Countrywide Financial Corp, the largest mortgage lender in
the nation announced, before the stock marketed opened on Friday, that it is
posting a loss of 1.2 billion for the third quarter of 2007 because of millions
it had to set aside in loan loss provisions, write downs, and lowered loan values.
This was the first quarterly loss posted by Countrywide in 25 years.
Corporate spokespeople, including President Angelo Mozilo
however, were upbeat, saying that this represented the bottom for the company
and predicting that it will be profitable in the fourth quarter and throughout
2008. This will happen, they said, because of drastic moves the company has
taken to tighten underwriting, shift its mortgage business into its banking
subsidiary, and otherwise restructure its operations.
The billion plus figure amounts to $2.85 per share. Analysts had, on average,
predicted a loss of $1.28 per share. During the third quarter of 2006 the company
showed a profit of $647.6 million or $1.03 per share.
The company reported revenue of $50 million compared to $2.82 billion during
the same period one year ago and said its origination volume dropped by $22
billion to $96 billion as it moved out of the subprime market.
According to the Wall Street Journal, prime-loan production
was down 7.9%, while subprime-loan production fell 66% and new home-equity loans
30%. "Collectively, the company reported a loss of $438 million on sold loans,
versus a year-earlier gain of $1.17 billion. Investors have become reluctant
to buy many types of loans now considered too risky, so Countrywide has begun
concentrating on ones it can hold as long-term investments or sell to government-sponsored
investors Fannie Mae and Freddie Mac. Such loans typically also have smaller
Countrywide announced it would pay its expected $0.15 per share dividend as
In early morning trading the stock was up as much as $3.23 (24%) per share
to 16.30. The stock had been heavily shorted by investors recently and much
of the run-up was probably because these shorts were being covered.