Subpoenaed Employees Raise Concerns Over Mortgage Disclosures

  • SEC interviews three former Change Lending employees under subpoena
  • Investigation focuses on accurate recording of mortgages for Black and Hispanic borrowers
  • Change is a certified Community Development Financial Institution with relaxed underwriting rules
  • Former employee alleges misleading investors about lending to underserved groups
  • SEC subpoenas indicate advanced stage of investigation

The Securities and Exchange Commission (SEC) is investigating Change Lending, a California mortgage lender, focusing on whether the company accurately recorded mortgages for Black and Hispanic borrowers in its government disclosures. The firm is certified as a Community Development Financial Institution (CDFI), which requires at least 60% of its lending to underserved groups. A former chief of staff filed a whistle-blower complaint alleging misleading investors about lending practices. Change Lending has faced scrutiny over its lending to low-income borrowers and lost CDFI status temporarily before regaining it through a settlement agreement.

Factuality Level: 8
Factuality Justification: The article provides accurate and objective information about the SEC’s investigation into Change Lending, including details on the interviews with former employees, the company’s CDFI status, and the whistle-blower complaint from a former chief of staff. It also includes statements from Change Lending in response to the allegations. While it does mention a legal challenge by the company against Barron’s analysis, it presents both sides of the argument without favoring one over the other.
Noise Level: 6
Noise Justification: The article provides relevant information about the SEC’s investigation into Change Lending and its compliance with CDFI requirements, but it also includes some filler content such as advertisements and repetitive mentions of Barron’s investigation. Additionally, there is a brief mention of Antonio Villaraigosa’s political campaign without directly relating to the main topic.
Private Companies: Change Lending,Change Company
Key People: Adam Levine (former chief of staff at Change), Antonio Villaraigosa (former Los Angeles Mayor and board chair of Change Company), Arthur Laby (former lawyer with the SEC and co-director of the Rutgers Center for Corporate Law and Governance)

Financial Relevance: Yes
Financial Markets Impacted: SEC, Change Lending and related financial institutions
Financial Rating Justification: The article discusses an investigation by the Securities and Exchange Commission (SEC) into Change Lending’s lending practices, which could impact the company’s regulatory status and potentially affect other financial institutions that are also certified as Community Development Financial Institutions. The investigation focuses on whether Change Lending accurately reported its lending to Black and Hispanic borrowers, which could have implications for the financial markets and companies in the mortgage industry.
Presence Of Extreme Event: No
Nature Of Extreme Event: Other
Impact Rating Of The Extreme Event: Minor
Extreme Rating Justification: There is no extreme event mentioned in the article, but the SEC investigation into Change Lending’s practices could potentially escalate to a more significant issue if it uncovers major misconduct.
Move Size: No market move size mentioned.
Sector: Finance
Direction: Down
Magnitude: Large
Affected Instruments: Stocks

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