Countrywide in crisis

Good morning. After witnessing the rapid collapse of dozens of lenders this year, we can't really be surprised at the speed of these implosions. Credit to a lender is like oxygen. When a lender can't borrow, the end is near.

These are your Countrywide developments this morning:

--Countrywide announced it has drawn down all of an $11.5 billion credit facility to fund its operations. Countrywide also said it has significantly tightened lending standards.

--Reuters via CNBC: Fitch Ratings downgraded Countrywide's senior debt two notches to "BBB-plus," a low investment grade, citing "unprecedented disruption in the capital markets" that has crimped access to "primary liquidity sources."

--Countrywide shares fell another 15% in early trading, below $18/share. The stock traded above $45/share in January.

Our take: even if Countrywide survives, there are numerous lasting developments here, notably a significant tightening of underwriting standards at the nation's biggest mortgage company.

Comments? Thoughts? Insights?
Photo Credit: Reuters

Comments

[pugtv]

If the want cash, they should consider selling all those foreclosed homes they have on their books at market prices. I can't feel bad for these guys since they've been arrogantly pricing their homes at prices no one is willling to pay for. They're one of the key players that are keeping home prices at vastly inflated prices.

[samantha]

countrywide has been poorly regulated and has been operating in the grey area as part of customary operational practices for some time. the business model is fraught with peril based upon borrowing to fund and the inability to withstand a liquidity crisis. perhaps mozilo should forego his huge salary to assist the company in it's liquidity needs at the moment. i have no respect for an organization that PURPOSEFULLY designs its business practices to operate in the grey area. let it fall, there are plenty of other buyers for countrywide's sub-prime mortgages.

[Rob]

Yep, let the house of cards fall. These and the "association" goons will be looking for work soon. If Countrywide goes looking for a Government bailout that is your tip to liquidate your stocks. What the goons said would take years is now exponential.

I am waiting to hear a story of a broker that used to write bad loans and is now losing his own house due to layoffs.

[sunsetbeachguy]

Over in the comments on Calculated Risk, a poster linked to the new as of last Monday underwriting guidelines and rate sheets.

Wooh boy!

FICO over 700, over $750K 5/25 ARM was paying around 9%.

What's that sound? The LA/OC housing market cratering.