US subpoenas Ally’s lending records
DETROIT — Federal investigators have subpoenaed mortgage records from Ally Financial Inc., signaling that a probe into troubled mortgages that helped cause the financial meltdown is turning toward original underwriters of home loans that went bad.
Ally, the former finance arm of General Motors that was bailed out by the US government, disclosed the subpoenas yesterday in a filing with the Securities and Exchange Commission. The filing is another step in Ally’s bid to sell stock in a yet-unscheduled initial public offering.
The subpoenas indicate that investigators now are looking at mortgage originators, companies that signed up borrowers and approved home loans that were bundled into securities and sold to investors. Many of the loans went bad after the housing market collapsed, costing investors billions.
Peter Henning, a former SEC attorney and a law professor at Wayne State University in Detroit, said investigators are looking at originators because of lax lending standards. They also may be looking into whether banks knew the loans were no good but failed to disclose that to investors who bought mortgage securities, he said.
“When you look at the origination standards, there were no standards,’’ Henning said. “It was ‘pump out product.’ ’’
Ally’s filing said that a subpoena from the Justice Department sought “documentation and other information in connection with its investigation of potential fraud related to the origination and/or underwriting of mortgage loans.’’
Ally also said yesterday that it will take a $100 million charge in the second quarter for payments it made to trust funds to cover their losses on mortgages that went bad.
The US government owns 74 percent of Ally, which it got in exchange for a $17.2 billion bailout.
Detroit-based Ally said in its filing that the SEC wants records of payments made to Ally by companies from which Ally bought mortgages. Ally would buy the loans and package them with its own mortgages to form securities, which it would then sell.