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To: marginnayan who wrote (71141)	11/11/2007 10:15:44 PM
From: marginnayan	Read Replies (2) \| Respond to of 116555

Countrywide Issues Ratings Warning By JAMES R. HAGERTY November 12, 2007 Countrywide Financial Corp. warned in a securities filing that further cuts in its credit ratings to junk-bond levels could "severely" limit its ability to raise money in public debt markets and cause it to lose bank deposits. In a quarterly filing with the Securities and Exchange Commission late Friday, the Calabasas, Calif., home-mortgage lender said that a cut in its ratings to levels below investment-grade could prevent it from placing funds from custodial accounts at its savings-bank subsidiary, Countrywide Bank. Ratings below investment grade also might cause Countrywide Bank to lose commercial deposits and limit the trading activities of the company's broker-dealer unit, Countrywide said. The company's long-term debt is rated Baa3, the lowest investment-grade level, by Moody's Investor Service. All three ratings agencies "have placed our ratings on some form of negative outlook," the company noted. Countrywide said it has lined up additional sources of funds to try to maintain its investment-grade rating. Among other things, Countrywide is relying more on loans from the Federal Home Loan Bank of Atlanta. In addition, the company is heavily promoting above-average interest rates on certificates of deposit to attract funds. Countrywide said it believes it has "adequate funding liquidity," but that "the effect of future developments on the company may require us to ... procure additional sources of financing." In August, Countrywide raised $2 billion by selling preferred stock to Bank of America Corp. That preferred stock is convertible into a stake of about 16% in Countrywide. Another uncertainty is whether Countrywide will have to make further large write-downs in the value of the loans and mortgage securities it holds. Because trading in such assets dried up in recent months, the company said in its filing, it was harder than usual to estimate values. Countrywide said it had to "apply more judgment to the valuation of nonconforming prime, home equity and nonprime loans because of a lack of executed trades that could be used to assure the valuations are reflective of fair value." Countrywide said about 4.9% of the subprime loans it services were pending foreclosure as of Sept. 30, up from 2.9% a year earlier. For all loans in its servicing portfolio, the foreclosure rate rose to 0.9% from 0.5% a year ago. Write to James R. Hagerty at bob.hagerty@wsj.com