The Company utilizes a variety of derivative financial instruments to manage interest-rate risk. These instruments include interest rate floors, MBS mandatory forward sale and purchase commitments, options to sell or buy MBS, treasury futures and interest rate futures, interest rate caps, Capped Swaps, Swaptions, interest rate futures and interest rate swaps. These instruments involve, to varying degrees, elements of interest-rate and credit risk. In addition, the Company manages foreign currency exchange rate risk with foreign currency swaps.

  The Company has potential exposure to credit loss in the event of nonperformance by the counterparties to the various over-the-counter instruments. The Company manages this credit risk by selecting only well established, financially strong counterparties, spreading the credit risk amongst many such counterparties, and by placing contractual limits on the amount of unsecured credit risk from any one counterparty. The Company's exposure to credit risk in the event of default by a counterparty is the current cost of replacing the contracts net of any available margins retained by the Company, a custodian or the Mortgage-Backed Securities Clearing Corporation (the "MBSCC"), which is an independent clearing agent.

  The total amount of counterparty credit exposure as of February 28, 2001, before and after applicable margin accounts held, was as follows:

(Dollar amounts in millions)	As of February 28, 2001
Total credit exposure before margin accounts held	$	1,095.5
Less: Margin accounts held		(622.4)
Net unsecured credit exposure	$	473.1

Hedge of Committed Pipeline and Mortgage Loan Inventory

As of February 28, 2001, the Company had $2.0 billion of closed mortgage loans and MBS held in inventory, including $1.7 billion fixed-rate and $0.3 billion adjustable-rate (the "Inventory"). In addition, as of February 28, 2001, the Company had short-term rate and point commitments amounting to approximately $7.1 billion (including $6.4 billion fixed-rate and $0.7 billion adjustable-rate) to fund mortgage loan applications in process and an additional $2.3 billion (including $2.2 billion fixed-rate and $0.1 billion adjustable-rate) like commitments subject to property identification and borrower qualification (together the "Committed Pipeline"). Substantially all of these commitments are for periods of 60 days or less. (After funding and sale of the mortgage loans, the Company's exposure to credit loss in the event of nonperformance by the mortgagor is limited as described in Note L).

  In order to mitigate the risk that a change in interest rates will result in a decline in the value of the Company's Committed Pipeline or Inventory, the Company enters into hedging transactions. The Inventory is hedged with forward contracts for the sale of loans and net sales of MBS, including options to sell MBS where the Company can exercise the option on or prior to the anticipated settlement date of the MBS.

  Due to the variability of closings in the Company's Committed Pipeline, which is driven primarily by interest rates, the Company's hedging policies require that substantially all of the Committed Pipeline be hedged with a combination of options for the purchase and sale of MBS and treasury futures and forward contracts for the sale of MBS. As of February 28, 2001, the notional amount of options to purchase and sell MBS aggregated $3.1 billion and $3.8 billion, respectively. There were no treasury futures options in place at February 28, 2001. The Company had net forward contracts to sell MBS that amounted to $5.8 billion (including forward contracts to sell MBS of $16.0 billion and to purchase MBS of $10.2 billion). The MBS that are to be delivered under these contracts and options are either fixed or adjustable-rate, and generally correspond with the composition of the Company's Inventory and Committed Pipeline.

  The Company is generally not exposed to significant losses nor will it realize significant gains related to its Inventory or Committed Pipeline due to changes in interest rates, net of gains or losses on associated hedge positions. The correlation between the Inventory, the Committed Pipeline and the associated hedge instruments is very high due to their similarity. However, the Company is exposed to the risk that the actual closings in the Committed Pipeline may deviate from the estimated closings for a given change in interest rates. Although interest rates are the primary determinant, the actual loan closings from the Committed Pipeline are influenced by many factors, including the composition of the Committed Pipeline and remaining commitment periods. The Company's estimated closings are based on historical data of loan closings as influenced by recent developments.

Servicing Hedge

The Company manages its exposure to interest rate risk primarily through balancing its loan production and loan servicing operations, which are counter cyclical in nature. In order to further mitigate the effect on earnings of MSR impairment that may result from increased current and projected prepayment activity that generally occurs when interest rates decline, the Company maintains a portfolio of financial instruments, including derivative contracts, that increase in aggregate value when interest rates decline (the "Servicing Hedge"). The financial instruments that form the Servicing Hedge include interest rate floors, options on interest rate futures, interest rate swaps, interest rate caps, Capped Swaps, Swaptions, options on MBS, principal-only swaps and P/O securities.

(Dollar amounts in millions)	Balance, February 29, 2000		Additions	Dispositions/ Expirations	Balance, February 28, 2001
Interest Rate Floors	$	50,500	5,000	(23,500)	$	32,000
Long Call Options on Interest Rate Futures	$	15,000	16,300	(26.700)	$	4,600
Long Put Options on Interest Rate Futures	$	1,750	7,500	(9,250)		-
Long Call Options on MBS	$	8,561	1,500	(4,000)	$	6,061
Capped Swaps	$	1,000	-	(1,000)		-
Interest Rate Swaps	$	1,500	-	-	$	1,500
Interest Rate Cap	$	2,500	1,500	(1,500)	$	2,500
Swaptions	$	36,250	25,000	(19,000)	$	42,250
Principal-Only Swaps		-	1,250	(1,125)	$	125

  The Servicing Hedge is intended to protect the value of the investment in MSRs from the effects of increased prepayment activity that generally results from declining interest rates. Should interest rates increase, the value of the MSRs generally will increase while the value of the Servicing Hedge will decline. With respect to the options on interest rate futures and MBS, Swaptions, interest rate floors, interest rate caps, Principal-only swaps and P/0 Securities included in the Servicing Hedge, the Company is not exposed to loss beyond its initial outlay to acquire the instruments plus any unrealized gains recognized to date. With respect to the Swap contracts entered into by the Company as of February 28, 2001, the Company estimates that its maximum exposure to loss over the remaining contractual term is $1 million.

Interest Rate Swaps

As of February 28, 2001, CHL had interest rate swap contracts, in addition to those included in the Servicing Hedge, with certain financial institutions having notional principal amounts totaling $8.8 billion. The effect of these contracts is to enable CHL to convert its fixed-rate long term debt borrowings to LIBOR-based floating-rate cost borrowings (notional amount $6.1 billion), to convert its foreign currency denominated fixed rate medium-term notes to U.S. dollar LIBOR-based floating-rate cost borrowings (notional amount $1.5 billion) and to convert a portion of its medium-term note borrowings from one floating-rate index to another (notional amount $1.2 billion). Payments are due periodically through the termination date of each contract. The agreements expire between March 2001 and June 2027.

  The interest rate swap agreements related to debt had an average fixed rate (receive rate) of 6.03% and an average floating rate indexed to 3-month LIBOR (pay rate) of 6.17% on February 28, 2001.

Broker-Dealer Financial Instruments

Countrywide Securities Corporation ("CSC") utilizes a variety of financial instruments for trading purposes and to manage interest-rate risk. These instruments include MBS mandatory forward sale and purchase commitments as well as short sales of cash market U.S. Treasury securities. At February 28, 2001, CSC had forward contracts to sell MBS that amounted to $7.5 billion and forward contracts to purchase MBS that amounted to $4.0 billion. During the year ended February 28, 2001, the average fair value of the forward contracts to sell MBS amounted to a gain of $6.0 million and the average fair value of forward contracts to purchase MBS amounted to a gain of $13.7 million.

Fair Value of Financial Instruments

The following disclosure of the estimated fair value of financial instruments as of February 28 (29), 2001 and 2000 is made by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

	February 28, 2001		February 29, 2000
(Dollar amounts in thousands)	Carrying Amount	Estimated Fair Value	Carrying Amount	Estimated Fair Value
Assets:
Mortgage loans and mortgage-backed securities held for sale	$ 1,964,018	$ 1,964,018	$ 2,653,183	$ 2,653,183
Trading securities	4,050,082	4,050,082	1,984,031	1,984,031
Securities purchased with agreements to resell	3,109,556	3,109,556	435,593	435,593
Items included in investments in other financial instruments:
Principal-only securities purchased	1,348,994	1,348,994	952,840	952,840
Mortgage-backed securities retained in securitizations	1,202,093	1.202,093	823,196	823,196
Insurance Company investment portfolio	550,422	550,422	520,490	520,490
Equity Securities - restricted and unrestricted	-	-	46,193	46,193
Items included in other assets:
Rewarehoused FHA and VA loans	790,876	790,876	336,273	336,273
Loans held for investment	269,942	269,942	177,330	177,330
Receivables related to broker-dealer activities	318,739	318,739	22,612	22,612
Liabilities:
Notes payable	11,402,791	11,159,777	8,281,216	7,957,602
Securities sold under agreements to repurchase	3,541,230	3,541,230	1,501,409	1,501,409
Securities sold not yet purchased	260,151	260,151	181,903	181,903
Corporate guarantees	56,312	56,312	-	-
Company-obligated mandatorily redeemable Capital trust pass-through securities of
subsidiary trusts holding solely Company guaranteed related subordinated debt	500,000	521,929	500,000	489,744
Derivatives:
Interest rate floors	349,002	343,151	411,278	180,360
Forward contracts on MBS	(8,673)	(40,312)	(11,080)	(13,511)
Options on MBS	78,386	54,759	75,950	32,415
Options on interest rate futures	7,660	6,625	8,921	6,032
Interest rate caps	15,216	2,310	47,348	39,088
Capped Swaps	-	-	(5,619)	(8,040)
Swaptions	644,181	590,906	341,039	76,254
Interest rate swaps	(3,682)	(110,852)	(23,228)	(457,051)
Principal-only swaps	-	-	-	-
Short-term commitments to extend credit	-	35,200	-	52,500

  The fair value estimates as of February 28 (29), 2001 and 2000 are based on pertinent information that was available to management as of the respective dates. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

  The following describes the methods and assumptions used by the Company in estimating fair values.

Mortgage Loans and Mortgage-Backed Securities Held for Sale

Fair value is estimated using the quoted market prices for securities backed by similar types of loans and dealer commitments to purchase loans on a servicing-retained basis.

Trading Securities

Fair value is estimated using quoted market prices.

Principal Only Securities

Fair value is estimated using quoted market prices and by discounting future cash flows using discount rates that approximate current market rates and market consensus prepayment rates.

Mortgage-Backed Securities Retained in Securitization

Fair value is estimated by discounting future cash flows using discount rates that approximate current market rates, market consensus and internally developed prepayment rates.

Insurance Company Investment Portfolio

Fair value is estimated using quoted market prices.

Derivatives

Fair value is defined as the amount that the Company would receive or pay to terminate the contracts at the report date. Market or dealer quotes are available for many derivatives; otherwise, pricing or valuation models are applied to utilizing current market information to estimate fair value.

Notes Payable

Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.