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Countrywide Loan Volume Spurs Rally

January 12, 2006|From Reuters

Countrywide Financial Corp. sparked a rally among mortgage companies' shares Wednesday after the largest U.S. home-loan provider said December volume surged higher.

Shares also rose after the Mortgage Bankers Assn. said U.S. mortgage applications rose for the first time in five weeks, as interest rates fell to their lowest level since October.

Calabasas-based Countrywide said December residential mortgage lending totaled $44.1 billion, up 27% from a year earlier and up 4% from November.

Daily application activity rose 24% from a year earlier to $2.47 billion, and loans yet to be closed grew 25% to $59.7 billion.

For the year, Countrywide said it handled $491 billion of mortgages, more than any U.S. residential lender ever.

Countrywide shares rose $1.51, or 4.3%, to $37.04.

Chief Operating Officer Stanford Kurland said Countrywide benefited from continued "relatively low interest rates" throughout the year on longer-term borrowings.

Long-term rates have changed little since the Federal Reserve began raising short-term rates in June 2004. Short-term rates have risen 3.25 percentage points since that date.

Mike McMahon, a Sandler O'Neill & Partners analyst, estimated that Countrywide's production market share rose to 17% last year from 11.3% two years earlier.

"Countrywide's December production bucks the normal industry cycle in which volume tends to decline," McMahon wrote.

Countrywide also said its mortgage loan servicing portfolio rose 33% from a year earlier to $1.11 trillion.

Shares of several other mortgage specialists also rose.

Fannie Mae and Freddie Mac, the largest U.S. mortgage financiers, rose 3.2% and 2.2%, respectively. Meanwhile, Oakland-based Golden West Financial Corp. and Pasadena-based IndyMac Bancorp rose 2.8% and 1.5%, respectively.

Golden West, the No. 2 U.S. savings and loan, specializes in adjustable-rate mortgages. IndyMac offers adjustable-rate "option" loans that let borrowers choose how much to pay each month.

The average borrowing cost on 30-year fixed-rate mortgages fell to 6.08% for the week ended Friday from 6.15% a week earlier, the lowest since the week ended Oct. 21, the Mortgage Bankers Assn. said.

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