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. The company would not comment further.
Just three weeks ago Countrywide secured a $2 billion equity investment from Bank of America Corp. Last month it tapped its entire $11.5 billion of unsecured backup credit lines when liquidity disappeared from the commercial paper market. And last week it said it would lay off up to 20% of its work force in the next three months.
Countrywide announced the $12 billion of additional funding as part of its monthly results.
Its August mortgage funding dropped 17.3% from a year earlier, to $34.4 billion, the lowest total so far this year. Its pipeline of loans in process fell 16.8% from July and 19% from a year earlier, to $51.8 billion.
Assets at Countrywide Bank rose 4.4% from a month earlier and more than twelvefold from a year earlier, to $94 billion.
Delinquencies rose 13 basis points from July and 125 basis points from a year earlier, to 4.9%. Foreclosures rose 6 basis points from July but jumped 54 basis points from a year earlier, to 1.2% of unpaid principal balances.
Mr. Cannon said larger loans are going into foreclosure, largely because more alternative-A loans are moving into that status and foreclosures are increasing in coastal states and the Midwest.
