AG expands mortgage probe to trustees

New York Attorney General Eric Schneiderman is expanding his investigation into the U.S. mortgage industry, having teamed up with Delaware Attorney General Joseph Biden III in requesting information from Deutsche Bank AG and the Bank of New York Mellon about their roles as trustees overseeing mortgage securities for investors. As the New York Times reported, trustees were administrators — not originators or servicers — of the loans, and thus had not previously been under much scrutiny as part of other nationwide investigations into what fueled the industry’s boom and bust. But trustees were supposed to make sure that all documentation was accurate and accounted for — a responsibility that has already been called into question by a probe into shoddy foreclosure practices by some of the nation’s largest mortgage servicers. Those servicers are currently negotiating a settlement with a group of state attorneys general, but if Schneiderman and Biden find that trustees were also falling short on their oversight duties in the securitization process, it could mean even more expensive litigation is on the horizon for big U.S. banks. Bank of New York Mellon and Deutsche Bank were the two largest banks that acted as trustees. [NYT]