Industry News

Fed chief raises expectations of more rate cuts

Mortgage stocks rebound on rumor of BofA, Countrywide merger

Federal Reserve Chairman Ben Bernanke raised expectations of further cuts in short-term interest rates in a speech delivered Thursday, capping a week in which investors temporarily lost faith in publicly traded giants of the mortgage lending industry including Countrywide Financial Corp., IndyMac Bancorp Inc. and Freddie Mac. Countrywide, which has scrambled to obtain funding to make mortgage loans since the secondary market for mortgages and corporate debt was disrupted last summer, was plagued by rumors that it was preparing to file for bankruptcy. Countrywide officials denied the rumors -- and then had no comment on a report in the Wall Street Journal Thursday that it is in "advanced discussions" regarding a merger with Bank of America. Shares of Countrywide, which traded below $5 a share at times Thursday, shot up more than 50 percent on the news, closing at $7.75. IndyMac Bancorp Inc. also benefited from the news, rising 23 percent on the day to close at $5.78. IndyMac shares t...