FBI Probes 14 Companies Involved in Subprime Mortgages
The FBI is investigating 14 companies in connection with the fallout in the subprime mortgage market.
The criminal inquiries will include a look at possible accounting fraud and insider trading, according to reports in the New York Times and Wall Street Journal (sub. req.). The FBI will also cooperate with ongoing Securities and Exchange Commission civil investigations into how subprime loans were made and packaged for sale to investors.
Although the FBI did not identify specific targets, it disclosed that its probe includes mortgage lenders, loan brokers and Wall Street banks that packaged mortgage loans into securities for investors.
The Wall Street Journal story says one area of inquiry is whether real loans were used to create the securities, which can hold thousands of mortgages. The probe might look into whether one mortgage was used in multiple securities offerings to meet high investor demand.
The WSJ noted previous reports that federal prosecutors in Brooklyn and the SEC are investigating the collapse of two Bear Stearns & Co. hedge funds. Also, the SEC and Justice Department are probing possible insider trading and accounting problems at troubled mortgage lender New Century Financial Corp. And the SEC is investigating accounting practices at mortgage lender Countrywide Financial Corp.
Several state attorneys general have also opened subprime investigations while investors are filing class action lawsuits over subprime issues.
