Countrywide Financial ( CFC) shares plunged for the second day in a row, after foreclosures more than doubled last month and concerns were raised about the beset mortgage lender's capital adequacy. Foreclosures in December more than doubled to 1.44% on the more than 9 million loans it services compared to a year earlier, according to Countrywide's monthly operational results. Delinquencies as a percentage of unpaid principal balance rose to 7.2%, up nearly 3 percentage points, it said.
That said, total loans funded last month rose 1% from November, despite falling 45% from the year-earlier period, to $24 billion, the Calabasas, Calif.-based company said. Countrywide's daily average mortgage application activity totaled $1.5 billion, down 21% from mortgage application activity in November. The mortgage loan pipeline totaled $35 billion at Dec. 31, down 18% from a year earlier. "Our fourth quarter ended with a number of positive operational trends," said David Sambol, Countrywide's president and COO. "Management is pleased with the progress we have made in positioning the company to navigate the current challenging environment." Sambol said that total loans funded in the month of December were "ahead of our forecasts," fueling fourth-quarter loan fundings to $69 billion, which exceeded the company's expectations. Still, the stock fell as much as 19% Wednesday, one day after Countrywide slumped to a 52-week low, as
rumors swirled that the nation's largest mortgage lender was about to file for bankruptcy, sending shares tumbling more than 28% lower. The company denied the rumors. More recently, Countrywide shares were down 9.7% to $4.94.
They Just Don't Get Rumors!
"People really don't believe Countrywide and are clearly showing their concern," says Randy Diamond, an equity trader at Miller Tabak, in an email. "Countrywide continues to beg for deposits with the 5%
plus deposit rates that they are maintaining, even with interest rates in decline -- they obviously need the money and the public is not fooled. I guess the public fear of bankruptcy could almost become a self-fulfilling prophecy." The nation's largest mortgage lender is hardly alone among companies in the financial sector that have investors rattled about capital levels. Bond insurer MBIA ( MBI) on Wednesday morning cut its dividend and said it would raise $1 billion. E*Trade Financial ( ETFC) also said it had sold $3 billion in hard-to-price mortgage-related securities and municipal bonds as part of a restructuring, as it also sank to new lows. Total deposits were $61 billion at the end of the quarter. Countrywide's retail deposits rose $2.3 billion in December to $33 billion, the company said. Countrywide's business of bill collecting and loan monitoring proved once again to be a bright spot in this troubled company. Countrywide's servicing portfolio rose $5.4 billion from the end of November to $1.48 trillion.