June mortgage fundings by Countrywide Financial Corp. rose 4% from May, to $46 billion, and the home lender warned Monday of a softening housing market that has caused defaults to rise.
David Sambol, the Calabasas, Calif., company’s president and chief operating officer, said in a monthly release of operational results that June residential funding volume was strong despite heavier price competition.
“Market conditions became increasingly challenging throughout the second quarter of 2007,” Mr. Sambol said. “The housing market continues to soften, and delinquencies and defaults continue to rise. Additionally, interest rates, price competition in the residential lending markets, and secondary market volatility have all increased.”
Delinquencies rose 33 basis points from May and 116 basis points from a year earlier, to 4.77%. Foreclosures rose 6 basis points from May, to 0.96% of unpaid principal balances, but jumped 51 basis points from a year earlier.
The pipeline of loans in process fell 1.7% from May but rose 5.5% from a year earlier, to $70.7 billion.
Fred Cannon, an analyst at KBW Inc.’s Keefe, Bruyette & Woods Inc., wrote in a research note issued Monday that Countrywide’s alternative-A loans “have begun to move into foreclosure … and foreclosures have moved to the coastal areas in addition to the Midwest.” He expects the foreclosure rate “to continue to increase.”
Assets at Countrywide’s bank rose 3.4% from May, to $90 billion, and 7% from a year earlier.
Mr. Cannon wrote that in the first quarter the bank’s assets increased from securities holdings, as loan balances declined. (Countrywide did not disclose whether the growth in bank assets during June was from loans or securities.)
Countrywide’s funding of subprime loans fell dramatically in June: 55% from a year earlier, to $1.85 billion.
Subprime fundings made up 4.1% of its fundings, compared with 4.9% in May and 9.8% a year earlier.
Mr. Cannon wrote that correspondent originations continue to drive Countrywide’s production, accounting for 47% of June fundings, the highest contribution in four years.
Refinancings accounted for 54% of its originations, down from 58% in May but up from 51% a year earlier.
Fundings of adjustable-rate mortgages, including hybrid ARMs, fell 40% from a year earlier, to $12.6 billion, and made up 28% of total originations. Countrywide has ceased disclosing production volume for option ARMs, originations of which have been falling dramatically.
