EARNINGS : Countrywide Credit Sees Its Profit Triple
Countrywide Credit Industries Inc., the Pasadena lender that’s been cashing in on a huge nationwide boom in mortgage refinancings, said Wednesday that a record volume of business more than tripled its first-quarter earnings.
The nation’s largest independent mortgage banker reported a profit of $29 million, or 81 cents a share, for the period ended May 31, compared to $9.1 million, or 36 cents a share, in the year-ago period.
Separately, the company proposed a 3-for-2 stock split subject to shareholders’ approval of an increase in common shares.
“The driving force behind our growth is an increase in market share in new loan originations” because of the firm’s reputation as a low-cost and efficient producer of mortgage loans, said Stanford Kurland, Countrywide’s chief operating officer. And with a near-record $4.5 billion in loans already in the pipeline, Kurland added, “we look for the upcoming quarter to be positive as well.”
Low interest rates also fueled Countrywide’s skyrocketing earnings in the first quarter. Early this year, fixed mortgage rates of less than 9% fueled a surge in mortgage refinancing by millions of homeowners eager to cut their monthly payments.
When consumers receive new home loans, the mortgage banker collects origination fees--usually 1% to 3% of the loan amount. Countrywide’s loan origination income surged 242% to $49.3 million in the quarter ended May 31 as its share of mortgage refinancings grew to 72% of all its loans from 44% in the same period in 1991.
But Countrywide’s other major source of revenue--fees for collecting mortgage payments on loans it has sold to financial institutions or other investors--has been growing more slowly than loan origination income. The fees, which range from 25 cents to 40 cents on every $100 in mortgage principal, generated an increase of 62% for Countrywide in the first quarter, over the same period in 1991.
What’s more, analysts say, the surge in mortgage originations and refinancings won’t last forever even if interest rates stay low.
“Refinancing will definitely drop in the remainder of the year,” said Bruce W. Harting, a vice president at Salomon Bros. brokerage house in New York.
Still, Harting and many investors remain upbeat about Countrywide’s future. They note that the Federal Reserve could stimulate mortgage activity by succumbing to election year pressure to lower interest rates again to encourage the real estate market.
In composite trading Wednesday on the New York Stock Exchange, Countrywide’s stock closed at $31.625, up 12.5 cents.
