Mortgage bank Countrywide Financial's ( CFC) fourth-quarter earnings fell short of Wall Street expectations, as the home lender sees another rough year ahead.

Countrywide's profit fell 2.7% to $621.6 million, or $1.01 a share. A year ago, the lender earned $1.03, or $639 million. Revenue fell 6% to $2.76 billion.

Analysts, according to Thomson Financial, were looking for earnings for $1.03 a share on revenue of $2.8 billion.

The California-based lender, which has been the subject of merger speculation involving Bank of America ( BAC), offered a sobering outlook for 2007. But says things should get better in 2008, as the housing market improves.

"Looking ahead to 2007, the industry will likely see continued pressure on margins as mortgage origination volumes decline and industry capacity is rationalized. We are also preparing for increased borrower delinquencies and continued credit deterioration,'' Countrywide says. "We believe, however, that 2007 will likely be the trough year of the current housing cycle and that 2008 should represent the beginning of upward trends associated with the next cycle."