Earnings Boost Countrywide Despite MSR Hit

Countrywide Financial Corp., Calabasas, Calif., which has reported taking a nearly $1 billion writedown to the value of its mortgage servicing rights in the first quarter, says those MSRs are poised to generate earnings when rates rise.In a conference call with investors and analysts, Countrywide chairman Angelo Mozilo said servicing rights will "provide a significant share of the earnings mix when rates ultimately rise." He also noted that the MSR asset is valued at $5.3 billion on Countrywide's books, a relatively small portion of the firm's $74 billion balance sheet. He said the intrinsic value of the MSR asset is "significantly higher" than the value recorded on the balance sheet because of the potential for ancillary income from cross-sales and other sources. Investors seemed to agree, focusing on the fact that Countrywide beat analyst expectations for first-quarter income and raised its guidance on income for the rest of the year. The company's stock rose almost 9% April 29 to close at $67.83, a 52-week high for the firm.