Servicing Income Weakens at Countrywide
Analysts at Friedman Billings Ramsey still recommend the shares of Countrywide Financial Corp., but FBR lowered its earnings estimate and target share price in the wake of Countrywide's first-quarter financial performance.
Among the key points analysts Paul Miller, Annett Franke and Steve Stelmach made in their report was Countrywide's servicing income came in below expectations.
The servicing shortfall mainly reflected a $428 million writedown of subprime and home-equity line of credit residual interests. On the bright side, this writedown "should clear the book of higher-risk product going into next quarter," the analysts said in their report.
But they also noted that Countrywide valued its mortgage servicing asset at 1.78%, or 4.4 times the servicing fee, up from a multiple of 4.2 times in the prior quarter. FBR said the 4.4 multiple "is at the higher end" of servicing valuations, but this reflects Countrywide's shift toward more fixed-rate loans.
In addition, they noted that Countrywide continues to face a tough loan pricing market and higher nonperforming assets, as does much of the mortgage industry. Countrywide continues to gain market share despite the adversity, they noted. Pricing pressure eases, Countrywide "will be one of the winners in the mortgage market." (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com