FBI Opens Criminal Investigation of Countrywide
What took so long?
The investigation centers around the representations that Countrywide made as part of their quarterly and annual securities filings about the stability of the company and the soundness of the mortgage loans originated, sold and held by the mortgage giant. The FBI and the SEC are currently investigating 14 lenders for misrepresentation in areas such as accounting, loan securitizations, mortgage underwriting and subprime lending practices.
Countrywide was apparently unaware of the investigation.
From the New York Times on the FBI investigation of Countrywide:
The Justice Department and the Federal Bureau of Investigation are looking at whether officials at Countrywide, the nation’s largest mortgage lender, misrepresented its financial condition and the soundness of its loans in security filings, the officials said.
For years, the F.B.I. has been warning that mortgage fraud is a significant and growing problem. In the 2006 fiscal year, it documented 35,600 reports of suspected mortgage fraud, up from 22,000 the year before and 7,000 in 2003.
For the most part, the cases the F.B.I. has brought so far have focused on local or regional mortgage fraud rings that involve speculators, loan officers, brokers and other housing professionals.
The news couldn’t have come at a worse time for the mortgage giant as it tries to complete the Bank of America takeover. We’ve heard reports of FBI raids on regional offices for months without any confirmation. Now that the WSJ and NYT are running the story it seems likely that we’ll be hearing a lot more about the inner-workings of one of the most reviled companies in the country.