Shareholders of Countrywide Financial Corp. had little to thank the company for this Thanksgiving.
Countrywide's stock fell 22 percent last week to close at $9.42 the day before the holiday. That followed a week of unrelenting bad news, including fears of a possible bankruptcy and indications Freddie Mac and Fannie Mae may lose their appetite for buying up Countrywide loans.
In a note titled "The Lifeline is Withdrawn," Fox-Pitt Kelton analyst Howard Shapiro said that the two government sponsored corporations might not be able to purchase Countrywide's loans thereby hampering its ability to issue new loans. He downgraded the stock to "in line" from "outperform."
Combined Freddie Mac and Fannie Mae own or guarantee more than 40 percent of the nation's home loans. But in recent weeks, both companies have reported third quarter losses possibly curtailing their ability to play their traditional role.
Freddie Mac reported last week that it lost $2 billion in the third quarter, and the week before Fannie Mae reported losses of $1.52 billion. The losses stem in large part from increasing foreclosures, lower prices and declines in lending activity, which have plagued the entire mortgage industry.
Countrywide has been especially hard hit by these developments because it became a leading issuer of high-risk subprime loans. In late October, Countrywide reported a $1.2 billion third-quarter loss. The company's market cap has plummeted by about 80 percent since its stock reached a 52-week high of $45.26 in February.
In August, the company got some relief when Bank of America extended a financial lifeline, purchasing $2 billion in preferred stock at $18 a share. But at current share prices that has cost the nation's second largest bank about $1 billion in paper losses.
In response to the bankruptcy rumors, the company released a statement last week saying "Countrywide has ample liquidity and capital and will be a beneficiary of ongoing mortgage market consolidation."
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