Carolina on Countrywide's Mind

The news of a possible probe into Mozilo came on the same day that Countrywide said mortgage originations dropped by almost half last month.

Mortgage loan fundings during the month of September dropped 44% from a year ago to $21 billion. Average daily mortgage loan application activity in September dropped 39% to $1.7 billion. Mortgage loans in the pipeline tumbled to $42 billion from $65 billion a year ago.

"September's production volume is reflective of current market conditions and more restrictive underwriting," said president David Sambol.

Rising loan defaults have chased investors out of the secondary market for mortgage-backed securities. A number of lenders, including Countrywide and Thornburg Mortgage (TMA Quote), have had to scramble to raise cash to keep funding loans.

Borrower delinquencies on mortgage loans serviced rose in September, Countrywide said.

"The company is continuing to take the necessary steps to assist borrowers with foreclosure avoidance and investors with loss mitigation," Sambol said.

Shares fell 43 cents to $18.37.