cramerica1972
03-09-2008, 01:00 AM
http://www.marketwatch.com/news/story/fbi-probes-countrywide-possible-securities/story.aspx?guid=%7B4145FC3B%2D8CBC%2D4030%2DA8A8%2 DFEE8B2C879F7%7D&dist=TNMostReadFBI probes Countrywide for possible fraud: report
Proof of collusion could scuttle Bank of America deal
By Riley McDermid, MarketWatch
Last update: 10:25 a.m. EST March 8, 2008Print E-mail RSS Disable Live Quotes
NEW YORK (MarketWatch) -- Besieged subprime lender Countrywide Financial Corp. is being investigated by the Federal Bureau of Investigation for possible securities fraud, according to a news report Saturday.
The Wall Street Journal report said the probe focuses on whether Countrywide's management misrepresented the quality of its mortgages in routine securities filings, which may have led investors to overvalue the loans it then securitized into more than $100 billion worth investment vehicles between 2004 and 2007.
Banks and lenders lost billions of dollars over bad bets on mortgage-backed securities and analysts estimate they will continue to stanch the bleeding well into 2008.
The FBI inquiry will also take a closer look at how common fraud was in Countrywide's origination process, the report quoted unnamed sources as saying. The agency is currently investigating more than a dozen subprime lenders about their origination and securitization processes and possible conflicts of interest between the lenders and Wall Street.
Countrywide (CFC:Countrywide Financial Corp
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CFC 5.07, -0.13, -2.5%) said it had not been informed of any ongoing inquiry.
"We are not aware of an investigation being conducted by the FBI," Countrywide spokeswoman Jumana Bauwens told the newspaper.
The Calabasas, Calif-based lender is already facing multiple lawsuits in several states regarding its origination and foreclosure policies. A separate class action lawsuit filed by a consortium of government pension funds has accused Countrywide of behavior similar to that reportedly being investigated by the FBI.
A filing in that lawsuit says the lender "misled investors by falsely representing that Countrywide had strict and selective underwriting and loan origination practices, ample liquidity that would not be jeopardized by negative changes in the credit and housing markets, and a conservative approach that set it apart from other mortgage lenders."
Countrywide was also being investigated by the Securities and Exchange Commission for allegedly improper accounting.
Problems would hit merger
If the FBI does find Countrywide misled investors, it could scuttle a planned $4 billion acquisition of the lender by Bank of America, slated to be completed in the third quarter.
Although Bank of America (BAC:bank of america corporation com
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Last: 36.74+0.22+0.60%
4:01pm 03/07/2008
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BAC 36.74, +0.22, +0.6%) has repeatedly said it has priced in the lender's financial woes and potential legal troubles, proof of a management plan to overstate the value of Countrywide could mean all bets are off.
Bank of America reiterated earlier this week that the deal was still on. The bank declined to comment to the Wall Street Journal.
Riley McDermid is a MarketWatch reporter based in New York
Proof of collusion could scuttle Bank of America deal
By Riley McDermid, MarketWatch
Last update: 10:25 a.m. EST March 8, 2008Print E-mail RSS Disable Live Quotes
NEW YORK (MarketWatch) -- Besieged subprime lender Countrywide Financial Corp. is being investigated by the Federal Bureau of Investigation for possible securities fraud, according to a news report Saturday.
The Wall Street Journal report said the probe focuses on whether Countrywide's management misrepresented the quality of its mortgages in routine securities filings, which may have led investors to overvalue the loans it then securitized into more than $100 billion worth investment vehicles between 2004 and 2007.
Banks and lenders lost billions of dollars over bad bets on mortgage-backed securities and analysts estimate they will continue to stanch the bleeding well into 2008.
The FBI inquiry will also take a closer look at how common fraud was in Countrywide's origination process, the report quoted unnamed sources as saying. The agency is currently investigating more than a dozen subprime lenders about their origination and securitization processes and possible conflicts of interest between the lenders and Wall Street.
Countrywide (CFC:Countrywide Financial Corp
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Last: 5.07-0.13-2.50%
4:00pm 03/07/2008
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CFC 5.07, -0.13, -2.5%) said it had not been informed of any ongoing inquiry.
"We are not aware of an investigation being conducted by the FBI," Countrywide spokeswoman Jumana Bauwens told the newspaper.
The Calabasas, Calif-based lender is already facing multiple lawsuits in several states regarding its origination and foreclosure policies. A separate class action lawsuit filed by a consortium of government pension funds has accused Countrywide of behavior similar to that reportedly being investigated by the FBI.
A filing in that lawsuit says the lender "misled investors by falsely representing that Countrywide had strict and selective underwriting and loan origination practices, ample liquidity that would not be jeopardized by negative changes in the credit and housing markets, and a conservative approach that set it apart from other mortgage lenders."
Countrywide was also being investigated by the Securities and Exchange Commission for allegedly improper accounting.
Problems would hit merger
If the FBI does find Countrywide misled investors, it could scuttle a planned $4 billion acquisition of the lender by Bank of America, slated to be completed in the third quarter.
Although Bank of America (BAC:bank of america corporation com
News, chart, profile, more
Last: 36.74+0.22+0.60%
4:01pm 03/07/2008
Delayed quote dataAdd to portfolio
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BAC 36.74, +0.22, +0.6%) has repeatedly said it has priced in the lender's financial woes and potential legal troubles, proof of a management plan to overstate the value of Countrywide could mean all bets are off.
Bank of America reiterated earlier this week that the deal was still on. The bank declined to comment to the Wall Street Journal.
Riley McDermid is a MarketWatch reporter based in New York