Angelo R. Mozilo has endured in the notoriously cyclical world of mortgage banking.

Now that Dime Bancorp is buying North American Mortgage Co., Countrywide Credit Industries Inc. is once again without a major independent rival.

"I think I've seen this cycle three or four times," said Mr. Mozilo, Countrywide vice chairman and co-founder. He added that history would probably repeat itself and other mortgage companies are likely to go public as well, partly to fill the void.

In a wide-ranging interview, Mr. Mozilo discussed the difficulty his competitors have faced in matching Countrywide's success as a public company, the increased challenge he faces lately from bank-owned competitors, and the industry's recent forays into subprime lending.

Mr. Mozilo said some lenders are apt to think: "There's Countrywide. All I have to do is say is I'm different, I'm better, and hope the Street will buy the story."

Easier said than done. Countrywide, based in Calabasas, Calif., is the second-largest originator of mortgages and third-largest servicer. Its stock has risen 156% since the beginning of 1995, outpacing the 105% gain of Standard & Poor's 500 index. Countrywide became a member of the benchmark index last month.

There are some other publicly traded lenders, but they differ drastically from Countrywide.

Resource Bancshares Mortgage Group, the 11th-largest lender, is buying a subprime lender, Walsh Holding Co., whose owners will control nearly half of Resource.

HomeSide Inc., the nation's fifth-largest originator and seventh-largest servicer, went public this year. But two venture capital firms and two banks-BankBoston Corp. and Barnett Banks Inc.-own most of HomeSide.

Mr. Mozilo said he thinks other banks may be reluctant to start a HomeSide-like structure but added that bank-owned mortgage companies clearly are looking for a change.

Commercial banks went on a mortgage company buying binge in 1993 and 1994. But for some banks, the deals have not generated the anticipated cross-selling opportunities, and mortgage banking is not as profitable as other businesses.

"There is a very good possibility we'll see banks looking for other ways to achieve greater value from their mortgage banking operations," Mr. Mozilo said.

Some banks might follow the lead of Fleet Financial Group and spin off their mortgage units, Mr. Mozilo said. Fleet publicly sold part of its mortgage unit in 1992 but bought back the shares in 1995.

There aren't many publicly traded mortgage companies because mortgage banking is difficult for many to understand.

"I've been doing this for 40 years, and my wife still thinks I'm a teller," Mr. Mozilo quipped.

Many investors have a simple rule for mortgage companies. When interest rates go down, lenders' stocks go up because they will do more business. When interest rates rise, the stocks fall because origination volume will decline.

But that formula is flawed for companies like Countrywide, which has a servicing portfolio totaling $165.5 billion, because higher rates increase the value of servicing rights.

Investors must try to understand how and why mortgage lenders buy derivatives to hedge their servicing portfolios. And the accounting rules for mortgage servicing are cumbersome.

"The industry was a lot simpler 10 years ago than it is today. I don't think investors will ever understand it in totality," Mr. Mozilo said.

In the mid-1980s, a company with a servicing portfolio larger than $10 billion was a behemoth. Now companies with portfolios of that size are questioned about their commitment to the business.

Ten years ago Lomas Financial Corp. was the industry giant that Countrywide and others chased. Countrywide placed an ad saying "Watch out Lomas, here we come," when it hit the $100 million mark in servicing.

Now Lomas is out of the mortgage business, having gone through bankruptcy twice. Several other publicly traded mortgage companies encountered financial problems after going public.

What went wrong?

Mr. Mozilo said going public revealed some mortgage companies' financial difficulties.

"These companies were never what they were perceived to be to start with. The expectations were much too high," Mr. Mozilo said. In some cases, management lost its edge after getting rich from bringing the companies public, he said.

Might the same thing be said about the founders of the many subprime mortgage companies that have gone public in the last two years?

Mr. Mozilo said the real problem for the subprime companies is competition rather than complacency. A number of major players, Countrywide included, have entered this arena, and as a result, subprime lenders may have to resort to doing business with customers with increasingly weaker credit histories, he said.

"The more profound issue is the substance of their business. The margins have narrowed, and there are only a certain amount of legitimate B and C loans out there," Mr. Mozilo said.

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