August 10, 2007 (LPAC)--Countrywide Financial Corp, the largest U.S. mortgage lender, said it is experiencing "unprecedented disruptions" in the credit markets, negatively impacting its financial condition. This credit crunch has forced it to hold on to more mortgage loans than expected -- at a significant markdown --, because it has been unable to sell them. Already about 70 mortgage lenders have ceased business operations or sought buyers in the past six months.

Countrywide, in a regulatory filing with the U.S. Securities and Exchange Commission, said it would hold, rather than sell, $1 billion more of subprime mortgage loans than it had intended, while marking down the value by 20%.

Delinquencies are rising not only on subprime and alt-a (so-called "liar loans"), but also on prime home equity loans. Countrywide said mortgage payments were at least 30 days late on 20% of the non-prime loans it serviced as of June 30, up from 17% three months ago. The delinquency rate on prime home equity loans jumped to 3.7% from 1.5% a year earlier.

Meanwhile, the largest U.S. savings and loan, and the third-biggest U.S. mortgage lender, Washington Mutual said liquidity in the subprime mortgage market had "diminished significantly," adding that subprime turmoil has "spread" into higher-quality loans.