by Calculated Risk on 1/26/2008 10:49:00 PM

Jenny Anderson and Vikas Bajaj at the NY Times report: Reviewer of Subprime Loans Agrees to Aid Inquiry (hat tip James)

Clayton Holdings, a company ... that vetted home loans for many investment banks, has agreed to provide important documents and the testimony of its officials to the New York attorney general, Andrew M. Cuomo, in exchange for immunity from civil and criminal prosecution in the state.

... Clayton has told the prosecutors that starting in 2005, it saw a significant deterioration of lending standards and a parallel jump in lending exceptions. In an another sign that the industry was becoming less careful, some investment banks directed Clayton to halve the sample of loans it evaluated in each portfolio, a person familiar with the investigation said.
...
It is unclear how many lending exceptions are contained in the $1 trillion subprime mortgage market, but industry participants cite figures ranging from about 50 percent to 80 percent for some loan portfolios they examined.

It seems the key question here is: Did the investment banks adequately disclose the information from Clayton to the investors in the mortgage securities?