Is WaMu the Next Countrywide?

http://www.thestreet.com/s/is-wamu-the-next-countrywide/newsanalysis/ratings/10375529.html ^ | 8-22-07 | Philip van Doorn

[Hydroshock]

Countrywide Financial (CFC - Cramer's Take - Stockpickr - Rating) isn't the only big bank threatened by the deepening real estate crisis.

An analysis of the largest 20 banks and thrifts by TheStreet.com Ratings shows that four institutions are under-reserved for possible credit losses, a red flag as the economy slows and mortgage defaults rise.

Perhaps more troubling, the numbers show that one of those institutions -- Washington Mutual (WM - Cramer's Take - Stockpickr - Rating) -- could join Countrywide in facing serious liquidity problems as worries about the housing and mortgage markets multiply. Meanwhile, another big lender, National City (NCC - Cramer's Take - Stockpickr - Rating), could see its earnings and dividend come under pressure as a result of its low reserve levels.

Neither Washington Mutual nor National City immediately returned calls seeking comment. But the findings come as investors confront a rising tide of bad news in the U.S. credit markets. Foreclosures nearly doubled last month from a year ago, RealtyTrac reported Tuesday. Shares in bank and brokerage stocks have dropped sharply this summer. Countrywide alone has shed $13 billion in market value this year.

With the financial sector under increasing stress, TheStreet.com Ratings checked two key ratios to measure the strength of big banks' balance sheets: loan-loss reserves as a percentage of nonperforming loans, and nonperforming assets as a proportion of core capital and reserves.

[SeaHawkFan]

Does not affect your loan as long as you continue making the payments.