FBI to probe 21 high-risk mortgage firms

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By Ben Conery THE WASHINGTON TIMES

The FBI announced Wednesday that it is investigating 21 high-risk mortgage companies, up from 17 companies as recently as March.

"We receive information from a variety of sources on a daily basis, and we have an obligation to review each allegation on its merits," the FBI said in a statement. "Given the volatility of today´s subprime market, we have seen an increase in sub-prime related complaints.

The Associated Press reported that the investigation includes IndyMac Bank in California, which was seized by the federal government last week.

IndyMac, with $18 billion in insured deposits and $1 billion in uninsured deposits, specialized in providing risky and exotic loans and bank accounts in California, one of the states hit hardest by the mortgage crisis.

The investigation reportedly centers on whether the IndyMac committed fraud when making loans to risky borrowers, some of whom had to show little proof of income or assets before receiving loans.

The bank's fortunes fell as the nation's mortgage crisis deepened.

IndyMac is the second-largest financial institution to fail in U.S. history and the largest to fail in 25 years.

Throngs of customers descended on the bank, with some even clashing with police, in frenzied attempts to get their money.

"Once I get in the door, I'm going to get every penny I can out of there," Diane Klein, a retired schoolteacher standing outside the bank's Pasadena, Calif., headquarters told the Associated Press. "I'm going to bury it in the back yard."

Ms. Klein originally chose IndyMac for its high interest rates. She said her account has more than the federally insured limit of $100,000 and didn't want to risk losing any of it.

"I worked my whole life for this money," she told the AP. "It's kind of scary."

Joan Rubin was among 200 anxious customers waiting outside the bank. "I've already lost three nights of sleep and three days of eating; now I'm done," Ms. Rubin told the AP.

Most depositors were given immediate access to a maximum of $100,000 in their accounts and 50 percent of any money beyond that threshold, though depositors with joint accounts or retirement accounts could immediately withdraw greater sums, David Barr, a spokesman for the Federal Deposit Insurance Corp. (FDIC) — which is now operating the bank — told the AP.

"It is possible for them to receive more in the future. It's impossible at this point to say how much more. That depends on how much we can get from the sale of the bank and the sale of its assets," he said.

FDIC Chairman Sheila C. Bair has said the vast majority of IndyMac's 200,000 customers are "fully protected."

Federal regulators have blamed erroneous media reports and inflammatory remarks by Sen. Charles E. Schumer, New York Democrat, for accelerating IndyMac's demise.

In a letter to the FDIC and Office of Thrift Supervision (OTS) publicized June 26, Mr. Schumer expressed worry about the bank. According to OTS, customers withdrew $1.3 billion from their accounts after the letter was released.

The federal takeover of IndyMac Bank could cost between $4 billion and $8 billion.