Focus Shifts to Credit as Lenders Look Back on First Quarter.

NEW YORK, NY -- It May not have been the best of times, but it certainly wasn't the worst of times either when big mortgage companies reported results for the first quarter.

None of the nation's biggest servicers saw the valuation of their mortgage servicing asset push them into the red during the first quarter. A fairly stable rate environment helped in that regard. According to Freddie Mac, the average 30-year mortgage rate was 6.16% in March, up just two basis points from 6.14% in December of last year.

But while rate stability helped, mortgage bankers couldn't escape the impact of turmoil in the subprime home loan industry. Many took charges against their residual interests in subprime assets that have been securitized or reported higher delinquencies on portfolio loans.

Countrywide Financial Corporation serviced 8.4 million mortgages, accounting for 13% of home loans outstanding at March 31, as the company continued to accrue market share in both origination and servicing.

Countrywide's chairman and CEO, Angelo Mozilo, said first-quarter performance suffered from charges related to subprime lending, higher loss reserves and asset valuation adjustments related to higher delinquencies, and softer housing markets.

Countrywide said its loan servicing sector lost $69 million in the first quarter, reflecting a downward valuation adjustment, and its impairment charges totaling $429 million against retained interests wiped out earnings from the servicing segment.

Like just about everyone else in the industry, Countrywide said it has changed policies and product guidelines to reduce its future exposure to deterioration in subprime credit quality.