Countrywide taps $11.5 billion credit line
By Jonathan Stempel
NEW YORK (Reuters) - Countrywide Financial Corp.(CFC.N: Quote, Profile, Research), the largest U.S. mortgage lender, said on Thursday it drew down an entire $11.5 billion bank credit line as a global credit shortage limits its access to short-term cash.
The drawdown, which should help the lender conduct daily operations, shows how liquidity strains have spread beyond subprime lenders to companies that mainly offer higher-quality loans. At least two analysts have raised the specter of a bankruptcy filing for Calabasas, California-based Countrywide.
"The fact Countrywide did this shows how disrupted capital markets have become," said Christopher Wolfe, managing director at Fitch Ratings, which downgraded Countrywide's debt ratings. "It may force Countrywide to reduce lending and migrate toward safer loans, and affect earnings from originations."
Shares of Countrywide fell $3.21, or 15.1 percent, to $18.08 in late morning trading on the New York Stock Exchange. They began the year at $42.45.
Several Countrywide representatives did not immediately return requests for comment.
Countrywide said it has tightened its lending standards so most new home loans will qualify for purchase and guarantee by mortgage companies Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research). These are considered among home loans least likely to default.
"When you're in a pit, the first thing to do is to stop digging," said James Ellman, a portfolio manager at Seacliff Capital, a San Francisco hedge fund.