US mortgage probe turns to HSBC

CRUSADING New York Attorney General Eliot Spitzer has requested information from HSBC's American arm, Household International, as part of a wider probe into mortgage lending.

It is Spitzer's first foray into retail lending practices and comes after a string of successful investigations by his office into the mutual fund industry, insurance and investment banking.

At issue in his latest salvo are lending practices for home loans, particularly whether the rates offered to minority, or poorer, customers, are excessive. A spokesman for HSBC confirmed today that the bank was cooperating with Spitzer's request.

HSBC bought Household International for $14bn(£9bn at the time) in 2002, greatly expanding its reach in the US. Its business includes home loan lending, including to poorer customers.

As many as 10 companies could have been hit by requests for information. Spitzer's action follows greater mandatory disclosure by banks in the US about their mortgage businesses. The Home Mortgage Disclosure Act required them to issue information on the race and gender of those applying for loans, and whether they were accepted, by 31 March.

Banks also had to disclose whether loan holders were paying interest rates of more than three percentage points above the US Treasury rate, the lending market benchmark.

Spitzer's investigations typically see his office issue hundreds of requests to companies for information, which his staff then comb through for evidence of possible wrongdoing.

Some of the many probes have followed tip-offs from insiders about what to search for. Often cases involve neither indictments nor court appearances but are ended through multi-million-dollar negotiated settlements.

There is no suggestion HSBC or any of the other lenders that have been asked for information, have done anything wrong.

Spitzer, a Democrat, has been nurturing political ambitions, and is running to be New York state's governor in next year's election

He has often attacked federal regulators in Washington - including the Securities and Exchange Commission, which polices Wall Street - for not doing enough to protect and enforce consumers' rights, labelling them 'spineless and gutless'.

'If the public thinks I've done the right job, then maybe they will vote for me for governor, or maybe not,' Spitzer said recently.

'Capitalism is the best system. We have to, having said that, enforce the rule of law.'