FBI mortgage probe examining 17 large firms

By Randall Mikkelsen

WASHINGTON (Reuters) - The FBI's criminal probe of the mortgage lending industry has grown to 17 firms, involves large companies, and could take years to conclude, bureau officials said on Tuesday in a Reuters interview.

The investigation now involves 17 firms, up from 16 previously acknowledged, the officials said.

"The corporate fraud cases are pretty large entities," said Neil Power, economic crimes unit chief of the Federal Bureau of Investigation's financial crimes section. "The majority I would think we're looking at years."

Power declined to comment when asked if the FBI was looking into the collapse of Bear Stearns, which led to an emergency sale to JPMorgan Chase last weekend. However, he said, "common sense would indicate that we would look at something that big."

The hundreds of FBI agents taking part in the probe are looking at issues including all phases of the process of securitizing loans, insider trading and whether firms properly disclosed the value of their assets.

Corporate employees ranging from senior executives to lower-level management were under scrutiny, an official said.

The officials described widespread opportunities for fraud in the industry, which can all be traced back to human greed, and to lax documentation in loan applications, which allowed for loans based on false values or income.

"The problem is that banks weren't doing their due diligence," Power said.