Countrywide's ( CFC) third-quarter earnings rose 27% from a year ago as the mortgage company's strategy of using a loan-servicing portfolio to fend off narrower lending spreads also helped offset insurance losses. Countrywide earned $633.9 million, or $1.03 a share, in the quarter, compared with $498.1 million, or 81 cents a share, a year ago. The latest quarter had a charge of 19 cents a share primarily related to losses in its insurance unit caused by Hurricane Katrina. Analysts had been forecasting earnings of $1.04 a share in the quarter. Countrywide's revenue, which includes profits earned from the sale of loans and securities, net interest income and money collected for administering existing mortgages, rose 29% from a year ago to $2.71 billion. Analysts had been forecasting revenue of $2.69 billion. Lending spreads narrowed across the banking industry in the third quarter due to the refusal of long-term interest rates to rise in step with fed funds. Countrywide also made less money on loans sold to third parties as investors worried long-term rates would eventually rise and crimp the loans' value. As a result, Countrywide's loan-producing unit earned $414 million before taxes in the third quarter, down from $497 million a year ago. The decline came despite a $54 billion increase in overall loan production and a $37 billion increase in loans sold. The unit's overall profit margin was half its level of a year ago. In Countrywide's servicing sector, fee revenue rose 38% from a year ago as the company added $262 billion in assets to the portfolio. The value of servicing rights tends to grow in a rising interest rate environment and Countrywide uses the business as a hedge to its production unit. Taken together, the banking and servicing units produced pretax earnings of $703 million, up from $496 million a year ago.