UPDATE 1-Countrywide under Illinois probe-state official

(Confirms subpoena of Countrywide by Illinois attorney general, adds details, changes dateline, previous NEW YORK)

CHICAGO, Dec 13 (Reuters) - The home loan unit of Countrywide Financial Corp CFC.N, the largest U.S. mortgage lender, is under investigation in Illinois over its lending practices in the state, an Illinois attorney general official confirmed on Thursday.

Deborah Hagan, chief of the Illinois Attorney General's consumer protection division, said a subpoena for documents was sent to Countrywide in mid-September. Information sought relates to any mortgage-related activity by the company in Illinois, including loan originations, fundings and securitization, Hagan said. She declined to discuss the time frame in which that activity took place.

"We're receiving documents now," Hagan said. "We're early in what we're doing."

The Countrywide subpoena grew out of a lawsuit the state filed in November against mortgage broker One Source Mortgage, which primarily had its loans funded by Countrywide. The lawsuit alleged the broker had violated state consumer fraud laws, Hagan said.

"We sued them basically for getting borrowers into loans they couldn't afford," Hagan said, adding that many were pay-option adjustable rate mortgages that are now in trouble based on a sampling of data.

Mark Belongia, an attorney representing One Source, said the lawsuit had no merit and his client will be vindicated in court.

Countrywide did not immediately return a call for comment early on Thursday.

Countrywide, the most high-profile lender at the center of the mortgage crisis, is already facing scrutiny by the U.S. Securities and Exchange Commission over stock sales by Chief Executive Angelo Mozilo. It also faces five class-action lawsuits from investors charging that it inflated earnings.

Countrywide has faced heavy criticism from U.S. Sen. Charles Schumer, a New York Democrat, and others for putting borrowers into home loans they could not afford in the pursuit of profit.

Countrywide shares were down 53 cents or 5 percent at $10 in afternoon trading. Earlier, the company said mortgage loan funding fell 40 percent in November and late payments escalated. (Reporting by Karen Pierog in Chicago and Bill Rigby in New York; Editing by Gerald E. McCormick)