Federal Grand Jury Investigating Countrywide, IndyMac, New Century (Richard B. Schmitt)

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Grand Jury Seal

Sources say subpoenas have been issued to the lenders, in the clearest sign yet that prosecutors are looking into whether fraud and other crimes contributed to the mortgage debacle.

WASHINGTON -- A federal grand jury in Los Angeles has begun probing three of the nation's largest subprime mortgage lenders in the clearest sign yet that prosecutors are investigating whether fraud and other crimes contributed to the mortgage debacle.

{xtypo_quote_left} Irvine-based New Century, an early illustration of the mortgage boom and bust, has been operating under federal bankruptcy law protection since April 2007. In a lengthy report last March, a court-appointed examiner concluded that the bank had engaged in improper accounting that overstated its profit and allowed top executives to reap millions in inflated or undeserved bonuses. {/xtypo_quote_left}

Grand jury subpoenas have been issued in recent weeks and months to Countrywide Financial Corp., New Century Financial Corp. and IndyMac Federal Bank seeking a wide range of information, according to sources with direct knowledge of the subpoenas.

People familiar with the situation told The Times that the subpoenas seek e-mails, phone bills and bank records and follow interviews that federal investigators have conducted with employees and others knowledgeable about the lending operations of the three Southern California institutions, which all collapsed under the weight of bad loans.

In the case of Countrywide, the sources said, investigators have also begun looking into news reports that the firm and its former chairman, Angelo Mozilo, gave mortgage breaks to members of Congress and other influential "friends of Angelo," including Richard Aldrich, an associate justice of the California Court of Appeal.

The investigations are part of a coordinated Justice Department effort that until now has focused primarily on smaller operators suspected of defrauding homeowners and mortgage lenders.