Industry News

Stocks tank on Countrywide fears

Analyst: Forced asset sales could cause bankruptcy
Published on Aug 16, 2007

A Merrill Lynch analyst's warning that Countrywide Financial Corp. could go bankrupt, coupled with alarming news from other lenders, helped kill a stock market rally Wednesday and reinforced fears that investors are no longer willing to fund mortgage lenders. Countrywide's stock dipped below $20 at one point Wednesday afternoon in furious trading over fears that a shortage of liquidity in secondary mortgage markets could force the company to curtail its lending. The stock rallied to close at $21.29, down 13 percent for the day and 53 percent off its one-year high. The Dow Jones Industrial Average fell 167 points to a four-month low, erasing gains made earlier in the day. Countrywide, the nation's largest mortgage lender, said Tuesday that loan production dropped 14 percent in July compared to the previous month, to $39 billion, following warning that "unprecedented disruptions" in the secondary market could restrict the number of loans it can make. Falling home prices ...

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