Schneiderman named to fed mortgage unit

New York State Attorney General Eric Schneiderman will co-chair a new federal mortgage unit that will investigate abuses that created the financial bubble and collapse.

President Barack Obama announced Schneiderman's appointment during his State of the Union address Tuesday night.

"Our working group is working on the conduct related to the pooling and creation of mortgage-backed securities and issues relating to the conduct that created the crash," Schneiderman told reporters in Washington, D.C., Wednesday. Schneiderman said the unit, which is part of the president's Financial Fraud Task Force, will investigate "every aspect of the conduct that created the bubble and crash."

Mortgage-backed securities are bundles of mortgages that are sliced up and sold to investors as bonds. The market for the securities collapsed after high-risk subprime mortgages began to fail en masse, plunging the country into a recession in late 2007. In October, housing prices had declined by 32.1 percent from their June-July 2006 peak, according the most recent Standard & Poor's Case-Schiller index of 20 large cities. Prices are back at mid-2003 levels, according to the index.

The goal of the unit, formally known as the Unit on Mortgage Origination and Securitization Abuses, will be to investigate and hold accountable institutions that violated the law, compensate victims and provide relief to homeowners, according to a handout from the White House. The unit will also be co-chaired by officials from the U.S. Department of Justice, the Securities and Exchange Commission and the Internal Revenue Service.

State Comptroller Thomas DiNapoli praised the appointment as a step toward addressing "the reckless behavior of certain financial institutions."

"Those responsible should be held accountable for their actions," DiNapoli said.

Schneiderman, a Democrat, has garnered national attention for raising concerns that an effort to work out a national settlement with large financial institutions over foreclosure abuses would let companies off the hook. The new unit will deal with the problems that led up to the crash and will not have an impact on talks for the multistate settlement, Schneiderman said.

Anthony Casale, chief of staff to New York State Republican Party chairman Edward Cox, said it's good when state figures are given national recognition, but questioned the need for another layer of government.

"Whenever there's a task force, an ad hoc committee, a special panel, you wonder why we have to have another level of government when existing agencies should be doing this from the beginning," Casale said.