ALBANY, N.Y. – New York Attorney General Eric Schneiderman is seeking records from three major Wall Street banks as part of a broad investigation into the mortgage crisis that fueled the recession, an official familiar with the issue said Tuesday.

Schneiderman is meeting with representatives of the Bank of America, Morgan Stanley and Goldman Sachs, according to the official, who spoke to The Associated Press on condition of anonymity. Those meetings are expected to focus on mortgage securities operations during the boom on Wall Street that ultimately cost banks billions of dollars.

The official said securitization of those mortgages would be an area Schneiderman will examine. Packaging mortgages into securities that investors could buy might have concealed risky loans, something critics on Wall Street said was at the center of the mortgage crisis.

The official spoke on the condition of anonymity because of the sensitivity of the continuing investigation.

There was no immediate comment from the banks.

There also was no immediate response to messages left at Schneiderman’s offices about the records search, which was first reported by The New York Times and the Wall Street Journal.

The official told the AP that the records search is part of Schneiderman’s review of factors that led to the 2008 financial crisis.

Back then, banks sold bundles of risky mortgages with teaser rates that increased after only a few years. Many borrowers ended up defaulting on the loans when the interest rates spiked. As a result, the value of mortgage securities plummeted.

Experts in the area have since said that banks had very little of their own money invested in those mortgages. That led banks to take greater risks, which contributed to the fiscal crisis.

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Associated Press Business Writer Pallavi Gogoi contributed to this report from New York City.

(Reuters) – Settlement agreements being hammered out by securities regulators and securities firms accused of fraud in mortgage bond deals are likely to include civil charges against at least one person connected to each deal, the Wall Street Journal said, citing people familiar with the matter.

SEC officials are pushing hard as part of their ongoing probe of collateralized debt obligations and other mortgage related products developed by Wall Street to bring charges against individuals, such as executives involved in selling the deals or outsiders who managed the assets, the Journal said.

The agency may also file civil charges against hedge fund managers who helped structure certain mortgage bond deals but then bet against them, the paper said.

The SEC could not immediately be reached for comment outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Muralikumar Anantharaman)

(Reuters) – The securities regulator is in talks with major Wall Street banks to settle fraud allegations relating to the sale of toxic mortgage bonds to various investors that helped unleash the financial crisis, the Wall Street Journal reported, citing sources familiar with the matter.

The first settlement with the Securities and Exchange Commission (SEC) could be reached as soon as next week, while some of the other deals could take months to work out, the WSJ said.

SEC’s negotiations with the banks include JPMorgan Chase, Citigroup Inc, Morgan Stanley, Merrill Lynch, now an unit of Bank of America, and UBS, according to the Journal.

The SEC hopes to reach a series of settlements with individual banks over the sales of mortgage bonds, rather than a big industry wide deal, the Journal said, citing people familiar with the matter.

The regulator’s decision to go for individual settlements reflects substantial differences in the nature of the civil fraud allegations faced by each bank, the sources told the Journal.

All of the banks named in the report and the SEC declined to comment to WSJ.

Spokesmen for JPMorgan and Bank of America Merrill Lynch declined to comment on the Journal report to Reuters . All other parties could not immediately be reached for comment outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Dhara Ranasinghe)

(Reuters) – The securities regulator is in talks with major Wall Street banks to settle fraud allegations relating to the sale of toxic mortgage bonds to various investors that helped unleash the financial crisis, the Wall Street Journal reported, citing sources familiar with the matter.

The first settlement with the Securities and Exchange Commission (SEC) could be reached as soon as next week, while some of the other deals could take months to work out, the WSJ said.

SEC’s negotiations with the banks include JPMorgan Chase, Citigroup Inc, Morgan Stanley, Merrill Lynch, now an unit of Bank of America, and UBS, according to the Journal.

The SEC hopes to reach a series of settlements with individual banks over the sales of mortgage bonds, rather than a big industry wide deal, the Journal said, citing people familiar with the matter.

The regulator’s decision to go for individual settlements reflects substantial differences in the nature of the civil fraud allegations faced by each bank, the sources told the Journal.

All of the banks named in the report and the SEC declined to comment to WSJ. They could not be immediately reached for comment by Reuters outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore)

NEW YORK – Investors are brushing aside some positive economic news on lingering concerns over the housing market.

But while U.S. markets were in negative territory Thursday, stocks are likely to end the year on an upbeat note: The S&P 500 index is up 12 percent and the Dow is up 11 percent in a year marked by big corporate profits. The Dow is back to levels last seen in August 2008, prior to the heat of the financial crisis, while the S&P might just eke out the best December in 20 years, if it manages to go back to positive territory.

At midday, the Dow Jones industrial average was off 23.73 points, or 0.2 percent, to 11,561.70. The S&P 500 edged down 2.64, or 0.2 percent, to 1,257.14, while the technology-focused Nasdaq composite index fell 3.98, or 0.2 percent, to 2,662.95.

The week has been thinly traded, and Thursday is effectively being considered the last trading day of note because of the spate of economic data and also because even fewer traders are expected to show up on Friday, the last day of the year.

Despite the strong corporate profits recorded during the year, economists have been worried about the stubbornly high rate of unemployment at 9.8 percent. Thursday’s report from the Labor Department should offer some relief.

The number of Americans applying for unemployment benefits fell to its lowest point in nearly two and a half years, a sign that the job market is slowly improving. Applications dropped by 34,000 to 388,000, the fewest since July 2008, the Labor Department said Thursday. Unemployment claims generally predict where the job market will go over the next few months.

In further positive news, the Chicago Purchasing Managers Index for December showed that companies in the Midwest were faring better. The index, which surveys business conditions in the states of Illinois, Indiana and Michigan, came in with a reading of 68.6, up from 62.5 in the previous month. Economists had been expecting the index to drop to 61.

Home sales also fared well. The National Association of Realtors said the number of people who signed contracts to buy homes rose in November, the fourth increase since contract signings hit a low in June. Its index of sales agreements for previously occupied homes increased 3.5 percent.

However, with mortgage rates creeping up, investors worried over its effect on home sales. The average rate on 30-year fixed mortgages rose this week to 4.86 percent, the highest level in seven months.

U.S. Treasurys are also down slightly, which has led to a slight bump up in yields. The benchmark 10-year bond is yielding 3.39 percent, up from 3.35 at Wednesday’s close.

NEW YORK/WASHINGTON (Reuters) – Securities regulators have broadened their inquiry into the mortgage industry, asking big banks about the early stages of securitizing home loans, two sources familiar with the probe said.

The Securities and Exchange Commission launched the new phase of its investigation by sending out a fresh round of subpoenas last week to big banks including Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Goldman Sachs Group Inc and Wells Fargo & Co, the sources said.

Months ago, the SEC began looking into the banks’ foreclosure practices following allegations that mortgage servicers were using shoddy paperwork to evict delinquent borrowers from their homes.

Now the SEC is looking at how the lenders packaged up mortgages for sale to investors, said the sources, who requested anonymity because the probe is not public.

Questions from the SEC include information about the role of so-called “master servicers” — specialized firms that oversee the selection and maintenance of the large pool of home loans that go into every mortgage-backed bond.

In many cases, Wall Street banks that underwrite mortgage-backed securities either own their own master servicing firms or are closely aligned with one.

The Justice Department, banking regulators and the attorneys general in all 50 U.S. states are also probing potential wrongdoing.

The state of Arizona sued Bank of America on Friday, accusing the bank of misleading consumers about its home loan modification process.

TRUSTS AND TRANSFERS

One of the sources said the SEC is seeking information about the role banks had in mortgage securitization. The regulator is also looking at the role trustees for the trusts that issued the mortgage-backed securities had in monitoring the performance of the underlying loans.

The SEC is looking at whether loans were properly transferred to the trusts that issued the securities, the source said.

The renewed look at the securitization process is an extension of the SEC’s preliminary probe into the mortgage mess. The SEC’s regional offices are all looking at some aspect of the foreclosure crisis.

The SEC had no comment.

Separately, the SEC is still investigating banks, credit rating agencies and individuals in connection with the 2007-09 subprime crisis. Those investigations center around potential misrepresentations to investors about the value of the mortgage-backed securities that helped fuel the crisis.

The agency has filed some high-profile cases, including one against former Countrywide Financial chief Angelo Mozilo and another against Goldman Sachs.

Banking regulators, including the Federal Reserve, are reviewing lenders’ foreclosure practices and are expected to reveal their findings in January.

In particular, the Fed is concerned about investors accusing lenders of misrepresenting the loans that underpin mortgage securities, and demanding repayment.

That has already happened with Bank of America, which has started negotiating with a group of angry mortgage investors, including BlackRock Inc.

Bank of America, Citigroup, JPMorgan and Goldman had no comment. Wells Fargo said it is “always working with regulators and others who are interested in its servicing business” but declined to comment on whether the bank had received a subpoena.

(Additional reporting by Elinor Comlay and Joe Rauch; editing by John Wallace and Tim Dobbyn)