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LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP DARREN J. ROBBINS (168593) DAVID C. WALTON (167268) CATHERINE J. KOWALEWSKI (216665) 655 West Broadway, Suite 1900 San Diego, CA 92101-3301 Telephone: 619/231-1058 619/231-7423 (fax) darrenr@lerachlaw.com davew@lerachlaw.com katek@lerachlaw.com

– and – RANDI D. BANDMAN (145212) 9601 Wilshire Blvd., Suite 510 Los Angeles, CA 90210 Telephone: 310/859-3100 310/278-2148 (fax) randib@lerachlaw.com

Attorneys for Plaintiff

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

WESTERN DIVISION

JOEL ABRAMS, Individually and On Behalf of All Others Similarly Situated,

Plaintiff,

vs.

COUNTRYWIDE FINANCIAL CORPORATION, ANGELO R. MOZILO, STANFORD L. KURLAND, DAVID SAMBOL, ERIC P. SIERACKIand CARLOS M. GARCIA,

Defendants.

) ) ) ) ) ) ) ) ) ) ) ) ) ) )

VIA FAX

No.

CLASS ACTION

COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS

DEMAND FOR JURY TRIAL

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JURISDICTION AND VENUE

1. Jurisdiction is conferred by §27 of the Securities Exchange Act of 1934

(“1934 Act”). The claims asserted herein arise under §§10(b) and 20(a) of the 1934

Act and SEC Rule 10b-5.

2. (a) Venue is proper in this District pursuant to §27 of the 1934 Act.

Many of the false and misleading statements were made in or issued from this District.

(b) Countrywide Financial Corporation’s principal executive offices

are located at 4500 Park Granada, Calabasas, California. INTRODUCTION

3. This is a securities class action on behalf of all persons who purchased or

otherwise acquired the common stock of Countrywide Financial Corporation

(“Countrywide” or the “Company”) between January 31, 2006 and August 9, 2007

(the “Class Period”), against Countrywide and certain of its officers and/or directors

for violations of the 1934 Act.

4. Countrywide is engaged in mortgage lending and other real estate

finance-related businesses, including mortgage banking, banking and mortgage

warehouse lending, dealing in securities and insurance underwriting. Countrywide is

headquartered in Calabasas, California.

5. During the Class Period, defendants issued materially false and

misleading statements regarding the Company’s business and financial results. As a

result of defendants’ false statements, Countrywide stock traded at artificially inflated

prices during the Class Period, reaching a high of $44.94 per share on February 6,

2006.

6. On July 16, 2007, the Company issued a press release entitled

“Countrywide Reports June 2007 Operational Results.” The release stated in part:

Countrywide Financial Corporation released operational data for the

month ended June 30, 2007. Key operational results included the

following:

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− Mortgage loan fundings for the month of June totaled $45 billion,

an increase of 4 percent from June 2006.

− Commercial real estate funding volume for the month of June was

$814 million, up 75 percent from June 2006.

− Average daily mortgage loan application activity for June 2007

was $3.1 billion, up 15 percent from June 2006. The mortgage

loan pipeline was $69 billion at June 30, 2007 as compared to $65

billion at June 30, 2006.

− The mortgage loan servicing portfolio continued to grow, reaching

$1.4 trillion at June 30, 2007. This is an increase of $219 billion,

or 18 percent, from June 30, 2006.

− Banking Operations’ assets were $90 billion at June 30, 2007,

which compares to $84 billion at June 30, 2006.

− Securities trading volume in the Capital Markets segment of $450

billion for June 2007 was 40 percent higher when compared to the

same month last year.

− Net earned premiums from the Insurance segment were $125

million, up 23 percent from June 2006.

“Market conditions became increasingly challenging throughout

the second quarter of 2007,” said David Sambol, President and Chief

Operating Officer. “The housing market continues to soften, and

delinquencies and defaults continue to rise. Additionally, interest rates,

price competition in the residential lending markets and secondary

market volatility have all increased. However, Countrywide’s residential

funding volume in June was strong, driven primarily by seasonal

purchase activity and higher application volumes in preceding months.”

7. On July 24, 2007, the Company issued a press release entitled

“Countrywide Reports Diluted EPS of $0.81 for Second Quarter of 2007; – Strong

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Loan Production Offset By Higher Credit Costs; – 2007 Guidance Updated at $2.70 to

$3.30 per Diluted Share; – Board Authorizes $0.15 Dividend.” The press release

stated in part:

Countrywide Financial Corporation today announced results for the

second quarter ended June 30, 2007. * * *

“Countrywide’s results for the second quarter of 2007 reflected

strength in our core loan production business, but were adversely

impacted by continued weakness in the housing market,” said Angelo R.

Mozilo, Chairman and Chief Executive Officer. “During the quarter,

softening home prices continued to affect many areas of the country and

delinquencies and defaults continued to rise across all mortgage product

categories as a result. Due to these adverse conditions, the Company

incurred increased credit-related costs in the quarter, primarily related to

its investments in prime home equity loans.”

Credit-related costs in the second quarter included:

− Impairment on credit-sensitive retained interests.

Impairment charges of $417 million were taken during the quarter on the

Company’s investments in credit-sensitive retained interests. This

included $388 million, or approximately $0.40 in earnings per diluted

share based on a normalized tax rate, of impairment on residual

securities collateralized by prime home equity loans. The impairment

charges on these residuals were attributable to accelerated increases in

delinquency levels and increases in the estimates of future defaults and

loss severities on the underlying loans.

− Held-for-investment (HFI) portfolio. The provision for

losses on HFI loans incurred in the second quarter was $293 million,

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driven primarily by a loan loss provision of $181 million on prime home

equity HFI loans in the Banking segment.

“Partly offsetting increased credit costs, our residential Loan

Production sector delivered strong results during the quarter,” said

Mozilo. “Consolidated quarterly funding volume was the third-highest in

our history, prime production margins were relatively stable, and

subprime production margins substantially improved. As a result, Loan

Production sector pre-tax profit in the quarter was at its highest level

since the first quarter of 2005.”

During the quarter, the Company also benefited from a non-

recurring reduction in its corporate tax rate to 27.0 percent, which

compares to 38.1 percent in the first quarter of 2007. The benefit from

this tax rate change equated to $0.12 per diluted share. The change in the

tax rate is the result of a remeasurement of deferred income taxes

precipitated by the relocation of certain operating activities resulting in

favorable state income tax consequences. The Company anticipates a

recurring benefit to the tax rate in future quarters of approximately 0.5

percent as a result of these operational changes.

“Looking to the second half of 2007, we expect difficult housing

and mortgage market conditions to persist,” Mozilo concluded.

“Nonetheless, management remains optimistic about the long-term future

growth prospects and profitability of the Company as industry

consolidation continues.”

8. After this news, Countrywide’s stock collapsed $3.56 per share to close

at $30.50 per share, a decline of 10% on volume of 51 million shares. The stock

continued to decline after this drop.

9. Then, on August 9, 2007, Countrywide filed its second quarter Form 10-

Q which highlighted the funding problems it faced:

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We have maintained access to our traditional, highly reliable short-term

liquidity sources. In view of current unprecedented market conditions,

we are accessing other pre-existing funding liquidity sources, procuring

new sources and accelerating the integration of our mortgage company

with the Bank. As a result of this accelerated integration, a significantly

higher percentage of our mortgage banking fundings will occur in the

Bank sooner than originally planned. The Bank has significant liquidity

sources available to fund our mortgage banking operations. While we

believe we have adequate funding liquidity, the situation is rapidly

evolving and the impact on the Company is unknown.

10. As Associated Press reported on August 9, 2007:

Countrywide Financial Corp. said Thursday that disruptions in credit and

secondary mortgage markets pose a risk to the company and could hurt

its financial condition in the short-term.

The Calabasas-based company made the disclosure in a filing with

the Securities and Exchange Commission, supplementing other “risk

factors” the company had outlined in its annual report.

The mortgage industry has seen a liquidity drain in recent weeks.

The market that sees banks buy loans is in distress because investors

have soured on risky debt.

Countrywide, one of several mortgage lenders struggling with the

ripple effects of the housing slump, warned that if the state of debt

markets worsens, it could translate in reduced liquidity and a rise in

credit risk premiums.

“Since the company is highly dependent on the availability of

credit to finance its operations, disruptions in the debt markets or a

reduction in our credit ratings could have an adverse impact on our

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earnings and financial condition, particularly in the short term,”

Countrywide said in the filing.

The company said it believes it has enough capital to hold on to

mortgage loans and mortgage-backed securities until the housing market

picks up, but if debt markets tighten further it may result in the lender’s

loan production volumes falling, which would hurt earnings.

Earlier this week, Countrywide sought to reassure Wall Street that

it has access to capital despite the credit crunch roiling the industry.

The company said it has access to $46.2 billion in cash, credit

lines and other investments.

11. On this news, Countrywide’s stock dropped to as low as $24.71 per

share.

12. The true facts, which were known by the defendants but concealed from

the investing public during the Class Period, were as follows:

(a) The Company lacked requisite internal controls to ensure that

Countrywide’s loan loss provisions were adequate given the Company’s shift to little

or no-documentation loans, and, as a result, the Company’s projections and reported

results issued during the Class Period were based upon defective assumptions and/or

manipulated facts;

(b) Inflated appraisals of properties on loan applications would make

Countrywide’s losses much larger than current reserve levels once real estate values

cooled off, but the Company was failing to adjust its reserve levels to account for this

phenomenon;

(c) The Company’s financial statements were materially misstated due

to its failure to properly account for its allowance for loan losses; and

(d) Given the deterioration and the increased volatility in the mortgage

market, the Company would be forced to tighten its credit guidelines and implement

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additional lending restrictions, which would have a direct material negative impact on

its loan productions going forward.

13. As a result of defendants’ false statements, Countrywide’s stock price

traded at inflated levels during the Class Period. However, after the above revelations

seeped into the market, the Company’s shares were hammered by massive sales,

sending them down more than 32% from their Class Period high of $44.94 per share

in February 2006. PARTIES

14. Plaintiff Joel Abrams purchased Countrywide common stock as

described in the attached certification and was damaged thereby.

15. Defendant Countrywide engages in mortgage lending and other real

estate finance-related businesses, including mortgage banking, banking and mortgage

warehouse lending, dealing in securities and insurance underwriting. The Company

operates in five segments: Mortgage Banking, which originates, purchases, sells and

services non-commercial mortgage loans; Banking, which takes deposits and invests

in mortgage loans and home equity lines of credit; Capital Markets, which operates an

institutional broker-dealer that primarily specializes in trading and underwriting

mortgage-backed securities; Insurance, which offers property, casualty, life and

disability insurance as an underwriter and as an insurance agency, and Global

Operations, which licenses technology to mortgage lenders in the United Kingdom.

16. Defendant Angelo R. Mozilo (“Mozilo”) co-founded Countrywide in

1969. Defendant Mozilo is, and at all relevant times was, Chairman of the Board, a

director and Chief Executive Officer (“CEO”) of Countrywide. During the Class

Period, Mozilo was responsible for the Company’s false financial statements and

reaped proceeds of $232 million by selling his Countrywide stock.

17. Defendant Stanford L. Kurland (“Kurland”) was, until September 2006,

President and Chief Operating Officer (“COO”) of Countrywide. Defendant Kurland

joined the Company in 1979. During the Class Period, Kurland was responsible for

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the Company’s false financial statements and reaped proceeds of $152 million by

selling his Countrywide stock.

18. Defendant David Sambol (“Sambol”), is, and at all relevant times was,

President, Chief Operating Officer (“COO”) of Countrywide, and additionally serves

as Chairman of the Board and CEO of the Company’s principal operating subsidiary,

Countrywide Home Loans, Inc. Defendant Sambol joined Countrywide in 1985.

During the Class Period, Sambol was responsible for the Company’s false financial

statements and reaped proceeds of $27 million by selling his Countrywide stock.

19. Defendant Eric P. Sieracki (“Sieracki”) is, and at all relevant times was,

Chief Financial Officer (“CFO”) and Executive Managing Director of Countrywide.

Defendant Sieracki joined Countrywide in 1988. During the Class Period, Sieracki

was responsible for the Company’s false financial statements.

20. Defendant Carlos M. Garcia (“Garcia”) is, and at all relevant times was,

Executive Managing Director, Banking and Insurance of the Company. Defendant

Garcia joined Countrywide in 1984. During the Class Period, Garcia was responsible

for the Company’s false financial statements and reaped proceeds of $28 million by

selling his Countrywide stock.

21. Defendants Mozilo, Kurland, Sambol, Sieracki and Garcia (the

“Individual Defendants”), because of their positions with the Company, possessed the

power and authority to control the contents of Countrywide’s quarterly reports, press

releases and presentations to securities analysts, money and portfolio managers and

institutional investors, i.e., the market. They were provided with copies of the

Company’s reports and press releases alleged herein to be misleading prior to or

shortly after their issuance and had the ability and opportunity to prevent their

issuance or cause them to be corrected. Because of their positions with the Company,

and their access to material non-public information available to them but not to the

public, the Individual Defendants knew that the adverse facts specified herein had not

been disclosed to and were being concealed from the public and that the positive

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representations being made were then materially false and misleading. The Individual

Defendants are liable for the false statements pleaded herein at ¶¶26-53. FRAUDULENT SCHEME AND COURSE OF BUSINESS

22. Defendants are liable for: (i) making false statements; or (ii) failing to

disclose adverse facts known to them about Countrywide. Defendants’ fraudulent

scheme and course of business that operated as a fraud or deceit on purchasers of

Countrywide common stock was a success, as it: (i) deceived the investing public

regarding Countrywide’s prospects and business; (ii) artificially inflated the price of

Countrywide common stock; (iii) allowed defendants Mozilo, Kurland, Sambol and

Garcia to sell over $440 million worth of their own Countrywide stock at artificially

inflated prices; and (iv) caused plaintiff and other members of the Class to purchase

Countrywide common stock at inflated prices. BACKGROUND

23. Countrywide is engaged in mortgage lending and other real estate

finance-related businesses, including mortgage banking, banking and mortgage

warehouse lending, dealing in securities and insurance underwriting.

24. A large part of Countrywide’s business depended on the values of the

properties securing Countrywide’s mortgage and home equity loans. Thus, appraisals

were an important component of Countrywide’s determination and the risk level

associated with its loans. Countrywide even offered appraisal services and generated

fee income from appraisals, reporting $109 million in appraisal fees in 2005. Many of

Countrywide’s important ratios were tied to the original appraisals. Defendants knew

that if appraisals were inflated, the risk levels of its loans would be higher than the

loan factors indicated. Moreover, because Countrywide had begun to accept loan

applications with much less documentation, the appraisals were even more important.

Mozilo acknowledged in May 2007 a shift in the Company’s attitude about

documentation:

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“I’ve been doing this for 54 years,” Mozilo recently said during a

speech in Beverly Hills, California. For many years, he said, “standards

never changed: verification of employment, verification of deposit,

credit report.” * * *

“Traditional lenders such as ourselves looked around and said,

“Well, maybe there’s a (new) paradigm here. Maybe we’ve just been

wrong. Maybe you can originate these loans safely without verifications,

without documentation,” Mozilo said.

25. Accurate appraisals were concealed under the new paradigm. Thus,

when defendants became aware that appraisals were being inflated to qualify buyers

for loans, defendants were reckless in not moving aggressively to stop this practice

and were reckless in not causing the Company to increase its reserves to account for

the increased risk associated with inflated appraisals. DEFENDANTS’ FALSE AND MISLEADING

STATEMENTS ISSUED DURING THE CLASS PERIOD

26. On January 31, 2006, Countrywide issued a press release entitled

“Countrywide Reports 2005 Fourth Quarter and Full-Year Results; – Diluted EPS Up

69% in Fourth Quarter, 13% in 2005 Compared to Prior Year Periods; –2006 Earnings

Guidance Announced at $3.80 to $4.80 per Diluted Share; – Board of Directors

Declares Dividend of $0.15 Per Share.” The press release stated in part:

Countrywide Financial Corporation today announced results for the

quarter and year ended December 31, 2005. Fourth quarter and 2005 net

earnings were $639 million and $2.5 billion, respectively, compared to

$370 million and $2.2 billion for the comparable periods in 2004.

Diluted earnings per share were $1.03 for the fourth quarter and $4.11

for the full year, which compares to $0.61 and $3.63, respectively, for

the same periods in 2004.

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“For the fourth quarter and full year 2005, Countrywide achieved

impressive earnings growth from the comparable prior year periods,

despite a challenging transitional operating environment,” said Angelo

R. Mozilo, Chairman and Chief Executive Officer. “In 2005, the

Company delivered a 22 percent return on average equity for our

shareholders and earnings of $4.11 per diluted share – the second-highest

year in Countrywide’s history. Annual mortgage loan production volume

reached $491 billion, establishing a new record for the Company as well

as the industry. Countrywide also made significant advances in market

share, which grew by more than 25 percent from 2004 to 2005,

according to various market estimates. In addition, pre-tax earnings for

the year in the Banking segment exceeded the $1 billion mark.

“Importantly, we achieved these results despite an environment

that included volatile interest rates; declining production profit margins

throughout the industry; and the adverse effects of 2005’s hurricanes,

primarily Hurricane Katrina. If not for the hurricane charges, the

Company would have surpassed its record of $4.18 per diluted share,

achieved in the peak refinance boom year of 2003. Countrywide’s

exceptional performance in the 2005 environment is a reflection of the

Company’s ability to generate organic market share growth in its

Mortgage Banking segment, and of the effective implementation of its

strategy to expand its other business segments.

“Within the Mortgage Banking segment, quarterly pre-tax

earnings rose 67 percent over last year to $434 million. Collectively,

quarterly pre-tax earnings for our other segments which include Banking,

Capital Markets, Insurance and Global Operations advanced 52 percent

to $578 million compared to the fourth quarter of 2004. For the full year,

Mortgage Banking pre-tax earnings rose 4 percent over 2004 to $2.4

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billion while the other segments collectively increased 36 percent to $1.7

billion.

“Throughout 2005, Mortgage Banking profitability was hampered

by declining margins in the Production sector. In the fourth quarter of

2005, margins declined to 9 basis points compared to 61 basis points in

the fourth quarter of 2004. The primary cause of the decline was a lower

gain on sale driven by front-end competitive pricing pressure and weaker

secondary market conditions, as well as a 10 basis point decrease in

warehouse spread driven by a flattening yield curve. Normally, declining

warehouse spreads caused by a flatter yield curve would likely be

mitigated by an accompanying increase in gains on sale, but in the fourth

quarter this was hindered by pricing pressure and weak secondary market

conditions. For the twelve months, overall production margins were 39

basis points in 2005 versus 84 basis points in 2004. For the full year,

margin compression was driven by a 36 basis point reduction (based on

production volume) in gain on sale margin and a 23 basis point reduction

in net warehouse spread. This decrease in gain on sale margin primarily

resulted from front-end competitive pricing pressures in the marketplace

and the decrease in net warehouse spread, which was primarily driven by

a flattening of the yield curve.

“In the Servicing sector, 2005 quarterly pre-tax earnings increased

$583 million over the prior-year period. Pre-tax servicing margins were

11 basis points for the fourth quarter of 2005, an improvement of 25

basis points from the fourth quarter of 2004. The improvement in year-

over-year servicing margins was aided by a lower prepayment rate,

which drove a 16 basis point improvement in impairment/recovery of the

MSRs and other retained interests, net of the hedge. Another factor was a

rise in short-term interest rates, which fueled a 5 basis point

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improvement in escrow balance benefits. For the 2005 full year, pre-tax

earnings grew $1.1 billion over 2004 and servicing margins increased to

7 basis points, an improvement of 13 basis points from 2004. This

expansion in servicing margins resulted primarily from a reduced

prepayment rate which yielded improvements of 7 basis points in

impairment/recovery of MSRs and other retained interests, net of the

hedge. Additionally, higher short-term rates increased escrow balance

benefits by 5 basis points. Countrywide’s servicing capitalization rate at

the end of 2005 was 129 basis points.

“In the Banking segment, pre-tax earnings grew 69 percent and 84

percent year-over-year for the fourth quarter and full year, respectively,

to $329 million and $1.1 billion. Within this segment, the Bank

continues to build its deposit base while leveraging the strong

operational capabilities of Countrywide Home Loans. Net interest

margins in the fourth quarter, as well as the prior quarter and full year,

were negatively affected by low introductory rates, or ‘teasers,’ on newly

produced pay-option loans, as well as by the lag period between the reset

date on certain loans and actual changes in the underlying index rate of

the same loans, commonly called the ‘lag effect.’ In the fourth quarter,

the teaser effect depressed net interest margins by 16 basis points, and

the lag effect contributed another 31 basis points. This was an

improvement over the third quarter, however, when the effect of teaser

rates was detrimental by 27 basis points, and the lag effect by a further

28 basis points. Similarly, these factors reduced net interest margins for

the full year 2005, as teaser rates and the lag effect reduced margins by

19 and 23 basis points, respectively.

“In the Capital Markets business, pre-tax earnings were $133

million for the fourth quarter and $452 million for the full year, which

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compares to $146 million and $479 million, respectively, for the same

periods a year ago. These year-over-year declines were primarily the

result of a decline in margins as a result of a flattening of the yield curve,

partially offset by gains in our commercial real estate finance business.

“Within the Insurance segment, pre-tax earnings were $104

million for the fourth quarter and $184 million for the full year, which

compares to $30 million and $160 million for the comparable prior year

periods. The fourth quarter favorable comparison was largely attributable

to a $13 million downward adjustment to the $98 million charge that was

recorded during the third quarter related to the hurricanes, primarily

Hurricane Katrina. Comparison of fourth quarter earnings was also

affected by a $45 million charge recorded in the fourth quarter of 2004

related to hurricane losses in that period.

“In addition to the Insurance segment’s $13 million downward

adjustment of previously recorded hurricane-related charges, other

segments had similar downward adjustments totaling $33 million out of

$85 million recorded in the third quarter, including $28 million in

Mortgage Banking ($22 million and $6 million for Servicing and

Production, respectively) and $5 million for Banking.

“As we look ahead to 2006 and beyond, we expect to see the

market transition continue, which should lead to substantial industry

consolidation. In the past, Countrywide has benefited from consolidating

environments by recruiting talented personnel and fortifying our

infrastructure. Just as we have done for nearly four decades, we expect to

emerge from challenging times as a stronger Company that is better

positioned for the future. We continue to believe the long-term

fundamentals of the housing and mortgage finance markets are strong as

homeownership remains the foundation of the American dream.

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Shareholders should take comfort in knowing that Countrywide’s

workforce of more than 50,000 will continue to work toward making this

dream available to all Americans.”

Countrywide’s 2006 earnings guidance was announced at $3.80 to

$4.80 per diluted share. Key full-year assumptions behind the guidance

include the following:

− Total mortgage market originations of $2.2 trillion to $3.2 trillion

− Average 10-year U.S. Treasury yield range of 4.0 percent to 5.0

percent.

− Mortgage Banking segment pre-tax earnings of $1.85 billion to

$2.55 billion

− Company-wide loan production market share of 18.0

percent to 18.5 percent

− Company-wide loan origination volume of $400 billion to

$600 billion

− Mortgage Banking segment production pre-tax margins of

15 basis points to 40 basis points

− Average loan servicing portfolio of $1.2 trillion to $1.3

trillion

− Loan servicing pre-tax margins of 1 basis point to 10 basis

points

− Pre-tax earnings from other segments (Banking, Capital Markets,

Insurance and Global Operations) of $2.05 billion to $2.35 billion

27. On February 9, 2006, Countrywide issued a press release entitled

“Countrywide Reports January 2007 Operational Results; – Servicing Portfolio

Reaches $1.13 Trillion.” The press release stated in part:

Countrywide Financial Corporation released operational data for the

month ended January 31, 2006.

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* * *

“Countrywide was the number one mortgage originator and

servicer for 2005, according to Inside Mortgage Finance,” said Stanford

L. Kurland, President and Chief Operating Officer. “Countrywide

increased its origination share by more than 3 percentage points from

2004 to reach 15.7 percent and widened its lead as the number one

originator. Similarly, our servicing share continued its climb, reaching

12.1 percent at year-end.

“For the mortgage lending activities, January 2006 fundings were

$33 billion, up from $28 billion in January 2005. On a sequential basis,

however, January 2006 fundings were down 26 percent from December

2005. This was largely a result of normal seasonal effects. Last year, by

comparison, January 2005 fundings fell 19 percent from December 2004.

At January 31, 2006, the Servicing sector recorded portfolio growth to

$1.13 trillion.

“Operational highlights for the month also included total assets at

the Bank increasing to $76 billion, up $33 billion from January 2005. In

addition, the Capital Markets segment set a new record for average daily

trading volume, and net earned premiums from the Insurance segment

were up 40 percent from last year.”

28. On March 9, 2006, Countrywide issued its operational results for

February 2006 in a release which stated in part:

Countrywide Financial Corporation released operational data for the

month ended February 28, 2006. * * *

“February operational results reflected across-the-board growth

compared to February 2005,” said Stanford L. Kurland, President and

Chief Operating Officer. “Compared to January 2006, mortgage loan

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funding volume decreased modestly as a result of typical seasonal

effects. The mortgage loan pipeline rose from the prior month to reach

$59 billion at month-end, despite virtually flat interest rates. The

servicing portfolio continued to expand, ending the month at $1.14

trillion. Year-over-year operational results from other businesses were

led by growth in assets at Countrywide Bank to $79 billion, growth in

securities trading volume from the Capital Markets segment to $292

billion, and growth in net earned premiums from the Insurance segment

to $91 million.”

29. On April 11, 2006, Countrywide issued a press release entitled

“Countrywide Reports March 2006 Operational Results; – First Quarter 2006

Mortgage Loan Fundings Total $103 Billion.” The press release stated in part:

“Countrywide’s mortgage banking activity remained strong in the

first quarter of 2006,” said Stanford L. Kurland, President and Chief

Operating Officer. “Mortgage loan fundings of $40 billion for March

2006 were up 10 percent year-over-year and 29 percent over the prior

month. For the first quarter of 2006, mortgage loan fundings were up 13

percent over the first quarter of 2005. Refinance volume remained high,

accounting for 55 percent of the first quarter’s production. As the yield

curve remained flat, we saw the continuation of a shift toward fixed-rate

products. In March 2006, adjustable-rate fundings were 48 percent of

total loan fundings, the lowest percent since April 2004. On the servicing

side, delinquencies fell to 3.68 percent, the lowest level since August

2005, the month prior to Hurricane Katrina’s impact.

“Countrywide’s other businesses also generated impressive

results, with Bank assets rising to $80 billion at the end of March 2006, a

9 percent growth rate for the quarter, and securities trading volume from

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the Capital Markets segment increasing by 13 percent from the fourth

quarter of 2005 and 18 percent over last year’s first quarter.”

30. On April 27, 2006, Countrywide issued a press release entitled

“Countrywide Reports 2006 First Quarter Results; – Diluted EPS of $1.10 for the

Quarter.” The press release stated in part:

Countrywide Financial Corporation today announced results for the

quarter ended March 31, 2006. For the first quarter of 2006, net earnings

totaled $684 million and diluted earnings per share were $1.10. This

compares to $689 million in net earnings and $1.13 in diluted earnings

per share for the first quarter of 2005, and $639 million in net earnings

and $1.03 in diluted earnings per share for the fourth quarter of 2005.

“Countrywide opened the year by delivering strong operational

and financial performance for its shareholders,” said Angelo R. Mozilo,

Chairman and Chief Executive Officer. “The first quarter of 2006 was

characterized by the continuation of a relatively flat yield curve,

although overall interest rates continued to rise. Despite the challenges

created by this environment, profitability improved over the fourth

quarter of 2005, driven primarily by a $121 million increase in pre-tax

earnings from the Mortgage Banking segment. Total Company earnings

were down modestly from the first quarter of 2005, when interest rates

were lower and the yield curve was considerably steeper. Overall, in this

challenging environment, Countrywide’s results demonstrate the

effectiveness of our time-tested business model, our focus on mortgage

lending and the continued diversification of our earnings base.

“Within the Mortgage Banking segment, our Loan Production

sector generated $284 million in pre-tax earnings for the first quarter of

2006, an increase of $182 million from the fourth quarter of 2005. This

resulted from improved gain-on-sale margins which pushed the overall

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Loan Production sector pre-tax margin to 30 basis points, compared to 9

basis points in the fourth quarter of 2005. On a year-over-year basis,

Loan Production sector pre-tax income was down from $735 million in

the first quarter of 2005.

“The Loan Servicing sector generated $249 million in pre-tax

earnings for the first quarter of 2006, up from $17 million in the first

quarter of 2005. Pre-tax Servicing margins were 9 basis points for the

first quarter of 2006, up from 1 basis point for the comparable year-ago

quarter.

“Our other business activities, primarily the Banking, Capital

Markets and Insurance segments, collectively contributed 50 percent of

consolidated pre-tax earnings for the first quarter of 2006, compared to

33 percent for the first quarter of 2005. Banking segment pre-tax

earnings grew 58 percent from the year-ago quarter to reach $341

million for the first quarter of 2006, accounting for 30 percent of

consolidated pre-tax earnings. Quarterly pre-tax earnings from the

Capital Markets group of $156 million increased from $122 million in

the first quarter of 2005. The Insurance segment generated $65 million in

pre-tax earnings for the first quarter of 2006, an improvement of 19

percent from the first quarter of 2005.

* * *

“Looking to the rest of 2006, we remain confident in

Countrywide’s position within the industry. We will continue to

capitalize upon consolidation and other industry dynamics to grow

market share, enhance our infrastructure and create greater shareholder

value.”

Countrywide’s 2006 earnings guidance has been revised at $3.90

to $4.80 per diluted share, which compares to previous guidance of $3.80

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to $4.80. Key full-year assumptions behind the guidance include the

following:

* Total mortgage market originations of $2.2 trillion to $3.0

trillion

* Average 10-year U.S. Treasury yield range of 4.50 percent

to 5.30 percent

* Mortgage Banking segment pre-tax earnings of $1.95

billion to $2.55 billion

∗ Company-wide loan production market share of 18.0

percent to 18.5 percent (1)

∗ Company-wide loan origination volume of $400 billion to

$550 billion (1)

∗ Loan Production sector pre-tax margins of 20 basis points

to 40 basis points (2)

∗ Average loan servicing portfolio of $1.20 trillion to $1.25

trillion (3)

∗ Loan Servicing sector pre-tax margins of 2 basis points to

10 basis points

* Pre-tax earnings from other business segments of $2.05

billion to $2.35 billion (4)

(1) Includes production from the Mortgage Banking and Capital

Markets segments and Countrywide Bank

(2) Excludes pre-tax earnings from Capital Markets, and is based on

total loans funded

(3) Total portfolio, including inventory, Bank portfolio and

subservicing

(4) Includes Banking, Capital Markets, Insurance and Global

Operations

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* * *

Loan Servicing

The Loan Servicing sector reflects the performance of mortgage

servicing rights (MSRs) and other retained interests associated with

Countrywide’s owned-servicing portfolio. Loan Servicing sector

earnings tend to improve when interest rates rise, in contrast to Loan

Production earnings, which typically improve in declining interest rate

environments. As of March 31, 2006, the servicing portfolio was $1.15

trillion, compared to $893 billion at March 31, 2005, with the weighted

average coupon of 6.2 percent increasing from 5.9 percent one year ago.

The servicing portfolio is comprised of 60 percent fixed rate loans and

40 percent adjustable rate loans.

31. On May 9, 2006, the Company filed its Form 10-Q for the first quarter of

2006, which included the same financial results previously reported. The Form 10-Q

also included a certification by Mozilo, which stated:

I, Angelo R. Mozilo, certify that:

1. I have reviewed this Form 10-Q of Countrywide Financial

Corporation;

2. Based on my knowledge, this report does not contain any

untrue statement of a material fact or omit to state a

material fact necessary to make the statements made, in

light of the circumstances under which such statements

were made, not misleading with respect to the period

covered by this report;

3. Based on my knowledge, the financial statements, and

other financial information included in this report, fairly

present in all material respects the financial condition,

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results of operations and cash flows of the registrant as of,

and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are

responsible for establishing and maintaining disclosure

controls and procedures (as defined in Exchange Act Rules

13a-15(e) and 15d-15(e)) and internal control over financial

reporting (as defined in Exchange Act Rules 13a-15(f) and

15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or

caused such disclosure controls and procedures to be

designed under our supervision, to ensure that

material information relating to the registrant,

including its consolidated subsidiaries, is made

known to us by others within those entities,

particularly during the period in which this report is

being prepared;

b. Designed such internal control over financial

reporting, or caused such internal control over

financial reporting to be designed under our

supervision, to provide reasonable assurance

regarding the reliability of financial reporting and the

preparation of financial statements for external

purposes in accordance with generally accepted

accounting principles;

c. Evaluated the effectiveness of the registrant’s

disclosure controls and procedures and presented in

this report our conclusions about the effectiveness of

the disclosure controls and procedures, as of the end

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of the period covered by this report based on such

evaluation; and

d. Disclosed in this report any change in the registrant’s

internal control over financial reporting that occurred

during the registrant’s most recent fiscal quarter (the

registrant’s fourth fiscal quarter in the case of an

annual report) that has materially affected, or is

reasonably likely to materially affect, the registrant’s

internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have

disclosed, based on our most recent evaluation of internal

control over financial reporting, to the registrant’s auditors

and the audit committee of the registrant’s board of

directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses

in the design or operation of internal control over

financial reporting which are reasonably likely to

adversely affect the registrant’s ability to record,

process, summarize and report financial information;

and

b. Any fraud, whether or not material, that involves

management or other employees who have a

significant role in the registrant’s internal control

over financial reporting.

32. Defendant Sieracki signed a nearly identical certification included in the

Form 10-Q.

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33. On July 13, 2006, the Company issued a press release entitled

“Countrywide Reports June 2006 Operational Results.” The press release stated in

part:

Countrywide Financial Corporation released operational data for the

month ended June 30, 2006. * * *

“Countrywide’s mortgage loan production results for the month of

June and the second quarter of 2006 reflected the year-over-year

slowdown in activity across the industry,” said Stanford L. Kurland,

President and Chief Operating Officer. “While the Company’s total

mortgage loan fundings for the second quarter of 2006 declined by 3

percent year-over-year, they were up 13 percent from the first quarter of

2006, reflecting seasonal improvement. This compared positively to the

industry, where industry origination volume for the second quarter of

2006 was estimated by various industry sources to decline, on average,

by approximately 13 percent year-over-year. In addition, compared to

last month, mortgage loan fundings and average daily applications

increased. The mortgage pipeline also remains strong at $65 billion,

matching last month and indicative of near-term strength in funding

volume for Countrywide.

“The servicing portfolio continued its uninterrupted growth,

reaching $1.2 trillion at the end of June. Similarly, our other business

segments demonstrated year-over-year growth with Banking Operations’

assets rising 29 percent, Capital Markets securities trading volume

increasing 5 percent and Insurance net earned premiums advancing 32

percent over the second quarter of 2005.”

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34. On July 25, 2006, the Company issued a press release entitled

“Countrywide Reports 2006 Second Quarter Results; – Quarterly Diluted Earnings per

Share Increased 25% Over Last Year to $1.15.” The press release stated in part:

Countrywide Financial Corporation today announced results for the

quarter and six months ended June 30, 2006. * * *

“Countrywide delivered strong results in the second quarter and

first half of 2006,” said Angelo R. Mozilo, Chairman and Chief

Executive Officer. “The Company achieved a 25 percent year-over-year

growth in diluted earnings per share for the second quarter despite a 121

basis point rise in the 10-Year U.S. Treasury yield and a 3 percent

decline in our total loan funding volume. This demonstrated the power of

our business model, as the strategic counterbalancing of our Production

and Servicing sectors fueled positive results in our Mortgage Banking

segment. The ongoing growth initiatives in our other businesses are

providing significant value to the consolidated franchise. Together, these

activities help position the Company as a strong performer over the long

term in a wide range of interest rate environments.

“Looking forward, we begin the second half of 2006 with a $65

billion pipeline of mortgage loan applications, and an assemblage of new

products targeted for introduction before year-end including reverse

mortgages; enhanced refinance programs; and a production salesforce of

over 16,000. Our Bank’s new SavingsLink deposit product and its

initiatives targeting small business customers are expected to fuel growth

in liability generation, enhancing the Company’s overall funding

capability. Capital Markets is progressing on the implementation of its

new business initiatives in the derivatives, commercial real estate

finance, and asset management sectors as well as continued global

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expansion. Our Insurance division continues to focus on profitable

growth by refining its operations and reducing its catastrophic risk

exposure. In addition, even as Countrywide seeks to sustain market share

growth, the Company is implementing an efficiency project designed to

identify redundancies and reduce costs as we move toward a more

normalized market. With a proven time-tested management team, a $195

billion balance sheet and high investment grade credit ratings, we are

well positioned to be a beneficiary over the long term in this

consolidating market.” * * *

The Loan Production sector is comprised of the following

distribution channels: prime and nonprime consumer-direct lending

through Countrywide Home Loans’ 960-branch retail system, call center

operations and the Internet; wholesale lending through a network of

mortgage brokers; and correspondent lending which buys closed loans

from other financial institutions such as independent mortgage

companies, commercial banks, savings and loans and credit unions. In

addition, the Loan Production sector encompasses loans originated

through Countrywide Bank sold into the secondary mortgage market.

35. On August 7, 2006, the Company filed its Form 10-Q for the second

quarter of 2006, which included the same financial results as previously reported. The

Form 10-Q also contained virtually identical certifications by Mozilo and Sieracki as

contained in Countrywide’s Form 10-Q for the first quarter of 2006, as cited above in

¶31.

36. On August 9, 2006, the Company issued a press release entitled

“Countrywide Reports Reports July 2006 Operational Results.” The press release

stated in part:

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Countrywide Financial Corporation released operational data for the

month ended July 31, 2006. Operational highlights included the

following:

∗ Mortgage loan fundings for the month of July were $36

billion, a decrease of 19 percent from July 2005. Year-to-date

fundings of $256 billion were essentially flat as compared to last

year.

− Monthly purchase volume in July was $17 billion as

compared to $21 billion for July 2005. Year-to-date

purchase activity of $119 billion was down 3 percent from

last year.

− Adjustable-rate loan fundings for the month of July were

$17 billion, a decline of 27 percent from July 2005. Year-

to-date adjustable-rate volume was $125 billion, down 10

percent from last year.

− Home equity loan fundings for July increased 4 percent

from July 2005 to reach $3.8 billion. Year-to-date home

equity fundings were $27 billion, 16 percent higher than

last year.

− Nonprime loan fundings in July were $3.4 billion,

compared with $3.7 billion for the year-ago period. Year-

to-date nonprime loan funding volume of $24 billion was

essentially unchanged from the comparable period last year.

− Consolidated pay-option loan fundings for the month of

July were $5.1 billion, compared with $8.6 billion in July

of last year. Year-to-date pay-option fundings were $44

billion, as compared to $50 billion from the same period

last year.

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− It should be noted that the various mortgage loan funding

categories listed above are not mutually exclusive and are

not intended to total 100 percent of total fundings.

∗ Average daily mortgage loan application activity in July

was $2.5 billion, a decrease of 15 percent from last year. The

mortgage loan pipeline was $62 billion at July 31, 2006 as

compared to $77 billion at July 31, 2005.

* The mortgage loan servicing portfolio totaled $1.2 trillion at

July 31, 2006, an increase of 22 percent from July 31, 2005.

* Total assets for Banking Operations were $85 billion at July

31, 2006, an increase of $15 billion, or 21 percent, from July 31,

2005.

* Securities trading volume in the Capital Markets segment of

$279 billion for the month of July 2006 was down 6 percent from

July 2005. Year-to-date securities trading volume reached $2.2

trillion, an increase of 9 percent year over year.

* Net earned premiums from the Insurance segment were $94

million for July 2006, compared with $82 million for the year-ago

period. Year-to-date net earned premiums were $658 million,

rising 33 percent from last year.

“Residential mortgage loan production for the month of July 2006

reflected current market conditions,” said Stanford L. Kurland, President

and Chief Operating Officer. “Countrywide’s mortgage loan production

volume was down 19 percent as compared to July 2005. The decline in

purchase activity was consistent with our overall funding volume, as the

pace of home sales has slowed. The servicing portfolio continued to

grow, adding $14 billion from last month and $220 billion from last year.

In addition, we experienced strong operational growth from our other

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business segments. Total assets from our Banking Operations rose 21

percent from July 2005 to reach $85 billion. Year-to-date securities

trading volume at our Capital Markets segment increased 9 percent from

the prior year period, and year-to-date net premiums earned from our

Insurance segment were 33 percent greater than the same period a year

ago.”

37. On September 14, 2006, the Company issued a press release entitled

“Countrywide Reports August 2006 Operational Results.” The release stated in part:

“Total mortgage loan fundings were up 12 percent sequentially,

but declined year over year as a result of the expected industry

slowdown,” said Angelo R. Mozilo, Chairman and Chief Executive

Officer. “While purchase funding volume was down significantly from

August 2005, purchase volume year-to-date was down only 6 percent

from 2005 which was an all-time high. The servicing portfolio continued

its growth, increasing $208 billion from last year to reach $1.2 trillion at

the end of August. Other business segments also demonstrated year-

over-year growth with Banking Operations’ assets rising $15 billion,

Capital Markets securities trading volume increasing $7 billion, and

Insurance net earned premiums advancing $42 million from August

2005.”

38. On October 11, 2006, the Company issued a press release entitled

“Countrywide Reports September 2006 Operational Results.” The release stated in

part:

Countrywide Financial Corporation released operational data for the

month ended September 30, 2006. * * *

“Operational results for September were solid despite the

fluctuations in the 10-year U.S. Treasury yield throughout the month,”

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said Angelo R. Mozilo, Chairman and Chief Executive Officer.

“Declining interest rates spurred a 7 percent increase in average daily

applications from August to September. While total mortgage loan

fundings were down from the prior month due to three fewer working

days, on an average daily basis, they increased 8 percent. For the third

quarter, total mortgage loan fundings of $114 billion were down only 2

percent from the second quarter of 2006 and down 22 percent from the

third quarter of 2005, which was a record quarter for fundings. The

servicing portfolio continued its growth, adding $16 billion from last

month and $197 billion from last year.

“Banking Operations’ assets increased 5 percent from June 30,

2006 and 24 percent from September 30, 2005. Capital Markets

securities trading volume of $933 billion for the third quarter of 2006

was down slightly from the second quarter of 2006, as it was affected by

the day count, but was up on an average daily basis. Third quarter net

earned premiums from the Insurance segment were up sequentially as

well as year over year.”

39. On October 24, 2006, the Company its third quarter 2006 results, stating

in part:

Countrywide Financial Corporation today announced results for the third

quarter and nine months ended September 30, 2006. * * *

“Countrywide achieved strong results in the Banking, Capital

Markets and Insurance segments, while the Mortgage Banking segment

continued to experience the effects of a transitional market,” said Angelo

R. Mozilo, Chairman and Chief Executive Officer. “Interest rates

declined significantly during the quarter, putting pressure on Loan

Servicing sector earnings. Despite the decrease in interest rates, real

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estate finance activity continued to moderate and, as a result, Loan

Production sector earnings also declined. However, consistent with the

design of our Macro Hedge, we expect the Loan Production sector’s

fourth quarter results to benefit from increased refinance funding activity

stemming from the third quarter decline in interest rates. While third

quarter diluted earnings per share of $1.03 remained unchanged

compared to the third quarter a year ago, diluted earnings per share of

$3.29 for the nine months of 2006 was up 7 percent and represented a

new nine-month record.

“We anticipate the fourth quarter of 2006 will be characterized by

a continued slowdown in purchase volume beyond typical seasonality.

However, should interest rates remain at their current levels or move

lower, we expect that increased refinance activity will mitigate this

decline. We also continue to expect that margins will remain under

pressure and that pricing will remain competitive as the mortgage market

consolidates. In addition, pay-option loans – which have historically

provided higher margins – are declining as a percentage of total

production and have experienced margin erosion, and this trend may

continue.

“In response to changing market conditions, management has

initiated an expense and headcount reduction program. By year end, we

expect that this program will generate an annualized cost savings run rate

of over $500 million.

“Additionally, as previously announced, management is executing

a capital optimization plan and the Board of Directors has authorized a

share repurchase program of up to $2.5 billion. In connection with this

program, the Company intends to repurchase $1 billion to $2 billion of

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its common stock in the fourth quarter financed through the issuance of

high equity-content debt securities.

“While we expect the continuation of a transitional environment in

the near term, we are bullish on the positive long-term growth prospects

for the mortgage lending industry and Countrywide in particular, as a

result of the proven power of our business model and our strategic

positioning. We believe Countrywide’s core strategies of profitable

market share expansion, growth in our mortgage loan investment

portfolio and associated spread income, continued synergistic

diversification, and ongoing capital optimization will continue to deliver

long-term shareholder value.” * * *

Quarterly Loan Servicing sector pre-tax earnings decreased year

over year because the valuation changes of MSRs and retained interests,

net of the hedge, were a loss of $173 million in the third quarter of 2006,

which compares to valuation changes, net of hedge, in the third quarter

of 2005 of $16 million – a negative swing of $189 million. This

unfavorable comparison was partially offset by third quarter 2005

hurricane losses of $51 million, which were not repeated in the third

quarter of 2006.

Delinquencies in the servicing portfolio were 4.50 percent at

September 30, 2006, which compares to 4.03 percent at September 30,

2005. Foreclosures in the servicing portfolio were 52 basis points at

September 30, 2006, which compares to 42 basis points at September 30,

2005. The year-over-year increase in delinquencies and foreclosures are

primarily the result of portfolio seasoning, product mix and changing

economic and housing market conditions. The weighted average age of

the portfolio at September 30, 2006 was 21 months, while the age at

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September 30, 2005 was 18 months. The Company believes its asset

valuations and reserves for credit losses are appropriate for the increase

in delinquencies.

40. On November 6, 2006, the Company filed its Form 10-Q for the third

quarter of 2006, which included the same financial results as previously reported. The

Form 10-Q also contained virtually identical certifications by Mozilo and Sieracki as

contained in Countrywide’s Form 10-Q for the first quarter of 2006, as cited above in

¶31.

41. On November 9, 2006, the Company issued a press release entitled

“Countrywide Reports October 2006 Operational Results.” The press release stated in

part:

Countrywide Financial Corporation released operational data for the

month ended October 31, 2006. * * *

“October operational results reflect both seasonal and economic

mortgage market conditions,” said Angelo R. Mozilo, Chairman and

Chief Executive Officer. “As a result, purchase activity has started to

slow. However, following the drop in interest rates during the month of

September, October refinance activity increased to $24 billion – the

highest dollar volume since October 2005. The servicing portfolio

continued to grow, reaching $1.26 trillion. Positive year-over-year

operational results for the month of October were delivered by our non-

mortgage banking businesses. Banking Operations’ assets increased 15

percent, Capital Markets had an 11 percent growth in securities trading

volume, and Insurance segment net premiums earned increased by 16

percent.”

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42. On December 12, 2006, the Company issued a press release entitled

“Countrywide Reports November 2006 Operational Results.” The release stated in

part:

“November 2006 operational results continued to reflect

transitional market conditions,” said Angelo R. Mozilo, Chairman and

Chief Executive Officer. “Total mortgage loan fundings declined

modestly from the prior month. Purchase volume fell as a result of

continued softness in the housing market, as well as seasonality.

Refinance activity declined as well, but falling long-term interest rates

during November resulted in an increase in average daily application

volume and an ending mortgage loan pipeline of $62 billion, indicative

of strong funding volume for the remainder of the year. Our servicing

portfolio continued its uninterrupted climb, reaching $1.3 trillion at the

end of November.

“Year-to-date operational results were positive across our other

business lines and are on pace to exceed 2005 full-year results. Banking

Operations’ assets were $82 billion, Capital Markets securities trading

volume rose to $3.5 trillion and net premiums earned from our Insurance

segment reached a record $1 billion.”

43. On January 12, 2007, the Company reported December 2006 operational

results in a release stating in part:

“Despite a transitional and challenging mortgage market

throughout 2006, Countrywide produced strong operational results for

the year,” said Angelo R. Mozilo, Chairman and Chief Executive

Officer. “While the 2006 mortgage market reflected excess capacity and

strong competition, Countrywide’s total mortgage loan funding volume

of $463 billion for the year was down less than 7 percent from the record

level set in 2005. This compares favorably to the industry, which is

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forecasted to decline by 15 to 20 percent. Our servicing portfolio

continued its upward path, reaching $1.3 trillion at year-end. And strong

operational metrics were achieved in all our other business segments –

$83 billion in Banking Operations’ assets, $3.8 trillion in securities

trading volume and $1.2 billion in net earned premiums.”

44. On January 30, 2007, Countrywide issued a press release entitled

“Countrywide Reports Record Earnings for 2006; – Quarterly Diluted EPS of $1.01

Drove Full Year EPS to a Record $4.30.” The press release stated in part:

Countrywide Financial Corporation today announced results for the

fourth quarter and full year ended December 31, 2006. * * *

“Countrywide delivered strong results again in 2006,” said Angelo

R. Mozilo, Chairman and Chief Executive Officer. “In the face of a

challenging environment which included flat and inverted yield curve

conditions, home price depreciation, slowing home sales, declining

production volumes, and pressure on credit quality, Countrywide set a

new record for annual diluted earnings per share. While our total loan

production declined six percent, our performance outpaced the industry.

Production margins dropped only modestly despite the very competitive

pricing environment we faced in 2006. Our servicing portfolio continued

its uninterrupted growth to $1.3 trillion, despite high prepayments among

ARM borrowers and slowing production volume. Pre-tax earnings for

our Banking segment increased 28 percent, establishing a new earnings

record at $1.4 billion. Furthermore, Banking Operations’ assets grew by

13 percent. Our Capital Markets business also set new records for pre-tax

earnings and securities trading volume at $554 million and $3.8 trillion,

respectively. Our Insurance segment set a new benchmark as well,

generating $320 million in pre-tax earnings for 2006.

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“The Company made progress in its expense management

campaign throughout the second half of the year and we continue to

focus on further efficiency and productivity improvements. Additionally,

Countrywide continues to focus capital optimization. During the fourth

quarter, the Company entered into an accelerated share repurchase

agreement with a dealer in which we repurchased 38.6 million shares

that were subsequently retired. The share repurchase program was

financed largely through the issuance of $1.5 billion in high equity

content debt securities, and had a net positive effect of $0.02 per diluted

share for 2006.

“I want to take this opportunity to thank all of our employees for

their effort and dedication this past year in assuring that Countrywide

continues on its mission of making a positive difference in the lives of

American families and in maintaining our industry leadership position.

This was clearly a challenging twelve months but our team again rose to

the occasion, making this the most successful year in our thirty-seven

year history. Our combined efforts have delivered a 36 percent

compound annual growth rate in net earnings over the past five years,

and a 26 percent compound annual growth rate over the past 10 years.

And, as a result of this performance, our total return to shareholders has

been 340 percent over the past five years and 561 percent over the past

10 years, outpacing the S&P 500’s performance of 35 percent and 124

percent, respectively.

“Looking ahead to 2007, the industry will likely see continued

pressure on margins as mortgage origination volumes decline and

industry capacity is rationalized. We are also preparing for increased

borrower delinquencies and continued credit deterioration. We believe,

however, that 2007 will likely be the trough year of the current housing

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cycle and that 2008 should represent the beginning of upward trends

associated with the next cycle. As we have said in the past, it is our view

that the most relevant way to measure performance and growth in our

industry and in our business is to view performance from business cycle

to business cycle rather than year over year. This is how Countrywide

manages its franchise and we are well positioned and extremely

optimistic about our prospects to continue generating growth and

superior returns over future cycles.” * * *

Quarterly Loan Servicing sector pre-tax earnings decreased year

over year as a result of both a negative swing of $215 million in the net

valuation changes of MSRs and retained interests and a $132 million

increase in interest expense. The primary sources of the negative

valuation movement were the increased investor yield requirements

(wider option adjusted spreads) and the impact of higher delinquencies

on residual valuations. The increase in interest expense primarily

resulted from higher prevailing interest rates on a larger servicing asset

as well as increased leverage in the Servicing sector stemming from the

issuance of the $1.5 billion high-equity content debt securities that took

place in the fourth quarter of 2006 in connection with Countrywide’s

share repurchase program.

Delinquencies in the servicing portfolio were 5.02 percent at

December 31, 2006, which compares to 4.61 percent at December 31,

2005. Foreclosures in the servicing portfolio were 65 basis points at

December 31, 2006, which compares to 44 basis points at December 31,

2005. The year-over-year increase in delinquencies and foreclosures is

primarily the result of portfolio seasoning, product mix and changing

economic and housing market conditions. The weighted average age of

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the loans in the portfolio at December 31, 2006 was 22 months, while the

age at December 31, 2005 was 19 months. The Company believes its

asset valuations and reserves for credit losses are appropriate for the

increase in delinquencies. * * *

OUTLOOK

Management’s outlook for 2007 contemplates that current difficult

market conditions will continue. The Company believes the industry will

experience continued pressure on volumes, margins and housing prices,

as well as increased defaults and foreclosures. As a result, 2007 is

anticipated to be a challenging year for the Company. However, the

Company also believes that these dynamics will result in further industry

consolidation as companies either exit the business or attempt to align

themselves with stronger players. Management believes the Company is

very well positioned to capitalize on these market opportunities which

should strengthen Countrywide’s franchise and result in accelerated

future market share and earnings growth.

45. On February 9, 2007, the Company issued its January 2007 operational

results, which stated in part:

Countrywide Financial Corporation released operational data for the

month ended January 31, 2007. * * *

“Countrywide’s operational results for January 2007 reflect

current mortgage market and seasonal conditions,” said David Sambol,

President and Chief Operating Officer. “Total mortgage loan fundings

for the month were up 13 percent year over year, but were down 11

percent on a sequential basis, in part a reflection of normal seasonal

effects. Other operational highlights for the month of January included

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year-over-year growth in Banking Operations’ assets to $83 billion and

expansion of Insurance segment net premiums earned to $112 million.”

46. On February 28, 2007, Countrywide filed its Form 10-K for fiscal 2006,

which included results for the fourth quarter of 2006, and included the same financial

results as previously reported. The Form 10-K also contained virtually identical

certifications by Mozilo and Sieracki as Countrywide’s Form 10-Q for the first quarter

of 2006, as cited above in ¶31.

47. On March 12, 2007, Countrywide reported its February 2007 operational

results, which stated in part:

Countrywide Financial Corporation released operational data for the

month ended February 28, 2007. * * *

“February mortgage loan fundings were $35 billion, up 10 percent

from the same period a year ago,” said David Sambol, President and

Chief Operating Officer. “Importantly, retail volume was up 11 percent

year over year, demonstrating the positive impact from our retail

salesforce growth initiatives. In fact, Countrywide captured the #1 spot

in retail originations for the fourth quarter of 2006 according to Inside

Mortgage Finance.

“The nonprime lending industry is currently experiencing

significant volatility and instability,” Sambol continued. “As a result,

many nonprime competitors have recently exited the market and other

lenders have suggested their continued viability is in question.

Aggressive industry underwriting guidelines and lower home price

appreciation have resulted in increasing delinquencies and defaults.

Furthermore, as a result of investor concerns about nonprime loan

performance, yield requirements have increased and secondary market

liquidity has been reduced. These factors will adversely impact residual

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valuations and gains on sale of nonprime loans until market conditions

improve.

“In response to market factors, management has implemented

changes to our origination policies to mitigate future exposure including

further tightening of underwriting guidelines. Nonprime fundings were

only 7 percent of total mortgage loan fundings in February and recent

nonprime application volumes have declined as a result of our recent

policy changes. At December 31, 2006, our nonprime residuals

amounted to $402 million, which represents 0.2 percent of the

Company’s assets.

“Management views that the long term impact of the current

nonprime market dynamics is positive for both the industry and

Countrywide,” Sambol concluded. “The industry should benefit from

more rational underwriting and pricing as excess lending capacity is

eliminated. Countrywide is well positioned to take advantage of this

market disruption due to its experience, operating controls, strong

liquidity profile and relatively low exposure to nonprime. Nonetheless,

the Company may experience short term earnings volatility during this

transition period.”

48. On April 26, 2007, Countrywide issued a press release entitled

“Countrywide Reports Diluted EPS of $0.72 for First Quarter of 2007; – 2007

Guidance Updated at $3.50 to $4.30 per Diluted Share.” The press release stated in

part:

Countrywide Financial Corporation today announced results for the first

quarter ended March 31, 2007. * * *

“Countrywide’s earnings for the first quarter of 2007 were $434

million, despite adverse subprime and housing market conditions,” said

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Angelo R. Mozilo, Chairman and Chief Executive Officer. “While the

Company’s core operations delivered what was otherwise a strong

quarter, earnings were impacted by charges relating to our subprime

activities as well as increases to our loss reserves and related asset

valuation adjustments stemming from higher delinquencies and softer

housing markets.”

During the quarter, subprime charges and other credit costs

impacted Countrywide as follows:

* Subprime operations. Mortgage banking revenues from

subprime operations, which include both production and

investment activities, declined approximately $400 million from

the fourth quarter of 2006, the equivalent of approximately $0.41

in earnings per diluted share. Subprime production revenues

decreased $245 million, primarily resulting from volatile market

conditions and related value declines of loans sold during the

quarter and unsold at quarter end, net of credit hedge gains.

Revenues from subprime investments fell $155 million from the

fourth quarter of 2006, largely as a result of impairment charges

against retained interests from subprime and related securities, net

of credit hedge gains. The Company has instituted policy and

product guideline changes and made other adjustments to reduce

exposure to future subprime losses, and as a result management

anticipates that both subprime production and investments will

return to profitability in subsequent quarters, absent a material

worsening of market conditions.

* Other credit costs. Aside from subprime-related credit costs

described above, other net credit costs increased from the fourth

quarter of 2006 by $132 million, the equivalent of $0.14 in

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earnings per diluted share, as a result of rising delinquencies,

deteriorating housing market conditions, and resulting increased

loss reserves. This included a $119 million increase in impairment

of prime-quality home equity retained interests and an $81 million

increase in the provision for loan losses, partially offset by a $68

million increase in loss reserve reversal in the Insurance segment.

“Excluding the impact of subprime conditions and increased credit

costs in the quarter, Countrywide’s core operations made strong

contributions to quarterly earnings,” said Mozilo. “Our Production sector

delivered strong volume and margins for both prime first and home

equity loans, which accounted for 93 percent of our total mortgage

banking originations; Servicing sector margins, excluding impairment of

retained interests, were strong; net interest margins increased in our

Banking Operations; and our Capital Markets and Insurance segments

both generated sequential quarter pre-tax earnings growth.

“On a consolidated basis, Countrywide’s residential lending

operations continued to grow market share, with first quarter production

representing over 18 percent of U.S. mortgage originations and our

servicing portfolio reaching 8.4 million loans, which represents 13

percent of residential loans outstanding. In addition, our pipeline heading

into the second quarter is very strong at $69 billion, up 21 percent from

the fourth quarter of 2006 and up 8 percent from the first quarter last

year. Furthermore, our increasingly diverse business model has been

generating more than half of our earnings from businesses other than

mortgage banking, as was the case in 2006 and in the first quarter of

2007 again.

“While turbulent mortgage market conditions had an adverse

impact on the Company’s first quarter, looking forward, management is

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optimistic about the long-term future growth prospects and profitability

of the Company stemming from the consolidation and rationalization

occurring in the residential mortgage markets today.

“I would like to conclude by thanking my 50,000-plus

Countrywide colleagues. Each of them works hard every day to deliver

outstanding long-term returns to shareholders, and to make the American

dream of homeownership available to as many people as possible.” * * *

Subprime gain on sale for the first quarter of 2007 was impacted

by deteriorating market conditions, specifically higher investor yield

requirements as well as increased future loss estimates, which adversely

impacted the value of subprime loans. The $244 million reduction in

subprime gain on sale was the result of a decline in the value of loans

sold during the quarter and unsold at quarter end, net of credit hedge

gains of $92 million.

Home equity gain on sale declined from the fourth quarter of 2006

because of increased credit enhancement costs and higher investor yield

requirements. Prime gain on sale increased from the fourth quarter of

2006 primarily as a result of changes in channel mix toward more retail

business. Factors impacting the overall year-over-year quarterly declines

included increased competitive pricing pressures, the decline in

production of higher-margin pay option products, and the general

deterioration of subprime market conditions discussed previously. * * *

Loan Servicing sector pre-tax earnings were adversely impacted

by $429 million in impairment charges against retained interests.

Impairment charges of $231 million were related to subprime and similar

retained interests, while $135 million was related to retained interests on

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home equity lines of credit extended to prime borrowers. These

impairment charges were driven by increased estimates for future losses

on loans underlying the related securities as well as increased market

yield requirements. In addition, the Company incurred $63 million in

impairment on other retained interests where Countrywide does not

retain credit risk. This impairment related to increased market yield

requirements.

Delinquencies (based on loan count, 30 days or more past due) in

the servicing portfolio were 4.29 percent at March 31, 2007, which

compares to 5.02 percent at December 31, 2006 and 3.68 percent at

March 31, 2006. Foreclosures in the servicing portfolio (based on loan

count) were 69 basis points at March 31, 2007, which compares to 65

basis points at December 31, 2006 and 47 basis points at March 31,

2006. The year-over-year increase in total delinquencies and foreclosures

is generally the result of softening housing market conditions and the

seasoning of the loans in the servicing portfolio. The sequential quarter

improvement in the delinquency ratio is primarily attributable to

seasonal factors. The weighted average age of the loans in the portfolio

at March 31, 2007 was 23 months, while the age at March 31, 2006 was

21 months. * * *

2007 OUTLOOK

Management believes that considerable risks remain in the

mortgage marketplace, including but not limited to potential further

deterioration in the housing market that could impact origination volume

and future credit costs; potential pending regulatory or legislative actions

that could impose constraints on our operations; and other business risks

as outlined in the disclaimer at the end of this press release. While the

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balance of 2007 is expected to be challenging, management continues to

believe that current market conditions will result in opportunities in the

form of further industry consolidation. Management also believes that

the Company is well-positioned to capitalize upon these opportunities,

which should strengthen Countrywide’s franchise and result in

accelerated future market share and earnings growth.

49. On May 9, 2007, Countrywide reported its April 2007 operational results

in a press release that stated in part:

Countrywide Financial Corporation released operational data for the

month ended April 30, 2007. * * *

“Residential mortgage loan production for the month of April

2007 increased 11 percent as compared to April 2006,” said David

Sambol, President and Chief Operating Officer. “Refinance activity

remains elevated, accounting for 61 percent of total monthly production

activity, which compares to 54 percent one year ago. Indicative of

underwriting guideline tightening, nonprime production declined to 4

percent of monthly origination volume, compared to 9 percent in April of

last year. Reflecting a pick-up in mortgage activity, mortgage loan

application volume and ending pipeline ere up 20 percent and 8 percent,

respectively, as compared to the year-ago period.

“Strong year-over-year improvement in all other business lines

rounded out the month. The loan servicing portfolio continued its

uninterrupted climb, increasing by 18 percent; Banking Operations assets

rose 9 percent; Capital Markets trading volume rose 10 percent; and

Insurance net earned premiums increased by 20 percent.”

50. On May 9, 2007, the Company filed its Form 10-Q for the first quarter of

2007. The Form 10-Q also contained virtually identical certifications by Mozilo and

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Sieracki as Countrywide’s Form 10-Q for the first quarter of 2006, as cited above in

¶31.

51. On June 12, 2007, the Company issued its May 2007 operational results

in a release which stated in part:

Countrywide Financial Corporation released operational data for the

month ended May 31, 2007. * * *

“Countrywide generated robust residential mortgage production

results for the month of May,” said David Sambol, President and Chief

Operating Officer. “Production trends included a 17 percent increase in

home purchase activity from the prior month; fixed-rate mortgages

accounted for 76 percent of monthly production, their highest percentage

since August 2003; and the pipeline of mortgage loans-in-process ended

the month at $70 billion, its highest amount since October 2005.

Reflecting our focus on integrating the activities of our Bank and

mortgage company, Countrywide Bank funded $19 billion, or 44

percent, of total residential mortgage production during the month of

May 2007, its highest monthly amount to date. According to Inside

Mortgage Finance, Countrywide retained its position as the #1 mortgage

originator in all channels for the first quarter of 2007. In particular, we

expanded our lead in the retail channel from the 4th quarter of 2006.

“Strong results were produced by our other businesses. The

servicing portfolio increased 18 percent from May 2006 and Banking

Operations’ assets rose 9 percent year-over-year. On a year-to-date basis,

Capital Markets securities trading volume increased 4 percent from the

five months ended May 2006, and net earned premiums from our

Insurance segment rose 22 percent from the same year-ago period.”

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52. On July 16, 2007, the Company issued a press release entitled

“Countrywide Reports June 2007 Operational Results.” The release stated in part:

Countrywide Financial Corporation released operational data for the

month ended June 30, 2007. * * *

“Market conditions became increasingly challenging throughout

the second quarter of 2007,” said David Sambol, President and Chief

Operating Officer. “The housing market continues to soften, and

delinquencies and defaults continue to rise. Additionally, interest rates,

price competition in the residential lending markets and secondary

market volatility have all increased. However, Countrywide’s residential

funding volume in June was strong, driven primarily by seasonal

purchase activity and higher application volumes in preceding months.”

53. On July 24, 2007, the Company issued a press release entitled

“Countrywide Reports Diluted EPS of $0.81 for Second Quarter of 2007; – Strong

Loan Production Offset By Higher Credit Costs; – 2007 Guidance Updated at $2.70 to

$3.30 per Diluted Share; – Board Authorizes $0.15 Dividend.” The press release

stated in part:

Countrywide Financial Corporation today announced results for the

second quarter ended June 30, 2007. * * *

“Countrywide’s results for the second quarter of 2007 reflected

strength in our core loan production business, but were adversely

impacted by continued weakness in the housing market,” said Angelo R.

Mozilo, Chairman and Chief Executive Officer. “During the quarter,

softening home prices continued to affect many areas of the country and

delinquencies and defaults continued to rise across all mortgage product

categories as a result. Due to these adverse conditions, the Company

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incurred increased credit-related costs in the quarter, primarily related to

its investments in prime home equity loans.”

Credit-related costs in the second quarter included:

− Impairment on credit-sensitive retained interests.

Impairment charges of $417 million were taken during the quarter on the

Company’s investments in credit-sensitive retained interests. This

included $388 million, or approximately $0.40 in earnings per diluted

share based on a normalized tax rate, of impairment on residual

securities collateralized by prime home equity loans. The impairment

charges on these residuals were attributable to accelerated increases in

delinquency levels and increases in the estimates of future defaults and

loss severities on the underlying loans.

− Held-for-investment (HFI) portfolio. The provision for

losses on HFI loans incurred in the second quarter was $293 million,

driven primarily by a loan loss provision of $181 million on prime home

equity HFI loans in the Banking segment.

“Partly offsetting increased credit costs, our residential Loan

Production sector delivered strong results during the quarter,” said

Mozilo. “Consolidated quarterly funding volume was the third-highest in

our history, prime production margins were relatively stable, and

subprime production margins substantially improved. As a result, Loan

Production sector pre-tax profit in the quarter was at its highest level

since the first quarter of 2005.”

During the quarter, the Company also benefited from a non-

recurring reduction in its corporate tax rate to 27.0 percent, which

compares to 38.1 percent in the first quarter of 2007. The benefit from

this tax rate change equated to $0.12 per diluted share. The change in the

tax rate is the result of a remeasurement of deferred income taxes

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precipitated by the relocation of certain operating activities resulting in

favorable state income tax consequences. The Company anticipates a

recurring benefit to the tax rate in future quarters of approximately 0.5

percent as a result of these operational changes.

“Looking to the second half of 2007, we expect difficult housing

and mortgage market conditions to persist,” Mozilo concluded.

“Nonetheless, management remains optimistic about the long-term future

growth prospects and profitability of the Company as industry

consolidation continues.”

54. After this news, Countrywide’s stock collapsed $3.56 per share to close

at $30.50 per share, a decline of 10% on volume of 51 million shares. The stock

continued to decline after this drop.

55. Then, on August 9, 2007, Countrywide filed its second quarter Form 10-

Q which highlighted the funding problems it faced:

We have maintained access to our traditional, highly reliable short-term

liquidity sources. In view of current unprecedented market conditions,

we are accessing other pre-existing funding liquidity sources, procuring

new sources and accelerating the integration of our mortgage company

with the Bank. As a result of this accelerated integration, a significantly

higher percentage of our mortgage banking fundings will occur in the

Bank sooner than originally planned. The Bank has significant liquidity

sources available to fund our mortgage banking operations. While we

believe we have adequate funding liquidity, the situation is rapidly

evolving and the impact on the Company is unknown.

56. As Associated Press reported on August 9, 2007:

Countrywide Financial Corp. said Thursday that disruptions in credit and

secondary mortgage markets pose a risk to the company and could hurt

its financial condition in the short-term.

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The Calabasas-based company made the disclosure in a filing with

the Securities and Exchange Commission, supplementing other “risk

factors” the company had outlined in its annual report.

The mortgage industry has seen a liquidity drain in recent weeks.

The market that sees banks buy loans is in distress because investors

have soured on risky debt.

Countrywide, one of several mortgage lenders struggling with the

ripple effects of the housing slump, warned that if the state of debt

markets worsens, it could translate in reduced liquidity and a rise in

credit risk premiums.

“Since the company is highly dependent on the availability of

credit to finance its operations, disruptions in the debt markets or a

reduction in our credit ratings could have an adverse impact on our

earnings and financial condition, particularly in the short term,”

Countrywide said in the filing.

The company said it believes it has enough capital to hold on to

mortgage loans and mortgage-backed securities until the housing market

picks up, but if debt markets tighten further it may result in the lender’s

loan production volumes falling, which would hurt earnings.

Earlier this week, Countrywide sought to reassure Wall Street that

it has access to capital despite the credit crunch roiling the industry.

The company said it has access to $46.2 billion in cash, credit

lines and other investments.

57. The Company also disclosed in the Form 10-Q a $1.3 billion loss on its

servicing hedge:

The Servicing Hedge is designed to supplement the macro hedge

and to offset a portion of the change in value of MSRs and retained

interests recorded in current period earnings. The values of the

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derivatives and securities that are the primary components of the

Servicing Hedge are tied to long-term mortgage, swap and Treasury

rates. These rates increased during the quarters ended June 30, 2007 and

2006. As a result, the Servicing Hedge incurred a loss of $1,373.1

million, including $125 million of time value decay of the options

included in the Servicing Hedge (our “hedge cost”) in the quarter ended

June 30, 2007 . . . .

58. On this news, Countrywide’s stock dropped to as low as $24.71 per

share.

59. The true facts, which were known by the defendants but concealed from

the investing public during the Class Period, were as follows:

(a) The Company lacked requisite internal controls, and, as a result,

the Company’s projections and reported results issued during the Class Period were

based upon defective assumptions and/or manipulated facts;

(b) Inflated appraisals of properties on loan applications would make

Countrywide’s losses much larger than current reserve levels once real estate values

cooled off, but the Company was failing to adjust its reserve levels to account for this

phenomenon;

(c) The Company’s financial statements were materially misstated due

to its failure to properly account for its allowance for loan losses; and

(d) Given the deterioration and the increased volatility in the mortgage

market, the Company would be forced to tighten its credit guidelines and implement

additional lending restrictions, which would have a direct material negative impact on

its loan productions going forward.

60. As a result of defendants’ false statements, Countrywide’s stock price

traded at inflated levels during the Class Period. However, after the above revelations

seeped into the market, the Company’s shares were hammered by massive sales,

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sending them down more than 32% from their Class Period high of $44.94 per share

in February 2006. COUNTRYWIDE’S FALSE FINANCIAL

REPORTING DURING THE CLASS PERIOD

61. In order to inflate the price of Countrywide’s stock, defendants caused

the Company to falsely report its results for 2006 through its failure to timely record

adequate reserves for credit impairment for both its Retained Interests and its Held-

for-Investment portfolio, which inflated the Company’s revenue and net income.

62. The results issued during the Class Period were included in Form 10-Qs

and a Form 10-K filed with the SEC. The results were also included in press releases

disseminated to the public.

63. Generally Accepted Accounting Principles (“GAAP”) are those

principles recognized by the accounting profession as the conventions, rules and

procedures necessary to define accepted accounting practice at a particular time. SEC

Regulation S-X (17 C.F.R. §210.4-01(a)(1)) states that financial statements filed with

the SEC which are not prepared in compliance with GAAP are presumed to be

misleading and inaccurate, despite footnote or other disclosure. Regulation S-X

requires that interim financial statements must also comply with GAAP, with the

exception that interim financial statements need not include disclosure which would

be duplicative of disclosures accompanying annual financial statements. 17 C.F.R.

§210.10-01(a).

64. Countrywide represented the following with respect to its Held-for-

Investment loans:

Loans are classified as held-for-investment based on

management’s intent and ability to hold the loans for the foreseeable

future or to maturity. Loans held for investment are carried at amortized

cost reduced by a valuation allowance for estimated credit losses

incurred in the portfolio as of the balance sheet date.

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65. The Company, in its 2006 Form 10-K represented the following with

respect to allowances for credit losses:

Credit Quality and Loan Impairment

The Company provides for incurred losses on loans with an

allowance for loan losses. The allowance for loan losses is a valuation

allowance established to provide for estimated incurred credit losses in

the portfolio of loans held for investment as of the balance sheet date.

The allowance for loan losses is evaluated on a periodic basis by

management and is based on a variety of factors, including historical

default and loss rates for similar loans originated by the Company

estimates of collateral value for individually evaluated loans and

evaluations of the effect of current economic and market conditions.

This evaluation is inherently subjective as it requires estimates that are

susceptible to significant revision as factors change or as more

information becomes available.

A loan is considered impaired when, based on current information

and events, it is probable that the Company will be unable to collect the

scheduled payments of principal or interest when due according to the

contractual terms of the loan agreement. The Company’s loan portfolio

is comprised primarily of large groups of homogeneous loans made to

consumers that are secured by residential real estate. The Company does

not evaluate individual homogenous loans for impairment. These loans

are generally placed on nonaccrual status when they become 90 days

delinquent. Loans in the Company’s warehouse lending and commercial

real estate lending portfolios are individually evaluated for impairment

on a regular basis.

66. A fundamental precept of GAAP is that impairment of financial

securities that is deemed to be other than temporary should be recorded as a charge

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against earnings. This impairment includes credit risk, where borrowers are not

expected to pay. FASB Statement of Financial Standards No. 115, Accounting for

Certain Investments in Debt and Equity Securities, ¶16, states in part:

For individual securities classified as either available-for-sale or held-to-

maturity, an enterprise shall determine whether a decline in fair value

below the amortized cost basis is other than temporary. . . . For example,

if it is probable that the investor will be unable to collect all amounts due

according to the contractual terms of a debt security not impaired at

acquisition, an other-than-temporary impairment shall be considered to

have occurred. If the decline in fair value is judged to be other than

temporary, the cost basis of the individual security shall be written down

to fair value as a new cost basis and the amount of the write-down shall

be included in earnings (that is, accounted for as a realized loss).

67. Countrywide has now acknowledged that it must increase its estimate of

the allowance for loan losses. Countrywide’s failure to properly accrue and report is

loan loss reserves caused its financial statements to be materially misstated.

Ultimately, in the first quarter of 2007, Countrywide recorded a $429 million

impairment against retained interests and in the second quarter of 2007, Countrywide

has recorded some $417 million in impairment losses for Retained Interests and $293

million in a provision for losses on its Held-for-Investment portfolio. Countrywide

also transferred, during the first half of 2007, $1.9 billion of home equity and

mortgage loans which had been written down by $1.6 million for impairment from

loans held for sales to loans held for investment. Most of this occurred in the second

quarter 2007.

68. Due to these accounting improprieties, the Company presented its

financial results and statements in a manner which violated GAAP, including the

following fundamental accounting principles:

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(a) The principle that interim financial reporting should be based upon

the same accounting principles and practices used to prepare annual financial

statements was violated (APB No. 28, ¶10);

(b) The principle that financial reporting should provide information

that is useful to present and potential investors and creditors and other users in making

rational investment, credit and similar decisions was violated (FASB Statement of

Concepts No. 1, ¶34);

(c) The principle that financial reporting should provide information

about the economic resources of an enterprise, the claims to those resources, and

effects of transactions, events and circumstances that change resources and claims to

those resources was violated (FASB Statement of Concepts No. 1, ¶40);

(d) The principle that financial reporting should provide information

about how management of an enterprise has discharged its stewardship responsibility

to owners (stockholders) for the use of enterprise resources entrusted to it was

violated. To the extent that management offers securities of the enterprise to the

public, it voluntarily accepts wider responsibilities for accountability to prospective

investors and to the public in general (FASB Statement of Concepts No. 1, ¶50);

(e) The principle that financial reporting should provide information

about an enterprise’s financial performance during a period was violated. Investors

and creditors often use information about the past to help in assessing the prospects of

an enterprise. Thus, although investment and credit decisions reflect investors’

expectations about future enterprise performance, those expectations are commonly

based at least partly on evaluations of past enterprise performance (FASB Statement

of Concepts No. 1, ¶42);

(f) The principle that financial reporting should be reliable in that it

represents what it purports to represent was violated. That information should be

reliable as well as relevant is a notion that is central to accounting (FASB Statement

of Concepts No. 2, ¶¶58-59);

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(g) The principle of completeness, which means that nothing is left out

of the information that may be necessary to insure that it validly represents underlying

events and conditions was violated (FASB Statement of Concepts No. 2, ¶79); and

(h) The principle that conservatism be used as a prudent reaction to

uncertainty to try to ensure that uncertainties and risks inherent in business situations

are adequately considered was violated. The best way to avoid injury to investors is to

try to ensure that what is reported represents what it purports to represent (FASB

Statement of Concepts No. 2, ¶¶95, 97).

69. Further, the undisclosed adverse information concealed by defendants

during the Class Period is the type of information which, because of SEC regulations,

regulations of the national stock exchanges and customary business practice, is

expected by investors and securities analysts to be disclosed and is known by

corporate officials and their legal and financial advisors to be the type of information

which is expected to be and must be disclosed. INSIDER TRADING

70. The Individual Defendants’ insider trading while Countrywide’s stock

price was artificially inflated due to their false statements was large by any measure: NAME DATES OF SALES SHARES SOLD PROCEEDS MOZILO 2/3/06 – 7/23/07 6,078,963 $232,078,180 KURLAND 2/3/06 – 10/9/06 4,363,772 $152,174,495 SAMBOL 2/2/06 – 7/19/07 728,625 $27,874,006 GARCIA 9/25/06 – 6/21/07 716,625 $28,411,206 TOTAL 11,887,985 $440,537,887

LOSS CAUSATION/ECONOMIC LOSS

71. By misrepresenting Countrywide’s financial statements, the defendants

presented a misleading picture of its business and prospects. Thus, instead of

truthfully disclosing during the Class Period that Countrywide’s business was not as

healthy as represented, Countrywide falsely overstated its net income.

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72. These claims of profitability caused and maintained the artificial inflation

in Countrywide’s stock price throughout the Class Period and until the truth was

revealed to the market.

73. Defendants’ false and misleading statements had the intended effect and

caused Countrywide stock to trade at artificially inflated levels throughout the Class

Period, reaching as high as $44.94 per share.

74. On July 24, 2007, defendants were forced to publicly disclose that

Countrywide was recording hundreds of millions of dollars of impaired losses in

addition to those recorded in the first quarter of 2007, causing its stock to drop to

$30.50 per share. Later on August 9, 2007, upon the filing of the Form 10-Q,

Countrywide’s stock dropped to $24.71 and then, as the market began to appreciate

the extent of Countrywide’s problems, the stock dropped to below $20 per share.

75. As a direct result of defendants’ admissions and the public revelations

regarding the truth about Countrywide’s overstatement of income and its actual

business prospects going forward, Countrywide’s stock price plummeted 10% on July

24, 2007 to $30.50 per share, a decline of $3.56 per share and then to below $20 per

share by the following week. These drops removed the inflation from Countrywide’s

stock price, causing real economic loss to investors who had purchased the stock

during the Class Period. COUNT I

For Violation of §10(b) of the 1934 Act and Rule 10b-5 Against All Defendants

76. Plaintiff incorporates ¶¶1-75 by reference.

77. During the Class Period, defendants disseminated or approved the false

statements specified above, which they knew or deliberately disregarded were

misleading in that they contained misrepresentations and failed to disclose material

facts necessary in order to make the statements made, in light of the circumstances

under which they were made, not misleading.

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78. Defendants violated §10(b) of the 1934 Act and Rule 10b-5 in that they:

(a) employed devices, schemes and artifices to defraud;

(b) made untrue statements of material facts or omitted to state

material facts necessary in order to make the statements made, in light of the

circumstances under which they were made, not misleading; or

(c) engaged in acts, practices and a course of business that operated as

a fraud or deceit upon plaintiff and others similarly situated in connection with their

purchases of Countrywide common stock during the Class Period.

79. Plaintiff and the Class have suffered damages in that, in reliance on the

integrity of the market, they paid artificially inflated prices for Countrywide common

stock. Plaintiff and the Class would not have purchased Countrywide common stock

at the prices they paid, or at all, if they had been aware that the market prices had been

artificially and falsely inflated by defendants’ misleading statements. COUNT II

For Violation of §20(a) of the 1934 Act Against All Defendants

80. Plaintiff incorporates ¶¶1-79 by reference.

81. The Individual Defendants acted as controlling persons of Countrywide

within the meaning of §20(a) of the 1934 Act. By reason of their positions with the

Company, and their ownership of Countrywide stock, the Individual Defendants had

the power and authority to cause Countrywide to engage in the wrongful conduct

complained of herein. Countrywide controlled the Individual Defendants and all of its

employees. By reason of such conduct, defendants are liable pursuant to §20(a) of the

1934 Act. CLASS ACTION ALLEGATIONS

82. Plaintiff brings this action as a class action pursuant to Rule 23 of the

Federal Rules of Civil Procedure on behalf of all persons who purchased or otherwise

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acquired Countrywide common stock during the Class Period (the “Class”). Excluded

from the Class are defendants.

83. The members of the Class are so numerous that joinder of all members is

impracticable. The disposition of their claims in a class action will provide substantial

benefits to the parties and the Court. Countrywide has over 593 million shares of

stock outstanding, owned by hundreds if not thousands of persons.

84. There is a well-defined community of interest in the questions of law and

fact involved in this case. Questions of law and fact common to the members of the

Class which predominate over questions which may affect individual Class members

include:

(a) whether the 1934 Act was violated by defendants;

(b) whether defendants omitted and/or misrepresented material facts;

(c) whether defendants’ statements omitted material facts necessary to

make the statements made, in light of the circumstances under which they were made,

not misleading;

(d) whether defendants knew or deliberately disregarded that their

statements were false and misleading;

(e) whether the price of Countrywide’s common stock was artificially

inflated; and

(f) the extent of damage sustained by Class members and the

appropriate measure of damages.

85. Plaintiff’s claims are typical of those of the Class because plaintiff and

the Class sustained damages from defendants’ wrongful conduct.

86. Plaintiff will adequately protect the interests of the Class and has retained

counsel who are experienced in class action securities litigation. Plaintiff has no

interests which conflict with those of the Class.

87. A class action is superior to other available methods for the fair and

efficient adjudication of this controversy.

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PRAYER FOR RELIEF

WHEREFORE, plaintiff prays for judgment as follows:

A. Declaring this action to be a proper class action pursuant to Fed. R. Civ.

P. 23;

B. Awarding plaintiff and the members of the Class damages, including

interest;

C. Awarding plaintiff reasonable costs and attorneys’ fees; and

D. Awarding such equitable/injunctive or other relief as the Court may deem

just and proper. JURY DEMAND

Plaintiff demands a trial by jury. DATED: August 20, 2007 LERACH COUGHLIN STOIA GELLER

RUDMAN & ROBBINS LLP DARREN J. ROBBINS DAVID C. WALTON CATHERINE J. KOWALEWSKI

DAVID C. WALTON

655 West Broadway, Suite 1900 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax)

LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP RANDI D. BANDMAN 9601 Wilshire Blvd., Suite 510 Los Angeles, CA 90210 Telephone: 310/859-3100 310/278-2148 (fax)

Attorneys for Plaintiff