Bank of America's Countrywide Bet May Bolster Mortgage Market

Bank of United States Corp. bought $2 billion of preferable stock from Countrywide Financial Corp. to stabilise the nation's biggest mortgage loaner as radioactive dust from the U.S. lodging slack paralyzes recognition marketplaces worldwide.

``Countrywide is no longer on the endangered company list,'' Hood Ziegel & Co. analyst Dick Bove wrote in a short letter to clients yesterday. ``This investing do sense for both companies. Depository Financial Institution of United States will now presumably be the preferable loaner to Countrywide.''

Depository Financial Institution of America, the second-biggest U.S. bank, acquires shares that output 7.25 percentage and can be converted into common stock at a terms of $18, Calabasas, California-based Countrywide said yesterday in a statement. Countrywide shares climbed 21 percentage in drawn-out trading followers the announcement.

While Countrywide acquires hard cash needed to maintain making loans, the extract also may assist to reassure investors that the mortgage marketplace is safe after rising default rates sparked a planetary recognition crunch and forced the U.S. Federal Soldier Modesty to cut adoption costs for banks. The Fed's Aug. Seventeen move, designed to direct more than hard cash to companies starved for short-term financing, came a twenty-four hours after Countrywide tapped $11.5 billion of exigency recognition lines.

``With last week's Federal action and today's announcement, it looks that the mortgage working capital marketplaces will go back to more than normal degrees of activity and liquidness sooner than we thought,'' Fox-Pitt Kelton Inc. analyst Leslie Howard Shapiro wrote in a short letter to investors yesterday.

The proclamation sent Countrywide shares to $26.33 as of 7:07 p.m. yesterday, after they gained 3 cents to $21.82 in New House Of York Stock Exchange composite trading. Countrywide had dropped 49 percentage for the year, including the diminution that followed the Aug. Fifteen Merrill Lynch & Co. study predicting the company's hard cash deficit might coerce it into bankruptcy.

Off the List

Converting the preferable stock would give Depository Financial Institution of United States 111 million common shares, or a 16 percentage interest in Countrywide, Bove estimated. The dealing will be ``additive'' to Depository Financial Institution of America's earnings, he said.

``We were able to travel to California, expression at their trading operations and their books,'' said Henry Martin Robert Stickler, a spokesman for Charlotte, North Carolina-based Depository Financial Institution of America. ``We determined the value is greater than what the marketplace was giving them recognition for.''

The ballot of assurance sent shares of mortgage loaners up in after-hours trading. Thornburg Mortgage Inc. gained as much as 10 percent, IndyMac Bancorp added 7 percentage and American Capital Mutual Inc. advanced about 2.5 percent. Accredited Home Lenders Retention Co., which slashed 1,600 occupations yesterday in an attempt to sit out the mortgage meltdown, rose almost 9 percent.

Worth Less

Countrywide, which made $421.1 billion of loans last year, have struggled to maintain its terms after investors stopped buying mortgages and short-term debt investors refused to refinance its commercial paper.

The company may necessitate to raise more than working capital because falling terms for place loans inch the secondary market, where they're bought and sold by Wall Street traders, have got pared the value of its mortgage portfolio, according to Sean Egan, managing manager of Egan-Jones Ratings Co. in Haverford, Pennsylvania.

The assets are probably deserving ``less than its outstanding obligations,'' he said.

In January, Countrywide shares were buoyed by guess that it might be acquired by Depository Financial Institution of America. The stock tumbled after Depository Financial Institution of United States Head Executive Military Officer Kenneth Jerry Lee Lewis said he had reserves about the pattern of loaning through mortgage brokers, as Countrywide does.

``We like the product, but we don't like the business,'' Jerry Lee Lewis said Jan. 31. Six calendar months later, in a June 19 interview, he said the lag in place gross sales was ``just about over'' and predicted that the economic system would pick up in the 2nd one-half of this year.

Back to Normal

In yesterday's statement, Jerry Lee Lewis said Depository Financial Institution of America's investing in Countrywide ``will be a measure toward a tax return to more than normal liquidness in the mortgage markets.''

Countrywide chief executive officer Angelo Mozilo said the bank's investing ``strengthens our balance sheet, enabling us to place Countrywide for future growth.''

Depository Financial Institution of United States won't acquire any Countrywide board seating in connexion with its investment, Stickler said.

Lehman Brothers Holdings Inc., the greatest investment banker of U.S. chemical bonds backed by mortgages, announced yesterday that it will fold its subprime-lending unit and fire 1,200 employees. Accredited Home announced 1,600 occupation cuts, and HSBC Holdings Plc said it would get rid of 600 occupations in the U.S. and stopping point a mortgage business office in Indiana.

To reach the newsman on this story: Thomas Bradley Keoun in New House Of York at
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