The devil is in the mortgage finance reform details

The devil is in the mortgage finance reform details

On the bumpy road to a common securitization platform

Housing shouldn’t look at any color but the color of money

People with bad credit and bad habits should be squeezed out of housing

Who is Nat Hardwick?

Former LandCastle Title CEO owns NASCAR team, rubs elbows with PGA pros
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Countrywide's Fourth Quarter: Ouch

(Update 1; adds discussion of non-performing assets) So much for that promise to return to profitability during Q4. Instead, the nation's largest lender posted its first annual loss in more than 30 years -- including a Q4 loss that the company had said a few months ago it would avoid. Countrywide Financial Corp. reported a $422 million loss for the fourth quarter on Tuesday, as losses continue to mount amid a burgeoning U.S. mortgage crisis. The loss amounted to $.79 per share, compared to net income of $622 million, or $1.01 per diluted share, for the fourth quarter of 2006. Bloomberg reported that the loss vastly outstripped analysts' expectations of $.28 per share. Subprime delinquencies above 30 percent Credit quality is clearly a problem across the entire servicing portfolio -- a telling trend for the rest of the mortgage industry. Total delinquencies reached 8.64 percent of outstanding loan balances in Q4, up from 7.12 percent one quarter earlier and 5.30 percent at the end of 2006. Severe delinquencies -- loans more than 90+ days in arrears -- reached 3.78 percent, up from 1.55 percent one year earlier. Subprime delinquencies reached above 30 percent, registering 33.64 percent at the end of December. The deterioration in credit quality wasn't just limited to subprime loans; every loan category is seeing fast-increasing delinquency activity, including traditional mortgages. Conventional first liens registered a total delinquency rate of 5.76 percent in Q4, up from 4.41 percent one quarter earlier. Severe delinquencies in the category jumped to 2.28 percent, up from less than one percent at the end of 2006. Severe delinquences in Countrywide's $28.1 billion option ARM portfolio -- which is largely held-for-investment -- jumped to 5.7 percent in Q4, almost doubling the rate recorded in the third quarter. Credit costs continue to bite big Countrywide said that it recorded a provision for credit losses of $924 million during Q4, compared to $937 million last quarter and $73 million in the fourth quarter of 2006. Loss reserves ballooned to $1.9 billion at year's end, net of charge-off activity, up from $1.2 billion in reserves at the end of the third quarter. Total non-performing assets reached $3.3 billion in the quarter, 2.9 percent of assets, nearly doubling reported NPAs of $1.7 billion and 1.6 percent of assets from just one quarter earlier. Of that $3.3 billion, Countrywide reported that $1.3 billion was covered by mortgage insurance or some other form of third-party credit enhancement. The mortgage lender also said that it wrote down $831 million in residual interests during the quarter, driven primarily by worsening performance in prime, junior-lien home equity securitizations. Fourth quarter's write-down compares to an impairment charge of $690 million from the third quarter. Continued dislocation in the capital markets led Countrywide to move $7.0 billion of non-agency loans into its held-for-investment portfolio during the fourth quarter, driving a loss of $394 million for the company as it marked the loans to market value. Despite the mounting losses, Countrywide shares rose 38 cents at the open of trading on Tuesday, a rise of more than 6 percent, to $6.33 -- still a wide spread below Bank of America's offer price for the troubled lender, reflecting investor concern that the final price is likely to be renegotiated. BofA's $4.1 billion offer amounts to roughly $7.00 per share. For more information, visit http://www.countrywide.com. Disclosure: The author held no positions in CFC when this story was originally published.

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