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Countrywide CEO sees more trouble ahead for housing market
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BEVERLY HILLS, Calif. - The chief executives of Countrywide Financial Corp. and KB Home predicted more trouble ahead for the nation’s slumping housing market on Monday, calling on lawmakers to expand financing for home buyers.
The remarks from Angelo Mozilo of Countrywide, the nation’s largest mortgage lender, and Jeffrey Mezger of KB Home, one of the biggest homebuilders, came during a panel discussion hosted by the Milken Institute on the economic impact of the subprime mortgage meltdown.
Asked if the worst was over, Mozilo said: “No. I don’t think so.”
Last week, Countrywide reported a $1.2 billion loss in the third quarter, but its shares soared after the company said it expects to be profitable this quarter and next year.
Mezger, also KB Home’s president and director of the board, offered a similarly downbeat outlook.
“We anticipate things are going to stay tough for quite some time,” he said.
Earlier this year the number of defaults and foreclosures among home loans, particularly subprime mortgages taken out by borrowers with credit problems, spiked.
That sent a jolt through financial markets as investors pulled back from buying mortgage-backed bonds and other securities. The resulting credit crunch left Countrywide and other lenders scrambling for cash to keep funding loans.
“Falling values is what continues to be the problem here,” said Mozilo, also Countrywide’s chairman. “And as long as values keep on falling, the subprime situation will get worse and begin to spill into prime (loans).”
Countrywide, based in Calabasas, Calif., originated about 7 percent of subprime home loans in the U.S. last year.
The housing slowdown has forced Los Angeles-based KB Home and other homebuilders to slash prices to help combat a glut of homes on the market.
Mozilo and Mezger said they want the government to lift loan limits on government-sponsored operations such as Fannie Mae, Freddie Mac and the Federal Housing Administration.
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