US mortgage firm sees $1.2bn loss

US mortgage giant Countrywide Financial has reported $1.2bn (£584m) in losses during the third quarter.

The loss, the first for the firm in 25 years, comes after profits of $647.6m a year earlier. The latest quarter included $2.9bn in credit losses.

But the firm said it was through the worst of the slowdown that has dogged the US housing sector and expected to make a profit in the fourth quarter.

The improved outlook sent shares surging nearly 25% higher.

"We view the third quarter as an earnings trough, and anticipate that the company will be profitable in the fourth quarter and in 2008," said David Sambol. Countrywide's chief operating officer.

'Trough'

Rising interest rates in the US have made it harder for many borrowers to meet payments.

Earlier this week, Countrywide promised to set new terms or refinance $16bn worth of mortgages, in a bid to help those struggling to make payments.

News of the turnaround comes after the firm announced 12,000 job losses in September as part of wider restructuring plans.

The Californian firm has been one of the worst hit following contraction in the housing market that has triggered wider fears about the US economy.

During the summer, analysts had voiced fears that the firm could go bust.