Fitch Ratings announced Thursday that it has revised its Rating Watch on Countrywide Financial Corp. (CFC) and its related subsidiaries from "Negative" to "Evolving." This revised rating signifies that Fitch may upgrade, downgrade or affirm the current rating once they have gathered additional information.

The Rating Watch revision comes in wake of the $2 billion equity investment from Bank of America (BAC). The investment comes in non-voting convertible preferred stock which yields 7.25% and can be converted into common stock at $18 per share, subject to restrictions on trading for 18 months and including no Board representation.



The downgrade of CFC by Fitch came on August 16, 2007 as a result of the company's announcement to fully utilize its $11.5 billion credit line due to increasing liquidity problems. Fitch said they believe the decision itself raises concerns but they believe the added liquidity will provide relief in the short term and that the current liquidity issues were not a result of a fundamental breakdown in CFC's strategy but more so with investor's extreme aversion to risk that has spawned unprecedented disruption in the capital markets. Fitch also believes that residual effects caused by these liquidity issues will have significant impact on origination volume and operating performance.

Fitch has revised the Rating Watch on the following ratings to Evolving from Negative:

Countrywide Financial Corp.
--Long-term Issuer Default Rating (IDR) 'BBB+';
--Short-term Issuer Default Rating (IDR) 'F2';
--Senior debt 'BBB+';
--Subordinated 'BBB';
--Individual 'C';
--Support floor 'NF'.

Countrywide Bank FSB
--Long-term Issuer Default Rating (IDR) 'BBB+';
--Short-term Issuer Default Rating (IDR) 'F2' ;
--Senior debt 'BBB+';
--Long-term deposits 'A-';
--Short-term deposits 'F2';
--Individual 'B/C';
--Support floor 'NF'.

Countrywide Home Loans, Inc.
--Long-term Issuer Default Rating (IDR) 'BBB+';
--Short-term Issuer Default Rating (IDR) 'F2';
--Senior debt 'BBB+'.

Countrywide Capital I, III, IV, V
--Trust preferred 'BBB-'.

Countrywide stock was down 5% early in Friday's trading session as fears of subprime fallout grew. News out of China revealed that the four largest banks, including the state-run Bank of China, have higher-than-expected exposure to subprime.