The chief risk officer of Countrywide Financial Corp, the poster-child company for the loose U.S. home loans that staggered the world economy, was warning against them even when it put him at odds with his own company -- and with Fed chairman Ben Bernanke.

At a time when many in the U.S. home loan industry were offering money to almost anyone who walked in the door, John P. McMurray publicly warned about the risks of such lax lending.

McMurray pointed out the risks at the Federal Reserve Bank of Chicago's annual conference on bank structure and competition on May 18, 2006 -- less than a year before the housing sector and mortgage lending industry began collapsing, leading to a credit crunch that spread around the world.

Such lending practices also eventually collapsed Countrywide into a fire sale takeover and led to charges of fraud and insider trading being brought against company co-founder Angelo Mozilo.

McMurray's presentation on the home lending boom contrasted with comments Federal Reserve Chairman Bernanke had made in the event's keynote address about 90 minutes earlier.

Bernanke said home finance innovation did carry risk but provided significant net benefits.

Borrowers have more choices and greater access to credit; lenders and investors are better able to measure and manage risk; and, because of the dispersion of financial risks to those more willing and able to bear them, the economy and the financial system are more resilient, Bernanke said, according to a transcript of his speech.

A LOSING BATTLE

McMurray, who was on a panel about home finance innovation, had a different view, highlighting an internal Countrywide study that showed the realities of mortgage delinquency and the dangers of lending to people who couldn't afford to take on their loans.

But even as he cautioned the world, emails show, McMurray was losing a battle in his own office to convince top brass at the largest U.S. mortgage lender to curb its lending practices.

Last week, the Securities and Exchange Commission charged Mozilo with securities fraud and insider trading, and McMurray's emails were a critical element in the lawsuit. Countrywide's former president David Sambol and chief financial officer Eric Sieracki were also charged with fraud.

McMurray has been called a hero by at least one advocate for whistleblowers for trying to raise red flags in Countrywide as its lending standards rapidly went downhill.

The deterioration in its credit quality eventually triggered big losses that forced it into the arms of Bank of America , which bought it at a fraction of the price it was once worth.

Some of the same warnings McMurray gave to higher-ups at Countrywide about relaxed lending practices bled into his presentations at the 2006 conferences, which were attended by industry leaders, academics, investors, economists and the media, as well as Fed officials.

He got it, said Jim Callahan, the executive director of Connecticut-based PentAlpha Capital Group, who moderated a panel that included McMurray at an American Securitization Forum in January 2006 in Las Vegas. He was not trying to oversell a positive story.

Callahan said McMurray appeared balanced in his statements at a time when many others in the industry were wearing rose-colored glasses.

At the Fed conference, McMurray gave an almost academic presentation that included 29 slides packed with graphics and charts on the risks and causes of mortgage delinquency.

He explained how larger loans, lower credit scores, higher loan-to-value ratios, and less required documentation from loan applicants were coinciding with greater delinquency, wrote Cabray Haines, who summarized the conference for the Chicago Fed Letter.

McMurray pointed out that this finding is particularly worrisome, given the recent popularity of loans that require little to no documentation of borrowers' income and credit history, Haines wrote

10 MILLION LOANS

Countrywide's internal study included about 10 million mortgages and examined them on a number of variables that helped approximate risk for lenders, Haines wrote. The presentation touched on the types of loans that accompany the most risk and how lenders could adjust course.

McMurray, who declined to comment, left Countrywide in August 2007, a month after the company's surprise disclosure that it had drawn down an $11.5 billion credit line because it had trouble selling short-term debt.

On August 31, 2007, Washington Mutual announced it had hired McMurray as chief credit officer. Countrywide announced his replacement within a week.

McMurray, who was promoted in April 2008 to chief enterprise risk officer at WaMu, is no longer with the company, whose banking units were acquired by JPMorgan Chase & Co after it failed and was seized by federal authorities last September.

Mike Fratantoni, an economist who reported to McMurray at WaMu, calls him an extremely impressive guy who fully understands every aspect of risk management.

My observation was that he could work well with management at any level of an organization, Fratantoni said. He was respected, but he was also very persistent. If he saw something he thought was a problem, he would keep pushing at it until he got it fixed.

On May 1, McMurray began working as a senior vice president and chief risk officer with the Federal Home Loan Bank of Seattle, a cooperative that provides liquidity to help make affordable housing available to the public.

(Reporting by Steve Eder; Editing by Gary Hill)

Ben Bernanke Bank of america