Gold9472
07-26-2007, 08:30 AM
Countrywide profit sinks, defaults rise
http://news.yahoo.com/s/ap/20070724/ap_on_bi_ge/earns_countrywide_3
By ALEX VEIGA, AP Business Writer
Tue Jul 24, 6:20 PM ET
LOS ANGELES - Countrywide Financial Corp. said Tuesday its second-quarter profit shrank by nearly a third as softening home prices led to rising delinquencies and mortgage defaults among the most creditworthy borrowers.
The huge mortgage lender was forced to take impairment charges as it braced for the possibility of more people failing to make their mortgage payments.
Countrywide also said the market will become increasingly challenging as loan production subsides while lenders compete with one another more fiercely.
"This is a huge battleship and it's headed in the wrong direction," Chief Executive Angelo R. Mozilo said during a lengthy conference call with Wall Street analysts.
"Looking to the second half of 2007, we expect difficult housing and mortgage market conditions to persist," he said.
The news sent shares of the Calabasas-based company sliding $3.56, or 10.45 percent, to close at $30.50 on Tuesday.
The rise in credit-related costs were primarily related to the company's investments in prime home equity loans, Mozilo said.
Unlike subprime loans, which target borrowers with spotty credit histories, prime loans are typically available only to those with solid credit profiles who are considered less risky.
The rise in delinquencies and projections of more defaults led Countrywide to write down the value of securities backed by prime home-equity loans by $388 million in the quarter, reducing earnings by 40 cents per share.
It also recorded $25 million in charges on subprime residuals and other securities.
Countrywide reported second-quarter net income of $485 million, or 81 cents per share, in the quarter ended June 30, compared to $722 million, or $1.15 per share, in the year-ago period.
Analysts polled by Thomson Financial forecast profit of 95 cents per share.
Revenue shrank 15 percent to $2.55 billion from $3 billion. Analysts expected revenue of $2.86 billion.
The company cut its earnings projection for the year to between $2.70 and $3.30 per share, down from the $3.50 to $4.30 per share figure provided in April.
The company has set aside $292.9 million in preparation for borrowers missing payments on loans, with some $181 million of that amount for prime home equity loan losses. The reserve is more than four times the size of the reserve established in the second quarter of last year.
Countrywide issued $123.07 billion in home loans during the quarter, an 18.8 percent increase.
Barring a decline in mortgage interest rates, the company said it expects its loan production volume to decline.
Mozilo said the number of unsold homes must fall before the market can begin to recover. He doesn't expect the market will turn around until 2009 at the earliest.
The mortgage lending industry has been grappling with a spike in mortgage defaults and foreclosures as the housing market has cooled.
Many homebuyers have been forced into default or foreclosure because they haven't been able to sell their homes or end up owing more than their home is worth.
A jump in subprime mortgage defaults earlier this year forced several lenders out of business and prompted industrywide tightening of lending standards involving higher risk borrowers.
Like other lenders, Countrywide has also tightened its credit guidelines and stopped selling some types of adjustable rate loans.
Management said the company plans to undertake additional lending restrictions.
Countrywide said 4.56 percent of its prime home-equity loans were delinquent at the end of the quarter, up from 1.77 percent in the year-ago period. Some 23.71 percent of its subprime loans were delinquent, up from 15.33 percent.
Countrywide said mortgage delinquencies were particularly high in areas of central California, South Florida and the Midwest.
The company said the delinquencies were not due to borrowers struggling with mortgage interest rate resets, as many had expected.
Instead, the delinquencies have been largely due to people losing their jobs or similar factors, the company said. Those homeowners have been unable to refinance because the value on their home has fallen and the credit crunch has cut off other borrowing options.
"I do think it's important to observe what happens going forward," Mozilo said. "We are experiencing home price depreciation almost like never before, with the exception of the Great Depression."
For the first six months of the year, Countrywide's net income fell 35 percent to $919 million, or $1.53 per share, compared to $1.40 billion, or $2.25 per share in the same period last year.
Total revenue for the first six months fell 15 percent to $4.95 billion, compared to $5.83 billion for the first six months of 2006.
http://news.yahoo.com/s/ap/20070724/ap_on_bi_ge/earns_countrywide_3
By ALEX VEIGA, AP Business Writer
Tue Jul 24, 6:20 PM ET
LOS ANGELES - Countrywide Financial Corp. said Tuesday its second-quarter profit shrank by nearly a third as softening home prices led to rising delinquencies and mortgage defaults among the most creditworthy borrowers.
The huge mortgage lender was forced to take impairment charges as it braced for the possibility of more people failing to make their mortgage payments.
Countrywide also said the market will become increasingly challenging as loan production subsides while lenders compete with one another more fiercely.
"This is a huge battleship and it's headed in the wrong direction," Chief Executive Angelo R. Mozilo said during a lengthy conference call with Wall Street analysts.
"Looking to the second half of 2007, we expect difficult housing and mortgage market conditions to persist," he said.
The news sent shares of the Calabasas-based company sliding $3.56, or 10.45 percent, to close at $30.50 on Tuesday.
The rise in credit-related costs were primarily related to the company's investments in prime home equity loans, Mozilo said.
Unlike subprime loans, which target borrowers with spotty credit histories, prime loans are typically available only to those with solid credit profiles who are considered less risky.
The rise in delinquencies and projections of more defaults led Countrywide to write down the value of securities backed by prime home-equity loans by $388 million in the quarter, reducing earnings by 40 cents per share.
It also recorded $25 million in charges on subprime residuals and other securities.
Countrywide reported second-quarter net income of $485 million, or 81 cents per share, in the quarter ended June 30, compared to $722 million, or $1.15 per share, in the year-ago period.
Analysts polled by Thomson Financial forecast profit of 95 cents per share.
Revenue shrank 15 percent to $2.55 billion from $3 billion. Analysts expected revenue of $2.86 billion.
The company cut its earnings projection for the year to between $2.70 and $3.30 per share, down from the $3.50 to $4.30 per share figure provided in April.
The company has set aside $292.9 million in preparation for borrowers missing payments on loans, with some $181 million of that amount for prime home equity loan losses. The reserve is more than four times the size of the reserve established in the second quarter of last year.
Countrywide issued $123.07 billion in home loans during the quarter, an 18.8 percent increase.
Barring a decline in mortgage interest rates, the company said it expects its loan production volume to decline.
Mozilo said the number of unsold homes must fall before the market can begin to recover. He doesn't expect the market will turn around until 2009 at the earliest.
The mortgage lending industry has been grappling with a spike in mortgage defaults and foreclosures as the housing market has cooled.
Many homebuyers have been forced into default or foreclosure because they haven't been able to sell their homes or end up owing more than their home is worth.
A jump in subprime mortgage defaults earlier this year forced several lenders out of business and prompted industrywide tightening of lending standards involving higher risk borrowers.
Like other lenders, Countrywide has also tightened its credit guidelines and stopped selling some types of adjustable rate loans.
Management said the company plans to undertake additional lending restrictions.
Countrywide said 4.56 percent of its prime home-equity loans were delinquent at the end of the quarter, up from 1.77 percent in the year-ago period. Some 23.71 percent of its subprime loans were delinquent, up from 15.33 percent.
Countrywide said mortgage delinquencies were particularly high in areas of central California, South Florida and the Midwest.
The company said the delinquencies were not due to borrowers struggling with mortgage interest rate resets, as many had expected.
Instead, the delinquencies have been largely due to people losing their jobs or similar factors, the company said. Those homeowners have been unable to refinance because the value on their home has fallen and the credit crunch has cut off other borrowing options.
"I do think it's important to observe what happens going forward," Mozilo said. "We are experiencing home price depreciation almost like never before, with the exception of the Great Depression."
For the first six months of the year, Countrywide's net income fell 35 percent to $919 million, or $1.53 per share, compared to $1.40 billion, or $2.25 per share in the same period last year.
Total revenue for the first six months fell 15 percent to $4.95 billion, compared to $5.83 billion for the first six months of 2006.