Countrywide Problems

Countrywide shares plunge; NYT reports co. admitted to fabricating documents

NEW YORK (Thomson Financial) - Shares of Countrywide Financial Corp.
plummeted in midday trading Tuesday, dropping to levels unseen in nearly eight
years.

A sharp sell-off began in the stock roughly an hour and a half ago. The
session low of $6.10 is well below the issue's prior 52-week nadir of $7.51,
which was set this past Friday. The stock hasn't traded that low since March
2000. Shares were off 19.5% to $6.15 in recent trades with volume of 59 million
already eclipsing the 30-day daily average of 41.4 million.

Analysts at Thomson Squawk Box, a real-time market intelligence service,
cited an article in the New York Times that says court records indicate
Countrywide has admitted to fabricating letters related to a bankruptcy case in
Pennsylvania. "The Times article really seems to be spooking a lot of people,"
said TSB's William Maloney.

The Times article provides online access to the related letters as well as
a transcript of the exchange between Countrywide's local counsel and the
presiding judge.

The documents in question reportedly claim the borrower, a Pittsburgh woman
seeking Chapter 13 bankruptcy protection to prevent foreclosure on her house,
owed Countrywide roughly $4,700 because of discrepancies in escrow deductions,
the Times said.

Countrywide is also the subject of a bearish research note Tuesday from
Lehman Bros., which sees a bleak outlook for the nation's largest mortgage
provider relative to management's recent guidance.

The firm, which maintained an underweight rating on the stock, still sees
risk for the company, which has been at the center of the subprime meltdown.

"The secondary market for non-conforming mortgages remains closed, forcing
CFC to substantially cut back its volumes and produce lower margin GSE
(government-sponsored enterprises) conforming loans," Lehman said, adding that
this has caused a dramatic decline in Countrywide's earnings power that's
keeping the company's creditors "nervous" about its liquidity.

Lehman believes both investors and creditors will stay cautious on the
stock until its credit stabilizes and profitability recovers, a scenario the
firm doesn't expect to take place until 2009 or later.

The Calabassas, Calif., company wasn't immediately available for comment.
Michael Baron

Grüße

Octavian