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Title
FBI probes 14 companies over home loans

Link
FBI probes 14 companies over home loans - Yahoo! News
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Excerpt

FBI probes 14 companies over home loans

By ALAN ZIBEL, AP Business Writer 2 hours, 53 minutes ago

WASHINGTON - 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.

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Comment:

accounting fraud, insider trading and other violations in connection with home loans!

no kidding?

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jowey

Wonder if the companies committed fraud will the people be able to keep the homes ? Like a thief getting caught stealing, they lose everything....

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itsmeeeeeee

shirley you jest!

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jowey

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Sean

Wonder how many home owners are guilty of the same; i.e. doctoring their paperwork to attain financing?

Seriously most companies want to foreclose on your home.

DanS.

Why would they want to foreclose?

also...

what does the way that companies bundled the high-risk loans to investors have to do with them helping the homeowners?

Teri B.

If mortgage companies are too stupid to CHECK application information on credit reports, they deserve what they get. Besides, that's seriously got to be a rare occurrence.

I hope they nail these bastards to the wall.

Veronica

Mortgage companies are not in the business of foreclosing. They lose money everytime unless there is about 40% equity in the house. This rarely if ever happens. Most people owe 80 to 100% of the value of their homes. That being said there is more blame on the lender side to be sure for this mess. They relaxed the guidelines too much and Wallstreet was eager for the business.

anhailla

anyone remember Bush saying over and over...

"the number of people that own homes is the highest ever"

yea....until that variable interest rate went to 10..11..12%
bye bye home sweet home

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jowey

If they are stupid enough to give money away they deserve to lose it. I think it so funny that these "businesses" would give people loans/credit cards who cannot afford the payments on the high limits and then cry when they are not paid.

Also they can legally attach to anyone who was put down as a reference and claim that person owes them. This is their solution, to extort money from family and friends rather than eat their stupidity. It is not the desperate person's fault for taking the risk in hopes of being able to pay, it is the moron that put the carrot out and then gets their hand bitten.

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