Countrywide Financial Corporation logged in on Tuesday with its third consecutive quarterly loss due to a sharp increase it its provision for loan losses.
Countrywide reported that it lost $893 million or $1.60 per share during the first quarter of 2008. One year ago the quarterly earnings were $434 million or $0.72 per share. Most analysts were projecting earnings of $0.02 per share.
Countrywide said it has set aside $1.5 billion to cover impending loan losses. It charged off loans that were deemed unrecoverable in the amount of $606 million during the first quarter. One year ago charge-offs totaled $39 million. The bank said that 35.9 percent of its subprime loans were delinquent at the end of the quarter compared to 33.6 at the end of the fourth quarter. Delinquencies in conventional loans rose from 5.76 percent to 6.48 percent.
In January, facing widening losses from its concentration on subprime mortgages and teetering on the edge of bankruptcy, Countrywide agreed to sell itself to Bank of America
for about $4 billion in stock. A few months earlier Bank of America invested $2 billion in Countrywide's stock to shore up the smaller bank's capital. Bank of America is now reporting large losses of its own, but maintains in intends to proceed with the Countrywide deal.
On Tuesday the Nashville Business Journal reported that Bank of America is planning to modify or otherwise work out some 265,000 Countrywide loans, allowing those customers to stay in their homes.
The troubled loans that Bank of America has targeted for workout after it closes on the Countrywide deal in the third quarter total at least $40 billion.
Under its current policy Bank of America allows tenants living in properties facing foreclosure to remain in their homes for 60 days after the actual sale but will pay them $2000 to defray the costs of moving and locating new housing if they leave the foreclosed property voluntarily within 30 days of completion of foreclosure proceedings. Bank of America said it will continue this policy as it takes over the Countrywide portfolio. The companies' combined national consumer-mortgage headquarters will be located in Calabasas, California, Countrywide's home. Bank of America is based in Charlotte North Carolina.
Bank of America also plans to spend $1.5 trillion over the next 10 years in community-development efforts that focus on affordable housing, economic development and consumer and small-business lending.