NEW YORK (Legal Newsline) – Switzerland’s second-largest bank is reportedly being investigated by New York Attorney General Eric Schneiderman, and others, for how it bundled mortgage loans into securities.
Credit Suisse AG, based in Zurich, is being looked at by Schneiderman, the U.S. Department of Justice and the U.S. Securities and Exchange Commission, sources told Reuters Thursday.
According to the news service, details of the investigation were not immediately known.
However, other lawsuits filed against the bank claim it misrepresented the “quality” of its mortgages underlying securities it created and sold.
Credit Suisse would be the second bank — in mere days — targeted for making fraudulent misrepresentations and omissions to promote the sale of residential mortgage-backed securities, or RMBS, to investors.
On Monday, Schneiderman, in his role as co-chair of the Residential Mortgage-Backed Securities Working Group, sued JP Morgan Securities LLC — formerly known as Bear Stearns and Co. Inc. — JP Morgan Chase Bank NA and EMC Mortgage LLC.
The lawsuit was filed in New York state Supreme Court.
According to Schneiderman’s lawsuit, the defendants deceived investors as to the “care with which they evaluated the quality” of mortgage loans packaged into residential mortgage-backed securities prior to Bear Stearns and Co’s collapse in early 2008, incurring losses that have totaled about $22.5 billion to date.
Monday’s suit is the first legal action from the RMBS Working Group, which was created by President Barack Obama and operates as part of the federal government’s Financial Fraud Enforcement Task Force.
The working group, formed earlier this year, brings together federal, state and local agencies, including the U.S. Department of Housing and Urban Development, FBI, IRS, the Consumer Financial Protection Bureau, the Financial Crimes Enforcement Network and the Federal Housing Finance Agency Office of Inspector General.
The group is tasked with investigating those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities.
“This lawsuit will bring accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy,” Schneiderman said in a statement Monday.
“Our lawsuit demonstrates that there is one set of rules for all — no matter how big or powerful the institution may be — and that those rules will be enforced vigorously.”
The attorney general called the JP Morgan suit a “workable template” for future actions against insurers of residential mortgage-backed securities that defrauded investors and cost millions of Americans their homes.
From Legal Newsline: Reach Jessica Karmasek by email at firstname.lastname@example.org.