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Countrywide Selloff Accelerates

Laurie Kulikowski

The Countrywide (CFC Quote) selloff steepened after CEO Angelo Mozilo said he doesn't expect the U.S. housing market to rebound this year or next.

Shares dropped 12% in midafternoon trading after Mozilo admitted that the nation's biggest mortgage lender was blindsided by a sharp rise in defaults in delinquencies among recent homebuyers.

Countrywide set off a broad decline in shares of banks and lenders Tuesday morning when the company cut its full-year earnings guidance, citing weakening returns in so-called prime mortgages as well as in the subprime loans that swooned this spring. Shares in big rivals such as Downey (DSL Quote) and WaMu (WM Quote) tumbled 4% each.

"The deterioration in real-estate values, that is the base cause," Mozilo told investors on a conference call Tuesday afternoon. "Clearly the deterioration is a result of the affordability issue and the oversupply. Once that turns around -- the psychology of the country changes."

But Mozilo said it will be 2009 before the housing market starts to recover.

"As I try to walk through what happened there and could a lot of this have been foreseen ... nobody saw this coming," Mozilo said.

Shares were off $3.93 to $30.12 after earlier touching a new 52-week low of $29.99.