FBI takes a look at mortgage industry

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.

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