Demand for mortgage loans is off from last year's pace at two major mortgage banks.

Countrywide Credit Industries Inc., the nation's second-largest mortgage bank, originated $3.1 billion of mortgages in April, 16% less than in April 1996. North American Mortgage Co., the 12th-largest originator, produced $761 million, for a 14% drop.

In the year through April, Pasadena, Calif.-based Countrywide originated $11.7 billion, a 17% decline. North American, Santa Rosa, Calif., originated $2.7 billion, down 17%.

Jonathan Gray, analyst with Sanford C. Bernstein & Co., said unfavorable first-quarter comparisons can be attributed to higher interest rates. He added that there was a refinance wave in the first quarter of 1996 that boosted loan volume for the two companies.

There are signs that the sluggish demand for loans will continue for both companies in the short term. Countrywide's pipeline of loans in process, a measure of approved loans that are likely to close in the next two months, was $5.2 billion at the end of April, 11% less than a year earlier.

North American, which re-ports monthly loan applications instead of approved loans, received $1.34 billion in applications in April, a 9% drop from last year.

But Thomas O'Donnell, an analyst with Smith Barney, said both companies could offset the decline in volume somewhat because of their expansion into the higher-growth and more profitable area of subprime lending, originating mortgages to customers with shabby credit histories.

Countrywide, which started to originate subprime and home equity loans in 1995, originated $96 million of B and C loans and $105 million of home equity loans in April, increases of 57% and 209%, respectively, from April 1996.

Mr. Gray said he is estimating that Countrywide will originate at least $2.2 billion in subprime and home equity loans this year. "Countrywide's penetration of that market has been impressive," he said.

North American originated $33 million in subprime loans last month.

The company began a subprime lending program in November. North American originates B and C loans with the help of Contifinancial, a leading nonconforming lender based in New York.

Seth Potter, an analyst with Sands Brothers & Co., expects the company to originate $70 million of subprime loans in the second quarter.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.