Oct. 11 (Bloomberg) -- Countrywide Financial Corp., the largest U.S. mortgage company, said late payments at its servicing unit rose, foreclosures doubled and new loans fell 44 percent as housing sales slowed.

Overdue loans as a percentage of unpaid principal increased to 5.85 percent in September from 4.04 percent a year earlier, the company said in a statement. Foreclosures climbed to 1.27 percent from 0.51 percent. Mortgages funded by the Calabasas, California-based company last month declined to $21 billion.

Countrywide's servicing business, which does billing and collections, serves as a barometer for current conditions in the mortgage industry. The company's report adds to evidence that the worst U.S. housing slump in 16 years is getting deeper. Nationwide foreclosures set a record in the second quarter, according to the Mortgage Bankers Association, and doubled in September from a year earlier, RealtyTrac Inc. reported today.

``The whole mortgage lending market is tightening very dramatically,'' Gary Gordon, an analyst in New York at Portales Partners. ``Home prices are falling, people have over-borrowed and employment growth is slowing. I'm convinced that we'll see that for the next three years.''

Countrywide fell 52 cents, or 2.8 percent, to $18.28 at 4 p.m. in New York Stock Exchange composite trading.

Late Payments

Delinquencies rose 19 percent in September from the preceding month, the company said, with about half the increase tied to the fact that there were four fewer business days than in August. Foreclosures gained 5.8 percent in September from August.

Countrywide's servicing portfolio of $1.46 trillion, or almost 15 percent of total U.S. home-loan debt, includes mortgages owned by other companies and investors, with Countrywide handling the paperwork and record-keeping.

``The company is continuing to take the necessary steps to assist borrowers with foreclosure avoidance and investors with loss mitigation,'' Countrywide President David Sambol said in the statement.

Total employment fell more than 4,900, with most of the dismissals affecting staff that handles new loans, said a report by Moshe Orenbuch at Credit Suisse Group. Countrywide is about halfway to the goal of 10,000 to 12,000 job cuts announced last month, he said in the report, which rates the shares ``outperform.'' The reductions, if fully completed, would equal about 20 percent of the workforce.

Countrywide's delinquency and foreclosure rates are likely to double over the next two years, Gordon said. He still rates Countrywide at ``buy'' because its shares are trading at such a low price relative to the company's net worth.

Countrywide Bank

The lender said 89 percent of production in September came through its own bank. That's almost triple year-earlier levels, when the company relied on independent mortgage brokers to originate most of its loans. Assets in Countrywide's bank topped $100 billion, aided by a record inflow of $2.7 billion in the month, the company said.

Countrywide obtained $12 billion in financing in September to help weather a decline in demand for mortgages and reduced access to the commercial paper market, where the company usually borrows money. Countrywide received a $2 billion investment in August from Bank of America Corp., the second-biggest U.S. bank, to ease a cash shortage.

The company's shares have lost 57 percent this year. North Carolina's state treasurer asked federal securities regulators to probe whether Countrywide Chief Executive Officer Angelo Mozilo illegally changed plans for share sales to avoid losses.

Advance Notice

Mozilo had disclosed his intention to sell shares in advance, under federal rules that let executives dispose of stock without being accused of insider trading. Mozilo repeatedly increased sales before the price fell, North Carolina's Richard Moore wrote in an Oct. 8 letter to the U.S. Securities and Exchange Commission released today.

``As one of many investors who have felt the painful losses in Countrywide stock, I am outraged at this manipulation of the system and this abuse of shareholders,'' Moore wrote. ``The timing of these sales and the changes to the trading plans raise serious questions about whether this is mere coincidence.''

Spokesmen for Countrywide didn't return phone calls and SEC spokesman John Nester declined to comment. The New York Times reported Moore's letter earlier today.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: October 11, 2007 16:42 EDT