Countrywide Rebounds Despite Big Losses

Shares of the mortgage lender shot up 32 percent Friday after the company issued a rosy forecast

It’s fair to wonder whether the 32 percent gain in Countrywide Financial shares on October 26 was just a dead-cat bounce or a reflection of a more enduring turnaround in investor confidence. After all, this was the first quarterly loss the nation’s largest mortgage lender has recorded in 25 years and it’s not as if anyone, including the company’s top executives, expects deterioration in home values to end anytime soon.

But given the nervous speculation in recent weeks about whether Countrywide would remain solvent, the news that it has secured ample capital and liquidity to continue originating and selling mortgage loans and to meet its debt obligations through next year was greeted with a big sigh of relief by investors.

Countrywide Financial reported a net loss of $1.2 billion, or $2.85 a share, vs. a profit of $648 million, or $1.03 a share, a year ago. Excluding the impact of the below-market strike price of convertible preferred shares issued in the third quarter of 2007, which amounted to 73 percent a share, the company had a loss of $2.12 per share.

Countrywide Rebounds Despite Big Losses
By David Bogoslaw | MSNBC