Tuesday, January 29, 2008


It's important to remember that the subprime loans were just the first phase.

Countrywide Financial, the largest U.S. mortgage lender, Tuesday said more than one in three subprime mortgages were delinquent at year-end in the $1.48 billion portfolio of home loans it services.

The comments on loan delinqencies comes as the troubled mortgage lender reported a loss of $422 million, or 79 cents a share, for the fourth quarter, compared with a year-earlier profit of $622 million, or $1.01 per share.

Countrywidesaid borrowers were delinquent on 33.64 percent of subprime loans it serviced as of Dec. 31, up from 29.08 percent in September. It also said borrowers were at least 90 days late on payments on 17.25 percent of subprime mortgages.

The rate of late payments rose to 7.32 percent at year end from 5.76 percent on prime home equity loans, and to 5.76 percent from 4.41 percent on conventional first mortgages, Countrywide said. For all loans, the delinquency rate rose to 8.64 percent from 7.12 percent, it said.

I don't know what overlap there is between subprime and option ARMs - the former is a characteristic of the borrower and the latter is a type of loan - but Mozilo has lots of those.

It seems the CEO of America's No. 1 mortgage lender would have you believe the company is above reproach. But Calabasas (Calif.)-based Countrywide has been among the most aggressive underwriters of option ARMs. As of the end of last year, the dollar amount of option ARMs on its books leaped more than fivefold, to $26.1 billion, or 38% of its total mortgages held, vs. 11% in 2004. Three-quarters of the company's option ARM borrowers chose the cheapest mortgage payment, according to its latest earnings release -- meaning these loans could reset at much higher rates. Yet accounting rules let Countrywide book the full payment as revenue on its books right now.

That was in 2006.