It has been no secret that home lenders are in some serious trouble as borrowers are having troubles making payments on their mortgages. Even American Home Mortgage Investments, the then-nation’s 10th largest home lender filed for bankruptcy in early August.
But that doesn’t necessarily mean Countrywide Financial (NYSE:CFC), the nation’s largest home lender, will be shutting its doors also – as some reports have suggested over the previous two weeks and are still hinting.
“Just weeks ago, they were begging to sell you a loan,” said CNBC’s Diana Olick on the August 16 NBC “Nightly News,” while a Countrywide Financial commercial played in the background. “Today a cash-strapped Countrywide Financial, the nation's largest mortgage lender, announced it will severely cut the number of jumbo loans it offers – this on the heels of American Home Mortgage, which filed for bankruptcy earlier this month, sending 8,000 employees packing.”
Many of these reports have stopped short of forecasting a Countrywide bankruptcy, but that didn’t stop CBS correspondent Susan McGinnis from suggesting it.
“[S]ales of existing homes fell in 41 states from April through June,” said McGinnis on the August 16 “The Early Show.” “Meanwhile, foreclosures continue to soar. And there are growing worries about the nation's biggest mortgage lender; Countrywide Financial could be forced into bankruptcy.”
Anthony Mason was less alarmist on the “CBS Evening News” the same evening.
“Again the mortgage crisis was behind that volatility,” Mason said. “Countrywide Financial, the country’s largest mortgage lender – hit hard by bad loans and foreclosures, had its debt rating slashed, but it’s not alone.”
All this media coverage calling for doom and gloom has contributed to a panic for Countrywide Bank customers. The August 17 Los Angeles Times reported customers were jamming phone lines and the company’s Web site and waiting in long lines to pull their money out of Countrywide Bank.
The act by the Federal Reserve was seen as a measure to stabilize financial markets stirred up by a widening credit crisis, not a bailout measure. But, it did show confidence in mortgage lenders, said Larry Kudlow on the August 17 CNBC “Squawk on the Street.”
“[C]ommercial paper last week, we just got the new Fed numbers, was down $91 billion, it’s the worst since 9/11 – so Countrywide, Thornburg, Washington Mutual and other big mortgage lenders are not going to go under – that’s basically what the Fed is saying. That’s terrific stuff, but it’s only the first step – much more is coming.”
Another big name in the financial world seems to think Countrywide is going to survive based on what he has seen.
“Well, Countrywide is amazing,” said Donald Trump on the August 16 CNN “Larry King Live.” “They took down an $11-billion line. These banks must be absolutely thrilled, because everyone's saying they're going bankrupt, but just prior to going bankrupt they took down $11 billion. How would you like to be one of those banks? And it looks to me like Countrywide's going to be around a little bit, because they went out and borrowed a lot of money.”