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Capital One Subpoenaed by U.S. Amid Mortgage-Fraud Investigation

Feb. 27 (Bloomberg) -- Capital One Financial Corp., the bank that gets more than half of its revenue from credit cards, received subpoenas and information requests from U.S. authorities investigating mortgage fraud.

The lender and its GreenPoint Mortgage unit received the requests last year, McLean, Virginia-based Capital One said today in its annual filing with the Securities and Exchange Commission.

The Residential Mortgage-Backed Securities Working Group, which pulled together the Justice Department and state attorneys general to bring cases, is among regulators and law enforcement agencies seeking information from Capital One, according to the filing. JPMorgan Chase & Co. agreed last year to a $13 billion accord over allegations it misled investors and the public when it sold bonds backed by faulty home loans.

Capital One, led by Chief Executive Officer Richard Fairbank, said in the filing that it’s “cooperating with these regulators and other authorities in responding to such requests.”

GreenPoint, the lender acquired by Capital One as part of its 2006 purchase of North Fork Bancorp, was sued last year over about $400 million in losses on mortgage-backed securities by trustee U.S. Bancorp. Greenpoint mortgage loans sold to Lehman Brothers Holdings Inc. and bundled into securities were riskier than the lender represented, the trustee said in a July 9 complaint in Manhattan federal court.

The Obama administration set up the RMBS working group in 2012 to coordinate a crackdown on deceptive underwriting practices that contributed to the financial crisis. The six biggest U.S. banks, led by New York-based JPMorgan and Charlotte, North Carolina-based Bank of America Corp., have piled up more than $100 billion in legal costs since the crisis.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net

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