The Securities and Exchange Commission has disclosed that it is investigating Residential Capital, the home lending arm of Ally Financial, for potential instances of mortgage fraud.
In a filing in Federal District Court in Los Angeles dated Monday, the S.E.C. wrote that it was looking into the lender's originating and underwriting of mortgages that were later bundled together, or securitized, and sold to investors. The inquiry began on Feb. 22.
The investigation was disclosed as part of the agency's effort to obtain documents from R.R. Donnelley & Sons, which prepared due-diligence reports for the investment banks that securitized the mortgages in question. Donnelley was subpoenaed in June but has so far not complied with the document request.
“The information in Donnelley's possession is relevant in determining whether ResCap made material misrepresentations or omissions about the mortgage loan pools that backed the securitizations under investigation ,†the S.E.C. wrote in its filing.
ResCap filed for bankruptcy protection in May, a long-awaited move meant to help its parent company shed legal burdens that have delayed Ally's own turnaround efforts. The Treasury Department still owns 75 percent of Ally, formerly the General Motors Acceptance Corporation, after having helped bail out the financial firm during the crisis of 2008.
News of the S.E.C.'s filing was reported earlier by Reuters.
