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SEC Probing ResCap for Possible Mortgage Fraud

The U.S. Securities and Exchange Commission is investigating Ally Financial mortgage unit Residential Capital for possible misconduct in its loan origination and underwriting practices.

The U.S. Securities and Exchange Commission is investigating Ally Financial mortgage unit Residential Capital for possible misconduct in its loan origination and underwriting practices.

The SEC disclosed in court documents that it had issued a formal order of investigation on Feb. 22 to probe possible fraud in the offer and sale of mortgage-backed securities by ResCap.

The SEC disclosed the inquiry in a court request to force R.R. Donnelley & Sons to turn over certain due diligence records the company prepared for investment banks that underwrote the securitizations.

The agency said it needed the reports to determine whether ResCap made "material misrepresentations or omissions about the mortgage loan pools that backed the securitizations under investigation."

ResCap filed for bankruptcy in May to shed liability for mortgage-related claims that were weighing on Ally.

Representatives of Ally and R.R. Donnelley were not immediately available for comment.

Copyright 2012 by Reuters. All rights reserved.

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