WASHINGTON - April 13, 2010 - The mortgage lending operations of Washington Mutual, the biggest U.S. bank ever to fail, were threaded through with fraud and the bank's own inquiries were unable to stop the deceptive practices, according to a report by Senate investigators.

The investigators said the bank's pay system rewarded loan officers for the volume and speed of the subprime mortgage loans on which they closed. Bonuses even went to loan officers who overcharged borrowers or levied stiff penalties for prepayment, according to the report being released Tuesday by the investigative panel of the Senate Homeland Security and Governmental Affairs Committee.

Chairman Carl M. Levin (D-Mich.) said Monday that the panel would decide after hearings this week whether to make a formal referral to the Justice Department for possible criminal prosecution. Justice, the FBI and the Securities and Exchange Commission opened investigations of Seattle-based Washington Mutual soon after its collapse in September 2008.