US mortgage probe widens

JP MORGAN Chase, UBS, Royal Bank of Scotland and Deutsche Bank are being scrutinised by the New York State Attorney in an expanded probe into mortgage practices at large banks.

Units of bond insurers Ambac Financial, MBIA, Syncora Holdings and Assured Guaranty have also been subpoenaed by the state’s attorney general for information related to claims they paid out on mortgage-related products.

The probe comes amid a flurry of regulatory activity into how financial institutions handled home loans and assembled them into pools sold to investors.

Ambac, Deutsche Bank, JP Morgan and UBS and RBS declined to comment. Banks’ foreclosure practices are also under investigation by all 50 US state attorney generals, as well as the Justice Department and the Securities and Exchange Commission (SEC). The SEC is also investigating how banks bundled and sold toxic mortgages in collateralised debt obligation deals.

Earlier this month, the Department of Justice sued Deutsche Bank for $1bn for allegedly misleading the Federal Housing Administration about the quality of its mortgages in an effort to obtain insurance for them and later sell them.