Fitch Eyes Countrywide, Citing MSR Risk

Fitch Ratings has placed the debt of Countrywide Financial Corp. on Rating Watch Negative, citing the risk of impairment to the company's balance sheet.Fitch said mortgage companies in general face an increasing risk of impairment, because falling rates can substantially reduce the value of assets such as mortgage servicing rights. The rating agency said Countrywide's MSR portfolio is particularly large in relation to equity. Countrywide, responding to the move, said it has demonstrated its ability to produce record earnings in a falling rate environment while effectively hedging the value of its MSRs. The servicing hedge produced a gain of $1.8 million in 2002, the company said. "Countrywide's management believes that the company is in the strongest financial position in its history and is well positioned for the future," said Angelo Mozilo, the company's chairman and chief executive officer. Most forecasts call for interest rates to increase this year, which would bolster the value of servicing. Fitch can be found online at http://www.fitchratings.com, and Countrywide can be found at http://www.countrywide.com.