Risk & Compliance

”We’re Looking at Subprime”: SEC

Director of Enforcement Linda Thomsen reportedly acknowledges that the regulator is involved in a broad examination of the subprime mortgage industry.
Stephen TaubMarch 20, 2007

The Securities and Exchange Commission is investigating a number of companies that operate in the shaky market for mortgage loans to individuals with poor credit, according to the Associated Press.

“We’re looking at subprime,” SEC Director of Enforcement Linda Thomsen told reporters following an address to an investment conference, according to the AP. “As with anything, we’re going to look at all the actors and their roles.”

Thomsen’s comments were the first public acknowledgment that the regulator is involved in a broad examination of the subprime mortgage industry, the wire service noted.

Last week, New Century Financial disclosed that the Pacific Regional Office of the SEC is conducting a preliminary investigation into the company. New Century also received a letter from the U.S. Attorney’s Office for the Central District of California, indicating that prosecutors are conducting a criminal inquiry into trading in New Century securities and into accounting errors regarding allowances for repurchase losses.

Meanwhile, Sen. Christopher Dodd (D-Conn.), chairman of the Senate Committee on Banking, Housing, and Urban Affairs, announced that he has invited the CEOs of the top five subprime lending companies to testify before the committee on Thursday.

Dodd invited executives from HSBC, New Century Mortgage, Countrywide Home Loans, WMC Mortgage, and First Franklin Mortgage “to explain their lending practices in the subprime mortgage market and how those practices have affected homeowners,” according to a press release issued by the senator’s office.

He also invited the participation of representatives from the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Office of Thrift Supervision, and the Conference of State Bank Supervisors, as well as consumer advocates.