GM Subpoenaed Over Subprime Auto Loans (GM)

Rob Wile

According to a regulatory filing posted online Monday, prosecutors are looking for loan documents stretching back to 2007.

In particular, they're looking for info about the underwriting standards used to originate loans, and the corresponding "warrants and representation" that get sent along with the loans as they're packaged into securities.  

We've been reading a lot lately about a subprime auto loan bubble —the New York Times says they've climbed 130% in the past five years. And Morgan Stanley's Adam Jonashas argued recent outperformance in auto sales has been driven by overly generous leasing terms.

It's not immediately clear whether prosecutors are looking into this, given that they're looking for info that predates the crisis, but we have no doubt they're aware of the current environment.

King & Spalding, an Atlanta-based firm, recently explained the statute under which the feds are questioning GM.

"Taking advantage of FIRREA’s lengthy statute of limitations, arguably low burden of proof , and the ability to issue administrative subpoenas to conduct a civil investigation in advance of filing a civil complaint, the government’s actions appear to promise a host of suits targeting many financial institutions." 

Here's the full text of the filing:

On July 28, 2014, General Motors Financial Company, Inc. (the “Company”) was served with a subpoena by the U.S. Department of Justice directing it to produce certain documents relating to its and its subsidiaries’ and affiliates’ origination and securitization of subprime automobile loan contracts since 2007 in connection with an investigation by the U.S. Department of Justice in contemplation of a civil proceeding for potential violations of Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Among other matters, the subpoena requests information relating to the underwriting criteria used to originate these automobile loan contracts and the representations and warranties relating to those underwriting criteria that were made in connection with the securitization of the automobile loan contracts.

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