mortgages servicers.
The collaboration between Schneiderman and Biden was discussed on MSNBC's Rachel Maddow Show Oct. 27.
Beau Biden... and I thought we really needed to dig in a little bit deeper, Schneiderman told Maddow. And we were doing an investigation into what caused the bubble and the crash in the housing market.
The two have been on similar tracks in investigating the mortgage crisis.
Schneiderman attempted to toss a monkey wrench into a proposed $8.5 billion settlement between Bank of America and Bank of New York Mellon, a trustee of Countrywide mortgage-backed securities. Bank of America bought Countrywide, a mortgage giant, in 2008.
A New York State court was tasked with signing off on the deal, but Schneiderman filed to intervene in an attempt to derail approval. Biden later attempted to intervene to block the proposed settlement as well.
Meanwhile, Biden Oct. 27 filed a suit against an industry-created mortgage registry that acts as a mortgagee for lenders, allowing the company to initiate foreclosure proceedings. The company, called MERS, is at the center of the housing crisis, Biden said.
Critics of the Virginia-based MERS--Mortgage Electronic Registration Systems--have alleged that the system obscures the real owner of a mortgage. The system also acted without authority in foreclosing on loan it never owned on behalf of a securitization trust, according to Biden's complaint.
Where the name of the owner of the mortgage loan recorded in the MERS System does not reflect the true owner, any action MERS takes on behalf of the purported owner is without authority, the complaint reads.
In response, a MERS spokeswoman defended the company's business model and said that Biden's allegations about deceptive practices have no merit.
We refute claims that use of the MERS system caused confusion to borrowers or any other participants in the mortgage finance system, said spokeswoman Janis Smith.
In addition to the lawsuit, Schneiderman issued a subpoena for MERS for information about how major banks used the service.
We are determined to get out in the open the troubling facts related to the banks' use of MERS, the attorneys general wrote in the Politico op-ed.