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SEC Probing Washington Mutual

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December 21, 2007 05:22 PM EST | AP

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WASHINGTON — The Securities and Exchange Commission is probing how Washington Mutual Inc., the nation's largest savings and loan, handled mortgages that were possibly based on inflated home appraisals.

"We are voluntarily and fully cooperating with the SEC's inquiry as well as the (Office of Thrift Supervision) and look forward to bringing the facts to both the regulators and public," according to a company statement. OTS is the company's federal regulator.

Shares of Seattle-based Washington Mutual fell 57 cents, or 3.9 percent, to close at $14.10 Friday. The company's stock has traded between $13.99 and $46.38 in the past year.

SEC spokesman John Nester declined to comment Friday.

Shares of WaMu have dropped about 65 percent since mid-September, following some dismal financial disclosures and a lawsuit filed in November by New York's attorney general against one of its real estate appraisers, alleging the companies colluded to inflate home values.

"After spending a month and a half investigating these allegations, we can say with confidence that there has been no systematic effort by WaMu to inflate home appraisals," the company statement said. "We take these allegations very seriously."

The company's chief legal officer, Fay L. Chapman, this week said she was retiring. Chapman, 61, will serve as a consultant for two years to help with the transition, and a WaMu spokeswoman said then that there was no connection between the company's legal troubles and Chapman's departure.

WaMu also said this month that it was closing offices, laying off more than 3,100 people and that it would no longer issue loans to people with shaky credit histories.