Aug. 7 (Bloomberg) -- Countrywide Financial Corp., the home lender acquired last month by Bank of America Corp., received subpoenas from the Securities and Exchange Commission as part of a formal investigation.

Countrywide responded to the subpoenas, according to a regulatory filing today. Bank of America bought Countrywide last month to become the largest U.S. mortgage lender. Charlotte, North Carolina-based Bank of America, the nation's second-largest bank, said it also received subpoenas regarding sales of auction- rate securities and municipal derivatives.

The SEC investigation probably relates to whether former Countrywide Chief Executive Officer Angelo Mozilo sold shares before disclosing information about the company's finances, said David Lykken, co-founder of Mortgage Banking Solutions, an Austin, Texas-based consulting firm. ``That has been a glaring issue in front of everybody,'' said Lykken.

Mozilo, who left Countrywide upon Bank of America's purchase, has denied wrongdoing. He exercised stock options that produced $121.5 million in gains in 2007 while Countrywide stock fell almost 80 percent. Mozilo, who co-founded the company, said in April that he was giving up $36.4 million in severance pay he could have received from the Bank of America sale.

Bank of America spokesman Scott Silvestri and SEC spokesman John Heine declined to comment. Attempts to reach Mozilo today were unsuccessful.

Countrywide Purchase

Bank of America Chief Executive Officer Kenneth Lewis considered mounting legal costs and likely higher loan losses in pricing his $2.5 billion purchase of Countrywide, which made nearly one of every five U.S. home loans last year. Countrywide had almost $4 billion in loan losses during the second quarter.

Countrywide was sued yesterday by Connecticut Attorney General Richard Blumenthal for allegedly duping borrowers into taking mortgages they couldn't afford. California and Illinois sued Countrywide on June 25, the same day shareholders approved the company's sale to Bank of America. Washington state has announced plans to fine the mortgage lender.

Bank of America is probably seeking a nationwide settlement with the 50 state attorneys general that would cap its legal risks related to Countrywide, said Kathleen Engel, an associate professor of law at Cleveland Marshall College of Law in Ohio.

``Bank of America wants this off their back and it's a lot easier to assess mortgage risk than litigation risk,'' she said.

`Relief and Remedies'

Bank of America wasn't included in Connecticut's lawsuit because it didn't own Countrywide during the alleged wrongdoing, Blumenthal said in a Bloomberg TV interview this week. Bank of America is ``very receptive to conversations about providing some relief and remedies,'' he said.

The bank also said today it is cooperating with state and federal investigators probing auction-rate securities. Bank of America and other Wall Street banks have been under regulatory scrutiny over their role in the $330 billion auction-rate market, which seized up in February, stranding thousands of investors.

Attorneys general ``of a number of states'' have subpoenaed the bank as part of an investigation into municipal-derivative transactions, Bank of America said in the filing.

The attorneys general derivative probe mirrors a federal investigation of anticompetitive practices in the $2.66 trillion municipal-bond market. Bank of America is cooperating with the U.S. Justice Department in a criminal antitrust probe. The bank still faces civil charges from the SEC.

Investigators are looking into whether advisers hired by municipalities to handle bidding conspired with banks and insurance companies to rig auctions, through so-called ``courtesy bids'' or rotations where firms take turns being the low bidder.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: August 7, 2008 19:09 EDT