Mortgage brokers, who arranged loans, then sold them to banks and to Wall Street, are in the crosshairs of various state government investigators, as the subprime mortgage debacle continues to unwind.The state of Massachusetts has filed a lawsuit against Lehi Mortgage Services, Inc., a Quincy-based mortgage broker, alleging that Lehi Mortgage fraudulently procured mortgage loans by submitting to lenders asset and income information for loan applicants that was fabricated or inflated.

The suit, filed by Attorney General Martha Coakley, seeks injunctive relief to prohibit Lehi Mortgage from acting as a mortgage broker, civil penalties, and reimbursement of Commonwealth's costs and attorney's fees.

Coakley said her office took after following a referral by the Massachusetts Division of Banks, which said its probe found brokering misconduct in numerous mortgage loans arranged by Lehi.

In addition to filing the lawsuit, Coakley obtained a temporary restraining order to prohibit Lehi Mortgage from destroying documentation related to the business of brokering mortgage loans and prohibiting Lehi Mortgage from transferring or otherwise disposing of company assets.

"Irresponsible behavior by mortgage brokers has directly contributed to the foreclosure crisis that has devastated communities across the state," Coakley said. "Our office will continue to hold businesses accountable for their role in fraudulent mortgage lending, and will continue to work closely with the Division of Banks in doing so."

The complaint asserts that Lehi Mortgage violated the Massachusetts Consumer Protection Act by:

• Soliciting, arranging, and submitting loan applications to lenders that it knew or should have known contained false or inflated asset information;

• Soliciting, arranging, and submitting loan applications to lenders that it knew or should have known contained false and inflated income;

• Failing to make timely and complete mortgage broker disclosures as required by law; and

• Providing loan applicants with loan "pre-approval" letters in violation of Division of Banks regulations that prohibit "pre-approvals" by brokers.

The suit claims that Lehi Mortgage secured mortgage loans for consumers who would not otherwise have qualified for such loans, and, as a result, Lehi Mortgage received fees from lenders it otherwise would not have received had it submitted accurate information.

Last week, Illinois Attorney General Lisa Madigan has issued subpoenas to Countrywide Home Loans, Inc., and Wells Fargo Financial Illinois, Inc., to determine whether the lenders unfairly steered African American and Latino borrowers into higher cost home loans in violation of fair lending and civil rights laws.

Madigans probe follows a Chicago Reporter study finding that the Chicago area led the country in high-cost home loans for the second year in a row.

The study also found marked disparities in loan pricing between white and non-white borrowers, with African American borrowers three times as likely as white borrowers to receive a high-cost home loan and Latino borrowers twice as likely.