THE TIMES 100 : RISING FORTUNES : Pasadena Lender Thrives in Sluggish Housing Market : Low-cost refinancings put Countrywide Home Mortgage among the profit-growth leaders.

Housing market in the tank?

Don’t tell Countrywide Credit Industries Inc., better known to homeowners as Countrywide Home Mortgage Loans.

Sure, hardly anyone’s buying a house these days, given the parlous state of California’s economy.

But a lot of people are taking advantage of low interest rates by refinancing their homes.

And Pasadena-based Countrywide has come out of nowhere to land a huge chunk of that business; it lent an eye-popping $32 billion to homeowners last year. (That’s up from $4.5 billion in 1990.) It’s enough to make Countrywide the biggest home mortgage lender in the nation--bigger than the banks, bigger than the savings and loans.

And big enough to clock in at sixth place on The Times 100 list of companies with the fastest profit growth in 1992. Countrywide’s profit jumped 173%, to $123 million, during the calendar year 1992, as calculated by STAR Services, the San Francisco business research firm that compiled The Times 100. (The company actually reports results on a fiscal year that ended Feb. 28.)

It also landed among the top 100 in sales: a healthy $573 million, up 106%.

How has Countrywide done it? Like banks and thrifts, mortgage bankers make loans on homes and take an origination fee for their trouble. Unlike banks and thrifts, however, mortgage bankers don’t, of course, take in deposits, nor do they keep the loans they make. Instead, they sell them to investors and turn another profit.

Countrywide makes loans to homeowners from a network of small, unassuming offices staffed by salaried employees who don’t get the big commissions typical in the mortgage industry. By holding down costs this way, Countrywide can underprice its competitors’ origination fees and mortgage rates.

But the loan offices alone can’t generate $32 billion in business. So Countrywide has been aggressively buying up loans “wholesale” from other lenders too, elbowing its way into the market-share big leagues.

The company says it has been careful to buy only the loans most likely to be repaid by homeowners.

But that’s one nagging question about its rapid rise raised by nettled competitors: Is Countrywide buying so many loans that it is sweeping up the dross along with the good ones?

Another big question: What happens to all that business when rates rise and refinancing dries up?

All this is merely carping on the part of disgruntled competitors, Countrywide said. “I’ll match our default rates with anyone in the country,” said Angelo R. Mozilo, vice chairman and executive vice president.

Some stock analysts agree.

“Growth is a big risk,” said E. Gareth Plank, a stock analyst at Mabon Securities Corp.’s San Francisco office, “but the kind of controls they’re using in selecting those mortgages seems to be mitigating that risk a lot.”

Defaults on Countrywide’s mortgages, in fact, are going down, Plank said.

Countrywide started out in 1965 as a little mortgage bank run by David S. Loeb, chairman and president, and Mozilo. The two men have known each other since the early 1960s.

By the 1970s, the company was suffocating under the weight of the commissions paid its sales staff. In 1974, Loeb and Mozilo let everyone go and staffed the sales offices with salaried people.

There was a scrape in 1988 with the Belzberg family--Canadians known for corporate takeover forays in the 1980s. They bought 7% of the Countrywide’s stock and hinted that they might try to take over the entire company.

Now, though, things look pretty good, even if interest rates should rise and the freshet of refinancings dries up. That’s because the company has another business to fall back on: servicing mortgages for the investors who own them. Countrywide handles paperwork for those investors, issuing statements and collecting monthly payments. Last year, this business accounted for about a quarter of Countrywide’s profit.

Strategically, higher interest rates could be good for the company, Mozilo said. Even if mortgage rates go up a point or two, there will still be business out there, he said.