Countrywide's Servicing Grew 34%; Deals Eyed

Countrywide Credit Industries, Pasadena, Calif., continues to show steady growth in its servicing portfolio and expects to make "substantial" purchases of bulk servicing soon.

David Loeb, chairman, said the purchases are in the pipeline but would not be announced until contracts are signed.

February ended Countrywide's fiscal 1995, and the year showed loan production of $27.9 billion, down 46.8%. The servicing portfolio stood at $113.1 billion, a gain of 34% for the year.

"The portfolio continues to benefit from the higher interest rate environment as monthly prepayments remained at an annualized rate of less than 4%," he said.

Bulk purchases will continue to be part of the company's growth strategy, Mr. Loeb said. Countrywide is looking for servicing that would offer an unleveraged pretax yield of 13% to 14%, he said.

Just a year ago, prepayments at Countrywide were running at about 24%, but they have sunk steadily since the Fed began to push interest rates upward last February.

On the production side of the business, Mr. Loeb said, new marketing and business development efforts had led to a February increase in originations of 8% from the January level. The dollar volume of production was $1.65 billion.

"Average daily applications increased 8% versus January, contributing to a $259 million gain in the month-end pipeline, to $3.64 billion," Mr. Loeb said.

But he added that production remained unprofitable "on an industrywide basis" because of excess capacity. Despite acquisitions, he said, capacity has shrunk little because acquirers have tended to retain their targets' production capacity.

But now he points to a liquidation phase that should improve margins in the production side of the business. "In addition, a flattening yield curve should enhance the attractiveness of fixed-rate mortgages, a favorable trend for Countrywide."

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