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January 30, 2008
FBI To Probe Subprime Mess
Rick Moran
Were laws broken during the subprime mortgage bubble? The FBI wants to know:
The Federal Bureau of Investigation has opened criminal inquiries into 14 companies as part of a wide-ranging investigation of the troubled mortgage industry, F.B.I. officials said Tuesday.
The F.B.I. said it was looking into possible accounting fraud, insider trading or other violations in connection with loans made to borrowers with weak, or subprime, credit.
The agency declined to identify the companies under investigation but said the inquiry, which began last spring, involves companies across the financial industry, including mortgage lenders, loan brokers and Wall Street banks that packaged home loans into securities. It is unclear when charges, if any, might be filed.
As part of its investigation, the F.B.I. is cooperating with the Securities and Exchange Commission, which is conducting about three dozen civil investigations into how subprime loans were made and packaged, and how securities backed by them were valued. State prosecutors are also investigating various areas of the mortgage industry. Fraud may be one area where the feds are going to concentrate. There have been numerous complaints from consumers that lenders misrepresented the terms of mortgages although it may be very difficult to prove intent to deceive.
More than 35,000 "suspicious activity" reports were filed with the FBI in 2006. That's up from 22,000 in 2005 and just 7,000 in 2003.
State regulators are also looking into the problems and are complaining that no clear lines of policing the industry have been established between federal and local jurisdictions.
One thing is for sure, it will be a while before all of this is untangled and the real story of what happened emerges.
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