Countrywide Financial Corp., Calabasas, Calif., has reported that fourth-quarter earnings declined to $343 million ($0.56 per share) from $564 million ($0.94) in the fourth quarter of 2003 as a hedging loss took a bite out of the company's results.Overall, Countrywide said loan production volume totaled $95 billion in the fourth quarter, up 25% from the fourth quarter of last year. For the full year, loan production totaled 363 billion, down 17% from the record-breaking volume of 2003. The servicing portfolio grew to $838 billion, maintaining Countrywide's status as the largest originator and servicer of home loans. Fourth-quarter results were hurt by the loan servicing sector, where earnings declined by $255 million from those of the third quarter as a result of a flattening of the yield curve, a tightening of mortgage swap spreads, and a reduction in interest rate volatility. These factors diminished the value of hedging instruments. At the same time, flat mortgage rates meant that the value of the MSR asset did not increase as much as expected to offset the hedge losses. Countrywide was the most actively traded stock on the New York Stock Exchange Wednesday morning. It was down 4.2% ($1.61) at noon. The company can be found online at http://www.countrywide.com.

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