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Lender expects pretax charge up to $150M

Countrywide faces the cost of slashing its work force and dealing with loan defaults.

LOS ANGELES - Struggling mortgage lender Countrywide Financial Corp. expects to book a pretax charge ranging from $125-million to $150-million related to its plan to slash thousands of jobs amid rising defaults and foreclosures.

Shares of the Calabasas, Calif., lender dropped more than 4 percent Wednesday in trading on the New York Stock Exchange.

Countrywide said it anticipates booking a charge of $57-million in the quarter ended Sept. 30, with the remainder recognized the following quarter, according to a Securities and Exchange Commission filing Tuesday.

Countrywide announced in early September that it would cut as many as 12,000 jobs, or about 20 percent of its work force, to cope with soaring foreclosures and defaults.

Countrywide expects that about $65-million to $90-million of the total charge will result in future cash outlays.

The charges consist of about $30-million to $35-million in one-time termination benefits, $73-million to $89-million in lease termination costs, and $22-million to $26-million in fixed asset disposals and other miscellaneous costs.

The housing slump and the credit crunch stemming from subprime mortgage woes have battered lenders nationwide.

Last week, Countrywide disclosed its mortgage fundings for September fell 44 percent from the same period a year ago.

Countrywide also reported a higher percentage of delinquencies between August and September in its loan servicing portfolio, which accounts for nearly 14 percent of all mortgage debt in the United States, along with a higher number of loans in foreclosure.

The weak housing market could further squeeze Countrywide's prospects for originating more loans and perhaps force the company to expand layoffs beyond currently planned levels, Lehman Brothers analyst Bruce Harting wrote in a research note Wednesday.

Countrywide shares had fallen almost 6 percent Wednesday before rebounding.

[Last modified October 18, 2007, 00:34:36]