Countrywide, WaMu say pressured by mortgage market
By Jonathan Stempel
NEW YORK, Aug 9 (Reuters) - Two of the largest U.S. providers of home loans, Countrywide Financial Corp CFC.N and Washington Mutual Inc (WM.N), on Thursday said difficult mortgage market conditions are likely to hurt operations in the near term.
Countrywide, the largest mortgage lender, said it faces "unprecedented disruptions" in the debt market and secondary market for mortgages. It said these "could have an adverse impact on the company's earnings and financial condition, particularly in the short-term."
Washington Mutual, the largest U.S. savings and loan, said liquidity in the market for less-than-prime home loans and securities backed by the loans has "diminished significantly." It said that while this persists, its ability to raise liquidity by selling home loans will be "adversely affected."
The lenders offered their assessments in quarterly reports filed with the U.S. Securities and Exchange Commission.
Many U.S. mortgage lenders have struggled as housing price appreciation slowed, borrowing costs rose, defaults soared and investors grew wary of holding all but the safest home loans. Dozens of weaker lenders have been sold, quit the industry, or gone bankrupt this year.
Calabasas, California-based Countrywide last month posted a 33 percent decline in second-quarter profit and slashed its full-year earnings outlook. It said delinquencies had risen, especially among people who took out home equity loans.
In its quarterly report, Countrywide said payments were at least 30 days late on 20.15 percent of "nonprime" loans it serviced, up from 16.67 percent three months earlier and 14.41 percent a year earlier. The rate on "prime" home equity loans rose to 3.70 percent from 2.96 percent in March and 1.51 percent in June 2006.
For all loans, the delinquency rate rose to 4.98 percent from 4.29 percent in March, and 3.92 percent in June 2006.
Countrywide said it believes it has "adequate" near-term funding liquidity to combat the market environment, but that the situation "is rapidly evolving and the potential impact on the company is unknown."
It repeated, though, that it expects to benefit as weaker rivals merge or quit the industry. On Tuesday, Countrywide agreed to buy five loan branches from HomeBanc Corp HMBN.PK, an Atlanta lender that is exiting the mortgage business.
Seattle-based Washington Mutual said the disruption in the subprime secondary mortgage market in the first half has "spread into markets for all other nonconforming residential mortgages." It said it has been "impacted," but remains "well-capitalized and its capital position is diversified."
Washington Mutual's home loans unit lost $37 million in the second quarter as loan volume fell 24 percent. The thrift has subprime home loan volume by more than two-thirds, and tightened lending standards.
Countrywide shares closed down 45 cents, or 1.6 percent, at $28.66 on Thursday, and have fallen 32 percent this year. Washington Mutual shares closed down 79 cents, or 2.1 percent, at $36.76, and have fallen 19 percent this year.
