NPR featured a story on Tracy Warren, an auditor at Watterson-Prime, a quality control contractor who reviewed subprime loans for investment banks before they were sold on Wall Street. (The biggest client of Watterson-Prime? Bear Stearns.) She has over 25 years of experience in mortgage lending and her job was to find bad loans and say no.
Warren says that when she’d reject (kick out) a loan, her supervisors would overrule her and the loan would be approved. She says that they’d justify overruling the kicks, yet the applicants clearly weren’t qualified, often with very poor credit scores or income that wasn’t verified and didn’t pass the smell test. Continue reading
According to the Financial Times, the Securities and Exchange Commission has been working to create four groups that will focus on fraud. The groups include one for hedge funds and insider trading, one for stock options backdating, and one for municipal bond issuance. The most recent group was set up in January, and focuses on subprime mortgage issues.
Walter Ricciardi, deputy director of enforcement for the SEC says that these working groups will be formed when issues arise, and he wants would-be criminals to know about their focus on fraud.
The groups are being set up to focus on specific types of cases, so that the SEC employees can maximize resources and share expertise.