U.S. News

Countrywide Tries Soothing Customer Worries Amid Layoff Reports


Countrywide Financial on Monday ran advertisements seeking to reassure customers it's safe to do business with the company, while a published report said the largest U.S. mortgage lender has begun layoffs to help cope with a credit crunch.

The company ran full-page ads in Monday editions of The New York Times and other newspapers assuring customers that problems in the mortgage market don't affect the safety of federally-insured deposits at its Countrywide Bank unit. It also said the bank is "well capitalized" and that "the future is bright."

Countrywide did not immediately return several requests for comment.

The company ran the ads after customers armed with withdrawal slips descended on branches last Thursday and Friday, worried that their money was not safe even with Federal Deposit Insurance Corp. backing.

Fear about Countrywide's stability grew after the Calabasas, Calif.-based company unexpectedly tapped an entire $11.5 billion credit line to help fund operations.

Credit Crunch Cost

Like many mortgage lenders, Countrywide has struggled with rising delinquencies and foreclosures, and an unwillingness among bankers to extend credit and among investors to buy loans it makes.

Analysts have said difficult market conditions may force Countrywide to reduce mortgage lending.

The Wall Street Journal, citing an internal e-mail, on Monday said Countrywide's Full Spectrum lending unit has begun laying off an unspecified number of employees.

Full Spectrum offers many "Alt-A" home mortgages, which rank between prime and subprime in quality and often go to borrowers who cannot fully document income or assets.

The unit's sales force on June 30 numbered about 6,785 people, or 38 percent of Countrywide's total sales force of 18,091. Full Spectrum had 228 branches.

Any job cuts would reverse the trend from January to July, when Countrywide added nearly 7,000 employees as weaker rivals fell away. It said it ended July with 61,586 employees.

Turning to Credit Line

Countrywide is expected to slash costs as it becomes more difficult to sell higher-risk mortgages, according to the Journal.

Countrywide last week drew down an entire $11.5 billion bank credit line as a global credit crisis limited its access to short-term cash.

The lender also said it had tightened its lending standards so most new home loans will qualify for purchase and guarantee by mortgage companies Fannie Mae and Freddie Mac. Such loans are, in contrast to Alt-A and subprime mortgages, considered among the least likely to default.