COUNTRYWIDE $150M CHARGE
Struggling mortgage giant Countrywide Financial, a bellwether for the ailing housing market, said it will take a pretax charge of as much as $150 million related to layoffs and operational restructuring.
The nation’s largest mortgage lender said yesterday that the charge includes $30 million to $35 million for termination benefits, $73 million to $89 million to end leases, and $22 million to $26 million for other expenses.
Countrywide expects to realize $57 million of the charge in the third quarter ended Sept. 30 and the remainder primarily in the current quarter.
Countrywide’s shares fell as much as 4.8 percent yesterday following a Goldman Sachs report that said the company is likely to report a wider-than-estimated loss for the quarter on Oct. 26. The stock recovered later, closing down 25 cents, or 1.4 percent, to $18.09.
Goldman analyst James Fotheringham told investors yesterday that Countrywide may announce “significant” writedowns on its loans because of a weakening credit market and mortgage-related losses.
Fotheringham reduced his earnings estimates for the third quarter to a loss of $1 a share from a loss of 13 cents a share. He also reduced estimates for 2007 through 2009.
The worst housing slump in 16 years is causing borrowers to miss payments and default on their mortgages, which hurts big lenders like Countrywide. The continuing credit crunch has hampered finance companies like Countrywide from borrowing short-term debt to fund new loans.
Countrywide has laid off over 5,000 employees and is more than halfway through its planned “reduction in force” program to eliminate 12,000 jobs. Some insiders expect the company will increase the cuts by another 5,000 workers or more in the coming months if the housing crisis continues.
Meanwhile, Countrywide’s chief Angelo Mozilo, who has sold over $100 million in options-related stock this year, dumped another 140,000 shares last Friday.
The timing of Mozilo’s stock sales faces possible scrutiny by the Securities and Exchange Commission after the state treasurer of North Carolina raised questions about changes to his arranged stock selling program last week.
The changes, which were made in the months before the company’s stock plunged, allowed Mozilo to increase his sales of Countrywide shares.
Other lenders face similar woes. Wells Fargo, the nation’s second-biggest mortgage lender, reported lower-than-estimated third-quarter profit yesterday because of rising loan losses.
Finance giant CIT Group is expected to report big losses today and has retained several investment banks to work on strategic initiatives to enhance shareholder value as the credit crisis continues, several sources said.