March 20 (Bloomberg) -- Countrywide Financial Corp.'s ex- president and at least nine other former senior employees from the largest U.S. home lender are starting a mortgage company that will initially focus on buying loans.

Stanford Kurland, who left Calabasas, California-based Countrywide in 2006, is leading the management team of Private National Mortgage Acceptance Company LLC, or PennyMac, according to the company's Web site. It's buying loans ``from financial institutions seeking to reduce their mortgage exposures.''

PennyMac, also based in Calabasas, would join more than 70 funds, including ones run by Blackstone Group LP, Pacific Investment Management Co. and Goldman Sachs Group Inc., that have been established to snap up mortgage assets at cheap prices amid the largest drop in U.S. home prices on record. Billionaire Wilbur Ross has also been shopping.

``It's really a terrific time to design and build'' a mortgage company, K. Terrence Wakefield, a Milwaukee-based consultant to lenders, said in a telephone interview today. Kurland and his colleagues ``have the experience and contacts and relationships to be successful,'' he said.

Chairman and Chief Executive Officer Kurland, 55, confirmed today that the company and Web site exist. He declined to comment until next week. PennyMac's chief investment officer, David Spector, another Countrywide alumnus, was co-head of global residential mortgages for New York-based Morgan Stanley, the second-biggest U.S. securities firm.

Investing and Servicing

The company will focus on investing in and servicing residential mortgage assets on behalf of private investors, PennyMac's Web site says. Earlier, the site said the company was ``establishing a new investment, lending, and servicing model for the U.S. mortgage market'' with an ``initial focus'' on distressed-asset investing.

The market for U.S. home-loan securities without guarantees from government-linked entities such as Washington-based Fannie Mae collapsed last year, roiling the mortgage business and housing market. Issuance of such ``non-agency'' home-loan bonds plunged to $19 billion in the first two months of this year, compared with $1.2 trillion in 2006 and $707 billion in 2007, according to Inside MBS & ABS, an industry newsletter.

More than 225 independent mortgage companies have failed and more 100,000 associated jobs have been lost in the past two years, IndyMac Bancorp Chief Executive Officer Michael Perry said in a letter to shareholders last month. Pasadena, California- based IndyMac, the second-largest independent mortgage company after Countrywide, began as a Countrywide-controlled real estate investment trust in the 1980s.

`Element of Risk'

The mortgage market probably won't improve much until at least next year, so ``there's an element of risk'' for new lenders because start-up costs such as business plans and technology can reach ``tens of millions of dollars,'' Wakefield said. He helped run a lender that began as a joint venture between Salomon Brothers, now part of Citigroup Inc., and a Prudential Financial Inc. predecessor.

Kurland joined Countrywide in 1979 and was heir-apparent to CEO Angelo Mozilo before he left, Mozilo has said. The formation of Kurland's company was reported in an issue of the newsletter Asset-Backed Alert sent by e-mail today.

Countrywide, which has accepted a takeover offer from Bank of America Corp., lost $703.5 million in 2007, its first annual loss in more than 30 years. About 43 percent of Countrywide's $87 billion loan portfolio is in California, which had the nation's sharpest decline in home prices in the fourth quarter, according to the Office of Federal Housing Enterprise Oversight.

Stepping Down

In an October 2006 interview, Mozilo dismissed speculation that his former deputy left Countrywide a month earlier because Kurland thought the lender faced tough times. Kurland wanted the CEO post on terms the board couldn't accept, said Mozilo, who'd been scheduled to step down from the role at year-end.

Countrywide President David Sambol, who has been tapped to lead the combined Bank of America-Countrywide mortgage business, replaced Kurland.

Ross's WL Ross & Co. purchased the mortgage-servicing unit of bankrupt American Home Mortgage Investment Corp. last year for about $500 million and agreed this month to buy a similar H&R Block Inc. unit for $1.1 billion. Servicers manage outstanding mortgages, collecting payments and reworking problem loans.

Former Countrywide employees following Kurland to PennyMac include Farzad Abolfathi, who will be chief technology officer; James S. Furash, chief development officer; Michael L. Muir, chief capital markets officer; Mark P. Suter, chief portfolio strategy officer; David M. Walker, chief credit officer; Lior Ofir, director of technology; and Aratha M. Johnson, chief administrative officer.

Other Staff

Adal Bisharat, PennyMac's director of strategic planning, was the head of sales and production for the home-equity division of IndyMac's bank and also worked at Countrywide. Andrew Chang, chief fund administration officer, was a director at BlackRock Inc. and leader of its advisory services practice.

Home prices in 20 U.S. metropolitan areas dropped 8.9 percent in the fourth quarter from a year earlier, the most in at least 20 years, according to an S&P/Case-Shiller home-price index. The median sales price for existing homes nationwide fell 12.6 percent to $201,100 from July 2006 to January, according to the National Association of Realtors.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net.

Last Updated: March 20, 2008 16:53 EDT