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Countrywide Buys Assets as HomeBanc, Impac Halt Loans (Update1)
By Elizabeth Hester

Aug. 7 (Bloomberg) -- Countrywide Financial Corp. and CIT Group Inc. said they'll be able to ride out the mortgage industry's credit crunch as two more rivals, HomeBanc Corp. and Impac Mortgage Holdings Inc., curtailed new loans.

HomeBanc said it's selling assets to Countrywide after bankers cut off credit and left the Atlanta-based company unable to fund loans. Impac, based in Irvine, California, halted ``Alt- A'' loans and fired some of its staff. CIT, which disclosed plans last month to leave the mortgage business, said it has access to a cash cushion of almost $15 billion.

Bankers have cut off credit to home lenders as overdue payments rose to the highest level since 2002, according to the Mortgage Bankers Association. Markets where mortgages are bought and sold have almost shut down, leaving lenders short on cash. At least 70 have closed operations or sought buyers since the start of 2006, and now rivals are moving in to pick up the pieces.

``There's a huge amount of consolidation going on,'' said David Lykken, president of Austin, Texas-based mortgage consulting firm MBSD LLC. ``In markets like this, people look for conviction, and Countrywide is going to do well.''

Lykken predicted Countrywide may capture as much as 34 percent of the market as other lenders pull out.

Countrywide's stock rose $1.38, or 5.2 percent, to $28.13 and CIT fell for the 15th straight session, losing 43 cents or 1.3 percent to $33.95 in 12:47 p.m. New York Stock Exchange composite trading. Impac, which sold for $22 in June 2005, dropped 36 percent to $1.09 and HomeBanc shares, down 98 percent this year, traded at 10 cents each.

Halt at HomeBanc

HomeBanc couldn't borrow to finance mortgages as of Aug. 6 and doesn't expect to fund any pending or future loans, the company's statement said. It's selling assets from the retail mortgage unit including five branches to Countrywide, with a ``significant'' number of people keeping their jobs.

A day earlier, San Francisco-based Luminent Mortgage Capital Inc. said bankers were cutting back on credit and that markets where mortgages and related securities are sold to investors had ``seized up.'' Luminent suspended its dividend, canceled an earnings call and said it was searching for new sources of cash. The shares fell 81 percent to 85 cents today.

Impac said today it will suspend making Alt-A loans, an alternative for A-rated borrowers who fall just short of standards for regular prime mortgages. The company didn't say how many employees had lost their jobs. So far, Impac has met all margin calls and a sale of $1 billion of loans is scheduled to close in the next 30 days, said a company statement.

CIT Resources

CIT, the biggest independent U.S. commercial finance company, said its liquidity was bolstered by a sale in July of securities backed by student loans that raised $3 billion. New York-based CIT said last month it will quit the home-loan business after bigger-than-expected losses. The company said it's received ``a number of inquiries from possible buyers'' for the mortgage unit.

Countrywide has twice assured investors it has enough cash to cope with a credit crunch, and executives have said the lender may benefit as the industry's capacity shrinks. The company said yesterday it had access to $186.5 billion at midyear.

``Countrywide is continuing to leverage the opportunities that are arising from the consolidating market,'' said President David Sambol in a statement. Buying HomeBanc assets ``illustrates the low-cost, low-risk transaction strategy we are undertaking in this environment.''

To contact the reporter on this story: Elizabeth Hester in New York at ehester@bloomberg.net .

Last Updated: August 7, 2007 12:53 EDT
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