FBI Probing 14 Companies For Loan Fraud

Companies Under Investigation For Possible Fraud In Connection With Subprime Loans

(AP)  The FBI on Tuesday said it is investigating 14 companies for possible accounting fraud, insider trading or other violations in connection with home loans made to risky borrowers.

Agency officials did not identify the companies under investigation but said the wide-ranging probe, which began in spring 2007, involves companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors.

The Federal Bureau of Investigation is working in conjunction with the Securities and Exchange Commission on the corporate-fraud probe, said Neil Power, chief of the FBI's economic crimes unit in Washington.

As the nation's housing crisis worsens, there has been a dramatic spike in the number of mortgage fraud cases under investigation. An agency spokesman said 1,210 such cases are open, up from roughly 800 a year ago.

The announcement comes weeks after authorities in New York and Connecticut said they are investigating whether Wall Street banks hid crucial information about high-risk loans bundled into securities sold to investors.

Power said the FBI is looking into the practices of so-called subprime lenders, as well as potential accounting fraud committed by financial firms that hold these loans on their books or securitize them and sell them to other investors.

Referring to certain unnamed bankrupt subprime lenders, Power said there are "some irregularities there that we're looking into," including the timing of stock sales by executives. Dozens of subprime lenders have filed for bankruptcy in the past year, most prominently New Century Financial Corp.

"We're looking at the executives to see if they were committing insider trading," Power said.

Power also said law enforcement officials are looking at whether homebuilders manipulated financial statements to inflate revenues.

An SEC spokesman declined to comment. The agency has said about three dozen investigations related to the mortgage market meltdown are ongoing.Defaults on subprime loans have risen over the past 12 months and are primarily responsible for the credit crunch that has disrupted global financial markets.

Morgan Stanley, Goldman Sachs Group Inc. and Bear Stearns Cos. all disclosed in regulatory filings Tuesday that they are cooperating with requests for information from various, but unspecified, regulatory and government agencies. Officials at the companies either declined to comment, or could not immediately be reached.

FBI officials also highlighted what they called a growing pattern of suspected mortgage loan fraud potentially committed when loans were made to shaky borrowers. They cited a surge in "suspicious activity reports" that banks are required to file with the government.

The number of those reports is projected to rise to 60,000 this year after hitting 48,000 last year, up from about 7,000 in 2003. "We're going to have to take a hard look at these things," said Assistant FBI Director Ken Kaiser.

Earlier this month, Connecticut Attorney General Richard Blumenthal said he and New York Attorney General Andrew Cuomo were looking whether banks properly disclosed the high risk of default on so-called "exception" loans — considered even risker than subprime loans — when selling those securities to investors.

In November, Cuomo said he issued subpoenas to government-sponsored mortgage companies Fannie Mae and Freddie Mac in his investigation into what he claims are conflicts of interest in the mortgage industry. He said he wanted to know about billions of dollars of home loans they bought from banks, including the largest U.S. savings and loan, Washington Mutual Inc., and how appraisals were handled.

[sophielhu]

Just think what would happen if we privatize Social Security and turn what is left of the fund over to the tender mercies of the Wall Street crooks? Wall Street needs more regulation not less.
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[keithle1]

How did these idiots think they were going to afford to pay the mortgage when the rate changed? Which of course it was going to. Money was gonna fall from the sky?

[keithle1]

"Loan fraud"? I beg your pardon. I''m shocked. Companies wouldn''t do that. They''re not obsessed with profits above all else. As if.

If it sounds too good to be true, it probably is.

Foreclosures have gone up by 79%. Maybe some of us have learned our lesson. Maybe not. The kind of people that fall for the make-money-in-real-estate-with-no-money-down scams.

[fuzzybear9]

Hello Panicky Neighbors

I`m just glad I didn`t refinance the loan
on Wendnesday

WoW how much lower can he Go?

``
Jack Be nibble, Jack be quick,
Jack Jump over Limbo Stick,
Limbo, Limbo, Limbo Rock,
doot do do do doot doot ...
Limbo Limbo Limbo rock
doot do do do doot doot ...
when you do the Limbo Rock.
Gee How much Lower can he Go? ``

Sincerely your almost convinced Bear
Fuzzy

[ov442]

Heres where the REAL economic disaster is coming.
Remember when in spring of 2001 the Stock market SPiked Downward? that was because of ENRON''s illegal dealings and accounting frauding people and it was the tip of an iceberg of about 9 major companies doing the same thing caught around the same time. This was when Bush announced Tighter corporate governance and some laws were passed.
That was the major reason the stock market slid downward for a time because there was PLENTY of money sitting in Investors accounts waiting, but they were skittish. The Tech bubble burst as well and that was bad for investor perception.

Well here we go again for round 2. 14 companies investigated and I will bet you 12 -13 of them are guilty of intentional fraud and questionable if not illegal accounting practices. And i''ll bet at least a half dozen more get investigated by year''s end.
This will PUMMEL the stock market, regardless of incentives.

[rowdytexan2]

Oh Gawd, the 14 companies must have really screwed some big republicans out of some money! lol

After they got all of our money, now they''re going to try to con each other!

Justice may yet be served!

[runningralph]

I meant to say it would be impossible to regulate them all. The millions of investors, that is.

[runningralph]

Wall Street is about the stock exchange. It''s not concerned with mortgages unless the mortgage company sells stock in it''s own company. Millions of investors control the stock market. It would be regulate them all.

[eskieville1]

mcv57 - I am not as cynical as you-but close. I will vote Democratic this year. But I also know there is a good chance McCain could win. I do know McCain is very hard to control -- we can only hope.

[mcv57]

The witch hunt is on. Now I know why the pilgrims burned women and witches - it was a distraction to keep the moB from hanging the officials who where to blame for starvation.