Countrywide under FBI Investigation for Possible Fraud

[Brutus]

a buddy of mine (who's wife works for countrywide) was saying the other night that the whole real estate mess would only going to cost investors 400 billion, and that the whole thing would blow over in another year. 400 billion seems like a lowball number if I ever heard one. b


Countrywide Financial Corp., the largest of the U.S. is under the scrutiny of the FBI for possible securities fraud, said a person familiar with the matter.

The focus of investigation lies in finding whether Countrywide's management altered the quality of its mortgages in routine securities filings. It could have led investors to assess too highly the loans it then securitized into more than $100 billion worth investment vehicles between 2004 and 2007.

The person, who made the revelation refused to be identified but said the inquiry, reported earlier by the Wall Street Journal, was preliminary.

Besides Countrywide, FBI is checking more than a dozen of companies including mortgage lenders, housing developers and Wall Street firms, for possible breaches in accounting related to the subprime crisis.

The Calabasas, California-based Countrywide claimed to be oblivious of FBI’s inquiry. "We are not aware of an investigation being conducted by the FBI," said Countrywide spokeswoman Jumana Bauwens.

http://www.themoneytimes.com/article...d-1018512.html

[Brutus]

Next shoe to drop: Prime mortgages

The credit crunch is cutting a broad swath across the economy, and it's hard to know how far it will go. That's because for years, the housing bubble was the heart of the economy.

By Bill Fleckenstein
Several years ago, I sketched out a thesis called "The Next Time Down." Its onset took a bit longer than I had expected (like about three years) due to the lunacy in the credit markets. However, "the next time down" is essentially the situation in which we now find ourselves.

According to a friend I've dubbed the "Lord of the Dark Matter," credit is rapidly being withdrawn across a broad spectrum -- especially for the major brokers, giants like Goldman Sachs (GS, news, msgs) and Citigroup (C, news, msgs), which have served as enormous financial intermediaries. This is now raising the costs for nearly all credit-oriented hedge funds. And, my friend said, the pace of massive de-leveraging could accelerate further. That in all likelihood would feed on itself. Lift a rock, find more schlock

I believe the next area of the credit sector to implode will likely be Alt-A -- loans granted to people who didn't want to document their income, also known as liar loans -- which will help illuminate the fact that our mortgage problems were never just subprime. Rather, they sprang from one big credit bubble, thanks to which mortgages were handed out to anyone who could fog a mirror. Most people took on more than they should have. (Some are now walking away from their obligations, a development recently highlighted in the media.)

In time, it will be clear that prime mortgages are also vulnerable.

http://articles.moneycentral.msn.com...Mortgages.aspx

[moo321]

Meh. Credit crunches are usually solved by just allowing companies to raise interest rates. If those subprime loans were being offered at 15% APR, we wouldn't have had a problem.