Countrywide takes huge hit, ends quarter $1.2 billion in red
CALABASAS – Countrywide Financial Corp. lost $1.2billion in the third quarter as its mortgage business took a huge hit from the credit crisis and home sales slump, the company said Friday. It was the first quarterly loss in 25 years for Calabasas-based Countrywide – and the company claimed the last by predicting it would return to profitability in the fourth quarter and next year. The optimistic forecast sent the company’s stock price soaring 32.3percent, to $17.30, after hitting a 52-week low Thursday. The share price is 64percent under the 52-week high of $45.26. “We continue to be bullish about the long-term prospects for both Countrywide and our industry,” company Chairman and Chief Executive Officer Angelo Mozilo said during a lengthy conference call. AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREGame Center: Chargers at Kansas City Chiefs, Sunday, 10 a.m.“I firmly believe that we will be as successful in the future as we have been in the past.” David Sambol, the company’s president and chief operating officer, blamed the lousy quarter on three factors: losses and writedowns on loans totaling $1billion, increased credit costs and charges related to cost reductions. Countrywide, the nation’s biggest mortgage lender, said last month that it was cutting up to 12,000 jobs. During the quarter, the company integrated its mortgage lending operations into Countrywide Bank and during September it accounted for about 90percent of loan fundings. Countrywide’s loss amounted to $2.85 a share, down from a profit of $648million, or $1.03 a share in the year-ago period. The company reported a revenue figure of negative $50million for the July through September period due to charges and writedowns compared with $2.82billion during the same period a year ago. “Countrywide’s results for the third quarter of 2007 reflect the impact of unprecedented disruptions in the U.S. mortgage market and the global capital markets, as well as continued weakening in the housing market,” Mozilo said. And because of that it is suffering proportionately, said Bart Narter, senior analyst with Celent, a Boston-based financial research and consulting firm. “While they have mildly expanded their offerings with Countrywide Bank to help fund their loans, they lack the diversity of a Washington Mutual or JPMorgan Chase,” Narter said in an e-mail. He also said Countrywide will have to change its business model to reflect the fact that it might need to fund its own originations for the upcoming months. “This should continue to be a drag on earnings well into 2008,” Narater said. During the quarter, Countrywide funded $96million in loans, down from $118million a year ago. To deal with rising late payments and defaults, the company also boosted reserves to $934million in the quarter, up from $38million during the year-ago period. The company said that it expects housing market weakness to continue through next year and loan originations will also fall. Increasing delinquencies and foreclosures are also anticipated. In its presentation to analysts, Countrywide noted that many of its competitors have quit the business and more are expected to do so in the coming months. Company executives predict that they will capture this part of the market share next year. It also said that current borrowers have very high credit quality. “Countrywide has sufficient capital, liquidity and financing capacity for its operating needs and growth needs,” Sambol said. Mozilo also defended his slew of stock trades and confirmed an informal probe of his actions by the Securities and Exchange Commission. These automatic trading plans were set up in 2004 because at that time he planned to retire in 2006, Mozilo said. “I’d like to state categorically that at no time did I make any trading decisions based on any material nonpublic information, and I fully complied with all company policies,” Mozilo said during the call. “I am confident that this will demonstrate that I’ve complied with all protocols.” [email protected] (818) 713-3743160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!