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Last Updated: Monday, 10 March 2008, 12:31 GMT
Countrywide in US sub-prime probe
Countrywide banking and home loans office in Arizona
Countrywide was almost bankrupted by the US housing crisis
Countrywide Financial is being investigated by US authorities over suspected fraud, US media reports say.

The Federal Bureau of Investigation (FBI) and Department of Justice will examine financial irregularities at the firm, the Wall Street Journal reported.

Countrywide told the paper that it was "not aware" of such an investigation and the FBI and DoJ would not comment.

The US housing market downturn has hit the firm, which in January was sold to Bank of America for $4bn (1.98bn).

The investigation into Countrywide centres on whether the firm misrepresented the health of its business to US regulators in regular financial updates, according to the newspaper.

The New York Times and CNN also carried reports of the investigation.

They say it is part of a broader FBI investigation into the practices of US mortgage lenders.

Deep problems

The firm also faces a separate investigation by the Securities and Exchange Commission into how sub-prime loans were made and valued, as well as a number of lawsuits by investors and mortgage holders, the reports add.

Sub-prime loans are those offered to people with inferior credit records or unpredictable incomes.

That market rapidly expanded and big banks packaged the loans together and sold them on to investors, as well as keeping some of the new assets for themselves.

But the downturn in the US housing market means those investments are in trouble and have caused billions of dollars of losses for banks.

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