August 16, 2007 (LPAC)--A syndicate of "40 of the world's largest banks" has come up with an emergency credit line of 11.5 billion dollars for the largest mortgage lender in the United States, Countrywide Financial Corp., which "has elected to draw upon this entire facility to supplement its funding liquidity position," the company's Chief Operating Officer Davide Sambol announced this morning.

Countrywide's stock promptly dropped 18% in pre-market trading, after a 13% drop yesterday.

Sambol assured lenders that it will upgrade its loan issuing standards so that, by the end of September, 90% of its loans will meet Fannie Mae and Freddie Mac criteria. But Countrywide may not be around by September. An August 16 Merrill Lynch research report on the company acknowledged what LPAC said on August 10: "it is possible for (Countrywide) to go bankrupt."

Among the ramifications:

1. Countrywide bills and collects payments on $US1.4 trillion in mortgages for itself and other lenders. Countrywide is also the largest customer for Fannie Mae - more than a third of all mortgages sold to Fannie Mae come from Countrywide.

Countrywide bankruptcy would shake Fannie Mae to its foundation, especially the $6.5 trillion Mortgage Backed Securities market.

2. Countrywide Financial bought Countrywide Bank in 2000, which has grown significantly since then. Countrywide Bank has $57.7 billion worth of deposits. Nearly 40 per cent of the bank's deposits were uninsured by the Federal Deposit Insurance Corp as of March 31, according to the FDIC website.

3. Countrywide has 61,500 employees, who, were Countrywide to go bankrupt, would lose their jobs.