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Concerns about

Countrywide Financial

( CFC) dragged on financial stocks Monday, after ratings agencies expressed concern about the lender's debt and an analyst said

Bank of America

(BAC) - Get Bank of America Corp Report

should "walk away" from their proposed deal.

A Friedman, Billings Ramsay analyst suggested BofA should at least lower its offer price for Countrywide. Meanwhile, Standard & Poor's on Friday downgraded the lender's debt to junk status, and Fitch Ratings on Monday put the lender's debt on its "Rating Watch Evolving" list. The stock tanked closed down 62 cents, or 10.4%, to $5.36.

Other mortgage lenders, like

Washington Mutual

(WM) - Get Waste Management, Inc. Report

fell on the news, losing 7.9% to $11.22. The


Financial Sector Index declined 69.99 to 7,902.48.

In other lender news, Rep. Barney Frank (D., Mass.) expressed concern about reports that people are having difficulty obtaining a jumbo mortgages, even after Congress changed rules that were supposed to loosen the market for big loans. He said he will hold a hearing on May 21 to question mortgage bankers and government-sponsored entities like

Fannie Mae

( FNM) and

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Freddie Mac

( FRE). Freddie Mac gave back 5.8% to $25.52 and Fannie Mae was trading at $28.29, a loss of 4.1%.

Shares of bond insurers



dropped 8.9% to $4.90 and

XL Capital

(XL) - Get XL Fleet Corp. Class A Report

closed down 8.5% to $34.57, after rival


said it had received proposals to assist the company in raising capital. Goldman Sachs is helping FGIC get capital to keep the company going. It was also reported on Monday that

State Street

(STT) - Get State Street Corporation Report

holds a 6.9% stake in Ambac.

American Insurance Group

(AIG) - Get American International Group, Inc. Report

gave back $1.65 to $47.39.

One of the few winners on the day was student lender

First Marblehead


. The company, which has struggled ever since the non-profit agency that guarantees it loans declared bankruptcy, announced that it was cutting half of its work force and slashing operating costs by $200 million. The stock ended the day up 4.7% to $4.04.