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Thursday, Feb 2, 2023

Countrywide Quarterly Profit Falling Short

Countrywide Financial Corp. said Thursday its second-quarter profit may not meet investors’ expectations because the amount of loans that it retained in its own portfolio and didn’t sell to investors nearly doubled.

The Calabasas-based independent mortgage lender retained $15.7 billion in loans it produced in the quarter, compared with the $8.5 billion, an increase of 85 percent. It also held on to $1.8 billion in home-equity loans. The company said the loan retentions cut into its profits, eliminating a potential $150 million pre-tax gain.

“High funding volume during the quarter created significant economic value, not all of which will be reflected in second quarter earnings as a substantial portion of this production was retained in portfolio,” said Stanford L. Kurland, president and chief operating officer, in a statement.

The company re-affirmed its estimate for yearly income of $3.60 to $4.60 per share. Analysts forecast earnings for the full year of $4.20 per share and second-quarter profit of $1.06 per share.

The profit forecast appeared to assuage Wall Street, and with Countrywide shares up 0.5 percent to $38.80 in early afternoon trading Thursday.

Over a longer term, a significant gain in loan retention could spell future trouble for Countrywide if it signifies that investors who take the loans off the company’s books are getting skittish about exposure to the heated U.S. real estate market. That would crimp the company’s ability to originate new loans.

This was not an issue in the second-quarter, however, with the company reporting mortgage loan volume rose 21 percent to $120 billion, boosted by falling long-term interest rates. The company had $77 billion mortgage loans in process in June, up from $47.3 billion a year earlier.

The company’s adjustable-rate loan volume rose 38 percent from the year-earlier period to $67 billion. Countrywide’s total assets reached $66 billion at June 30, an increase of 141 percent from the prior year.


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