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FBI expands inquiry on mortgage lending
The FBI's criminal probe of the mortgage lending industry has grown to 17 firms, involves large companies, and could take years to conclude, bureau officials said today in a Reuters interview.
The investigation now involves 17 firms, up from 16 previously acknowledged, the officials said.
"The corporate fraud cases are pretty large entities," said Neil Power, economic crimes unit chief of the Federal Bureau of Investigation's financial crimes section.
"The majority I would think we're looking at years," Mr Power said.
Mr Power declined to comment when asked if the FBI was looking into the collapse of Bear Stearns, which led to an emergency sale to JPMorgan Chase last weekend. However, he said, "common sense would indicate that we would look at something that big".
The hundreds of FBI agents taking part in the probe are looking at issues including all phases of the process of securitizing loans, insider trading and whether firms properly disclosed the value of their assets.
Corporate employees ranging from senior executives to lower-level management were under scrutiny, an official said.
The officials described widespread opportunities for fraud in the industry, which can all be traced back to human greed, and to lax documentation in loan applications, which allowed for loans based on false values or income.
"The problem is that banks weren't doing their due diligence," Power said.
The FBI disclosed in January that it was investigating 14 firms in its probe of the mortgage-lending industry, where a foreclosure crisis has spread from subprime lenders to the housing market overall, shaken Wall Street and major financial institutions, and threatened the US economy with recession.
Among companies implicated in FBI mortgage probes are Beazer Homes and Doral Financial Corp. A former Doral treasurer was indicted for investment fraud earlier this month. He denied the allegations and the company declined to comment.
The largest US mortgage lender, Countrywide, is also under FBI investigation, authorities have said, although the FBI has has declined to comment and Countrywide said it was unaware of any investigation.
When the FBI disclosed its industry investigation, major investment banks Goldman Sachs, Morgan Stanley and Bear Stearns each said the government had asked them for information, but there was no confirmation of any FBI role and Power declined to comment on individual targets.
The FBI has assigned 100 agents to investigate corporate fraud aspects of the housing crisis, including subprime lending and insider trading. Another 150 are looking at related securities fraud, and 153 are looking at loan originations, officials said.
FBI agents were working in conjunction with the Securities and Exchange Commission and other federal agencies as part of a Justice Department mortgage fraud group, Mr Power said. He said a majority of the FBI corporate cases were referred to the agency
