Subprime Mortgages

A federal district court has denied defendants' motions to dismiss a complaint brought by the State of Michigan Retirement Systems on behalf of a putative class of investors who purchased or otherwise acquired publicly traded securities issued by American International Group, Inc. ("AIG"), between March 16, 2006, and September 16, 2008.

Citigroup has agreed to pay $75 million to settle SEC charges that it misled investors about its exposure to subprime mortgage-related assets. Former chief financial officer Gary Crittenden agreed to pay $100,000, and former head of investor relations Arthur Tildesley, Jr., (currently the head of cross marketing at Citigroup) agreed to pay $80,000, to settle charges against them. 

The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter. 

The Securities and Exchange Commission today charged Boston-based State Street Bank and Trust Company with misleading its investors about their exposure to subprime investments while selectively disclosing more complete information to specific investors. 

As we’ve pointed out, the federal government is devoting significant resources to identifying and holding accountable those who committed or allegedly committed fraud in the subprime industry. For example, the Securities and Exchange Commission has brought mortgage-related enforcement actions against Countrywide Financial CEO Angelo Mozilo, and senior executives, including the CEO, of American Home Mortgage Investment Corp. 

After Citigroup lost billions of dollars from its investments in mortgages and mortgage-related securities, shareholders brought suit in federal district court in New York against a number of Citigroup's current and former officers and directors.

What kinds of protection did Congress provide to loan servicing companies that have modified loans in recent months? According to a recent federal district court decision, that’s an issue for state courts to decide.

And in Real Estate news: Long Island newspaper Newsday reports that former Bear Stearns hedge fund manager Ralph Cioffi, who goes on trial next month on charges related to the subprime mortgage meltdown, sold his Southampton home for $8.55 million – after having purchased it for $10.7 million in 2007 and despite its listing price of about $12 million.