Morgan Stanley has downgraded Countrywide Financial, the nation's largest residential originator, to "equal-weight" from "overweight."In a new research report, Morgan analyst Ken Posner notes that despite the downgrade, the investment banker "modestly" increased its price target on Countrywide to $81. At deadline time, the California-based mega-lender/servicer was trading at $68.90, down almost 4%. "With moderate upside and estimates in line with consensus, we no longer see a basis for overweighting the stock relative to the group," Mr. Posner writes. Morgan Stanley says Countrywide has increased its production of niche mortgage products and should perform adequately as long as a price war for loans does not develop. "The mortgage industry appears to be competing rationally, in line with our thesis, even as we head deeper into the refi bust," Mr. Posner says.

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