WASHINGTON (AP) — Former senior executives of mortgage lender Washington Mutual, the biggest U.S. bank in history to fail, are appearing before Congress on Tuesday for the first time since the bank's September 2008 collapse.

Their testimony follows an 18-month investigation by a Senate panel that found fraud throughout the bank's lending operations and failure by management to stem the deception despite internal probes.

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

Testifying at a hearing of the subcommittee Tuesday are former Washington Mutual CEO Kerry Killinger, ex-President and Chief Operating Officer Stephen Rotella, and David Schneider, who was the highest-ranking executive in the bank's home lending operation. Two former chief risk officers and an internal auditor are also due to appear.

Sen. Carl Levin, D-Mich., the subcommittee chairman, said Monday the panel won't decide until after the hearings on Tuesday and Friday 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 into Washington Mutual soon after its collapse in the fall of 2008 at the height of the financial crisis.

The new report by the Senate investigators said the top WaMu producers, loan officers and sales executives who made high-risk loans or packaged them into securities for sale to Wall Street, were eligible for the bank's President's Club, with trips to swank resorts — like Maui in 2005.

Fueled by the housing boom, Seattle-based Washington Mutual's sales to investors of packaged subprime mortgage securities leapt from $2.5 billion in 2000 to $29 billion in 2006. The 119-year-old thrift, with $307 billion in assets, failed in September 2008. It was sold for $1.9 billion to JPMorgan Chase & Co. in a deal brokered by the Federal Deposit Insurance Corp.

WaMu was one of the biggest makers of so-called "option ARM" mortgages, which allowed borrowers to make payments so low that loan debt actually increased every month.

The Senate subcommittee investigated the Washington Mutual failure for a year and a half. It focused on the thrift as a case study for the financial crisis that brought the recession and the loss of jobs or homes for millions of Americans.

Senior executives of the bank were aware of the prevalence of fraud, the Senate investigators found.

Washington Mutual "was one of the worst," Levin told reporters Monday. "This was a Main Street bank that got taken in by these Wall Street profits that were offered to it."

The investors who bought the mortgage securities from Washington Mutual weren't informed of the fraudulent practices, the Senate investigators found. WaMu "dumped the polluted water" of toxic mortgage securities into the stream of the U.S. financial system, Levin said.

In some cases, sales associates in WaMu offices in California fabricated loan documents, cutting and pasting false names on borrowers' bank statements. The company's own probe in 2005, three years before the bank collapsed, found that two top producing offices — in Downey and Montebello, Calif. — had levels of fraud exceeding 58 percent and 83 percent of the loans. Employees violated the bank's policies on verifying borrowers' qualifications and reviewing loans.

In an episode in 2007, some of WaMu's mortgages were viewed as so suspect by American International Group Inc. that it refused to insure them and complained to both California and federal regulators, according to the Senate investigators. AIG, one of the world's largest insurance companies, itself nearly collapsed in the fall of 2008 and received about $180 billion in bailout aid from the government.

Washington Mutual was repeatedly criticized over the years by its internal auditors and federal regulators for sloppy lending that resulted in high default rates by borrowers, according to the report. Violations were so serious that in 2007, Washington Mutual closed its big affiliate Long Beach Mortgage Co. as a separate entity and took over its subprime lending operations.

In late 2006, Washington Mutual's primary regulator, the U.S. Office of Thrift Supervision, allowed the bank an additional year to comply with new, stricter guidelines for issuing subprime loans.

According to an internal bank e-mail cited in the report, Washington Mutual would have lost about a third of the volume of its subprime loans if it applied the stricter requirements.

Jennifer Zuccarelli, a spokeswoman for JPMorgan Chase, declined to comment Monday on the subcommittee report.