Countrywide CEO Expects Higher Servicing Profits

Countrywide Financial Corp. CEO Angelo Mozilo has a long history of setting ambitious goals - and usually meeting them.

Speaking at a Piper Jaffray Financial Services Conference here last week, Mr. Mozilo said that Countrywide expects to achieve about a 30% lending market share, and he believes this is what it will take to be the dominant player in the industry. And he said's Countrywide's portfolio of mortgage servicing rights - the largest in the industry - is poised to produce growing profits.

Mr. Mozilo cited research showing that the dominant companies in mature industries almost always control between 25% and 35% of their market. And he believes that the mortgage industry in the coming years will approach that maturity as an industry.

He said Countrywide needs "about 30% to dominate."

He said Countrywide believes it can achieve that goal through organic growth. Countrywide has no current plans to acquire other companies or raise additional capital to reach its targets, he said.

In 2004, Countrywide originated $363 billion of mortgage loans for a market share just shy of 13%. And its servicing portfolio stood at $878 billion of home loans as of Feb. 28, he said. At the end of 2004, Countrywide had a servicing market share of 11%. At that time, Countrywide serviced 6.2 million loans, up 116% since 2000.

The weighted average note rate on the loans fell to 5.9%, down 1.9% from 2000.

"All of these factors bode well for the mortgage servicing rights portfolio as interest rates continue to rise. That's the macro-hedge in action," he said.

Meanwhile, long-term investors have not been disappointed by Countrywide's performance in recent years. Over the past five years, Countrywide has produced an annual return rate of 43.9%, making it the 11th best performing stock over that period, according to a Wall Street Journal analysis cited by Mr. Mozilo.

"These cycles take out the weaker players, which creates opportunities for a company like Countrywide."

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