WASHINGTON (CNN) -- The FBI is investigating Indymac Bancorp for fraud, a source tells CNN.

The California-based bank was taken over by federal regulators last week.

Indymac's collapse was the second-largest bank failure in U.S. history.

A source said the federal government is looking into whether the bank engaged in fraud when it made home loans to high-risk borrowers.

The source said the investigation is focused primarily on the company, not individuals.

Meanwhile, Josh Hochberg, the former head of the U.S. Justice Department's fraud section, said that any investigation of Indymac would probably look into whether the bank used false information to give loans to people who wouldn't have otherwise been eligible.

"I would suspect they are looking at bad appraisals, bad underwriting, which would mean false statements on loan applications, some of which require federal forms to be filled out -- so they can be prosecuted for the false statements," he said. "I would also suspect they would look at false statements to the investing community for securities fraud violations."

In a written statement, the FBI didn't specifically comment on Indymac but noted that it is investigating 21 corporations in the subprime lending market for possible mortgage fraud.

"We receive information from a variety of sources on a daily basis, and we have an obligation to review each allegation on its own merits," the statement said. "Given the volatility of today's subprime market, we have seen an increase in subprime related complaints."

The statement said that in order to protect the integrity of its investigations, the bureau does not comment about or confirm specific companies that may be under scrutiny.

Friday's closure of IndyMac bank sparked investor panic that sent shares of mortgage finance giants Fannie Mae and Freddie Mac on a wild ride and fueled speculation of a government rescue. See a timeline of other banks that have failed »

IndyMac, which reopened Monday under federal supervision, was once one of the nation's largest home lenders.

Thanks in part to the nation's mortgage crisis, it lost hundreds of millions of dollars this year and in 2007, and concerns about the bank led customers to withdraw $1.3 billion in the last two weeks, prompting the government takeover.

On Sunday, the Treasury Department and Federal Reserve announced steps to make funds available to Fannie Mae and Freddie Mac if necessary. Fannie Mae and Freddie Mac were created to help individuals realize the American dream of home ownership, but they now find their survival at risk in the U.S. mortgage crisis.

About 95 percent of the $19 billion in deposits in Indymac bank are insured, but that leaves $1 billion that was not covered by Federal Deposit Insurance Corp. guarantees, according to CNNMoney. According to the FDIC, 10,000 IndyMac customers could lose as much as half of that amount, or $500 million.

The agency says the failure will cost the Deposit Insurance Fund between $4 billion and $8 billion, based on preliminary estimates.

"This will certainly be a costly failure. Whether it's the costliest, we just don't know at this point," FDIC Chairwoman Sheila Bair said late Friday night.

The failure of Indymac could also affect premiums paid by all banks for deposit insurance, she added.

IndyMac grew rapidly during the real estate and home building boom. Its specialty was so-called Alt-A loans, those for which home buyers were asked to produce little or no evidence of income or assets other than the house they were buying.

All About IndyMac Bancorp Inc. • Fannie Mae • Freddie Mac Holdings