Countrywide said probed for fraud

Federal authorities are investigating Countrywide Financial Corp. for securities fraud, according to newspaper reports.

The FBI is in the early stages of an inquiry into whether executives with the Calabasas-based company misrepresented its financial position and the quality of its mortgage loans, the Wall Street Journal first reported Saturday, citing law enforcement officials and finance executives with knowledge of the development.

The Justice Department is also involved in the investigation into the nation’s largest mortgage lender, according to the New York Times, which also cited anonymous sources who said they were not authorized to discuss ongoing criminal matters.

Investigators are looking at evidence that may suggest Countrywide executives knew their mortgage securities would see many more defaults than predicted in its public documents, one source told the Journal.

The inquiry is part of a larger probe involving as many as 15 companies and comes in the midst of the sub-prime mortgage crisis.

Bank of America Corp. is in the process of acquiring Countrywide for about $4 billion in stock. BofA agreed to the acquisition in January, and the transaction is expected to close in the third quarter. A spokesman for Bank of America declined to comment.

Countrywide Chief Executive Angelo R. Mozilo was one of three top financial industry executives brought before a congressional committee on Friday to defend their exorbitant pay at a time when the industry was reeling.

Congressional figures showed that Countrywide lost $1.2 billion in the third quarter of 2007 and an additional $422 million in the fourth quarter.

The company’s stock fell 80% between February 2007 and the end of the year.

During the same period, Mozilo received a $1.9-million salary and $20 million in stock awards contingent upon performance. He also sold $121 million in stock during that time.