NEW YORK – Countrywide Financial Corp. (CFC), the largest U.S. mortgage lender, sought to ease growing market concerns about its liquidity Thursday, as credit quality problems spread to a wider array of lenders.
In a statement, Countrywide Chief Financial Officer Eric Sieracki said the company has nearly $50 billion of "highly reliable short-term funding liquidity."
He also said day-to-day operations and the placement of short-term debt known as commercial paper, which companies often use to fund those operations, have not been disrupted.
Shares of the Calabasas, California-based company have fallen 21 percent since July 24, when Countrywide slashed its 2007 earnings outlook, posted a 33 percent drop in quarterly profit, and said borrowers with good credit histories were missing more payments.
This fanned concern that credit quality issues were moving beyond riskier "subprime" home loans and extending to lenders such as Countrywide that mainly make loans considered safer.
Countrywide has also made many of the more exotic loans that have been causing problems industrywide.
"We're concerned about Countrywide," said David Olson, president of Wholesale Access in Columbia, Maryland, which tracks the mortgage industry. "They're huge, but they did a lot of payment-option and interest-only mortgages, and we're concerned how those will perform. It could be the next shoe to drop. We'll be watching the next couple of months."
"Countrywide's financial condition remains strong," Sieracki said. "Countrywide has long-standing and time-tested funding liquidity contingency planning ... Our liquidity planning proved highly effective earlier during 2007 when market concerns first arose about subprime lending, and remains so today."
Earlier Thursday, a senior executive at bond insurer MBIA Inc. said delinquencies om sone subprime mortgages and home equity lines of credit that Countrywide services are rising.
Angelo Mozilo, Countrywide's chief executive, said on a July 24 conference call that it may not be until 2009 when the housing market recovers from oversupply, overstretched borrowers, rising borrowing costs, and "home price depreciation almost like never before, with the exception of the Great Depression,"
Countrywide shares closed off 43 cents at $26.77 on Thursday on the New York Stock Exchange, down 37 percent for the year, after earlier hitting their lowest level since January 2004. They rose to $27.35 in after-hours trading following the company's statement.
Options traders also bet that Countrywide's shares would fall. According to market research firm Track Data, a total of 85,907 puts compared with 26,135 calls changed hands Thursday, compared with normal daily options volume of 39,638 contracts.