Magazine article American Banker

$12B Funding for Countrywide

Magazine article American Banker

$12B Funding for Countrywide

Article excerpt

Countrywide Financial Corp. said Thursday that it has obtained $12 billion of additional borrowing capability, which would help it adjust to "turbulent conditions in the mortgage and credit markets."

The Calabasas, Calif., lender did not say who provided the funding or whether the funding came through its thrift, Countrywide Bank, or its holding company.

But Frederick Cannon, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., said the funding came from repurchase agreements with banks - a critical issue that will provide additional liquidity to Countrywide Home Loans, which holds mortgage servicing rights and other mortgage assets that could be subject to margin calls.

"The question was the cost of such funding," he said. "The thrift, in our estimation, has always had adequate liquidity and capital and can borrow from the Federal Home Loan bank and through the Fed's discount window. The problem at the holding company is they have all these assets that they need to fund, and the value of the assets is declining."

Nevertheless, investors applauded the funding. In late afternoon trading, Countrywide shares were up 12.76%, to $18.74.

David Sambol, Countrywide's president and chief operating officer, called the additional capacity one of several "decisive steps" his company has taken as it migrates funding of its mortgage originations to Countrywide Bank. Currently 90% of new loans are being funding through the thrift.

"We are confident that the actions, which we have taken in response to the current environment, will position us for profitable future growth and success," he said in a press release. …

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