Countrywide Praised For Low-Cost MSRs.(mortgage servicing portfolio )(Brief Article)(Statistical Data Included)

Continued strength in loan origination and a rapidly growing servicing portfolio make Countrywide Credit Industries an attractive stock to own, according to analyst Mike McMahon at Sandler O'Neill.

And a key to Countrywide's growth is its ability to "manufacture" servicing rights at below the cost of buying servicing rights on the open market, he said in a recent report on the firm.

And Countrywide's mortgage servicing portfolio "continues its long history of sequential monthly growth," the report said. At the end of May, Countrywide serviced $368 billion of home loans. That's an increase of 21.8% from a year earlier.

"Unlike almost all of its competitors, Countrywide's servicing portfolio has been grown almost exclusively internally," Mr. McMahon said.

Historically, Countrywide has been able to "manufacture" mortgage servicing rights through its production platform at a cost equal to about two-thirds of the market value it would pay to purchase servicing rights, based on Sandler O'Neill's calculations.

While economists had predicted that rates would edge up and refinancing would taper off, as Countrywide's May operating results show, ...