Loan Data Focus of Probe

Wall Street Journal (03/11/08) P. A3; Simpson, Glenn R.
Countrywide Financial Corp.'s lending practices are being investigated by the federal government, which is attempting to determine what the company knew about borrowers' assets. To get an idea of the lending practices under investigation, observers point to a mortgage fraud case in Alaska involving former Countrywide sales executive Kourosh Partow, whose lawyers filed documents alleging that the lender knew that documents "were fraught with inaccuracies." The filings indicate that underwriters reportedly were told to overlook details for stated income loans because it was widely known that they contained inaccurate information. The FBI's investigation centers on securitization practices, with former Justice Department fraud chief Joshua Hochberg noting that they will look at Countrywide's disclosures and insider trading. According to banking analyst Bert Ely of Ely & Associates, "If Countrywide's got a problem, everybody's got a problem." Although investors are worried that Bank of America will pull out of its acquisition of Countrywide because the company's market capitalization is now under the acquisition price, Bank of America says the deal is still on.