Government Intensifies Mortgage Investigation

New York Times (05/05/08) P. C1; Browning, Lynnley
Federal agencies are turning up the heat in their probe into the mortgage business, and the focus may be shifting to whether some lenders ignored exaggerated income data that borrowers put on their applications. A new task force--comprised of representatives from the Federal Bureau of Investigation and the Internal Revenue Service, as well as prosecutors in several major cities--was assembled at the beginning of the year to review home loans made with little or no proof of consumers' earnings or assets. While the panel is taking a hard look at the part that mortgage lenders and brokers played in facilitating low- or no-income products, it has broadened its scope to include how these loans were packaged into securities. The deeper scrutiny comes in the wake of recent disclosures of failed mortgage investments that have generated billions of dollars in additional write-downs for financial companies. "This is a look at the mortgage industry across the board, and it has gotten a lot more momentum in recent weeks because of the banks' earnings shortfalls," confirms a government official who asked to remain anonymous.