Countrywide, GMAC post big losses on mortgages

By Jonathan Stempel

NEW YORK (Reuters) - Countrywide Financial Corp CFC.N and GMAC LLC, which run the largest independent U.S. mortgage lenders, posted big first-quarter losses on Tuesday, hurt by credit problems as the nation's housing slump deepens.

Lenders are writing down mortgages that investors won't buy, and setting aside more money for losses on loans they made before housing prices began to tumble and defaults soared.

"The mortgage market has recovered slightly," said Paul Miller, an analyst at Friedman, Billings, Ramsey & Co. "But it is being overshadowed by credit losses that mortgage lenders have to take on loans they hold for investment."

Countrywide's quarterly loss was $893.1 million, or $1.60 per share, compared with a year-earlier profit of $434 million, or 72 cents per 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 lender has been in the red for three straight quarters, losing $2.52 billion. It agreed in January to be bought by Bank of America Corp (BAC.N) for $4 billion.

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

Private equity firm Cerberus Capital Management LP CBS.UL led a group that bought 51 percent of GMAC in 2006 from General Motors Corp (GM.N), 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."

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 largest U.S. mortgage lender in 2007, while ResCap was No. 8, according to the newsletter Inside Mortgage Finance.

In afternoon New York Stock Exchange trading, shares of Countrywide rose 12 cents to $5.95, Bank of America fell 29 cents to $37.89, and GM fell 57 cents to $21.37.

ResCap's 8.5 percent notes maturing in 2013 rose 1 cent to 49 cents on the dollar, yielding 27.4 percent, the bond pricing service Trace said. The level is considered "distressed."

BAD LOANS RISE, LENDING DROPS