Countrywide Financial Corp. boosted loan production in March by 5 percent compared to last year, while drastically slashing fundings of risky pay-option loans.

Countrywide’s total loan production of $43 billion for the month included $3.5 billion in pay-option loans, compared to $8.8 billion in March, 2006.

So far this year, Countrywide has funded $9.6 billion in pay-option loans, compared to $22 billion in the same period last year, the lender said in a Securities and Exchange Commission filing.

Refinanced loans accounted for 60 percent of total loan production, and 66 percent of the loans Countrywide funded in March carried fixed interest rates. Subprime loans accounted for 5 percent of Countrywide’s total mortgage loan originations in March 2007 and 7 percent for the year to date.

The number of loans pending foreclosure in Countrywide’s $1.4 trillion servicing portfolio was up sharply, however, from .47 percent in March 2006 to .69 percent last month. The servicing portfolio includes loans held for sale, loans held for investment, and loans serviced for others, including those under subservicing agreements.

As a percentage of unpaid principal balance, loans pending foreclosure in the servicing portfolio more than doubled, reaching .83 percent at the end of the month, compared to .44 percent at the same time last year.

Delinquencies as a percentage of unpaid principal balance in the servicing portfolio were up 89 basis points, to 4.07 percent, compared to last year.

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Send feedback or a letter to the editor to matt@inman.com.

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