Here's a shock: Countrywide Financial Corp. (NYSE: CFC) is deep in the red. The beleaguered mortgage company lost a whopping $1.2 billion, or $2.85 per share, in the quarter compared with earnings of $647.6 million, or $1.03 per share. It was its first quarterly loss in 25 years.But wait, the news isn't all bad, according to the company.
"We view the third quarter of 2007 as an earnings trough, and anticipate that the Company will be profitable in the fourth quarter and in 2008," President and Chief Operating Officer David Sambol said in the earnings release. "Over the longer term, we believe that prospects for the U.S. housing and mortgage markets, as well as for Countrywide, remain very attractive."
Chief Executive Angelo Mozilo goes even further, saying, "...during the period we also laid the foundation for a return to profitability in the fourth quarter..... We believe the steps which we have taken position the Company with the necessary capital and liquidity for our operating and growth needs, and will allow us to benefit from opportunities that result from industry consolidation."
Gosh, what about the $11.5 billion in emergency credit that the company tapped in August? Just a blip in the road? The SEC investigation? Just a hiccup? Well, Wall Street seems to think so, bidding up shares of the Calabassas, Calif.-based mortgage lender in pre-market action. But even the most ardent bulls on the stock know the company has a tough road ahead.
``Countrywide's problems won't work themselves out in a period of months or a quarter or two,'' fund manager Ron Muhlenkamp, which owns Countrywide shares, told Bloomberg News. ``The industry will be around three or four years from now, and Countrywide will be more valuable, either on the public markets or as part of a larger financial firm.''
The company's earnings conference call scheduled for later today should be a lively one.Wow, that isn't just high hopes. That's high apple pie in the sky hopes. (Yeah, it's a dated musical reference but an accurate one.
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Reader Comments (Page 1 of 1)
10-29-2007 @ 10:55AM
joe n said...
I am having a hard time determining where all of the loss has ocurred. If a house is valued at $100,000. The owner gets an 80% loan and defaults the house can be sold for $100,000 and the bank should make $20,00 less foreclosure expenses. What am I missing?
11-08-2007 @ 7:04PM
Amy Stoehr said...
Joe, the problem is that the buyer in your scenario then turns around and gets a home equity loan, completely leeraging the property, believing thy'll still get 10% apreciation annually. Two years later, the market is stagnant or soft, the house is now only worth $95,000 and then borrower owes $105,000 or more. They're upside down. The loan thy got is set toreadjust from that great 5% intro rate they ere sold, interest only, to 8 or 9% and the payment is going to balloon to a level the borrower can no longer afford to pay.