Countrywide Takes Impairment Hit

Countrywide Financial Corp., Calabasas, Calif., has reported net income of $485.1 million ($0.81 per share) for the second quarter, up from that of the first quarter but down 33% from $722.2 million ($1.15 per share) a year earlier due in part to $417 million of impairment charges.The company said the charges included $388 million on residual securities collateralized by prime home equity loans, stemming from accelerated delinquencies and higher estimates of future defaults and loss severities. However, pretax earnings by the mortgage production sector rose from $139 million in the first quarter to $439 million, chiefly as a result of improved gain-on-sale and net warehouse spread margins and lower expense rates, the company said. "Consolidated quarterly funding volume was the third-highest in our history, prime production margins were relatively stable, and subprime production margins substantially improved," said Angelo R. Mozilo, Countrywide's chairman and chief executive, adding that the sector's pretax profit was at the highest level since the first quarter of 2005. The servicing sector took $147 million in pretax losses, compared with $279 million in pretax earnings a year earlier, the company reported. Countrywide can be found online at http://www.countrywide.com.