Countrywide falls on rumors of subprime probe

NEW YORK, June 26 (Reuters) - Countrywide Financial Corp. CFC.N shares fell while the cost to insure its debt rose on speculation Tuesday that the largest U.S. mortgage lender may be involved in a government investigation related to subprime loans.

Rick Simon, a Countrywide spokesman, declined immediate comment.

A report on theflyonthewall.com indicated that Countrywide shares were down on "unconfirmed chatter of a subprime loan investigation." Countrywide is based in Calabasas, California.

Countrywide shares closed down 96 cents or 2.6 percent at $36.31, after earlier falling to $36.13.

Near the close, 35,453 put options versus 9,779 call options traded in Countrywide, roughly four times normal daily volume, according to Track Data.

Paul Foster, an options strategist at theflyonthewall.com, said the volume and volatility was a result of the rumors.

The cost to insure Countrywide's debt with credit default swaps jumped by about 10 basis points 70 basis points, or $70,000 per year for five years to insure $10 million of debt.

((Reporting by Karen Brettell, Doris Frankel and Jonathan Stempel, editing by Phil Berlowitz; Reuters Messaging: jon.stempel.reuters.com@reuters.net, 646 223 6317)) Keywords: COUNTRYWIDE/

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