Countrywide Tells Investors Its Finances Are Sound
Posted by ~Ray @ 2008-10-16 05:44:17
the largest U. S mortgage lender moved to reassure investors Tuesday that it is not borrowing too much and will not be constrained in its ability to provide home loans.
"We said it back in August we said it in September we said it last week we'll say it until we turn blue in the face but we have ample liquidity to fund our growth and operational needs," David Bigelow managing director of investor relations said at an FBR Capital Markets conference in New York.
Countrywide based in Calabasas. California has faced heavy criticism over its lending practices as defaults mounted leading to a $1.2 billion third-quarter loss.
Chief Executive Angelo Mozilo has said U. S housing is in its worst slump since the Great Depression. The company's share price decline has resulted in a roughly $1 billion paper loss for Bank of America the second-largest U. S bank on its $2 billion investment in the company in August.
Bigelow rejected criticism that Countrywide has threatened the soundness of the Federal Home Loan Bank system by borrowing excessively. He also said Countrywide does not expect to materially hurt its ability to make home loans.
In addition. Bigelow said Countrywide still plans to cut 10,000 to 12,000 jobs from July's level of 61,586 and said the number could be "a bit higher" depending on attrition.
He said that as Countrywide's mortgage portfolio deteriorates the FHLB exposure "poses an unreasonable risk."
Yet Bigelow said "we are very familiar with FHLB collateral requirements and we are in full compliance... The FHLB has some experience in risk management and they probably have some idea what they're doing in terms of their lending activities."
Schumer wrote his letter to Ronald Rosenfeld chairman of the Federal Housing Finance Board which oversees the system of 12 regional banks that offer financing to mortgage lenders.
As defaults mounted and capital markets tightened. Countrywide shifted its business to emphasize smaller safer home loans that Freddie Mac and Fannie Mae will buy.
But concerns about the government-sponsored enterprises grew last week after Freddie Mac posted a larger-than-expected $2 billion third-quarter loss and said it was looking to bolster capital. If GSEs were constrained from buying so-called "conforming" home loans. Countrywide's business could suffer.
Yet Bigelow said: "Countrywide does not believe that Freddie Mac's third-quarter loss or any other recent news from the GSEs will have a material impact on our ability to fund loans."
Countrywide funded $22 billion of mortgage loans in October down 48 percent from a year earlier. [ADVERTHERE]Related article:
http://www.cnbc.com/id/21993633
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