GE Lending Unit Said to be Target of U.S. Probe

At issue is whether WMC Mortgage knowingly wrote fraudulent loans it later sold to investors.

Federal authorities are investigating possible fraud at General Electric Co.’s former subprime mortgage arm amid increased public pressure to hold Wall Street accountable for its role in the financial crisis.

The FBI and Justice Department are looking into potentially criminal business practices at WMC Mortgage Corp. in Burbank during the home-loan boom, according to four people with knowledge of the investigation. They declined to be identified because of the sensitivity of the investigation.

The government is asking whether WMC used falsified paperwork, overstated income and other tactics to push through questionable loans, two of the people said. They said the probe appears to be focusing on whether senior managers condoned improper practices that enabled fraudulent loans to be sold to investors.

“It’s mostly about: Did they knowingly sell mortgages into the secondary market that they knew were fraudulent?” said one person with direct knowledge of the investigation.

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