WASHINGTON–Officials at the failed banking operations of Washington Mutual Inc. securitized substantial volumes of risky, fraudulent loans in the run-up to the financial meltdown despite repeated internal warning signs, according to a Senate probe.

The Senate Permanent Subcommittee on Investigations found that problems lending at the Seattle thrift grew so chronic and severe that one mortgage insurer warned it would stop writing coverage for loans generated by one of Washington Mutual's highest-volume offices in California....