FTC Seeks Data From Bear Stearns Unit
Bear Stearns Cos. said Friday that a federal regulator asked its EMC Mortgage Corp. unit to provide documents in connection with an investigation into “sub-prime” lending.
The Federal Trade Commission sent a civil investigative demand -- similar to a subpoena -- seeking documents and data relating to EMC’s business practices, Bear Stearns said in a regulatory filing.
An FTC official confirmed that the agency was investigating EMC, but declined to provide additional details.
“Sub-prime” lending, or lending to borrowers with imperfect credit histories, has been one of the fastest-growing segments of the mortgage industry over the last decade.
EMC is a mortgage banking company specializing in the acquisition, securitization, servicing and sale of home loans. Mortgage servicers collect payments from borrowers and give them to lenders.
Bear Stearns said the FTC issued the investigative demand as part of a probe of sub-prime lenders, loan servicers and loan brokers to determine whether they have broken consumer protection laws.
Sub-prime lending has been the source of several regulatory investigations into unfair lending practices that have often victimized poor borrowers.
EMC is cooperating with the FTC inquiry, Bear Stearns said.
A Bear Stearns representative was not immediately available to comment and an EMC executive referred calls back to Bear Stearns.
Sub-prime lending has surged in recent years, and in 2004 accounted for 19% of U.S. mortgages worth $530 billion, up from 5% of mortgage originations amounting to $35 billion 10 years earlier.
That has led housing, tax and law enforcement authorities at federal and state levels to investigate potential abuses. Among actions by other federal agencies, the FTC has brought more than a dozen cases against lenders since 1998.
The FBI also has investigated abuses in sub-prime lending, noting that minorities are disproportionately represented in the market. The Federal Reserve, too, has cited data showing that blacks and Hispanics are more likely to take out high-priced loans than whites are.
Standards against predatory lending, however, vary among states. The sub-prime mortgage industry is pushing for Congress to adopt a single federal standard.