Countrywide Financial Corp. (COF), the largest U.S. mortgage lender, Tuesday said fourth-quarter profit rose 73 percent as loan volumes and fees increased, but earnings and revenue fell short of Wall Street estimates.

Profitability was "hampered" as pricing competition and the almost nonexistent gap between long- and short-term lending rates, or "flat" yield curve, drove mortgage lending margins down, Chief Executive Angelo Mozilo said.

Many lenders, including Citigroup Inc. (C) and Bank of America Corp. (BAC), have said the flat curve was a factor hurting quarterly results. A flat curve makes it harder to lend at higher rates even as companies pay more on deposits or short-term borrowings.

Net income for Calabasas, Calif.-based Countrywide increased to $638.9 million, or $1.03 per share, from $369.8 million, or 61 cents, a year earlier.

Analysts, on average, expected profit of $1.05 per share, according to Reuters Estimates. Revenue increased 29 percent to $2.59 billion, below the average estimate for $2.69 billion, while expenses rose 15 percent to $1.58 billion.

Mozilo called earnings growth "impressive," though "volatile interest rates, declining production profit margins throughout the industry, and the adverse effects of 2005's hurricanes" impacted results.

Margins tumbled to 0.09 percentage point from 0.32 percentage point in the third quarter and 0.61 percentage point a year earlier.

Countrywide's mortgage market share nevertheless grew by more than one quarter, and its servicing portfolio swelled 33 percent to a record $1.11 trillion.

The company also forecast 2006 profit of $3.80 to $4.80 per share. Analysts, on average, were forecasting $4.40.

Countrywide's rivals include Wells Fargo & Co. (WFC) and Washington Mutual Inc., and Ameriquest Mortgage Co. and New Century Financial Corp. among subprime lenders.

Countrywide shares closed Monday at $34.25 on the New York Stock Exchange.

The Commerce Department on Friday said sales of new single-family homes rose 2.9 percent in December to a seasonally adjusted 1.269 million annual rate, but inventory and price data suggested some cooling in the housing market.

Investors hope increases in mortgage rates will help big loan servicers such as Countrywide compensate for increase competition and slowing growth in demand for homes.

Mortgage financer Freddie Mac said the average 30-year fixed mortgage rate was 6.12 percent for the week ended Jan. 26.

Total mortgage banking pretax profit at Countrywide rose 67 percent to $434 million. Profit from banking operations rose 69 percent, capital markets profit fell 9 percent, and insurance operations profit more than tripled.

Countrywide shares have fallen 7 percent in the last year, while the Standard & Poor's Thrifts and Mortgage Finance index has dropped 2 percent.