Pop the champagne! We only lost $1.2 billion!

It's a strange world in which a company reports $1.2 billion in losses and its stock shoots up 30 percent.

Countrywide Financial Corp.'s third quarter losses were less than many expected, and the company says that after posting its first loss in 25 years, it will return to profitability in the final quarter of 2007 (see Inman News story).

Countrywide says many of the losses it applied to its bottom line in the third quarter are a one-time deal, or that they anticipate future losses the company hasn't yet incurred. It remains to be seen whether Countrywide has realistic valuations on the loans it's been forced to hold onto rather than sell in the secondary market, or if other unexpected losses aren't in store.

But the good news today for the the real estate industry was that Countrywide execs see signs the secondary market for mortgages is stabilizing. I didn't have time to dial into the company's conference call with investors today, but according to Marketwatch, Countrywide COO David Sambol said spreads are tightening on securities backed by newly-originated, highly-rated loans -- both prime and subprime.

That means Countrywide will be able to sell loans to investors it thought it would have to hang on to until the first quarter of 2008 -- allowing it to fund more loans. So it could be that if home buyers start feeling like it's time to start snatching up bargains, the credit crunch is less likely to prevent Countrywide and other lenders from funding the deals. 

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