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Countrywide Denies Bankruptcy Rumors

Shapiro's downgrade also comes one day after shares of Countrywide plummeted nearly 13%, as market participants refreshed concerns about the Calabasas, Calif.-based company's liquidity, which may not be ample enough .

Shapiro says that the mortgage crisis could indeed get worse after Freddie's announcement.

"Freddie Mac and Fannie Mae have provided essential liquidity in a time of crisis," he wrote. "Now that that liquidity function has essentially been withdrawn, it will mean, in our opinion, a further exacerbation of the housing downturn, even less credit available and steeper downturns in home prices. At this point, some kind of policy response is absolutely essential, in our opinion."

Freddie Mac's news is troublesome because it is one of the largest purchasers of residential mortgage loans. These loans are considered less risky, because the GSEs require strict documentation on the mortgages and do not purchase some of the more exotic loans that were created in the last few years, such as negative amortization loans and other subprime loans.

The big mortgage finance firm's ability to purchase loans is particularly important these days, as the market in which Wall Street firms purchase mortgages in order to create securities and other complex instruments from the pools of loans remains frozen for the most part. As the market for mortgage-backed securities seized up this summer, it forced lenders to retract from the originate-and-sell business model and concentrate only on originating loans that could be sold to the GSEs.

On Monday, Countrywide CEO Anthony Mozilo appeared to be upbeat during a phone interview with Bloomberg. "I'm grateful I had the team here when I did," he said, according to the wire service. "So I think we can come out of the other side of this thing, certainly stronger and more mature than ever."

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