Countrywide seems to be in trouble and the market smells blood. According to The Street:

Countrywide Financial’s … shares plummeted to new lows Tuesday amid rumors — later denied — that the mortgage lender could be nearing a bankruptcy filing.

The beleaguered company’s stock closed down 28.3% to $5.43, a new 52-week low. Shares dipped as much as 34% to $5.05 in Tuesday trading — even after a brief trading halt on the New York Stock Exchange and the company issued a statement denying the rumors Tuesday afternoon — challenging the notion that the nation’s largest mortgage lender is too big to fail.

The rumors don’t appear to be without merit, according to MarketWatch:

“Countrywide is severely challenged and might falter if it does not receive an infusion of at least $4 billion within the next couple of weeks,” Egan-Jones Ratings Co., a ratings agency, wrote in a note Tuesday. “The GSEs likely curtailing purchases have hurt Countrywide.”

It’s really bad news if the nations largest mortgage lender fails. That would send the industry in a further tailspin.

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