Countrywide Financial Corp. boosted loan production in the first three months of the year but reported an $893 million net loss for the first quarter as charge-offs climbed and the company boosted loss provisions.

The Calabasas, Calif.-based lender earned $434 million in the same quarter a year ago, but has been in the red since posting a $1.2 billion net loss in the third quarter and a $422 million net loss in the fourth quarter of 2007.

Countrywide officials said the company boosted first-quarter loan originations by 6 percent from the previous quarter, to $73 billion, but provisions for credit losses on residential loans hit $1.5 billion, up from $925 million in the previous quarter and $158 million a year ago.

Countrywide said charge-offs totaled $606 million, compared with $283 million in the fourth quarter of 2007 and $39 million a year ago. Countrywide boosted reserves to credit losses by $1 billion, to $3.4 billion.

About 72 percent of mortgages funded during the quarter were refinance loans. Purchase loans totaled $20.7 billion, down 52 percent from a year ago.

Average daily applications were up 27 percent from the previous quarter, to $2.2 billion. The mortgage loan pipeline, or loans in process, was down 34 percent from a year ago, to 45,529.

Countrywide’s loan servicing portfolio grew 10 percent from a year ago, to $1.5 trillion, or about 9 million loans. Delinquencies in the servicing portfolio hit 9.27 percent as of March 31, up from 8.64 percent the previous quarter and 4.9 percent a year ago.

The percentage of seriously delinquent loans (more than 90 days) in the portfolio rose to 4.81 percent, up from 3.78 percent in the fourth quarter and 1.7 percent a year ago.

About 21 percent of subprime loans in the portfolio were seriously delinquent, up from 17.2 percent in the previous quarter and 7.8 percent a year ago. The percentage of seriously delinquent conventional first-lien loans also rose, to 3.2 percent, compared with 2.3 percent in the previous quarter and 0.8 percent a year ago.

Countrywide reported total nonperforming assets — bad loans plus foreclosed real estate — reached $4.6 billion, or 4.16 percent of assets, up from $3.3 billion and 2.9 percent of assets at the end of 2007.

The $505.2 million in foreclosed real estate on the books at the end of March represented a 28 percent increase from the previous quarter. Nonperforming loans grew 42 percent, to $4.1 billion.

Pre-tax losses in loan servicing rose to $818 million, up from $139 million in the fourth quarter, in part because lower interest rates and increases in prepayment speeds resulted in write-downs of expected cash flows.

Rising delinquencies and defaults and reduced secondary market demand for mortgages not backed by FHA, Fannie Mae or Freddie Mac have forced Countrywide to tighten underwriting standards.

At $12.1 billion, adjustable-rate mortgage loan fundings were down 70 percent during the first quarter compared to a year ago, and home-equity loan production fell 79 percent, to $2.2 billion. Government fundings, including loans eligible for purchase or guarantee by Fannie Mae and Freddie Mac, were up 188 percent from a year ago, to $10.2 billion. Countrywide funded no subprime loans during the quarter, compared with $7.9 billion a year ago.

In an effort to reduce expenses, the company has cut its workforce by 10 percent in the last year, to 50,549 at the end of March.

Countrywide agreed in January to be acquired by Bank of America, which has announced it will further tighten underwriting standards if the companies combine as planned in the third quarter. If regulators approve the deal, Bank of America says it also intends modify the terms of $40 billion in troubled mortgages in the next two years, or roughly 265,000 loans, to prevent foreclosures (see story).


What’s your opinion? Leave your comments below or send a letter to the editor.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Thank you for subscribing to Morning Headlines.
Back to top
Real estate news and analysis that gives you the inside track. Subscribe to Inman Select for 50% off.SUBSCRIBE NOW×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription