The slowdown in the housing sector is hitting Countrywide hard: income fell 33% in the second quarter, and the market is expected to remain “challenging” for the rest of the year. Shares dropped 8.7% on the news, reaching $31.11, the lowest level since November 2005.
Countrywide’s full-year earnings forecast was cut to a range of $2.70-$3.30 per share from April’s $3.50-$4.30 and January’s $3.80-$4.80. Revenue dropped to $2.5 billion from last year’s $3 billion.
Countrywide has recently tightened its credit guidelines and eliminated some especially risky mortgage products, but losses associated with mortgages issued in recent years are expected to climb in the coming months. The company has set aside $292 million for credit losses, more than four times last year’s provision of $61.9 million. According to Countrywide’s CEO Angelo Mozilo, losses were related to “prime” loans given to borrowers with good credit, not subprime mortgages as one would expect. What happened to “contained” subprime losses?
Mozilo said that problems are likely to persist for the rest of 2007 and well into 2008, possibly 2009. No wonder we’re seeing such robust insider selling at Countrywide.
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