Countrywide Lays an Egg - Is It Broken, Rotten, or Deviled?

October 30, 2007

Countrywide (CFC) reported its long awaited 3Q earnings report on Oct. 26th with an update on its mortgage origination, servicing and thrift deposit businesses. The loss for 3Q was $1.2 billion, in the middle of the analyst estimates. However, while not as bad as some expected, the magnitude of CFC losing 20% of its equity in one quarter is still staggering and may call into question its ability to survive as an independent company. In spite of the portfolio write down and significant increase in loan loss provisions, several questions are still to be answered.

1. How does the magnitude of this loss fit the numerous problems that Countrywide is facing?

2. Will Countrywide live to generate the level of profits in 2005 or 2006 or maintain its market share leadership?

3. What are the consequences for the rest of the mortgage banking and thrift industry players?

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