Countrywide Financial Corp. today reported a 12 percent drop in mortgage loan fundings in October compared to the same month last year, as activity fell to $41 billion last month.

Despite a boost in activity from September, year-to-date funding volume, at $375 billion, is still 7 percent below the same period last year, the company said.

“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.”

The nation’s largest mortgage lender said pay-option-ARM loan funding for October was $4.3 billion, a drop of 49 percent from the $8.5 billion funded in October 2005. Year-to-date pay-option fundings came in at $58 billion, compared with $79 billion for the same period last year.

Nonprime loan fundings last month also declined from their year-ago level, falling from $3.9 billion to $3.3 billion, while home equity lending volume was flat at $3.6 billion.

The mortgage loan servicing portfolio continued its growth, reaching $1.26 trillion at the end of October, up 18 percent from the same time last year.

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