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Rating Action:

Moody's lowers Countrywide debt to Baa3, from A3; ratings remain on review down

16 Aug 2007
Moody's lowers Countrywide debt to Baa3, from A3; ratings remain on review down

New York, August 16, 2007 -- Moody's Investors Service downgraded the senior debt ratings of Countrywide Financial Corporation and Countrywide Home Loans, Inc. to Baa3, from A3, and the deposits of Countrywide Bank FSB to Baa1, from A2. These rating actions follow Countrywide's announcement that it has fully drawn its $11.5 billion in committed bank credit facilities due to severe disruptions in its access to unsecured debt, and to secured debt for assets other than treasuries, agencies and conforming prime mortgages. The company has also announced that it will accelerate the shift of all mortgage production and related operations and funding to its bank subsidiary, Countrywide Bank FSB. All of Countrywide's ratings remain under review for further downgrade.

"The downgrade of Countrywide's ratings reflects significant diminution in the company's liquidity and debt market access due to the stresses being experienced in a wide array of single-family mortgage markets -- stresses that have caused Countrywide to fully draw its committed back-up bank lines," says Philip Kibel, Moody's analyst. In addition, these difficult financial markets create potential challenges to Countrywide's franchise and leadership in the mortgage banking business, and further dislocations in the US single-family mortgage markets.

Moody's said that factors that would lead to a rating confirmation include Countrywide making progress in stabilizing and widening its funding sources, and success in smoothly handling the repayment or refinancing of both unsecured and secured liabilities at Countrywide Financial and other units outside of the bank. The company's success at more fully integrating its mortgage origination platform into the bank, and continuing to generate positive earnings and defending its market leadership, are also factors that would likely lead to a rating confirmation. The rating of Countrywide Financial would likely be downgraded should its available liquidity come under further stress, and the bank find it difficult to provide additional production funding. The ratings could also come under downward pressure should the performance of its prime or non-prime mortgage portfolio significantly deteriorate, causing substantial negative pressure on operating earnings, such as two consecutive loss quarters. Further factors that could result in a downgrade include more intense or widespread liquidity or funding disruptions in the US mortgage market.

The following ratings were downgraded, and placed under review for further downgrade:

Countrywide Financial Corporation -- Backed senior debt to Baa3, from A3; backed senior debt shelf to (P)Baa3, from (P)A3; backed subordinate debt shelf to (P)Ba1, from (P)Baa1; backed preferred stock shelf to (P)Ba2, from (P)Baa2; subordinate debt to Ba2, from Baa2. The firm's rating for short-term debt was lowered to Prime-3, from Prime-2. These securities are all guaranteed by Countrywide Home Loans, Inc.

Countrywide Home Loans, Inc. -- Senior debt to Baa3, from A3; senior debt shelf to (P)Baa3, from (P)A3; subordinate debt shelf to (P)Ba1, from (P)Baa1. The firm's rating for short-term debt was lowered to Prime-3, from Prime-2.

Countrywide Capital I -- Backed trust preferred stock to Ba1, from Baa1

Countrywide Capital III -- Backed trust preferred stock to Ba1, from Baa1

Countrywide Capital IV -- Backed trust preferred stock to Ba1, from Baa1

Countrywide Capital V -- Trust preferred stock to Ba2, from Baa2

Countrywide Bank FSB -- Bank Financial Strength to C-, from C+; Long-term Bank Deposits to Baa1, from A2; Long-term Deposit Note/CD Program to Baa1, from A2; Long-term OSO to Baa1, from A2; Long-term Issuer Rating to Baa1, from A2; Short-term debt to Prime-2, from Prime-1.

Moody's will hold a teleconference to discuss this rating action today, August 16, 2007, at 1PM New York time. For dial in information for today's teleconference please go to www.moodys.com/events for further details.

Countrywide Financial Corporation [NYSE: CFC] is a leading originator and servicer of single-family mortgages. CFC operates in five segments: Mortgage Banking, which originates, purchases, securitizes and services mortgages; Capital Markets, which operates as an institutional broker-dealer that specializes in trading and underwriting mortgage-backed securities; Insurance, which offers property, casualty, life and credit insurance as an underwriter and as an independent agent, and provides reinsurance coverage to primary mortgage insurers; Banking, which operates a federal savings bank that offers retail and commercial financial products and services, and also originates mortgages and home equity lines of credit primarily sourced through CFC's mortgage banking operation; and Global Operations, which performs some of the company's administrative and loan servicing functions. At June 30, 2007 Countrywide reported assets of $217 billion and equity of $14.4 billion.

New York
Philip Kibel
Senior Vice President
Real Estate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
John J. Kriz
Managing Director
Real Estate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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