Mueller: 'Subprime Debacle' Probe Expanded

April 16, 2008— -- The FBI has again expanded its probe into the subprime mortgage collapse and is now investigating 19 lending institutions, bureau director Robert Mueller told lawmakers today.

Appearing before a Senate Appropriations subcommittee, Mueller told the panel that there has been a "surge related to the subprime debacle."

The investigation has been growing since January, when the FBI began looking at 14 firms. That number rose to 17 last month.

Officials have declined to name the companies that are under scrutiny, but two Justice Department officials confirmed reports that Countrywide Financial, the nation's largest mortgage lender, is a subject of the probe.

Justice Deptartment officials have declined to comment on whether collapsed investment bank Bear Stearns, which JPMorgan Chase & Co. agreed to purchase last month, is under the FBI's watch, but federal filings submitted by the bank in January indicated a possible probe.

Some of Bear's hedge funds invested heavily in subprime lending markets, and the Jan. 29 filing acknowledged that federal and state "regulatory and law enforcement authorities" had inquired about one such fund.

Mueller said the FBI is working more than 1300 mortgage fraud investigations, and pledged that the bureau will "work down systemic economic fraud."

Mueller acknowledged that the increasing number of claims being investigated has put a strain on the bureau, telling the senators at the budgetary hearing that the FBI "will need additional resources" to handle the increased case load.

The mortgage fraud investigations look into all types of alleged schemes, including illegal property flipping, home equity schemes and check fraud cases.