Countrywide Financial Corp. CEO Angelo Mozilo outlined his expectations for the mortgage market over the next few years during an Oct. 24 conference call, and he indicated that he is particularly upbeat about how trends are shaping up for 2008.

"You know, beauty is in the eyes of the beholder here," Mozilo said, pointing out that data on new home construction suggests that there has been "a pretty hard landing" in the residential real estate market in 2006. He expects that "we will be through with this in the next few months," and that the industry will be "treading water" throughout 2007 as mortgage industry consolidation continues.

By 2008, surviving players will be positioned for "one hell of a year," he said.

"It will be a smaller industry by that time, less capacity… [and] reasonable margins. So I'm looking for 2008 to be the breakout year," Mozilo said.

Company officials also discussed recently released interagency guidance on nontraditional mortgages during the conference call, which followed the release of third-quarter results. Carlos Garcia, executive managing director of banking and insurance, said that his company has not made any philosophical changes as a result of the guidance and, as such, any impact on volumes remains uncertain.

"The issue on that is … out in the real world that these loans are performing," Mozilo said. He said that assumptions in the guidance that nontraditional loans remain in place for a full 30-year term are "flawed" since Countrywide's experience has been that many borrowers pay off those loans early and generally use them wisely.
"So far they have proven to be a very, very good product for both the bank and for the secondary market," Mozilo said.