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Lender's mortgage fundings fall 44%

NEW YORK - Countrywide Financial Corp. said yesterday that its mortgage fundings for September fell 44 percent, and the mortgage lender is now facing a potential federal investigation over the timing of stock sales by its chief executive.

Countrywide, the nation's largest mortgage lender, said total mortgage fundings last month fell to $21.2 billion, from $38.1 billion a year earlier.

The steep decline in volume comes as the Calabasas, Calif., company shifts to traditional conforming loans instead of riskier nontraditional loans like subprime mortgages. Countrywide previously packaged the majority of its loans as securities and sold them to investors in the secondary market.

In the past few months, rising delinquency and default rates have caused demand for these securities to all but dry up. The collapse of the secondary market, coupled with the deteriorating housing market, has led to a steep drop in the mortgage business nationwide.

Housing foreclosures nearly doubled last month, according to RealtyTrac Inc. A total of 223,538 foreclosure filings were reported in September, up from 112,210 in September 2006.

Conforming loans - which now account for about 90 percent of Countrywide's volume - are considered safer because government-sponsored Fannie Mae and Freddie Mac are willing to purchase them. Typically, these loans are less likely to default.

The reduction in nonconforming loans was not much of a surprise, but the speed at which Countrywide shifted its production to fit Fannie and Freddie guidelines was faster than anticipated, said a Friedman, Billings, Ramsey & Co. analyst, Paul Miller.

To cope with the weakening market, Countrywide cut 4,935 jobs in September as part of plans to reduce its workforce by 12,000 jobs, or about 20 percent. A larger reduction may be required, Miller said.

The company may be facing a Securities and Exchange Commission probe into the timing of stock sales by chief executive Angelo Mozilo. North Carolina's treasurer, Richard Moore, claims Mozilo "apparently manipulated his trading plans to cash in" as the subprime crisis heated up.

Countrywide did not immediately return a call seeking comment; a spokesman for the SEC declined to comment.

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