Countrywide seeks to reassure investors

There were rumors the mortgage lender would seek bankruptcy protection.

LOS ANGELES (AP) — Countrywide Financial Corp., the nation’s largest mortgage lender, sought to reassure investors Tuesday, declaring it has ample capital, access to cash and is well-positioned to benefit from the financial turmoil rocking the mortgage sector.

The company’s statement came amid rumors the Calabasas, Calif.-based company could be looking to seek bankruptcy protection and as its stock tumbled at one point more than 15 percent.

Countrywide shares fell 32 cents, or 3 percent, to $10.25. At one point, the stock had dropped to a low of $8.21. Over the past 52 weeks, the stock price has ranged between $10.25 and $45.26.

“Countrywide Bank ... has sufficient liquidity available to meet its projected operating and growth needs and has accumulated significant contingent liquidity in response to evolving market conditions,” the company said.

The lender has shifted the bulk of its loan funding through its banking arm from sales on the secondary market in the wake of the liquidity crisis that rattled financial markets in the wake of a spike in home loan defaults this year.

Countrywide also noted it expects its home lending unit to be able to service debt beyond next year without having to purchase additional debt insurance.

The company said it had $35.4 billion in cash available as of Oct. 31, 2007, up from $33.6 billion in the previous month.

Countrywide’s stock price decline came as Fox-Pitt, Kelton analyst Howard Shapiro cut his rating on the company to “In Line” from “Outperform.”

Shapiro noted in a research note that Countrywide’s woes could worsen if the Federal Home Loan Mortgage Corp., or Freddie Mac, is forced to scale back how many loans it buys from mortgage lenders.

Like other mortgage lenders, Countrywide pools the home loans it originates and sells them to investment banks and government-backed mortgage banks such as Freddie Mac.

Freddie Mac is the nation’s No. 2 buyer and guarantor of mortgages, after Federal National Mortgage Association, or Fannie Mae.

A reduction in funding from Freddie Mac would hamper Countrywide’s ability to originate loans, causing its loan volume to fall further this year, Shapiro wrote.

Last week, Countrywide reported that its mortgage loan fundings dropped 48 percent to $21.9 billion in October compared with the year-ago month. The company posted a loss of $1.2 billion during the quarter ended Sept. 30.

Management said last month the company would post a profit in the coming quarter and next year.

Still, Moody’s Investors Service said Tuesday there is a possibility Countrywide will post losses in the fourth quarter of this year and first quarter of 2008.

Moody’s did not say it would lower ratings at Countrywide if the lender encountered future quarterly losses. It did, however, say it would review how those losses affect capital ratios to ensure the bank is maintaining adequate liquidity.