Countrywide Mortgage Reports on Sky-Rocketing Foreclosures

Foreclosures and delinquencies among home loans that Countrywide Financial Corp. services rose in July to their highest in at least several years, the largest mortgage lender said on Tuesday.
The company also said it made 14 percent fewer home loans in July than in June after tightening lending standards, while daily mortgage applications fell 15 percent to a nine-month low. It nevertheless added more than 1,100 workers as many smaller rivals curtailed lending or folded.

Countrywide said expected foreclosures as a percentage of unpaid principal rose to 1.04 percent from 0.46 percent a year earlier, and 0.96 percent in June. Delinquencies rose to 5.10 percent from 4.11 percent last July, and June’s 4.98 percent.

July’s totals are the highest that Calabasas, California-based Countrywide has reported in its monthly data reports since at least March 2002.

Overall July mortgage loan volume was $39.06 billion, down from June’s $45.26 billion but up 6 percent from July 2006. Nonprime loans such as bad credit home loans totaled $1.8 billion, down 3 percent from June and 46 percent from a year earlier.

“Our tighter lending guidelines (have) significantly curtailed total production,” Chief Operating Officer David Sambol said in a statement.

Still, Countrywide said it added 1,159 jobs in July, ending with 61,586 workers. It employed 54,655 people at year end.

Results reflected “continued deterioration of credit and declining originations,” wrote Bruce Harting, a Lehman Brothers Inc. analyst. “Though management has remained committed to its strategy of seeking to gain share in this market, we are surprised that they continue to grow headcount at such a rapid pace while business volumes are falling so significantly.”

Shares of Countrywide fell 82 cents, or 3.1 percent, to $25.79 in morning trading on the New York Stock Exchange.

Like many rivals, Countrywide has struggled with weakened credit quality and investor resistance to buying mortgage loans it makes.

Rising default rates have crimped even routine mortgage lending at many companies. Last Thursday, Countrywide said it faced “unprecedented disruptions” in the market to buy and sell home loans, and that the ultimate impact was unknown.

Chief Executive Angelo Mozilo said on July 24 he expects Countrywide to be one of five major mortgage lenders left after an industry shakeout. He also said the U.S. housing market was a “huge battleship” that might not turn around before 2009.

“You will have reduced competition (and) very substantial pent-up demand,” he said.