The Colonial BancGroup ($0.00 0%) on Tuesday confirmed it is complying with an investigation of its mortgage warehouse lending facility.

Federal agents from the Special Inspector General for the Troubled Asset Relief Program executed a search warrant at the firm's Orlando-based mortgage warehouse lending division. Colonial said in a statement that it continues to conduct business as usual in spite of the investigation.

Colonial last week cited 'substantial doubt' it could continue as a going concern after posting a $606m net loss in Q209.

The company recently consented to a cease-and-desist order given by the Federal Reserve. The order, which took effect July 22, addresses the capital, liquidity and loan loss allowance issues at the bank, Colonial said in a statement on the order.

Colonial BancGroup previously acknowledged loan losses in its portfolio are greater than estimated or expected, leading to a liquidity crisis that also affected the firm’s ability to raise additional capital and close on a pending agreement with investors led by Taylor, Bean & Whitaker Mortgage Corp. (TBW).

HousingWire's sources this week have said Colonial's woes are not wholly unexpected, and indicates its ties to TBW as a major warehouse lender may cause more financial fallout.

Write to Diana Golobay.