LOS ANGELES — Shares of Countrywide Financial Corp., the nation's largest mortgage lender, sank to an all-time low Tuesday as a major homebuilder offered a grim outlook for industry and signals that the Bush administration is growing more concerned about rising mortgage defaults.
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The head of California-based KB Home reported a mammoth loss for the fourth quarter and said there were no indications that housing markets are stabilizing. The head of Fannie Mae, a government-sponsored mortgage lender, predicted the housing market would weaken through 2009 and said a turnaround wasn't likely until 2010.
Treasury Secretary Henry Paulson said the administration was concerned about the potential for additional home defaults and is exploring expanding a deal it brokered with mortgage lenders last fall to include relief to people who borrowed at prime, conventional rates as well as those with subprime, adjustable-rate mortgages that were due to reset.
Countrywide stock was shaken when The New York Times reported accusations that the company had fabricated letters submitted in a court case involving a foreclosure in Pennsylvania.
At one point, the New York Stock Exchange temporarily halted trading in advance of a statement in which Countrywide tried to stem its share price losses by issuing a statement denying rumors that a bankruptcy filing was imminent.
When trading resumed, the shares rebounded somewhat, but then slid again. They finished with a decline of $2.17, or 28.4 percent, to $5.47 after falling to an all-time low of $5.05 earlier in the day.
A rating analysis issued by Egan-Jones Ratings Co. suggested Countrywide "is severely challenged and might falter if it does not receive an infusion of at last $4 billion within the next couple of weeks.”
The agency said the lender will need the funding to weather a decline in mortgage originations and its shift to less-profitable, nonsubprime lending.
Uneasy investors were hard-pressed to find reassurance elsewhere. KB Home, one of the nation's largest builders, reported a fourth-quarter loss of $772.7 million versus a loss of $49.6 million in the year-ago period.
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Housing slump goes on
The chief executive of Fannie Mae, the largest financer and guarantor of U.S. home loans, predicted Tuesday that the housing market downturn is likely to persist into 2010.
To blunt the broader economic impact, Fannie President and Chief Executive Daniel Mudd, speaking at an event hosted by the U.S. Chamber of Commerce, urged lawmakers and lenders to pursue "the most generous means possible” to help out borrowers facing sharply higher mortgage payments in the next few years. But Mudd voiced only qualified support for a plan orchestrated by the Bush administration that would help borrowers with weak credit whose mortgages are resetting to higher costs with a five-year freeze of interest rates.
Losses to investors from reworked loan contracts could reduce the available credit for mortgage securities and reverberate on Fannie and its smaller government-sponsored sibling, Freddie Mac, which buy up home loans made by banks and other lenders and then bundle them as securities for sale to investors worldwide.
Washington-based Fannie Mae, which lost $1.4 billion in last year's volatile third quarter, expects to lose money this year on eight to 10 of every 1,000 mortgages on its $2.4 trillion book — a steep increase from four to six in 2007.
Fannie Mae's stock fell $2.02, or 5.9 percent, to $32.21, while Freddie Mac shares declined by $2.04, or 7 percent, to $27.12. Both Fannie and Freddie are major buyers of loans made by Countrywide.
AP Business Writer Marcy Gordon
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