AP
Countrywide loses $893 million in 1Q on rising loss reserve
Tuesday April 29, 5:16 pm ET
By Alex Veiga, AP Business Writer
Countrywide posts 1st-qtr loss of $893M as it takes $3.05B credit-related charges


LOS ANGELES (AP) -- Countrywide Financial Corp. said Tuesday it lost $893 million in the first quarter, as rising loan defaults amid a deepening housing downturn forced the nation's largest mortgage lender and servicer to sharply increase its provision for loan losses and book other credit-related charges.

The latest results marked the third consecutive quarterly loss for Countrywide, which reaped a windfall during the housing boom but has been struggling since last summer, despite predictions last fall by CEO Angelo Mozilo that his company would turn a profit in 2008.

The Calabasas, Calif.-based company, which agreed in January to sell itself to Bank of America Corp. for about $4 billion in stock, did not conduct an earnings conference call with analysts, citing the proposed sale.

The company said its loss amounted to $1.60 per share for the quarter ended March 31. A year earlier, it earned $434 million, or 72 cents per share.

Revenue plunged 72 percent to $679 million from $2.4 billion in the year-ago quarter.

Analysts polled by Thomson Financial, on average, forecast earnings of 2 cents per share on sales of $1.5 billion.

Countrywide shares rose 2 cents, less than a percent, to $5.85 Tuesday after falling as low as $5.63 earlier in the session. Its shares are down sharply from their 52-week high of $42.24.

The latest results reflected $3.05 billion in credit-related charges. That includes $1.5 billion set aside to cover losses on mortgage loans, up from $158 million in the year-ago period.

Countrywide also set aside $456 million to cover warranty claims, up from $42 million a year earlier. And it made a provision for $441 million for the impairment of certain loans types, including accelerated payoffs of home equity lines of credit.

Charge-offs, or loans written off as not being repaid, totaled $606 million during the quarter, compared with $39 million in the same quarter last year, the company said.

By the close of the quarter, the lender boosted its reserve for credit losses by $1 billion to $3.4 billion, the company said.

Countrywide said the increase in credit-related charges were driven by the expectation of worsening mortgage delinquencies, defaults and falling home values.

Countrywide borrowers increasingly missed payments during the quarter, with delinquencies in the company's mortgage servicing portfolio nearly doubling from the same quarter last year to 9.3 percent. About 4.8 percent of the delinquent loans were 90 days or more behind in payments, the company said.

Late payments among subprime loans made to borrowers with past credit problems surged during the quarter. Nearly 39 percent of Countrywide's subprime loans were delinquent, up from 19.6 percent a year earlier.

The widening slate of delinquent loans at Countrywide could pose a challenge for Bank of America, should its proposed takeover of Countrywide close later this year.

At a Federal Reserve public hearing in Los Angeles on Monday, Bank of America executives announced the Charlotte, N.C.-based company plans to modify at least $40 billion in problem loans from at least 265,000 borrowers over the next two years.

Countrywide had at least one bright spot in its latest results.

The lender's average daily mortgage applications jumped 27 percent from the fourth quarter to $2.2 billion.

And its loan production unit posted pretax earnings of $232 million during the quarter, up from $171 million a year earlier.

The unit's loan originations totaled $73 billion, compared with $117 billion in the year-ago period.

Countrywide posted a $1.2 billion loss in the third quarter last year, after which Mozilo forecast the company would return to profitability the next quarter and through 2008.

The executive's outlook missed by a long shot, as the company posted a loss of $422 million in fourth quarter.

Shareholders saw their stake in the company dwindle as Countrywide shares lost 80 percent of their value by the end of 2007. Shares had hit a five-year peak of $45.03 in February of that year.

Meanwhile, Mozilo, who co-founded Countrywide in 1969, was paid more than $22.1 million and cashed out $121.5 million in stock options last year.

While he ended up with a sharp pay cut versus 2006 and has vowed to give up some $37 million in severance pay once the Bank of America buyout is complete, Mozilo's stock option windfall has drawn criticism from shareholder groups and lawmakers. His stock trades also are under scrutiny by the Securities and Exchange Commission.

Countrywide Financial: http://www.countrywide.com