Page last updated at 10:01 GMT, Thursday, 17 July 2008 11:01 UK

FBI 'probes US mortgage lender'

People queue outside an IndyMac branch after its collapse
IndyMac's failure have sparked concerns over other local US banks

Failed Californian mortgage lender IndyMac is reportedly being probed by US officials over suspected fraud.

Media reports say the Federal Bureau of Investigation (FBI) inquiry involves the bank's practice of giving home loans to risky borrowers.

The FBI would not name IndyMac, but said it had widened its investigation of the US sub-prime mortgage industry to 21 firms, up from 19.

IndyMac was seized by US regulators amid fears it was running out of cash.

The bank said it did not know anything about the investigation prior to reading about it in various media reports.

"We're not in a position to confirm or deny (the investigation) because it's an uncorroborated press account," said an IndyMac spokesperson.

He added: "It shouldn't be surprising that there is an investigation because of the size of the bank failure."

More gloom

Concerns about IndyMac's finances amid tumbling home prices and rising foreclosures prompted a run on the bank by panicked customers.

Concerned that it would be unable to meet all depositers' withdrawals, the bank's primary regulator, the Office of Thrift Supervision (OTS), seized its operations and transferred them to the Federal Deposit Insurance Corporation (FDIC), which will seek a buyer.

As of 31 March, the bank had total deposits of $19bn (9.5bn).

People with deposits of up to $100,000 each are covered by insurers.

But about 10,000 people had uninsured funds over that limit with IndyMac - worth a total $1bn at the time of closing last week.

Widening net

Over the past year, the FBI and other US organisations have been increasing efforts to root out mortgage lenders involved in selling home loans to buyers on low or unpredictable incomes, and also the investment banks that packaged these loans together and sold them on.

The slump in the US housing market has resulted in billions of dollars of losses for these banks and ructions in the credit markets.

Last month, two former managers at investment bank Bear Stearns were charged with fraud related to two hedge funds which collapsed after the US sub-prime market turned sour.

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