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Countrywide Bank works to reassure clients

August 18, 2007|E. Scott Reckard and Andrea Chang | Times Staff Writers

Seeking to prevent a run on deposits, the head of Countrywide Bank offered assurances Friday that customers' accounts were unaffected by the troubles of its parent company, Countrywide Financial Corp.

"It's important for our customers to know the bank is well capitalized, one of the largest banks in the United States and that FDIC-insured deposits are safe," Countrywide Bank President Tim Wennes said in a telephone interview.

Anxious depositors clutching withdrawal slips filled Countrywide offices for the second straight day. In Beverly Hills, the company placed extra chairs in a waiting area and asked customers to write their names on a sign-in sheet. By 10:45 a.m., 30 names filled nearly 2 1/2 pages.

Wennes said the unusually high outflow was offset by a continuing flow of new funds into the bank. The institution, which holds down costs by having just one or two employees work out of selected Countrywide mortgage offices, offers high interest rates on certificates of deposit and holds billions of dollars collected from Countrywide's mortgage customers to pay taxes and insurance on their homes.

"We've not seen a significant change in our deposit levels," Wennes said. "We've opened a lot of new accounts."

Wennes' attempts to reassure bank customers followed a week of bad news for Calabasas-based Countrywide Financial, the nation's largest mortgage lender, which disclosed that foreclosures and delinquencies had soared and that Wall Street would no longer buy its loans or provide it with funds to lend. The ratings on its bonds have been downgraded to just above junk level. At midweek, one analyst even suggested the company might have to file for bankruptcy.

The situation appeared more stable Friday, as a Bank of America Corp. analyst upgraded Countrywide Financial shares to "neutral" from "sell" and the stock rose $2.48, or 13%, to $21.43, reversing a steep decline.

An $11.5-billion line of credit from banks, which Countrywide Financial tapped Thursday to keep funding its operations, "should provide it with the time to address liquidity/capital concerns," analyst Robert Lacoursiere wrote to investors. "As a result we think the possibility of a liquidity-induced distressed sale unlikely."

That's not to say that the road ahead will be easy for Countrywide. Although a Federal Reserve rate cut Friday was a welcomed event for the lender, investors remained uninterested in any mortgage-backed securities except those issued by government-sponsored loan buyers Freddie Mac and Fannie Mae, analysts said.

Fannie Mae and Freddie Mac have been prohibited from buying many of the sub-prime, adjustable-rate and jumbo loans that helped fuel the housing boom this decade and that Countrywide made along with traditional mortgages.

That underscored the advantages enjoyed by large banks that are also major mortgage lenders, such as Wells Fargo & Co. and Washington Mutual Inc., which have the deposit base and capital to keep large numbers of such loans on their own books.

With competitors retrenching, "this is obviously a very good opportunity for us to grow assets," Washington Mutual Chief Executive Kerry Killinger said in an interview Friday.

In reaction to the end of the housing boom and competition in the mortgage business, Seattle-based Washington Mutual had cut back on home lending and sold $22 billion in loans and securities over the last year, focusing on growing its credit card and retail banking operations.

But as mortgage competitors have fallen by the wayside, it's now possible to make loans at solidly profitable interest rates, Killinger said -- so long as the lender can keep them if Wall Street won't buy them.

Washington Mutual plans to add $15 billion to $25 billion in loans to its books over the next two to three months, he said.

Countrywide said it hoped to accelerate a plan for rapid growth at its bank so it would be able to invest in more of the loans that Freddie Mac and Fannie Mae can't buy.

But the immediate goal was to respond to the concerns of depositors, assuring them that regulators wouldn't let the parent company bleed away bank assets and that their deposits of as much as $100,000 per account were safely insured by the Federal Deposit Insurance Corp.

"We definitely have seen an increase in the volume of customers' questions about FDIC insurance," Wennes said.

One concerned depositor at the Beverly Hills office, Woody McBreairty, said he heard about Countrywide's troubles for the first time Friday morning.

"I got out of bed and came right over here," said McBreairty, 60. "It was a wave of shock. I thought, 'My God, I've got to go and get my money.' "

The retiree from West Hollywood said he intended to close his CD account, which holds more than $100,000.

"Who wants to leave their money in a bank where they might lose it?" he said.

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scott.reckard@latimes.com

andrea.chang@latimes.com

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Times staff writer Annette Haddad contributed to this report.

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