JIM HENRY

SEC joins pile of regulators probing subprime loan securitization

Jim Henry is a special correspondent for Automotive News.

It appears that when it comes to investigating the securitization of subprime auto loans, the bigger the mountain of regulators, the better.

The latest agency to pile on is the Securities and Exchange Commission, which is launching probes on top of parallel investigations by the U.S. Department of Justice and some state attorneys general.

Last week, GM Financial and Ally Financial disclosed in separate reports aimed at investors that they had received document requests from the SEC in connection with the agency’s investigation into subprime auto loan securitization practices.

Steve Jones, vice president of investor relations at GM Financial, told Automotive News in an email on Monday that the SEC’s request is “similar in scope to the requests received by GM Financial from other federal and state agencies.”

Jones said the time frame for the SEC’s “voluntary request for information” covered Jan. 1, 2011, to the present. He added: “GM Financial is cooperating with all agencies.”

Last summer, Santander Consumer USA and GM Financial disclosed they had received subpoenas in connection with subprime auto loans and securitization from the U.S. Department of Justice. The disclosures cited language similar to that used recently by GM Financial and Ally in describing the document requests they received from the SEC. However, the time frame on the Justice Department subpoenas began earlier, starting from 2007.

The regulators aren’t saying, but legal experts have speculated the various agencies are investigating whether investors in asset-backed securities got sufficient warnings about risk. Auto lenders often sell off bundles of loans to investors in the form of asset-backed securities.

Last month, GM Financial also disclosed that some state attorneys general had issued it subpoenas along similar lines.

Several lenders said last month at an auto conference in Las Vegas they were hiring, to beef up their compliance departments. That trend looks like it will continue.

You can reach Jim Henry at autonews@crain.com

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