Washington Mutual's ( WM) earnings warning doesn't bode well for rival Countrywide Financial ( CFC). Observers are saying that Countrywide, the nation's largest independent lender, is likely to fare even worse than WaMu in the third quarter, as a result of the significant deterioration in the housing market and the seize-up of secondary markets for mortgage-backed securities over the summer. "Countrywide is going to have some significant losses," says Joe Capone, a managing member of Smart Financial Partners, a hedge fund focused on financial services equities. "There all sort of severance costs, marked-to-market issues, credit losses -- they've got everything." Early Friday, WaMu warned that third-quarter profit is expected to fall by 75% from a year ago. WaMu attributed the steep decline to a $975 million provision expense for loan losses from subprime mortgages and home equity loans, plus $410 million in other losses tied to mortgages and bond holdings. "What WaMu is trying to do is shore up its balance sheet that will allow investors to really focus on the credit issues and take the liquidity issues out," says Capone, who is also a contributor to RealMoney.com, TheStreet.com's investing ideas Web site. Investors, buoyed by Friday morning's solid jobs report, sent WaMu shares up 76 cents to $36.04. But Capone stresses that Countrywide fans won't have it so easy the next time they get an update on the firm's financial performance.