Reuters
Countrywide ads tout safety amid report of layoffs
Monday August 20, 8:52 pm ET
By Jonathan Stempel


NEW YORK (Reuters) - Countrywide Financial Corp sought to reassure customers on Monday it is safe to do business with the company, while a newspaper report said the largest U.S. mortgage lender has begun layoffs to help cope with a credit crunch.

The company, which is being closely monitored by U.S. regulators, had full-page advertisements in Monday editions of The New York Times and other newspapers assuring readers that mortgage market problems do not affect the safety of federally insured deposits at its Countrywide Bank unit, which it said was "well capitalized."

The ads ran as The Wall Street Journal, citing an internal e-mail, said Countrywide's Full Spectrum Lending is laying off employees. The unit offers mortgages to people with less than "prime" credit or who cannot fully document income or assets.

The unit's sales force on June 30 numbered about 6,785 people, or 38 percent of Countrywide's total sales force of 18,091. Any job cuts would reverse the trend of the first half of 2007, when Countrywide hired nearly 7,000 staff as smaller rivals fell away. It said it ended July with 61,586 employees.

Countrywide spokesman Rick Simon declined to provide a copy of the e-mail or confirm its contents.

Fear about Countrywide's stability grew after the Calabasas, California-based company last week unexpectedly tapped an entire $11.5 billion credit line to help fund operations. At least two Wall Street analysts said the company could end up in bankruptcy if market conditions worsen.

Customers flocked to Countrywide branches last Thursday and Friday, worried their money was not safe, even with Federal Deposit Insurance Corp backing.

"Top officials here in Washington are monitoring the situation with Countrywide very closely given recent events," Office of Thrift Supervision spokesman William Ruberry said on Monday.

"We're not there every day, but we're there most days," he said. "It changes depending on what is going on, what the examination staff is reviewing, so it's not a static situation."

Like many mortgage lenders, Countrywide has struggled with rising delinquencies and foreclosures, and an unwillingness among bankers to extend credit, and among investors to buy the loans it makes.

Analysts have said difficult market conditions may force Countrywide to reduce mortgage lending.

The company's shares were downgraded on Monday to "underperform" from "market perform" by Frederick Cannon, a Keefe, Bruyette & Woods Inc analyst.

Cannon said a loss of thrift deposits poses a "meaningful risk" that could reduce profitability and that "the likelihood of a dilutive capital raise or a distressed sale" has risen. He said Countrywide can survive without such actions, but will have an "impaired ability" to compete with large bank rivals.

Separately, law firm Lerach Coughlin Stoia Geller Rudman & Robbins LLP said on Monday it filed a lawsuit against the mortgage lender and would seek class-action status.

The suit was filed in federal court in California on behalf of purchasers of Countrywide common stock between January 31, 2006 and August 9, 2007. It alleges that the defendants, during that period, issued materially false and misleading statements regarding the company's business and financial results.

Countrywide shares, which have lost just over half of their value this year, fell $1.62, or 7.6 percent, to $19.81 on the New York Stock Exchange.

The fallout was not confined to Countrywide. Capital One Financial Corp said it would slash 1,000 jobs and book $860 million in charges as it shutters its recently acquired GreenPoint Mortgage unit. Elsewhere, home loan providers Thornburg Mortgage Inc and Luminent Mortgage Capital took steps to bolster liquidity as losses mount.

(Additional reporting by Alexandria Sage, Nichola Groom and Lisa Baertlein in Los Angeles, Lilla Zuill and Dan Wilchins in New York, and John Poirier in Washington)