Shares in Countrywide Financial Corp. closed down 14 percent Monday after a report surfaced over the weekend that the FBI is investigating the lender for possible securities fraud.
The Wall Street Journal reported that federal investigators are looking at whether Countrywide's management misrepresented the quality of its mortgages in routine securities filings, which in turn may have led investors to overvalue more than $100 billion worth of investments between 2004 and 2007.
The Journal added that the inquiry will look at whether fraud might have been a part of Countrywide's origination process.
The FBI is currently investigating more than a dozen lenders about their origination and securitization processes as well as possible conflicts of interest between the lenders and Wall Street.
Countrywide said it had not been informed of any inquiry.
The state of Illinois also announced a probe into whether Countrywide improperly steered minority borrowers into high-cost or inappropriate loans. A handful of other states are investigating the company's lending practices.
If the federal probe does find wrongdoing, it could scuttle the planned $4 billion acquisition of the lender by Bank of America Corp. , slated to be completed in the third quarter.
Shares in Countrywide closed down 14 percent to $4.36 in trading Monday.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- FBI Investigates Countrywide
- Loan Data Focus of Countrywide Probe
- FBI Probing IndyMac for Possible Fraud
- Countrywide Fights Federal Investigation
- Grand Jury Investigating Countrywide, IndyMac, Others
- SEC Probes Countrywide Stock Sales
- Countrywide Helps Out; Mozilo Feels Heat
- Federal Judge OKs Countrywide Probe