Countrywide Reeling Again as Bankruptcy Rumors Fly
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Rumors of imminent bankruptcy swirled around Countrywide
Financial Corporation for much of the day on Tuesday resulting in a
27.4 percent drop in the company's stock and contributing to the huge slide
in the Dow Jones Industrial Average.
Countrywide, the nation's largest mortgage lender, denied that there was any
truth to the rumors that it might seek bankruptcy protection but, according
to Reuters, one credit rating agency said that Countrywide "is severely
challenged and might falter if it does not receive an infusion of at least $4
billion within the next couple of weeks."
The company's stock closed down on Tuesday $2.09 at $5.55, a far cry
from the $45.26 peak of the 52 week trading cycle. Tuesday's decline was
the biggest one day drop in the stock since the 1987 market crash.
Contributing to the stock's slide was a New York Times article citing
court records that showed Countrywide had fabricated documents related to the
bankruptcy of a Pennsylvania borrower.
On Wednesday the company issued its monthly operating report
which said it funded $23.4 billion in home loans during the last month of the
year, 1 percent more than in the previous month but 44 percent less than in
December of 2006. Average daily applications fell 17 percent from the November
figure of $1.54 billion.
Foreclosures and delinquencies rose last month to the highest level since 2002
when the company began keeping such records. Pending foreclosures rose to 1.44
percent while delinquent loans rose to 7.20 percent from 6.52 in November and
4.60 percent in December one year ago.
The December report also said that the company had cut 10,986 jobs
since the end of July, ending the year with a total of 50,600 employees.
While the larger market was, mid-day Wednesday, recovering some of its massive
losses of the day before, Countrywide, up 13 percent in pre-open trading was
down nearly 10 percent by noon. The stocks of other mortgage giants were also
losing ground; Washington Mutual Inc., the biggest U.S. savings and loan, was
down over 15 percent early Wednesday, and IndyMac Bancorp Inc., the second-biggest
independent mortgage company, was off nearly 10 percent.
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