Countrywide Moving MSRs to Bank Unit

Countrywide Financial Corp. here is planning to transfer 70% of its mortgage servicing rights into its $92.8 billion federal savings bank by 2011.

It is part of a plan to more closely "integrate" Countrywide Home Loans (its mortgage banking company) with Countrywide Bank FSB, according to CFC chief financial officer Eric Sieracki. CHL has MSRs on $1.3 trillion of home loans as of Dec. 31, according to CFC's 2006 annual report.

The main objective of the integration is to stabilize the company's earnings, Mr. Sieracki told a Morgan Stanley conference, through the growth of the bank's mortgage investment portfolio.

Another objective is to reduce CFC's "dependence on unsecured public debt," the CFC executive managing director said, by relying more on Federal Home Loan Bank borrowings and deposits for financing.

Countrywide officials declined to discuss the integration plan with this newspaper. But CFC finances its MSR investments.

"Our long-term financing needs arise primarily from our investments in our mortgage portfolio, MSRs and retained interests," the CFC annual report says. MSRs also can have a stabilizing affect on earnings in a rising interest rate environment when loan production declines.

In 2006, Countrywide originated $463 billion in one-to-four family loans and Countrywide Bank handled 26% of the loan production. By 2011, Countrywide's goal is for the federal savings bank to handle 80% of originations.

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