Countrywide news signals worsening housing market

LOS ANGELES -- Countrywide Financial Corp., its stock pummeled this week by rumors of bankruptcy and lackluster housing market forecasts, said Wednesday the percentage of borrowers who missed payments on home loans last month rose, signaling worsening trouble for the nation's largest mortgage lender and for the entire mortgage sector.

The company also reported it had funded $23.5 billion in loans in December -- a steep decline from $42.8 billion in the year-ago period.

"Their new business is down roughly 50 percent," said Sean Egan, managing director of independent ratings firm Egan-Jones Ratings Co. in Philadelphia.

"The market is fairly concerned whether the company is going to be able to correct the fundamental problems that it's faced with," he said.

The new figures drove Countrywide stock down by more than 15 percent at one point in the day before it recovered to end down 35 cents, or 6.4 percent, at $5.12.

The decline followed a loss of $2.17, or 28.4 percent, on Tuesday after the company denied rumors a bankruptcy filing was imminent.

Wachovia Capital Markets analyst Jim Shanahan suggested Countrywide stock will remain volatile at least until the company reports its financial results for the fourth-quarter later this month.

Countrywide said some 6.96 percent of the loans in its servicing portfolio were delinquent last month, up from 5.02 percent in December 2006.

Loan delinquencies as a percentage of unpaid principal balances jumped to 7.20 percent from 6.52 percent.

About 1.04 percent of the mortgage loans were pending foreclosure, up from 0.65 percent.

The spike in loan delinquencies and pending foreclosures suggests many borrowers continue to struggle to make their payments, despite efforts touted by Countrywide to find ways to keep borrowers in homes.

Countrywide was among the major lenders involved in a Bush administration push to help homeowners with subprime loans avoid mortgage defaults by temporarily freezing their interest rates.

Falling or stagnant home prices, weak demand and a credit crunch following the subprime meltdown last summer has battered the mortgage sector and other financial institutions, leading to billions in losses.

"Mortgage quality is fast eroding and will continue to erode despite policy efforts to stem the surge in delinquency and foreclosure," said Mark Zandi, chief economist at Moody's Economy.com.