Countrywide Home Loans Inc. reported that its total loan production volume was $121 billion, up 21% from 2Q04. Pre-tax earnings in the Mortgage Banking segment were $526 million, versus $1 billion in the year-ago period. Additionally, Countrywide's servicing portfolio has grown by $238 billion, or 33% since June 2004, and now totals $964 billion.

In its preannouncement last Friday, Countrywide reported a 63% increase in its pipeline from the previous year to $77B as of 30 June 2005. The reported 63% rise in its pipeline from the previous year raised concerns of a supply overhang, according to Credit Suisse First Boston analysts.

CSFB examined Countrywide's issuance trends to determine the potential impact on the MBS basis of the mortgage originator's considerable pipeline jump. CSFB's analysis of Countrywide's product mix trends shows that any negative impact on the basis will probably be minimal considering the drop in Countrywide's agency fixed-rate issuance share to 36% from 43% in September 2004, and around 80% in mid-2003. This is more in-line with the 35% agency MBS share for the broader market. CSFB also noted that the agency MBS share in Countrywide's issuance has steadily declined since 2004.

"We believe that these concerns are potentially exaggerated," wrote analysts. Countrywide's current issuance mix implies that the Agency fixed-rate component of its pipeline is roughly $27 billion of $77 billion total.

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