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Announcement:

Moody's review down of Countrywide's Baa3 senior debt continues

23 Aug 2007
Moody's review down of Countrywide's Baa3 senior debt continues

Approximately $24 Billion in securities affected

New York, August 23, 2007 -- Moody's Investors Service continues to review for possible downgrade the Baa3 senior debt ratings of Countrywide Financial Corporation and Countrywide Home Loans, Inc., and Baa1 deposit ratings of Countrywide Bank FSB. These rating actions follow the announcement that Bank of America has made a $2 billion investment in Countrywide Financial Corporation in the form of convertible perpetual preferred stock.

"This investment by Bank of America in Countrywide should be a positive step in helping to alleviate pressure on Countrywide's liquidity, and in restoring confidence in the mortgage firm," said Philip Kibel, Moody's analyst. "However, Countrywide's overall liquidity and access to funding remain strained due to continued dislocations in the mortgage markets, and these matters, among others, need to be addressed before Moody's would resolve its the ratings review."

Moody's said that while Countrywide has been making efforts to shore up its funding, further, material progress in arranging term borrowing facilities remains to be made, and funding stresses exist as several points in the Countrywide organization. There is also the broader challenge of stabilization in the single-family mortgage market, with this current lack of stability putting pressure on Countrywide and numerous other mortgage firms. Additional factors driving the continued review for possible downgrade include potential impairment to Countrywide's leadership in the mortgage banking business, and the firm's success at more fully integrating its mortgage origination platform into the bank, and continuing to generate positive earnings. The company's strategic direction and potential business relationships with Bank of America are emerging issues of focus by Moody's.

Moody's said that factors that could lead to a confirmation of Countrywide's ratings with a stable rating outlook include Countrywide making progress in stabilizing and widening its funding sources in all parts of its organization, including the bank, 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 while defending its market leadership in the mortgage business and overall banking franchise, are also factors that could likely lead to a confirmation with a stable outlook. Countrywide would likely be downgraded should its liquidity come under further stress, or the bank find it difficult to stabilize and grow it deposit base in order 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 operating earnings pressure, 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.

At the same time Moody's affirmed the ratings of Bank of America Corporation (BAC) and those of its subsidiaries including the lead bank, Bank of America, N.A. (rated A for financial strength and Aaa for deposits). According to Moody's, the Countrywide transaction represents a relatively modest investment in light of BAC's balance sheet, equity base and core earnings.

The following ratings remain under review for possible downgrade:

Countrywide Financial Corporation -- Backed senior debt at Baa3; backed senior debt shelf at (P)Baa3; backed subordinate debt shelf at (P)Ba1; backed preferred stock shelf at (P)Ba2; subordinate debt at Ba2; short-term debt at Prime-3. These securities are all guaranteed by Countrywide Home Loans, Inc.

Countrywide Home Loans, Inc. -- Senior debt at Baa3; senior debt shelf at (P)Baa3; subordinate debt shelf at (P)Ba1; short-term debt at Prime-3.

Countrywide Capital I -- Backed trust preferred stock at Ba1

Countrywide Capital III -- Backed trust preferred stock at Ba1

Countrywide Capital IV -- Backed trust preferred stock at Ba1

Countrywide Capital V -- Trust preferred stock at Ba2

Countrywide Bank FSB -- Bank Financial Strength at C-; Long-term Bank Deposits at Baa1; Long-term Deposit Note/CD Program at Baa1; Long-term OSO at Baa1; Long-term Issuer Rating at Baa1; Short-term debt at Prime-2.

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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