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May 2, 2007
NEWS: Countrywide Loses in 1st Quarter
Countrywide Financial Corp., the
nation’s hugest independent mortgage lender,
announced last week that it had lost about 37%
of its first-quarter profits, after accounting
for funds lost to bad-debt write - offs.
Countrywide stated first-quarter net income of
$434 million, or 72 cents per share. Taken at
face value, that’s quite a bit of a downturn
from last year’s first-quarter profits of $683.5
million, or $1.10 per share. This time around,
revenue shrank 15 percent to $2.41 billion from
$2.84 billion. Countrywide’s performance fell
short of the 77 cents per share on $2.58 billion
forecast predicted by the analysts of Thomson
Financial.
Countrywide’s news is not surprising, given the
soaring default rates in the wake of the
subprime mortgage bust that began at the end of
last year. CEO Angelo R. Mozilo confirmed that
connection, citing the blanket deterioration of
credit by its higher-risk customers. Bad credit
managed to cost Countrywide a whopping $132
million, or 14 cents per share, this past
quarter.With defaults booming, and home prices
sagging, it makes sense that the lending
industry is feeling a direct hit. And the
experts say that there isn’t really an end in
sight.
Despite that, Countrywide reps say that the
company is looking optimistically towards their
second-quarter prospects. While it is true that
the subprime market is collapsing, it is also
taking many smaller lenders down with it, say
reps. That paves the way for the heavy hitters –
Countrywide being the weightiest – to step in
and work wonders.
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