Trouble still brewing at Countrywide

In a previous post, I blogged about the recent troubles of Countrywide. Well, the company made the news again for the wrong reasons.
CNN reports that [shares] "of Countrywide Financial Corp. plummeted Tuesday after a New York Times report said the mortgage lender fabricated bankruptcy documents and a Lehman Brothers analyst said the company is unlikely to return to prior profitability levels.
Shares of Countrywide fell $1.47, or 19.2 percent, to $6.17 in afternoon trading. Earlier in the session, shares bottomed out at $5.76 - their lowest since early 2000 - after speculation the company was planning to file for bankruptcy itself. Countrywide later denied the rumors.
Countrywide shares have already lost about 26 percent of their value since the beginning of the year. Since the beginning of 2007, shares of Countrywide have plummeted about 84 percent.
According to the New York Times article, Countrywide "recreated" letters claiming a borrower owed the company $4,700, even though the borrower was under bankruptcy protection.
"It is not Countrywide's policy to create or 'fabricate' any documents as evidence that they were sent if they had not been," Countrywide said in a statement sent to the Times prior to the story's publication that was e-mailed to CNNMoney.com.
Instead, Countrywide said the letters were printed with dates that listed when payment adjustments were made to the borrower's escrow account
The case is one of 300 bankruptcy cases in western Pennsylvania where Countrywide's practices are being scrutinized.
The nation's largest mortgage lender has been trying to cope with a worsening housing market and rising delinquencies and defaults, especially among subprime mortgages given to customers with poor credit history.
Countrywide posted $1.2 billion in losses in the third quarter of 2007 because of the weakening mortgage market. Countrywide set aside $934 million during that quarter to cover rising defaults among loans.
The company denied earlier speculation that it was planning to file for bankruptcy protection...
Lehman Brothers analyst Bruce Harting cut his fourth-quarter earnings estimate for Countrywide to 20 cents per share from 36 cents per share.
"While Countrywide's transition to originating mostly GSE conforming mortgages has reduced balance sheet risk caused by its non-conforming originations, the dramatic decline in Countrywide's earnings power this transition has caused has kept Countrywide's creditors nervous about the company's liquidity," Harting wrote in a research note.
Harting said Countrywide will face additional pressure because the weakness in the overall housing market has depressed total volume as well."

So how strong is Countrywide's foundation? There's an ill wind blowing from this company...

A view from the soapbox

According to the NY Post, "...late October, when Countrywide CEO Angelo Mozilo said he expected the fourth quarter to be profitable - comments that drove the stock up to $17.11 the next day. But over the last few weeks, investors have begun to believe that Mozilo's pledge could be tough to achieve as Countrywide's mortgage organizations fall and the available capital to fund new mortgages shrinks...The mortgage giant's stock is now trading at nearly half the $18 conversion price for the $2 billion of preferred stock that Bank of America bought back in August. Shares closed at $9.65 [11/23/07]."

And Bloomberg reports on 10/31/07 that "Countrywide Financial Corp. shareholders sued Chief Executive Officer Angelo Mozilo and 19 other company officers and directors, claiming a stock buyback program allowed them to sell shares at inflated prices.
The defendants sold $842 million in company stock while issuing false and misleading statements about the financial health of Countrywide, the biggest U.S. mortgage lender, the New England Teamsters and Trucking Industry Pension Fund alleged in a complaint filed Oct. 29 in Los Angeles Superior Court...Mozilo and the other ``defendants caused Countrywide to engage in unlawful business practices and to disseminate false and misleading statements to the public while simultaneously using more than $2 billion of Countrywide's assets to prop up the price of Countrywide stock via a share repurchase plan,'' the pension fund said in the complaint.
The fund accuses the company's officials of insider selling and breach of their fiduciary duty to both the company and shareholders. They seek unspecified damages."

I know this is a story that many will skip over... But this thing stinks like Enron. I remember the videos and news alerts from Ken Lay saying that Enron was in good standing. All the while, he was selling his Enron stocks while he convinced the suckers to keep their shares. This sounds just like what Mozilo may be doing. I am not saying that Countrywide is a repeat of the Enron scandal and implosion... But these sound so much alike. My feelings for Countrywide went negative as soon as I saw a story on ABCNews about how the company promised those victimized by Katrina could skip some mortgage payments. These customers were sent a letter telling them that they could focus their attention on the effects of the hurricane, and they wouldn't be forced to pay any penalties. The company then reneged on its promise and demanded backpayments from these customers or they would loose their home. The Countrywide twerps forced the people who wanted to keep their homes to take out loans to pay these charges. Luckily, one couple recorded phone conversations with a Countrywide rep who felt bad for the customer and admitted what happen over the phone. I am searching for this story on ABC and I will post the link once I find it. When and if Countrywide goes the route of Enron, then "all hell will hit the fan." Greed once again is going to suck some good people down. And I doubt that Bank of America will ever see any of its $2 Billion again. Even the Australians have an opinion of this...