A federal jury has subpoenaed documents from 3 mortgage lenders, suggesting that prosecutors are looking for evidence of fraud.
July 24, 2008: 2:46 PM EDT
LOS ANGELES (AP) -- A federal grand jury is investigating subprime mortgage lenders Countrywide Financial Corp., New Century Financial Corp. and IndyMac Federal Bank, a person familiar with the situation told The Associated Press on Thursday.
Subpoenas seeking documents have been issued to all three companies, according to the person, who was not authorized to speak publicly about the case and requested anonymity.
The subpoenas are seeking e-mails, phone bills, financial records and other information, according to the Los Angeles Times, which cited people with direct knowledge of the subpoenas in first reporting the investigation was under way.
The grand jury investigation is the clearest sign yet that prosecutors are investigating whether fraud and other crimes might have contributed to the mortgage crisis that led to the demise of all three California-based lenders.
The Times also said investigators have begun looking at whether Countrywide and its former chairman, Angelo Mozilo, gave mortgage breaks to influential friends, including members of Congress.
Countrywide (CFC, Fortune 500) had been the nation's largest originator and servicer of home loans. Its business included subprime loans, many of which went to people with poor credit histories.
California, Illinois and the city of San Diego are suing the company over its lending practices.
Bank of America Corp. (BAC, Fortune 500) bought Countrywide in a deal approved by the lender's shareholders late last month. Scott Silvestri, a spokesman for Bank of America, did not immediately return a call from the AP seeking comment.
New Century (NEWCQ) had been the second-largest originator of subprime loans in the country before seeking Chapter 11 bankruptcy protection in April 2007. Subprime loans are those made to borrowers with poor credit repayment records.
Federal regulators seized IndyMac's (IDMC) assets on July 11. The bank is the largest regulated thrift in the nation to fail, regulators said.
The FBI told The Associated Press last week that it is investigating IndyMac.
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