New York's attorney general has launched an investigation into eight banks to determine whether they misled ratings agencies about mortgage securities, according to published reports.

Attorney General Andrew Cuomo is trying to figure out whether banks gave the agencies false information in order to get better ratings on the risky securities, said a person with knowledge of the investigation, which has not been made public.

Yields on Fannie Mae and Freddie Mac mortgage securities that guide home-loan rates fell to the lowest in five months as US Treasuries gained on concern that the sovereign debt crisis will stunt economic growth.

Fannie Mae’s current-coupon 30-year fixed-rate mortgage- backed securities tumbled 0.08 percentage point to 4.19% as of 12:10 p.m. in New York, the lowest since Dec. 8.

In June 2006, a year before the subprime mortgage market collapsed, Morgan Stanley created a cluster of investments doomed to fail even if default rates stayed low — then bet against its concoction.

Known as the Baldwin deals, the $167m of synthetic collateralized debt obligations (CDOs) had an unusual feature, according to sales documents. Rather than curtailing their bets on mortgage bonds as the underlying home loans paid down, the CDOs kept wagering as if the risk hadn’t changed. That left Baldwin investors facing losses on a modest rise in US housing foreclosures, while Morgan Stanley was positioned to gain.

London house prices rose to a record in March, led by gains in some of the city’s most expensive districts, research group Acadametrics said.

Values jumped 0.9% from February to an average £378,955 ($555,510) and were up 17.3% from a year earlier, Acadametrics said in a report today. Kensington and Chelsea led gains. Nationally, prices rose 0.5% in April, it said.

A Pennsylvania man pleaded guilty to a criminal charge Thursday in a $136m fraud scheme that forced US Mortgage Corp into bankruptcy when it was revealed, prosecutors said.

In a statement, the US Attorney's office in Newark, NJ, said Leroy Hayden, the Pine Brook, NJ, the company's servicing manager, pleaded guilty.

Dubai repaid a $980m Islamic bond issued by developer Nakheel while another state-owned firm said it was confident of refinancing an upcoming loan as it digs out from a massive debt burden.

Nakheel, builder the palm-shaped artificial islands off Dubai, repaid the bond on schedule as talks continue between its parent Dubai World and lenders to restructure $24.8bn in debt.