“Operation Malicious Mortgage” needed to protect Americans

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WASHINGTON, DC – As part of ongoing congressional debates on the US mortgage industry in the wake of the subprime crisis, ranking member Spencer Bachus has commented on the US Department of Justice (DoJ) and the FBI’s investigations into fraud in the US mortgage lending industry.

“For far too long unscrupulous brokers and lenders have thrived because of the lack of adequate oversight and enforcement. The efforts by the DOJ and the FBI through ‘Operation Malicious Mortgage’ are needed to help protect Americans as they navigate the home financing process,” Bachus said.

Bachus introduced the Fair Mortgage Practices Act in July 2007. The legislation’s provisions to create a licensing and registration system for mortgage originators were included in the subprime lending legislation passed by the House of Representatives last November. Senators Dianne Feinstein and Mel Martinez also introduced the SAFE Mortgage Licensing Act, which was also included in the housing legislation currently under Senate consideration.

Bachus also co-wrote a letter to chairman of the Securities and Exchange Commission Christopher Cox in May concerning the conduct of credit rating agency Moody’s after reports it made great errors in rating debt obligations and left the issue unresolved as the subprime crisis deepened.

“The credit rating industry's reputation has suffered – deservedly, many believe – because of its failure to accurately assess mortgage market risk. The credit crisis will continue as long as investors, particularly those seeking to purchase structured products, lack the confidence in the rating agencies' ability to accurately assess credit risk,” said the letter, also signed by House Financial Services Committee chairman Barney Frank and Capital Markets Subcommittee chairman Paul Kanjorski.

For more information on continuing attempts to reform the US subprime mortgage industry and the root causes of the subprime crisis, see feature “The Rotten Core” in July’s edition of OpRisk & Compliance magazine.