Jan. 9, 2008
Stocks Plunge in Wake of Countrywide Financial Bankruptcy Rumors
By David M. Kinchen
Huntingtonnews.net Real Estate Writer
For the second time in less than a year, the nation's largest mortgage lender, Countrywide Financial Corp., has confronted bankruptcy rumors.
The company, based in the Los Angeles suburb of Calabasas, CA, on Tuesday, Jan. 8, 2008, denied rumors that it plans to file Chapter 11 bankruptcy as its already hammered stock hit a new low of $5.76; see link:
http://www.marketwatch.com/news/story/us-stocks-plunge-late-trading/story.aspx?guid=%7BAD0EFB35%2DA786%2D4FD8%2D8106%2D805690ACA456%7D
On November 26, 2007, Countrywide stock was hammered on the NYSE, dropping more than 10 percent to a level of $8.64 per share -- less than half the share's value in August when the firm faced bankruptcy rumors -- and a fraction of its value in 2006. One proximate cause were reports that the Atlanta Federal Home Loan Bank had extended a large amount of its credit to Countrywide to offset its inability to raise funds in the private market. U.S. Sen. Chuck Schumer, D-NY, called for an investigation as to the prudence of the FHLBB's action in this regard.
From 2005 to 2007 Countrywide co-founder Angelo R. Mozilo sold much of his Countrywide Financial stock resulting in $291.5 million in profits. A class action suit was filed on behalf of shareholders alleging securities violations.
On August 15, 2007, Merrill Lynch advised its clients to sell their stock in Countrywide. The stock has lost more than 57 percent YTD as of September 7, 2007.
Rumors that Countrywide Financial Corp. was preparing to file for Chapter 11 bankruptcy protection sent CFC's stock plunging by more than 20 percent Tuesday, Jan. 8 before trading was halted and the company issued a denial.
The New York Stock Exchange briefly halted trading of the company's stock to allow Countrywide to issue a statement saying there was "no substance" to the rumor or to additional speculation that rating agencies are preparing to downgrade the company's debt.
Trading was resumed after the announcement and Countrywide's stock, which closed at $7.64 Monday, bounced back above $6 after hitting a low of $5.76.
After the August 2007 bankruptcy rumors brought on in part by the collapse of the housing bubble and the subprime mortgage collapse, CFC announced plans to lay off 12,000 workers, drew down an $11.5 billion line of credit with 40 banks, and gave Bank of America the right to buy a minority interest in the company in exchange for a $2 billion loan. Countrywide lined up an additional $12 billion in financing in September.
Countrywide and other mortgage lenders faced a crisis when Wall Street investors stopped buying many types of mortgage-backed securities and short-term "commercial paper" debt used to finance their operations, because of concerns about rising delinquencies and foreclosures.
Countrywide reported $1.2 billion in third-quarter losses in October 2007 and is scheduled to report its fourth-quarter results this month. Statistics for December could come out this week or next.
In December 2007, CFC announced it had funded $23.1 billion in residential mortgage loans in November, up 5 percent from October but down 40 percent from a year ago.
The latest Countrywide bankruptcy rumors are fueling fears that the nation's housing collapse will drag the already shaky economy into a full-blown recession.
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Stocks Plunge in Wake of Countrywide Financial Bankruptcy Rumors
By David M. Kinchen
Huntingtonnews.net Real Estate Writer
For the second time in less than a year, the nation's largest mortgage lender, Countrywide Financial Corp., has confronted bankruptcy rumors.
The company, based in the Los Angeles suburb of Calabasas, CA, on Tuesday, Jan. 8, 2008, denied rumors that it plans to file Chapter 11 bankruptcy as its already hammered stock hit a new low of $5.76; see link:
http://www.marketwatch.com/news/story/us-stocks-plunge-late-trading/story.aspx?guid=%7BAD0EFB35%2DA786%2D4FD8%2D8106%2D805690ACA456%7D
On November 26, 2007, Countrywide stock was hammered on the NYSE, dropping more than 10 percent to a level of $8.64 per share -- less than half the share's value in August when the firm faced bankruptcy rumors -- and a fraction of its value in 2006. One proximate cause were reports that the Atlanta Federal Home Loan Bank had extended a large amount of its credit to Countrywide to offset its inability to raise funds in the private market. U.S. Sen. Chuck Schumer, D-NY, called for an investigation as to the prudence of the FHLBB's action in this regard.
From 2005 to 2007 Countrywide co-founder Angelo R. Mozilo sold much of his Countrywide Financial stock resulting in $291.5 million in profits. A class action suit was filed on behalf of shareholders alleging securities violations.
On August 15, 2007, Merrill Lynch advised its clients to sell their stock in Countrywide. The stock has lost more than 57 percent YTD as of September 7, 2007.
Rumors that Countrywide Financial Corp. was preparing to file for Chapter 11 bankruptcy protection sent CFC's stock plunging by more than 20 percent Tuesday, Jan. 8 before trading was halted and the company issued a denial.
The New York Stock Exchange briefly halted trading of the company's stock to allow Countrywide to issue a statement saying there was "no substance" to the rumor or to additional speculation that rating agencies are preparing to downgrade the company's debt.
Trading was resumed after the announcement and Countrywide's stock, which closed at $7.64 Monday, bounced back above $6 after hitting a low of $5.76.
After the August 2007 bankruptcy rumors brought on in part by the collapse of the housing bubble and the subprime mortgage collapse, CFC announced plans to lay off 12,000 workers, drew down an $11.5 billion line of credit with 40 banks, and gave Bank of America the right to buy a minority interest in the company in exchange for a $2 billion loan. Countrywide lined up an additional $12 billion in financing in September.
Countrywide and other mortgage lenders faced a crisis when Wall Street investors stopped buying many types of mortgage-backed securities and short-term "commercial paper" debt used to finance their operations, because of concerns about rising delinquencies and foreclosures.
Countrywide reported $1.2 billion in third-quarter losses in October 2007 and is scheduled to report its fourth-quarter results this month. Statistics for December could come out this week or next.
In December 2007, CFC announced it had funded $23.1 billion in residential mortgage loans in November, up 5 percent from October but down 40 percent from a year ago.
The latest Countrywide bankruptcy rumors are fueling fears that the nation's housing collapse will drag the already shaky economy into a full-blown recession.
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