Countrywide, IndyMac Shares Fall as Mortgage Markets Falter
By Elizabeth Hester and Joseph N. DiStefano
Aug. 3 (Bloomberg) -- Countrywide Financial Corp. and IndyMac Bancorp Inc. led shares of home lenders lower as demand from investors who buy their loans dried up.
Countrywide, the nation's biggest mortgage lender, dropped $1.13, or 4.2 percent, to $25.64 a share in 12:25 p.m. New York Stock Exchange trading. IndyMac, ranked ninth, fell 9.5 percent to $19.05 a share. Washington Mutual Inc., the nation's biggest thrift, lost $1.18, or 3.3 percent, to $35.06.
Rising defaults by borrowers with the worst credit histories have spread to people with more reliable records. That's making investment banks that repackage home loans into mortgage-backed bonds reluctant to buy, threatening profits of residential lenders. Mortgages backed by federally chartered agencies such as Fannie Mae are the only bright spot, said Bose George, an analyst with KBW Inc. in New York.
``The rest of the mortgage market is going through a liquidity crisis,'' George said. ``People just don't want the credit risk for mortgages right now.''
Among other home lenders, NovaStar Financial Inc. fell 4.6 percent and Impac Mortgage Holdings Inc. lost 20 percent.
CIT Group Inc., which said last month it's getting out of the home-lending business, dropped 6.6 percent. Fremont General Corp., which agreed to stop making subprime home loans earlier this year, lost 9.5 percent.
Accredited Home Lenders Holding Co., which said yesterday it may go bankrupt, rose 14 percent. The company said late yesterday it still expects to complete its $15.10-a-share sale to buyout firm Lone Star Funds.
Bids Evaporate
``The secondary market has really started to evaporate because people are concerned about any product that has any type of higher risk,'' said Joseph Blaston, executive vice president in charge of home lending at Philadelphia-based Sovereign Bancorp. ``I can't recall this happening since 1998, the Long- Term Capital Management crisis.''
The market for mortgage bonds has become ``very panicked and illiquid,'' Chief Executive Officer Michael Perry wrote in an e- mail earlier this week. National City Corp. told companies it buys loans from that it won't accept second mortgages and some low-documentation loans, according to a notice on its Web site.
Bids for subprime home loans, rated as the most likely to default, became scarce in March as overdue payments were heading for their highest level since 2002. Now buyers are shunning Alt-A loans, an alternative for people with A-rated credit who don't meet all the standards for prime loans. The category includes low-documentation loans.
Moody's Investors Service this week described some varieties of Alt-A mortgages as no better than subprime. The ratings company said it will change how it grades related securities after failing to predict how far delinquencies would rise.
Wells Fargo & Co., the No. 2 U.S. mortgage lender, said today it will stop making Alt-A home loans through brokers. American Home Mortgage Investment Corp., which specialized in Alt-A lending, became the second-biggest residential lender to fail this year when it announced yesterday it was halting most operations. Its shares lost half their remaining value today, trading at about 70 cents a share. |
