Mumbai:
Countrywide Financial Corp, the biggest US mortgage lender, had bought most of
the assets of another US mortgage lender HomeBanc Corp that filed for Chapter
11 bankruptcy protection, is now negotiating a second multi-billion dollar bail-out
package, similar to last month''s deal with Bank of America Corp, (See: Countrywide
gets $2 billion capital boost from Bank of America) the New York Post
reported in its online edition. The
report named possible lenders as JPMorgan and Citigroup and a group of hedge funds.
California-based
Countrywide received a $2-billion injection from Bank of America, helping the
mortgage lender to come out of a liquidity crunch. "Countrywide
is in desperate need of cash right now to continue funding mortgages, and the
credit markets are still largely closed to them," the report said. Countrywide
is working with Goldman Sachs and law firm Wachtell Lipton Rosen & Katz to
structure another similar strategic investment, the Post reported, citing
sources familiar with the development. It''s
unclear at this point who is involved in the investment, the report said. But
a final deal could be announced by the end of the month, the report added. Countrywide,
meanwhile, said last week it would eliminate as many as 12,000 jobs, or 20 per
cent of its workforce, after investors stopped buying loans and lenders alarmed
by rising subprime defaults refused to provide capital to mortgage companies.
Countrywide
handles one of every five new US mortgages. More than 100 mortgage companies have
sought buyers, halted applications or closed since the start of 2006, hurt by
falling prices and record foreclosures. Countrywide forecast last week that new
US mortgages may fall 25 per cent below this year''s level. "Actual
reductions could be lower should the interest rate environment and related market
volume outlook improve. Based on current interest rate levels, Countrywide presently
expects that total market origination volumes will decline approximately 25 per
cent in 2008 compared to 2007 levels," Countrywide said in a release. The
release also signals a changing course of direction for Countrywide. It has scraped
almost its entire subprime loaning operation, and will focus on secondary market
loans and/or "high quality prime loans" held in Countrywide Bank''s investment
portfolio. "As
we carry out our plan, the company''s overarching focus is exactly where it has
always been: to remain an industry leader in the US residential lending business
"
CEO Angelo Mozilo Mozilo said in the release. While
still the country''s largest lender, Countrywide has seen its stock nosedive 55
per cent from three months ago, when all was seemingly well with the mortgage
and credit markets. After the credit market turmoil erupted, Countrywide laid
off 1,400 workers and tapped all $11.5 billion of its credit line. And
as bad loans mounted, AXA SA, one of Countrywide''s largest shareholders, cut its
nearly 11 per cent share of Countrywide down to 4.1 per cent. Countrywide''s
shares have been hammered this month as a broadening crisis in the mortgage business
cut off the company''s access to its usual sources of borrowing in the market.
(See: Countrywide Financial stock slides
on rumours of bankruptcy)
also see : General
reports on Banks & Financial Institutions
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