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Martha Coakley expands inquiry on banks

Seeks data from HSBC Securities in toxic mortgages investigation

Martha Coakley was one of the first attorneys general to start pursuing claims against investment firms who sold the securities.

AP/File

Martha Coakley was one of the first attorneys general to start pursuing claims against investment firms who sold the securities.

Attorney General Martha Coakley of Massachusetts appears to be broadening her investigation into toxic mortgages, demanding that a US affiliate of Europe’s largest bank provide documents, testimony, and other information to her inquiry, according to a regulatory filing.

HSBC Holdings PLC, of London, said the demand received by its affiliate, HSBC Securities Inc., focuses on the sale of residential mortgage-backed securities to governments and private investors in Massachusetts since 2005. HSBC declined to comment further.

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Coakley’s office also declined to comment.

The inquiry comes as many state and federal investigators look into allegations that some banks and investment companies misled borrowers or investors about pools of home loans packaged together and sold to investors around the world during the housing boom. These toxic mortgages and securities were at the center of the housing crash and financial crisis.

Critics say one of the main problems was that many of the loans were made to borrowers who could not afford them, with complex terms they did not understand.

In some cases, borrowers were initially required to make only modest payments, but the payments skyrocketed as soon as the introductory teaser rates expired.

Coakley was one of the first attorneys general to start pursuing claims against investment firms who sold the securities. She has won more than $210 million in settlements against Goldman Sachs, Morgan Stanley, and the Royal Bank of Scotland since 2009.

Most recently, a unit of Royal Bank of Scotland agreed to pay $52 million in November to settle allegations that it financed, purchased, and bundled residential loans into securities that were unfair to consumers under Massachusetts law.

Last month, Coakley joined a national task force of state and federal officials looking into mortgage-backed securities. The group, called the Residential Mortgage-Backed Securities Working Group, will include at least 55 lawyers and investigators from the US Department of Justice, US Attorney General Eric Holder said last month.

Many investors have also sued banks for fraudulently marketing residential mortgage-backed securities. DZ Bank, Germany’s largest cooperative lender, sued HSBC in New York state court last month for allegedly making false and misleading statements related to $122 million in residential mortgage backed securities.

HSBC declined to comment on the suit.

Todd Wallack can be reached at twallack@globe.com. Follow him on Twitter @twallack.
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