Thank goodness Countrywide Mortgage uses sophisticated new strategies to insulate them from a real estate down-turn.
Countrywide Posts 47 Pct Drop in Earnings
By Aleksandrs Rozens
NEW YORK (Reuters) - Countrywide Financial Corp. on Wednesday posted a 47 percent drop in quarterly earnings and cut its outlook as mortgage refinancings fell and interest rates climbed, sparking a broad sell-off in mortgage company stocks.
Results at Countrywide, the largest independent U.S. mortgage lender, reflected an industry-wide drop in business during the third quarter from last year when historically low interest rates spurred record demand for refinancings and loans to buy homes.
The tougher market conditions also prompted Countrywide to lower its earnings outlook.
"Overall lending is down from a year ago and less money is being made from the few loans being made," said David Olson, head of Wholesale Access, an industry consulting group based in Maryland. Olson estimated that mortgage lending would drop by about one-third this year from last year's levels.
Total refinancing volume at Countrywide plummeted 55 percent during the period, helping to sink total lending 27 percent to $92 billion.
"Mortgage banking earnings declined as refinance volumes retreated," Angelo Mozilo, Countrywide's chairman and chief executive, said in a statement.
A report on Wednesday published by the Mortgage Bankers Association, an industry trade group, said refinancings fell 2.2 percent from year-ago levels and accounted for less than half of all loan applications processed by lenders last week.
Countrywide told analysts on a call that profits were eroded by a shift in demand among home buyers to adjustable rate loans from fixed rate loans.
"Generally, fixed-rate loan products carry higher margins. Our product mix has shifted to more ARMs (adjustable rate mortgages)," Mozilo told analysts.
Adjustable rate mortgages -- attractive for first-time home buyers because they offer lower monthly payments initially -- accounted for 61 percent of all loans Countrywide processed in the third quarter. |
