The FBI is investigating at least fourteen companies embroiled in the sub-prime mortgage crisis as part of a crackdown on improper lending and inside information according to The Wall Street Journal.
FBI did not identify the companies but said the investigation encompassed developers, sub-prime lenders and investment banks. FBI officials said the agency was looking at instances of accounting fraud and insider trading. The cases could lead to potential civil or criminal charges, the FBI said. According to the FBI mortgage fraud is viewed as an increasing threat to the national economy. It said that there had been 1,200 cases of mortgage fraud for the 2007 financial year compared with just 400 in 2006. The crisis in the sub-prime lending market has hit financial markets worldwide, led to a credit crunch and increasing fears of a serious recession in the US. FBI said it was investigating the cases with the US market regulator, the Securities and Exchange Commission. SEC has opened about three dozen investigations into the collapse of the sub-prime market. Targets of the SEC probe include Swiss bank UBS and US banks Morgan Stanley, Merrill Lynch and Bear Stearns, reported Reuters news agency. However it was not clear whether any of these firms were involved in the FBI investigation. The sub-prime market is focused on providing home loans to those with poor or limited credit histories. Many of these borrowers have been unable to keep up with payments and face losing their homes. The wider crisis emerged as many of these mortgages were converted into financial instruments and sold on to investors including the big investment banks. Defaults on these loans caused a steep drop in the value of related investments and has led to more than 100 billion of losses at banks worldwide, so far. FBI has been looking into mortgage fraud for the last ten years and so far has concentrated on cases involving real estate agents, assessment professionals and fictitious buyers according to the Wall Street Journal.
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