THE Federal Bureau of Investigations (FBI) has begun investigating Countrywide, America’s biggest sub-prime lender, it was reported today.

Citing unnamed law enforcement officials and finance industry executives, The Wall Street Journal stated that the inquiry’s focus is on whether Countrywide officials made misrepresentations about the company's financial position and the quality of its mortgage loans in securities filings.

Last week Countrywide boss Angelo Mozilo was among a number of finance executives grilled by Congress over the huge payouts they received during the boom in sub-prime lending.

Mozilo took home more than $410 million (£204 million) since becoming chief executive in 1999, including stock sales made under an automatic plan that paid out $141 million shortly before the company’s collapse.

"There seem to be two economic realities," said Henry Waxman, chairman of the House Oversight and Government Reform Committee and Californian Democrat. "Most Americans live in a world where economic security is precarious and there are real economic consequences for failure. But our nation's top executives seem to live by a different set of rules."

At its peak Countrywide was the US’s biggest private home loan company. The firm issued more than $100 billion in mortgage-backed securities between 2004 and 2007, according to the newsletter Asset Backed Alert.

Countrywide is already under investigation by the Securities and Exchange Commission, the top US financial regulator, for possibly improper accounting. The FBI probe is likely to focus on whether there is any evidence of fraud in the origination of mortgages and to what extent Countrywide management was aware of the liabilities its sub-prime business was building up.

According to The Wall Street Journal the FBI inquiry is being handled in New York and overseen in Washington. It is part of a wider investigation in to the mortgage crisis. Countrywide, alongside many of America’s largest financial institutions, faces a series of legal challenges from shareholders, states and pension finds.

The city and state of New York is suing 26 of the world’s biggest banks and two accountants that helped Countrywide package and sell mortgage-backed securities, including HSBC, Barclays Capital, Goldman Sachs and JP Morgan Chase.

New York City Comptroller William Thompson, who helps run the New York City Pension Funds, has said Countrywide "cashed out to the tune of almost $700 million" while borrowers lost homes and the value of investors' shares fell sharply. The firms have denied any wrongdoing.

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