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California and the West

Lending Slumps at Countrywide

Mortgage production falls 22% in the third quarter but new loans pick up in September as interest rates drop.

October 12, 2006|E. Scott Reckard | Times Staff Writer

Countrywide Financial Corp. said Wednesday that its third-quarter mortgage production tumbled 22%, but applications for new loans rose in September as interest rates declined.

Calabasas-based Countrywide, the nation's largest mortgage firm, funded $114 billion in loans in July, August and September, down from a record $146 billion in the third quarter of 2005.

The company's shares fell 31 cents to $36.09.

Countrywide said business picked up in September, with average daily applications rising 7% over the previous month. The average interest on a conventional 30-year fixed-rate mortgage hit 6.8% in mid-July but was down to 6.3% by the end of last month, according to a survey by loan buyer Freddie Mac.

Countrywide's loan accounting, billing and collecting business continued to balloon, reaching $1.24 trillion in loans on Sept. 30, up 19% from a year earlier. The company sells most of the loans it makes but keeps the right to earn fees by handling this servicing business for the new owners -- typically buyers of mortgage-backed securities. The increase results from new loans being added to the previous years' mortgages faster than the old ones are being paid off.

The results are watched carefully in California, home to many lenders. Amid a downturn in business, sales of weaker firms and heightened regulatory scrutiny of riskier loans, several mortgage companies recently have announced layoffs. Countrywide said last month that it would cut its general and administrative staff by 5% to 10%, a move that would eliminate thousands of jobs.

On Tuesday, Irvine-based New Century Financial Corp., one of the largest sub-prime lenders to riskier borrowers, said it funded $15.8 billion in mortgages during the third quarter. That was down 5% from a record of $16.7 billion a year earlier.

New Century shares slipped 79 cents to $40.21.

Several banks and thrifts with major mortgage operations will report earnings next week, including Wells Fargo & Co. and Washington Mutual Inc. Countrywide's earnings are expected the following week, on Oct. 24.


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