160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! CALABASAS — Countrywide Financial Corp., the biggest independent U.S. mortgage bank, reported a 37 percent decline in first-quarter profits Thursday, as the company was forced to set aside money for bad-debt losses amid rising payment defaults from subprime borrowers. The Calabasas-based company said net income for the quarter ended March 31 was $434 million, or 72 cents per share, compared with a profit of $683.5 million, or $1.10 per share, in the year-ago period. Revenue shrank 15 percent to $2.41 billion from $2.84 billion. The results missed the expectation of analysts polled by Thomson Financial, who forecast a profit of 77 cents per share on $2.58 billion in revenue. Chief Executive Angelo R. Mozilo said in a statement that deteriorating credit in the “subprime” market — an area of mortgage banking catering to people with low credit scores — ate into profit. A spike in payment defaults among the riskiest types of borrowers and softer home prices forced the mortgage bank to prepare for more payment defaults. Bad credit cost Countrywide $132 million, or 14 cents per share, during the quarter, the company said. It set aside $81 million, anticipating losses from unpaid loans, and recorded a $119 million accounting charge because its stake in prime-quality home equity loans lost value. The company said its mortgage banking revenues from subprime loan production and investments fell about $400 million from the previous quarter. Countrywide said that while “turbulent mortgage conditions had an adverse impact” on the first quarter, the mortgage bank is optimistic about long-term prospects and expects its subprime loan production to be profitable in the future. “We believe that considerable risks remain in the mortgage marketplace,” Mozilo said during a conference call with Wall Street analysts. “While the balance of 2007 is expected to be challenging, we continue to believe that current market conditions will result in opportunities in the form of further industry consolidation.” Mozilo also said he does not think new laws are needed to address the subprime problems. Many of the weaker mortgage lenders are going out of business, leaving the market to the bigger players. Countrywide expects a “rationalization” of the credit concerns now scaring investors away from buying mortgage debt. The company adjusted its earnings per share guidance downward for the year to between $3.50 and $4.30. Earlier this year, the company had projected earnings per share to range from $3.80 to $4.80. More than two dozen subprime mortgage lenders have gone out of business or filed for bankruptcy protection this year amid a rise in defaults. Like other lenders stung by the subprime mortgage sector fallout, Countrywide has taken steps to cut back its exposure to future subprime losses. The company said it has cut out subprime loans for first-time homebuyers and for 100 percent financing, and cut back on reduced or no-documentation loans. Management said it expects its slice of subprime loan volume to fall to between 4 percent and 6 percent. It was 8 percent in the fourth quarter of 2006. Countrywide has also adjusted its underwriting guidelines for Alt-A loans, which are extended to borrowers with credit score of at least 700 who may not qualify for prime loans. While some mortgage lenders have said they are having trouble selling Alt-A loans, Countrywide said the troubles that led to the subprime mortgage sector crisis have not had a “material impact or spillover to date” on the company’s Alt-A or prime loan business. Countrywide shares closed up $1.20, or 3.18 percent, to $39.92 Thursday on the New York Stock Exchange.