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Countrywide Warns of Higher Credit Costs, Citing 'Piggyback' Loans.
CALABASAS, CA -- Countrywide Financial Corporation warned of "continued weakness" in the housing sector, warning investors that subprime credit problems have seeped into its prime home equity business as well.
Countrywide said the home equity deterioration largely involves piggy-back loans and lines of credit originated along with a first mortgage.
Countrywide took a $417 million impairment hit to its investments in "credit sensitive retained interests" on securitized loans. $388 million of that total represented impairment of residual securities backed by prime home equity loans, the company said, reflecting higher expected delinquency and loss rates.
On its held-for-investment portfolio, Countrywide raised its loss provision by $293 million in the second quarter. $181 million of the additional loss reserve related to prime home equity loans held by the company's bank.
Moreover, Chairman and CEO Angelo Mozilo said Countrywide expects "difficult housing and mortgage market conditions to persist" for the remainder of this year.
"During the quarter, softening home prices continued to affect many areas of the country and delinquencies and defaults continued to rise across all mortgage product categories as a result," Mr. Mozilo said during a conference call with investors and analysts.
On the bright side, Countrywide's loan production performance was the strongest since early in 2005, the company said.
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Source: HighBeam Research, Countrywide Warns of Higher Credit Costs, Citing 'Piggyback' Loans.