Countrywide Benefits from Servicing Performance

Thanks to a strong performance in its servicing business, Countrywide Financial Corp., the nation's largest lender, earned $722 million in the second quarter, a 27% gain compared to the same period a year ago.

Meanwhile, Residential Capital Corp., the parent of the GMAC Residential family of companies, earned $548 million in the second quarter, an 82% improvement from the same period last year.

Compared to the first quarter, earnings at Countrywide rose about 6%. A nationally chartered bank, a majority of CFC's income ($630 million) came from its mortgage banking operations. Its servicing business had pretax earnings of $279 million in the quarter, a 213% gain compared to 2Q 2005.

Its production business had pretax earnings of $325 million in the quarter, a 21% drop from the second quarter of last year.

At the end of June, Countrywide's servicing portfolio topped $1.162 trillion, a 27% gain from the same period a year ago.

Until Wells Fargo's recent acquisition of $140 billion in receivables from Washington Mutual, Countrywide was the nation's largest servicer. (With WaMu's loans, Wells now ranks first with $1.273 trillion.)

Sandler O'Neill issued a report on CFC, noting that its production margin may have bottomed. "The third quarter is typically the strongest quarter in the mortgage banking cycle," Sandler added.

At Residential Capital its performance was helped, in part, by a one-time gain.

The company attributed its strong showing to a $259 million windfall from the sale of its stake in a regional homebuilding company. Without the sale, its earnings fell 4%. ResCap's mortgage affiliates funded $47 billion in the second quarter, a 10% increase from 2Q of last year.

Earlier this year, Cerberus Capital Management and two partners bought 51% of GMAC. General Motors owns the balance. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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