The ripples from last week's sudden collapse of one of the West Coast's biggest private-mortgage lenders are beginning to touch

Countrywide Financial

(CFC)

.

Countrywide confirmed Tuesday that it was one of the main lenders to Capitol Commerce, which closed up shop last Friday after underwriting about $3 billion in mortgages in July. But Countrywide said Capitol Commerce's sudden closing shouldn't have any "material impact" on its earnings.

Countrywide Chief Executive Officer Angelo Mozilo said the finance firm takes steps to make sure that all its short-term loans -- mortgage warehouse lines of credit -- are secured and backed with sufficient collateral in the event of a default.

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"We make sure every loan has been covered," said Mozilo. "The bottom line is we see no material impact on the company."

Countrywide is the nation's third-largest mortgage issuer and rode the wave of home refinancings the past few years to sharply higher profits. But another important line of business for Countrywide is providing short-term financing to smaller mortgage lenders like Capitol Commerce.

In the most recent quarter, Countrywide had $4.4 billion in mortgage warehouse lines of credit outstanding, an increase of $3.7 billion over the year-ago.

At one point, Countrywide had provided Capitol Commerce with a $500 million mortgage warehouse line of credit. But Mozilo said the amount outstanding is much less than that and "dwindling down each day." Mozilo said Countrywide had no advance notice that Capitol Commerce, which operated in a half-dozen western states, was shutting its doors after 17 years in business.

Speculation in the industry is that the sharp rise in mortgage rates and bond yields the past two months caught Capitol Commerce by surprise, though there's no definitive proof.

Mortgage lenders that guess wrong on rising rates can lose money fast, especially if they've locked themselves into low-yielding investments. The companies use the interest they earn on investments to help finance their lending operations.