UPDATE 2-FBI home mortgage probe now targets 19 firms

(Adds details, background)

By Randall Mikkelsen

WASHINGTON, April 16 (Reuters) - The FBI's probe of potential fraud in the U.S. home mortgage industry now encompasses 19 companies, up from 17 a month ago, agency director Robert Mueller told Congress on Wednesday.

He said there was no end in sight to the growth of individual and corporate fraud cases, and the Federal Bureau of Investigation was reassigning agents from other areas such as financial fraud and health care to cope.

"We've had a tremendous surge in cases related to the subprime mortgage debacle. We currently have almost 1,300 cases that have grown exponentially over the last several years and we expect them to grow even further," he said.

"We have also 19 cases involving institutions themselves where mortgage fraud may have contributed to misstatements and the like," Mueller said in testimony before a Senate appropriations subcommittee.

Bureau officials declined to name any additional companies targeted in the probe. "We've always said it was a fluid number," FBI spokesman Stephen Kodak said. "It could change at any time." He said the bureau has publicly acknowledged only one company as involved -- Doral Financial Corp (DRL.N).

A former Doral treasurer was indicted for investment fraud last month. He denied the allegations and the company declined to comment.

The largest U.S. mortgage lender, Countrywide CFC.N, also is under FBI investigation, authorities have said, although the FBI has declined to comment and Countrywide said it was unaware of any investigation.

When the FBI disclosed its industry investigation, major investment banks Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Bear Stearns Cos BSC.N each said the government had asked them for information, but there was no confirmation of any FBI role. Beazer Homes (BZH.N) said last year it had received a federal grand jury subpoena related to its mortgage business.

Mueller added that the agency also was seeing cases involving reverse mortgages.

Mueller was testifying on the agency's budget request for fiscal 2009, which begins Oct. 1.

"When this budget was put together, the subprime mortgage cases had not grown to the point where we could see the extent of the surge, and I'm not certain at this point we can see the extent of the surge," he said.

Bureau officials have said the probe is targeting major corporate insiders as well as lower ranks, and could take years to conclude. (Editing by Richard Chang and Carol Bishopric)