Countrywide Denies Rumor of Accounting Problems

Highflying mortgage lender Countrywide Financial ( CFC) is denying a market rumor that the firm may have an accounting problem.

The California-based lender issued a press release at midday Thursday to debunk the rumor, which at one point had pushed the company's stock 7% lower.

"Management firmly believes that there is no basis whatsoever for these rumors and stands behind the integrity of its accounting practices and financial statements," the company said.

Countrywide's stock recovered somewhat after the release, but in late afternoon trading the stock was still down $3, or 4%, at $71.44. For the year, Countrywide has been one of the top-performing financial stocks, rising nearly 40%.

It's unusual for companies to comment on market rumors. But Countrywide may have felt the need to do so in light of the accounting scandal now swirling around Freddie Mac ( FRE) -- the nation's second-biggest mortgage buyer. That's because Countrywide is one of the nation's biggest home lenders and maintains one of the largest mortgage-servicing portfolios.

The accounting controversy at Freddie is focusing on the firm's accounting treatment for derivatives -- sophisticated financial instruments that are used to hedge against interest rate fluctuation. In recent days, some have speculated that other mortgage firms that rely on derivatives as a hedging tool could become embroiled in a similar accounting controversy.

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