News Analysis: Top Servicer's Reign Could Be Ending Soon.

CALABASAS, CA -- Make no mistake about it - Countrywide's days as the top banana of mortgage servicing are numbered.

Over the past six weeks Countrywide Financial Corp. has seen its loan applications dwindle, its access to commercial paper dry up and its stock price get hammered.

Here's the kicker: as loan production drops that means it will be harder for the company to replace "run-off" in its gargantuan $1.415 trillion servicing portfolio. It even may be forced to sell some of its servicing rights to raise cash.

CFC's problems started in earnest late this summer when an equities analyst at Merrill Lynch named Kenneth Bruce wrote a research report, calling the publicly traded CFC a "sell," suggesting if the industry's liquidity crisis got bad enough the almost-40-year-old company might have to seek the refuge of the bankruptcy courts. (Interestingly enough, Mr. Bruce used to work at CFC.)

Even though CFC founder, chairman and CEO Angelo Mozilo dismissed Mr. Bruce's comments, the damage was done. CFC's stock swooned and the company's ability to borrow from a network of bank lenders was severely damaged.

One investment banker close to the company told Mortgage Servicing News, "Angelo's fatal mistake was relying too heavily on banks for its loans."

Even though CFC is a holding company that sits atop a depository insured by the federal government, sources told Mortgage Servicing News that the company was indeed having serious liquidity problems this past summer - thanks, in part, to Mr. Bruce's comments.