Alas, the mortgage refinance boom couldn't last forever. "It's coming to an end," says Angelo R. Mozilo, chairman, CEO and president of Countrywide Financial Corporation (Calabasas, Calif.), speaking at a recent Lehman Brothers conference.
Yet Mozilo was sanguine about Countrywide's ongoing prospects in a steady-and-rising interest rate environment. Although mortgage market participants will no longer be able to count upon a customer stampede after each Federal Reserve announcement, there are still ways to achieve ongoing profitability - through diversification and technology. "Countrywide is well-positioned to perform in a post-refi market," says Mozilo.
One reason is that mortgage servicing rights become more valuable in a rising-rate environment, and thus can offset the top-line revenue decline from falling originations. Accordingly, diversified mortgage firms both originating and servicing loans are ready to weather a drought. "Countrywide's macro-hedge works as it is designed to work," says Mozilo. "Servicing earnings will increase dramatically post-refi boom."
Furthermore, Countrywide's growing banking business, which concentrates on first-lien home equity loans and in warehouse lending (financing the inventory of smaller mortgage banks and mortgage brokers) also supports consistent revenues during a period of rising interest rates.
From a technology standpoint, Countrywide has been making the required investments to stay competitive all along. "Production operations are well-structured to handle a downturn," says Mozilo. "Countrywide uses proprietary, state-of-the-art technologies to cost-effectively expedite the loan origination process, making Countrywide the preferred provider to many brokers and correspondents."
Also, Countrywide has extended its technology platform overseas, as part of its contribution into a joint venture with Barclays Bank (London). Countrywide's technology footprint includes CLUES, its automated underwriting system powered by MindBox (Greenbrae, Calif.); CAPES, its property valuation system; CWBC.com for mortgage brokers; Landsafe for title services; and Countrywide.com for consumers.
But don't look for Countrywide in the M&A roundup. "The acquisition process, from our perspective, is a big diversion," Mozilo says. "The strength of Countrywide and the reason we've been able to gain share continuously: We were not diverted by acquisitions."
Even as the trend towards industry consolidation continues, Mozilo prefers to acquire experienced salespeople rather than brands, bricks or mortar. The top ten originators make up 67 percent of the market, up from 23 percent just a decade ago, he says.