Daily Briefing Weekend Edition

Fraud Probe For IndyMac

By Brian Collins

The FBI opened an investigation of IndyMac Bank for possible mortgage fraud shortly before the insolvent Pasadena, Calif., thrift was closed by regulators on July 11, according to news reports.

The $32 billion thrift that specialized in alt-A lending apparently is one of 21 companies under FBI scrutiny for possible mortgage fraud. "The FBI is currently investigating 21 companies involved in the mortgage/subprime industry," the Federal Bureau of Investigation said in a statement last week that was released in response to news reports about IndyMac.

One month ago, FBI director Robert Mueller told reporters that his agency had initiated 19 subprime-related corporate fraud investigations. And many of these investigations are coordinated with the Department of Justice and the Securities and Exchange Commission.

Those 19 companies include mortgage lenders, investment banks, hedge funds, brokerage houses, rating agencies and due diligence firms.

SEC chairman Christopher Cox told Congress last week that the agency has over four dozen law enforcement investigations in the subprime area. "We are investigating whether mortgage lenders properly accounted for the loans in their portfolios, and whether they established appropriate loan loss reserves," he testified. The SEC also is focused on whether mortgage lenders adequately disclosed the risk profiles of loans they placed in securitizations, Mr. Cox said.

The Federal Deposit Insurance Corp. currently is operating IndyMac as a conservatorship and offering banking services to depositors and borrowers.