Countrywide Home Loans - Analysis

Countrywide Home Loans is one of the larges mortgage companies in the United States. The company was founded in 1969 and the business is focused primarily on real estate finance and related activities. For years the company has been consistently among the top mortgage companies in the country. Recently, the mortgage industry has been in turmoil. Adjustable rate mortgages and a poor housing market are a few of the factors that are causing the industry to be essential turned upside-down. Even when faced with today's poor housing market and a time when many mortgage companies have either closed their doors or filed for bankruptcy protection, Countrywide Home Loans has survived its own struggle to remain one of the most profitable mortgage companies in the United States. A majority of Countrywide's revenue is generated through two sources. One of those sources is through loan origination. Loan origination is the process in which the lender actually funds the loan. An example would be when a borrower decides to refinance or purchase a home, the borrower will work with the lender to approve their loan so the lender can close and fund the loan. The other source of revenue is through loan servicing. This process is after the loan has closed and the lender gets paid for collecting payments from borrowers. Not only will Countrywide service their own loans, but they also buy loans from other lenders and brokers to add to their portfolio. After reports of net income of over 2 billion dollars the past two years, Countrywide is not on pace to reach that target this year (http://finance.google.com/finance?q=NYSE:CFC). The company’s sluggish reports are more of a reflection of the current state of the market then of its own strategies. “Over the past few years, the most common type of sub prime loan has been adjustable-rate mortgages known as the 2/28 ARM. Since mid-July, five of the six biggest sub prime mortgage lenders stopped offering 2/28