The SEC’s investigation into the subprime mortgage mess now includes examinations of the financial statements of the mortgage lenders who are generally blamed for creating the disaster that has swamped the global economy. Lenders suspected of misstating loss reserves, asset values, or the prices on foreclosed properties are going to be pursued by the SEC, according to commissioner Elisse Walter. If a lender’s disclosures about loan quality, credit risks, rates of default, mortgage delinquency, and exposures to the subprime market were inaccurate, then chances are, its executives are going to be paid a visit from the SEC’s enforcement staff. Walter was testifying during a March 20, 2009, House Financial Services Committee hearing on investor protection and enforcement during the subprime meltdown.
So far, the agency’s enforcement division has filed nine cases involving subprime issues, and it has many other subprime matters under active investigation, Walter told lawmakers.
The subjects of the investigations to date are primarily subprime lenders, credit rating agencies, home builders, and companies that provided mortgages to investors to enable them to finance securities purchases. The agency is also looking at the investment banks that bundled the mortgages into securities and then sold them into the secondary market.
Source: WG&L Accounting & Compliance Alert Checkpoint 3/23/09
