Countrywide under FBI Investigation for Possible Fraud

Countrywide Financial Corp., the largest mortgage lender of the U.S. is under the scrutiny of the Federal Bureau of Investigation for possible securities fraud, said a person familiar with the matter.

The focus of investigation lies in finding whether Countrywide's management altered the quality of its mortgages in routine securities filings. It could have led investors to assess too highly the loans it then securitized into more than $100 billion worth investment vehicles between 2004 and 2007.

The person, who made the revelation refused to be identified but said the inquiry, reported earlier by the Wall Street Journal, was preliminary.

Besides Countrywide, FBI is checking more than a dozen of companies including mortgage lenders, housing developers and Wall Street firms, for possible breaches in accounting related to the subprime lending crisis.

The Calabasas, California-based Countrywide claimed to be oblivious of FBI’s inquiry. "We are not aware of an investigation being conducted by the FBI," said Countrywide spokeswoman Jumana Bauwens.

The mortgage lender is already under investigation by the Securities and Exchange Commission, the top US financial regulator, probably for indecent accounting.

However, if Countrywide emerges guiltless from the FBI investigation, it could rush for a planned $4 billion acquisition by Bank of America, the nation's second-biggest bank by assets, put down for completion in the third quarter.

Countrywide went down 2.5 percent to $5.07 a share on March 7, which is 20 percent lower than its closing price on Jan. 11, when the Bank of America made its $4 billion offer for purchasing the lender. The stock has shed 86 percent in the past year in New York Stock Exchange trading.