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Countrywide Financial, the 500 pound gorilla in the mortgage lending world is in a fight for it’s survival as share prices plummeted yesterday in trading. In pre-market trading this morning today, Countrywide is down 10 percent.

Bankruptcy fears gripped the stock on Wednesday as an Merrill Lynch analyst wrote:

“If enough financial pressure is placed on Countrywide or if the market loses confidence in its ability to function properly, then the model can break, leading to an effective insolvency,” Merrill Lynch & Co. analyst Kenneth Bruce wrote. “If liquidations occur in a weak market, then it is possible for Countrywide to go bankrupt.” via Reuters

With the stock trading at lower in pre-market activity this morning, Countrywide issued a press release stating that they were going to use their 11.5 billion supplemental credit facility.

“As we have previously discussed, secondary market demand for non-agency mortgage-backed securities has been disrupted in recent weeks,” said David Sambol, President and Chief Operating Officer. “Along with reduced liquidity in the secondary market, funding liquidity for the mortgage industry has also become constrained.

“For many years, Countrywide’s liquidity management framework has focused on maintaining a diverse, multi-layered assortment of financing alternatives,” said Sambol. “A primary component of this framework is a committed, unsecured credit facility of $11.5 billion provided by a syndicate of 40 of the world’s largest banks. In response to widely-reported market conditions, Countrywide has elected to draw upon this entire facility to supplement its funding liquidity position. Over 70 percent of this facility has an existing term greater than four years and the remainder has a term of at least 364 days. Press Release

This is the story to watch for the real estate market and mortgage industry today. Countrywide has been changing their lending standards to conform to todays climate and if they can weather this storm the company should continue to be a force in the mortgage industry. 

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