GM unit gets subpoena over subprime auto loans

Mon Aug 4, 2014 2:58pm EDT
 
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By Aruna Viswanatha and Peter Rudegeair

WASHINGTON/NEW YORK (Reuters) - The U.S. government is investigating General Motors Co's (GM.N: Quote) auto financing arm over subprime auto loans it made and securitized since 2007, the company disclosed on Monday.

General Motors Financial Co Inc said it was served with a subpoena from the Department of Justice directing it to turn over documents related to underwriting criteria.

The subpoena, which the company said was in connection with an investigation into possible violations of the civil fraud law FIRREA, also asked for information on the representations GM made about the criteria when the loans were pooled into securities.

Financial services firms have paid billions of dollars to resolve investigations under FIRREA into questionable mortgages pooled into securities in the run-up to the financial crisis. The new subpoena could be one of the first public acknowledgements that investigators are also looking at the securitization of subprime auto loans.

FIRREA, the Financial Institutions Reform, Recovery and Enforcement Act, allows the Justice Department to sue over fraud affecting a federally insured financial institution.

GM Financial was known as AmeriCredit Corp until the carmaker acquired it in October 2010. It issued $2.15 billion in securities backed by subprime auto loans in the first six months of 2014, making it the second-largest issuer of such securities for the period.

INCREASED SCRUTINY   Continued...

 
Vehicles sit parked in a lot at a General Motors vehicle factory in Sao Jose dos Campos July 30, 2014.  REUTERS/Roosevelt Cassio