Countrywide, GMAC Posts Big Losses on Mortgages


Countrywide Financial and GMAC, which run the largest independent U.S. mortgage lenders, on Tuesday posted big first-quarter losses, hurt by credit problems as the nation's housing slump deepens.

The loss for Countrywide was $893.1 million, or $1.60 per share, compared with a year-earlier profit of $434 million, or 72 cents a share. Analysts on average expected a loss of 12 cents per share, according to Reuters Estimates.

Countrywide took charges of more than $3 billion for write-downs and bad loans. Banking and mortgage operations lost money, and profit fell in insurance and capital markets.

The Calabasas, California-based company has lost money in three straight quarters, losing $2.52 billion. It agreed in January to be bought by Bank of America for about $4 billion.

GMAC's loss nearly doubled to $589 million from $305 million. Its Residential Capital mortgage unit lost $859 million, an improvement from last year's $910 million loss, but profit fell in GMAC's auto finance and insurance units.

Private equity firm Cerberus Capital Management led a group that bought 51 percent of GMAC in 2006 from General Motors , which owns the rest.

GMAC, based in Detroit, said it might not turn a profit until "well into" 2009, after saying in March that it might make money in 2008. It lost $2.33 billion in 2007.

"We've expected 2008 to be a challenging year, and that was certainly the case," Chief Financial Officer Robert Hull said. "We've experienced continued capital markets volatility, U.S. economic weakness and deteriorating consumer credit."

Lenders are writing down mortgages that investors won't buy, and setting aside more money for credit losses as housing prices tumble and borrowers struggle to stay current.

Home prices in 20 metropolitan areas fell 12.7 percent in February from a year earlier, as measured by the Standard & Poor's Case-Shiller home price index released Tuesday.

Countrywide was the nation's largest mortgage lender in 2007, while ResCap was eighth, according to the newsletter Inside Mortgage Finance.

In afternoon New York Stock Exchange trading, shares of Countrywide rose 11 cents to $5.94, Bank of America fell 45 cents to $37.73, and GM fell 55 cents to $21.39. ResCap debt prices rose, but remained at deeply "distressed" levels.

Bad Loans Rising

Countrywide said it had set aside $1.5 billion for bad loans in the quarter, 10 times as much as a year earlier, and wrote down another $1.5 billion for other securities and claims.

The lender said 9.27 percent of all home loan borrowers and 35.88 percent of "subprime" borrowers had fallen behind on payments, both nearly twice as many as a year earlier. Countrywide collects payments on $1.48 trillion of home loans.

Mortgage lending fell 36 percent to $73 billion, as Countrywide curtailed riskier loans. Adjustable-rate loan volume fell 70 percent, and subprime volume dropped to zero.

Bank of America spokesman Bob Stickler declined to discuss Countrywide's results, but said the merger remained on track to close in the third quarter.

The second-largest U.S. bank has said it expects to modify or work out at least $40 billion of troubled mortgage loans over two years to keep at least 265,000 borrowers in their homes. It will also drop the Countrywide name.

Hull said international operations weighed particularly on ResCap, which he said was laboring under "falling home prices in the U.S. and tight mortgage liquidity around the world."

Mortgage volume fell 44 percent to $20.9 billion. In the United States, originations fell 40 percent to $18.7 billion, while international lending slid 66 percent to $2.2 billion.

GMAC said it had ended the quarter with $18.6 billion of cash and liquidity. ResCap had $4.2 billion, but has $17 billion of debt coming due this year. GMAC said it might provide more funding, sell ResCap assets, or try to refinance the debt.

GM is scheduled to report quarterly results on Wednesday.