Countrywide Financial, the largest U.S. home lender, is reporting a 33 percent drop in second-quarter net income. In addition, the California-based company's shares fell seven percent in morning trading on the New York Stock Exchange from Monday's close of $34.06.

A nationwide high foreclosure rate is just one of the many hurdles CEO Angelo R. Mozilo says Countrywide Financial is facing.

"Countrywide's results for the second quarter of 2007 reflected strength in our core loan production business, but were adversely impacted by continued weakness in the housing market," Mozilo said in a company released statement. "During the quarter, softening home prices continued to affect many areas of the country and delinquencies and defaults continued to rise across all mortgage product categories as a result. Due to these adverse conditions, the company incurred increased credit-related costs in the quarter, primarily related to its investments in prime home equity loans."

The lender earned $485.1 million in the second quarter, down from $722.2 million a year earlier.

"Looking to the second half of 2007, we expect difficult housing and mortgage market conditions to persist," Mozilo says. "Nonetheless, management remains optimistic about the long-term future growth prospects and profitability of the Company as industry consolidation continues."

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