Countrywide Financial Plummets On 'Unprecedented Disruptions' In Secondary Mortgage Market

Number one U.S. mortgage provider Countrywide Financial Corp. said Thursday night that "unprecedented disruptions" in the secondary-mortgage market have forced it to retain a greater proportion of the mortgage loans it originates. Its shares were down 17.1% in pre-market trading as of 8:00 a.m. ET. In a 10-Q filed with the SEC Thursday, Countrywide warned its inability to sell mortgages to secondary parties "could have an adverse impact on our future earnings and financial condition." The company plans to retain more loans until demand for secondary mortgage purchases improves. In its recent quarter, Countrywide reported a 33% drop in net profits and slashed its forecasts going forward (full story). The fact Countrywide will have to retain more loans will create another strain on already overstretched liquidity for new mortgages in the U.S., and the company will have to restructure the way it makes profits from a largely fees-based model to an interest-based one. For a second day, U.S. futures were negatively affected by liquidity concerns, with the DJIA down 190 points (1.43%) and the S&P down 21 points (1.45%) as of 8:00 a.m. ET. In related news, Countrywide CEO Angelo R. Mozilo exercised options for 92,000 shares of common stock under what he claimed to be a "prearranged trading plan." Wednesday, Mozilo exercised the options for a purchase price of $14.69 a share and sold them all later that day for $28.74 apiece.

Sources: CFC's 10-Q, Bloomberg, MarketWatch, Reuters, AP
Commentary: Countrywide Experiencing 'Unprecedented Disruptions' • Countrywide Still Looking For Biznas • Countrywide Financial Posts 33% Net Income Drop; Slashes Guidance
Stocks/ETFs to watch: CFC. Competitors: BAC, WFC
Conference call transcripts: Countrywide Financial Q2 2007 Earnings Call Transcript

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