The nation's biggest mortgage lender was "withering" and "might falter if it does not receive an infusion of at least $4 billion within the next couple of weeks," said Egan-Jones Ratings Co., an advisor to pension funds and other big investors.
Weiss Research, which rates the condition of lenders, said the Calabasas company "is on a collision course with bankruptcy," adding that it "exhausted many of its extraordinary financing options last year and is ill-prepared for the rising mortgage defaults and home foreclosures that are widely expected this year."
Countrywide did not respond to a request for comment. As bankruptcy rumors swept the financial markets Tuesday, it issued a general denial that it was near collapse.
Yet the stock fell as low as $4.43 on Wednesday, before rebounding to close down 35 cents at $5.12, an 11-year low. The shares had lost 28% on Tuesday.
Weiss said Countrywide borrowers had little to fear if the company should fail, noting that its loan servicing business was valuable and would continue on even in bankruptcy. But it said anyone negotiating a new loan should be cautious because "that process could easily be disrupted."
Speculation about Countrywide's future echoes concerns first raised last summer, when funding dried up from the Wall Street firms that had provided money for the company to make loans. Those same firms also had been big buyers of Countrywide's mortgages as fodder for debt securities sold to investors.
Countrywide squeaked through that crisis by drawing down a huge emergency bank credit line, getting a $2-billion investment from Bank of America Corp. and accelerating a plan to beef up deposits at its Countrywide Bank subsidiary, enabling it to fund all its own loans.
That tactic has generated results. The bank's retail deposits increased $7.7 billion in the fourth quarter to $33 billion. But it has been achieved at high cost.
Countrywide is offering a 5.45% annualized yield on three-month, $10,000 certificates of deposit, the highest in the U.S. and far above the national average yield of 3%, according to Informa Research Services.
On Wednesday, some customers at Countrywide Bank's Glendale branch said they were concerned and closely following the news, trying to determine whether the favorable terms offered were worth the risk.
Fred Campi of Silver Lake decided it wasn't. He was at the bank to withdraw four certificates of deposit, cashing out a total of $60,000.
Countrywide's individual accounts are federally insured for up to $100,000. But Campi, an administrative aide at Los Angeles City College, said he didn't want to risk losing access to his funds, even temporarily.
"I don't know if it's worth the crapshoot," Campi said. "If six months from now they're back on their feet, I'll be back."
Another customer, retired lawyer Rico Fabian, said he was sticking by the lender for now. But he asked the bank's associates detailed questions about whether his money would be safe as he made a deposit.
"I'm watching the news carefully. If I find a better investment option, I'll move my money, but they're offering good fixed annuities," the 75-year-old Los Angeles man said.
Pierre Habis, head of retail deposits at Countrywide Bank, said it had continued to attract new deposits this week despite the latest bankruptcy rumors.
The cash inflows have so greatly exceeded expectations, he said, that the bank planned to begin trimming its CD rates in the next week.
If Countrywide lowers CD rates, that could help damp concerns that the company is facing a funding crisis.
Countrywide's stock slump on Wednesday, meanwhile, appeared to be triggered by the release of its December lending summary.
Countrywide said the delinquency rate for the $1.5 trillion in mortgages it services had risen to 7.2% at the end of 2007, up from 4.6% a year earlier and 6.5% at the end of November.
The number of loans in foreclosure more than doubled from a year earlier, to 1.44% of 9 million loans the company services.
Like many mortgage lenders, Countrywide has been hit hard by defaults on high-risk loans made to people with weak credit. The company said in a statement that it was making progress in its efforts to focus on traditional loans and noted that its new loans were slightly higher in December than in November, ahead of its own forecasts.
Analyst Frederick Cannon said Countrywide's latest lending report contained an ominous sign -- that the average size of foreclosed loans was on the rise as well.
That shows that the credit decay was spreading from sub-prime customers to borrowers with good credit scores and that dud loans in high-priced housing markets -- especially California -- were taking a heavier toll on Countrywide, said Cannon, of banking industry specialist Keefe, Bruyette & Woods.
Yet on Wall Street, many analysts who follow the company continue to expect it to turn a substantial profit this year. The mean 2008 earnings estimate of 14 analysts surveyed by Thomson Financial is $1.66 a share.
Most of those same analysts, however, were blindsided by the mortgage debacle. As recently as mid-August, they expected Countrywide to earn $2.80 a share in 2007. Now the mean estimate is for a loss of 76 cents a share for 2007.
"The question from here is whether we will see some moderation in the growth of delinquencies and foreclosures in the next couple of months," said Robert Napoli, an analyst with Piper Jaffray & Co. "If we do, the market for their stock may stabilize somewhat."
Federal regulators, meanwhile, are closely monitoring the status of Countrywide and other large thrifts, said William Ruberry, spokesman for the Office of Thrift Supervision.
Staff writer Kathy M. Kristof contributed to this report.