State regulators and cities that have filed cases or disclosed investigations targeting Wall Street firms’ roles in the subprime mortgage market:
• New York Attorney General Andrew Cuomo has accused a major real estate appraisal company of colluding with Washington Mutual Inc., the nation’s largest savings and loan company, to inflate the values of homes nationwide, contributing to the subprime troubles. Cuomo also has issued subpoenas to Fannie Mae and Freddie Mac, seeking information about potential conflicts involving loans the government-sponsored lenders bought from banks. And Cuomo and Connecticut Attorney General Richard Blumenthal are investigating whether banks properly disclosed risks of mortgages that were bundled into securities sold to investors.
• Ohio Attorney General Marc Dann has accused 10 mortgage lenders and appraisal companies of pressuring appraisers to inflate home values. Dann also has sued Freddie Mac, accusing it of defrauding Ohio’s public employee pension fund by investing in subprime home loans. Dann also is considering a broader case against Wall Street banks, lawyers and bond-rating agencies.
• Massachusetts’ top securities regulator, Secretary of State William Galvin, has accused a unit of investment bank Bear Stearns Cos. of failing to disclose to investors a conflict of interest in its trading with two Bear Stearns-managed hedge funds. The funds collapsed after making bad bets in subprime-linked investments. And last month, Galvin subpoenaed municipal bond insurers MBIA Inc. and Ambac Financial Group Inc., seeking information on how much the firms disclosed to cities and towns about their exposure to mortgage-related investments. On Feb. 1, Galvin accused Merrill Lynch & Co. of fraud and misrepresentation, a day after the firm agreed to reimburse the city of Springfield, Mass., $13.9 million in a dispute over a subprime-related investment that soured. Galvin alleges Merrill Lynch made unsuitably risky investments on behalf of Springfield without permission.
• Attorneys general in Illinois and Florida are investigating mortgage lender Countrywide Financial Corp.
• The city of Cleveland in January sued 21 banks and claimed their subprime lending practices have left behind abandoned homes, creating a public nuisance that hurts property values and tax collections. Two days earlier, Baltimore sued Wells Fargo, alleging the bank intentionally sold high-interest mortgages more to blacks than to whites in violation of federal law.
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