Countrywide shares hit all-time low
Published: Wednesday, January 9, 2008 at 6:01 a.m.
Last Modified: Wednesday, January 9, 2008 at 12:00 a.m.
LOS ANGELES - Shares of Countrywide Financial Corp., the nation's largest mortgage lender, sank to an all-time low Tuesday as a major homebuilder offered a grim outlook for the industry and the Bush administration signaled that it is growing more concerned about rising mortgage defaults.
The head of California-based KB Home reported a mammoth loss for the fourth quarter and said there were no indications that housing markets are stabilizing. The head of Fannie Mae, a government-sponsored mortgage lender, predicted the housing market would weaken through 2009 and said a turnaround wasn't likely until 2010.
President Bush, meanwhile, conceded "It's going to take awhile to work through the downturn.''
And Treasury Secretary Henry Paulson said the administration was concerned about additional home defaults and is exploring expanding a deal it brokered with mortgage lenders last fall to include relief to people who borrowed at prime, conventional rates as well as those with subprime, adjustable-rate mortgages that were due to reset.
Countrywide stock was shaken when The New York Times reported accusations that the company had fabricated letters submitted in a court case involving a foreclosure in Pennsylvania.
At one point, the New York Stock Exchange temporarily halted trading in advance of a statement in which Countrywide tried to stem its share price losses by issuing a statement denying rumors a bankruptcy filing was imminent.
"There is no substance to the rumor that Countrywide is planning to file for bankruptcy, and we are not aware of any basis for the rumor that any of the major rating agencies are contemplating negative action relative to the company,'' the statement said.
When trading resumed, the shares rebounded somewhat, but then slid again. They finished with a decline of $2.17, or 28.4 percent, to $5.47 after falling to an all-time low of $5.05 earlier in the day.
A rating analysis issued by Egan-Jones Ratings Co. suggested 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 agency said the lender will need the funding to weather a steep decline in mortgage originations and its shift to less-profitable, non-subprime lending.
Uneasy investors were hard-pressed to find reassurance elsewhere.
KB Home, one of the nation's largest builders, reported a fourth-quarter loss of $772.7 million versus a loss of $49.6 million in the year-ago period.
The National Association of Realtors said its seasonally adjusted index of pending home sales fell 2.6 percent in November to 87.6 from October's upwardly revised index of 89.9.
"A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008,'' said Lawrence Yun, the group's chief economist.
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