Posted on 10/26/2007 11:54:52 AM PDT by Moonman62
NEW YORK (AP) -- Shares in Countrywide Financial Corp. surged as the nation's largest mortgage lender assured investors that the worst of the mortgage crisis is likely behind it.
The stock jumped $2.18, or 16.7 percent, to $15.25 in morning trading. The stock has ranged from $12.07 to $45.26 over the past year.
Countrywide on Friday reported more than $1 billion in third-quarter losses, mostly on write-downs related to bad loans, but promised that it had taken steps to adapt its business and would report profits in the fourth quarter and in 2008.
Morgan Stanley analyst Kenneth Posner said the results were better than he expected. "We feel substantially more confident in the company's liquidity," he wrote in a note to investors.
There had been concern Countrywide wouldn't be able to remain solvent as the mortgage crisis worsened in the summer months. But Bank of America gave it $2 billion in financing in return for a stake, and now the results showed the company had enough positive cash flow.
Posner said it remains to be seen whether Countrywide can "profitably originate mortgages" in the future in light of a still-deteriorating housing market. The analyst expects housing won't improve until 2009, which makes a long-term bet risky.
"We are not inclined yet to make a sizable bet on the stock," he said.
Wachovia's Jim Shanahan said he still has a lot of questions, but that the forecast was positive, at least on the surface. He said he was not surprised by Friday's rally, but took a wait-and-see approach to a long-term recommendation. He rates the stock "Market Perform."
The paid pessimists are waiting for their marching orders to spin this into glooooooooom.
Countrywide lost more than $1 billion, and the news has been out all day. I wondered why the vultures hadn’t posted anything.
Word must have got out yesterday; a rate cut is an absolute certainty and it will probably be .50.
It’s all part of the “No Banker Left Behind” act.
If you hurry, you can catch a video of stock analyst who points out how Countrywide’s risk of bankruptcy are not over. He provides a little objectivity to today’s perhaps pollyanna market reaction.
Two major points: 1) why did they escape from a Merrill Lynch sized writeoff; 2) how are they making a profit if their once lucrative loan origination business has dropped off?
He believes they might survive if they have an equity infusion of seven or so billion $$$.
http://www.bloomberg.com/index_americas.html
You didn’t read the article did you?
I absolutely read the article. I am very familiar with Countrywide and I’ve conducted a lot of research. I guess I could rely more on Yahoo for information. Is that your source?
Bear markets in stocks (CFC in this case) typically include moonshot rallies. That’s what today is.
But... but... but... but the end is near! We’re doomed! It’s “make room on the ledge” time!
We’re sorry, we won’t be able to attend doomsday this year. Perhaps we can pencil it in for next year, around April-ish?
Fits into my schedule. thanks
“2) how are they making a profit if their once lucrative loan origination business has dropped off?”
According to my main mortgage broker, Countrywide is pricing competitively, and originating a lot of loans. By “a lot” he means more than their usual share within the marketplace.
Like I said, I think the biggest news is that their packages of new loans are selling well in the secondary market.
I read in today’s news that Countrywide is benefiting from their competitors dropping out of the mortgage market.
Where is Hydroshock the DU troll, who loves to post horrendous bad mortgage\real estate news and keeps from getting his trollish butt kicked off FR by starting innocuous psudo-conserfvative threads about nothing.
Well, according to my read of Reuters, CFC is originating 44% fewer loans than it did this quarter last year.
That their packages of new loans are now selling well is good, because they have massively tightened their underwriting standards and probably been read the riot act by BAC who gave them the cash infusion that essentially saved them from BK. But these loans “selling well” is largely a tautology, because the buyers of these loans have stated what they will and will not accept. This says NOTHING about any of their existing loans or their status. I would suspect that CFC will take the lead from Citi and figure out a way to shove the reckoning of their substantial book of defaulted and unmarked to market loans somewhere off into the future, into these “SIVs” in order to magically remove them from CFCs’ books.
That the stock is at 2002 levels and down 60+% for the year is, I guess, good. Or bad. Or something. I agree, the biggest news is that there’s reason to believe they can continue in business, but without completely focusing on gloom & doom and without ONLY focusing on the one good aspect of their outlook, the financial info I’m getting is decidedly mixed.
Frankly, I don’t find CFC’s reporting particularly transparent. I take today’s 30% move in the stock and attribute half to a massive short squeeze and half to improved outlook.
They also have significantly fewer employees and lower costs.
This says NOTHING about any of their existing loans or their status.
Management said today that the old loan packages still aren't selling, so the market knows that.
Wonder how much of the surge was a ‘short squeeze.’ A lot of short positions on CFC (13.7% of float as of last month) ran up against better than expected news. Could have been a slight uptick that then becomes a rally as people rush to cover their shorts.
LOL!
I have no doubt that short covering was part of the move today. Somtimes uptrends begin that way. Sometimes they don’t.
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