WSJ: Smaller Banks in Spotlight for Financial Crisis Involvement

Following the completion of cases that led to mortgage-related penalties on big name banks, U.S. housing officials are setting their sights on smaller lenders, The Wall Street Journal reports.

“The completion of cases that led to mortgage-related penalties levied on larger banks such as J.P. Morgan Chase & Co. and Bank of America Corp. has freed up federal investigators,” a government official tells The Wall Street Journal.

Federal agencies are reviewing whether several lenders that are licensed to handle Federal Housing Administration (FHA) loans failed to meet underwriting standards.

“While the government is still carrying out probes involving big banks, mid-size players such as Fifth Third Bancorp, SunTrust Banks Inc. and Regions Financial Corp. in recent months have disclosed federal investigations related to the origination and servicing of home loans.

“Other banks, such as U.S. Bancorp and Capital One Financial Corp., have also disclosed details of probes related to various mortgage practices, including mortgage servicing and the packaging of loans into securities,” The Wall Street Journal reports, adding that none of the banks have been accused of wrongdoing.

Recouping money from more lenders would help stabilize the finances of the FHA, which suffered heavy losses in the wake of the housing bust and required a $1.7 billion taxpayer infusion last year, The Wall Street Journal reports.

Read the full WSJ report

Written by Cassandra Dowell

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