A report published today by the Wall Street Journal sheds light on the recently announced FBI probe of Countrywide, which claims the investigation is focused on the origination and subsequent sale of mortgages on the secondary market.
The Journal notes that Countrywide was one of the most aggressive lenders in the business, leading the FBI to look at how they may have targeted and sold loans to unqualified borrowers, which were eventually packaged and sold as securities.
To that effect, the FBI is concerned that Countrywide didn’t make clear the quality of the mortgages they pooled and sold to investors, knowing there was possible borrower and underwriter manipulation involved.
According to a related lawsuit detailed in the article, United States of America v. Koroush Partow, underwriters at Countrywide were told not to check the accuracy of stated loans as they were riddled with inaccuracies and would surely be declined if scrutinized.
This led to the approval and ultimate funding of scores of bad loans to unqualified borrowers that were in turn sold to investors at prices that in retrospect would be deemed highly inflated.
Despite the news, shares of Countrywide climbed 42 cents, or 9.61%, to $4.78 in early afternoon trading on Wall Street after touching upon a 13-year low Monday.