The Colonial BancGroup (CNB) 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.

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