And that is the next major scandal in securitization. We have mortgage-backed securitization, commercial-backed securitization, and rental-backed securitization..
(Bloomberg) — The Justice Department and state authorities are looking into the securitization of auto loans for possible fraud as part of an effort to seek out emerging areas of abuse, Acting Deputy Attorney General Sally Quillian Yates said.
The department’s No. 2 official, in a speech to state attorneys general Tuesday in Washington, said prosecutors were taking a hard look at the auto lending industry to stem any abuses before they could harm the marketplace.
“We shouldn’t wait until there is a crisis to pay attention,” Yates said. “We can and should use our experience investigating mortgage-backed securities to be on the lookout for, and head off, any potential threat, rather than waiting until after losses have been suffered.”
While the auto-loan securities market is much smaller than the market in subprime mortgages that was at the heart of the 2008 financial crisis, there are parallels. Ratings companies are awarding top grades to the securities, while it isn’t easy for buyers to verify the accuracy of those assessments, according to attorneys, academics and other auto-loan securities experts.
Here is the settlement agreement. Click here. And Attachment A. Click here.
Morgan Stanley agreed to pay $2.6 billion to settle U.S. claims stemming from the sale of mortgage bonds, the Wall Street firm’s biggest legal bill from the financial crisis.
In light of the new 10-figure settlement, Morgan Stanley upped its legal reserves by about $2.8 billion, accounting for the costs in the 2014 results of its securities business, the firm said Wednesday in a regulatory filing. The higher reserves in turn will cut its income from continuing operations by $2.7 billion, or $1.35 a share, roughly 40% of its previously disclosed 2014 net income.
The firm reached its agreement in principle with the U.S. Department of Justice and the U.S. attorney’s office for the Northern District of California, according to the filing.
Citigroup Inc. said Wednesday that the Treasury Department and California regulators are looking into its Banamex USA unit.
The Treasury and regulators have asked for information related to the bank’s compliance with anti-money-laundering rules, according to Citigroup’s annual report. The inquiries came from the Financial Crimes Enforcement Network, known as FinCEN, which is part of the Treasury Department, and the California Department of Business Oversight.
The disclosure came on a day when financial-services companies including Morgan Stanley, Wells Fargo & Co., Discover Financial Services and BB&T Corp. released their annual SHYreports.