Senator urges probe of lender

A U.S. regulator should scrutinize billions of dollars of loans that have helped keep troubled mortgage lender Countrywide Financial Corp. afloat in recent months, a leading senator said Monday.

In a letter to the regulator of the Federal Home Loan Bank system, Sen. Charles E. Schumer said Countrywide, the largest U.S. mortgage lender, might be abusing the program.

At the end of September, Countrywide owed the Federal Home Loan Bank system, a government-sponsored program, $51.1 billion, up from $28.8 billion at the end of June.

The Calabasas-based lender has put up about $62.4 billion of mortgages as collateral for the loans obtained from the Federal Home Loan Bank of Atlanta.

“Countrywide is treating the Federal Home Loan Bank system like its personal ATM,� Schumer, a New York Democrat who heads the housing panel of the Senate Banking Committee, said in the letter.

“At a time when Countrywide’s mortgage portfolio is deteriorating drastically,� Schumer wrote, the Home Loan Bank system’s “exposure to Countrywide poses an unreasonable risk.�

Schumer wrote Ronald Rosenfeld, chairman of the Federal Housing Finance Board, which oversees the system of 12 regional banks that offer financing to mortgage lenders.

Rosenfeld’s office and the Atlanta Federal Home Loan Bank declined to comment on Schumer’s letter. The company issued no response to the letter.

Shares of Countrywide sank $1.01, or 10%, to $8.64 on Monday. Their decline accelerated after Schumer’s letter was released. The stock is down 80% this year.