Countrywide's Mortgage Woes Deepen

Wall Street Journal (03/03/08) P. A2; Hagerty, James R.
In its yearly filing with the Securities and Exchange Committee, Countrywide Financial Corp. reported a substantial jump in defaulted option adjustable-rate mortgages and steep losses tied to obligations on home-equity lines of credit. Countrywide reported a surge in option ARMs in its portfolio that are 90 days or more late to 5.4 percent in the fourth quarter of 2007 from 0.6 percent the prior year. The Calabasas, Calif.-based lender also disclosed that minimum payments on these option ARMs were made by 71 percent of borrowers, and income documentation before origination was required for just 20 percent of borrowers. Additionally, homes in hard-hit Florida and California account for 50 percent of the company's $87.04 billion mortgage portfolio. Meanwhile, the $704 million loss with regard to home-equity lines of credit was the result of an agreement stating that the lender would not be reimbursed right away or possibly ever if income from the outstanding loans does not meet obligations to securities investors.