US widens mortgage probe

The two agencies finance almost half of US housebuyers

The US is launching a special investigation into accounting at the country's two main mortgage finance companies, after faults revealed in June sparked concerns about the wider health of the industry.

The Office of Federal Housing Enterprise Oversight (OFHEO), the main regulator, said it was hiring forensic accountants for an investigation into Freddie Mac, the state-sponsored mortgage firm which has admitted bookkeeping irregularities.

OFHEO also said it was looking into the accounts of Fannie Mae, the other main firm, which has not so far been the subject of any scrutiny.

Fannie Mae and Freddie Mac are crucial to the US financial system, since they effectively underwrite the mortgage market, financing nearly half of all American housebuyers, and dealing actively in bonds and other financial instruments.

Hearings

Federal oversight of the two firms may be led by Mark Brickell, who is due to be grilled by the Senate on 22 July.

The nomination of Mr Brickell is likely to be used by legislators as an unofficial congressional probe into the dealings of the two agencies.

Meanwhile, the House of Representatives have introduced legislation aimed at giving the Treasury Department responsibility for overseeing Fannie Mae and Freddie Mac.

The House also plans its own hearings into the affair in late July.