Countrywide Reeling Again as Bankruptcy Rumors Fly

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.