Countrywide Financial Corp, the US mortgage lender being acquired by Bank of America Corp, said the ratio of late payments on option adjustable-rate mortgages (ARM) increased nine-fold last year.
Countrywide on Dec. 31 had US$28.4 billion in option ARMs, which give borrowers choices of payment each month, including one that covers only part of the interest due. More than seven out of 10 Countrywide Option ARM borrowers chose that option, which pushes the loan balance higher each month, the company said in a regulatory filing on Feb. 29.
The worst US housing decline in more than two decades is worsening, with the S&P/Case-Shiller home-price index falling in December by the most on record. Repossessions of homes rose 90 percent to 45,327 in January from the same period a year earlier, said RealtyTrac Inc, a seller of foreclosure statistics.
Countrywide cited "the sudden deterioration in the housing market experienced in late 2007" for a US$704 million charge in the fourth quarter to cover estimated costs of its obligations to investors who bought the lender's home-equity lines of credit, the filing showed. When losses on those loans exceed specified levels, Countrywide is not reimbursed when borrowers make draws on the credit lines.
The company said payments on 5.4 percent of its option ARMs were at least 90 days past due on Dec. 31, up from 0.6 percent a year earlier.
Countrywide lost US$703.5 million last year, its first annual loss in more than 30 years. A call to the company's media relations office was not immediately returned.
About 43 percent of Countrywide's US$87 billion loan portfolio is in California, followed by 7 percent in Florida, the Feb. 29 filing showed.
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