the nation's largest home loan lender, reported yesterday that foreclosures and late payments on mortgages in December soared to their highest levels in five years.
The large number of the bad loans alarmed mortgage analysts who follow the company. Several said the Countrywide report showed that housing market conditions were unraveling at an unexpectedly rapid pace.
Countrywide, with a $1.5 trillion portfolio of loans, is so large that its failure may cause a crisis on Wall Street, which over the past few years has tied its fate to the mortgage industry by buying so many of the mortgage-backed securities these lenders produce, said Stuart Plesser, an equity analyst at Standard & Poor's.
The housing market would suffer as well, he added. "There are major implications if Countrywide fails," Plesser said. "A customer's ability get a mortgage would be significantly impaired."
In yesterday's monthly operating report, Countrywide said that among the 9 million mortgages for which it processes payments, the foreclosure rate doubled in December, to 1.44 percent from 0.7 percent a year earlier. Defaults rose to 7.2 percent from 4.6 percent in the same period.
Foreclosures and rising defaults, which occur when homeowners are more than 30 days late on monthly payments, deal a double blow to Countrywide: The firm suffers losses on the loans themselves, and its mortgage securities, which are backed by its loans, drop in value and become difficult to sell.
Without a robust mortgage-backed security business, the firm would face a severe cash shortage. Company officials have admitted that they face a challenging environment but have repeatedly said they are not considering a bankruptcy filing.
Some analysts doubt such statements. Egan Jones, a ratings company, wrote in a report Tuesday that Countrywide is "severely challenged and might falter if it does not receive an infusion of at least $4 billion within the next couple of weeks
