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Countrywide Wants Servicing Share To Lag Behind Its Origination Volume

Never shy about publicizing its growth targets, Countrywide Financial Corp. now says it hopes to control nearly 30% of the home loan production market and 20% of the mortgage servicing market by 2010.

And if that seems unrealistic, Countrywide's chief financial officer pointed to the company's dramatic gains in market share over the last five years as evidence that Countrywide can attain its goals.

In 2005, Countrywide produced $491 billion of home loans, a single-company record for the mortgage industry. That was $99 billion more than the second biggest lender last year, Wells Fargo.

Countrywide's 2005 volume accounted for nearly 16% of the whole loan origination market.

By way of comparison, Countrywide's $62 billion in volume in 2000, five years earlier, accounted for 5.9% of the loan origination market. CFO Eric Sieriacki said that over the past five years, Countrywide's gain in market share accounts for 49% of the total gain achieved by the top 10 mortgage lenders.

The company's servicing market gains have been similarly impressive. In 2000, Countrywide serviced $285 billion of home loans, accounting for 5.6% of mortgage debt outstanding. At the end of 2005, Countrywide serviced more than $1.1 trillion, for a market share of 12.1%, he said.

In the servicing arena, Countrywide's growth accounts for 72% of the market share gain achieved by the top 10, Mr. Sieriacki said during a Piper Jaffray financial services conference here.

He said Countrywide benefits from having an origination market share that somewhat exceeds its servicing market share.

"In the event of a rally, you are very well positioned to take advantage of mortgages being in play," he said.

At the end of 2005, Countrywide capitalized its mortgage servicing rights at 1.29%, a level Mr. Sieriacki said was more conservative than other mega-servicers.

Mr. Sieriacki described Countrywide as "an optimizer in the mortgage space," linking homeowners with the investors who ultimately fund loans. "We seek to make every single dollar we can between those two counterparties," he said.

Mr. Sieriacki also noted that Countrywide's diversification program continues to produce dividends. In 1995, 96% of pretax earnings came from mortgage banking. By 2000, that figure had dropped to 80%. And in 2005, mortgage lending and servicing accounted for 59% of Countrywide's earnings, with banking accounting for 26% and capital markets, insurance and global businesses accounting for 15% of pretax earnings.

Countrywide is aiming to grow the asset base of its bank subsidiary to $250 billion by 2010. In 2005, the bank reached $73 billion of assets.

SNAPSHOT: Countrywide's Goals for 2010

Servicing Share Approaching 20%

Origination Share Approaching 30%

Bank Assets Approaching $250B

Source: Countrywide Financial Corp.

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