Ally Financial records subpoenaed

DETROIT – Federal investigators have subpoenaed mortgage records from Ally Financial Inc., signaling that a probe into troubled mortgages that helped cause the financial meltdown is turning toward original underwriters of home loans that went bad.

Ally, the former finance arm of General Motors that was bailed out by the U.S. government, disclosed the subpoenas Wednesday in a filing with the U.S. Securities and Exchange Commission. The filing is another step in Ally’s bid to sell stock in a yet-unscheduled initial public offering.

The subpoenas indicate that investigators now are looking at mortgage originators, companies that signed up borrowers and approved home loans that were bundled into securities and sold to investors. Many of the loans went bad.

Peter Henning, a former SEC attorney and a law professor at Wayne State University in Detroit, said investigators are looking at originators because of lax lending standards. They also may be looking into whether banks knew the loans were no good but failed to disclose that to investors who bought mortgage securities, he said.

“When you look at the origination standards, there were no standards,” Henning said. “It was ‘pump out product.’ ”

The U.S. government owns 74 percent of Ally, which it got in exchange for a $17.2 billion bailout.