Countrywide Financial Corp., the nation's largest mortgage lender, said its profit tumbled 33 percent in the second quarter, and warned that falling house prices were causing more of its best borrowers to fall behind in their payments.

The Calabasas, California, company warned that even tougher times are to come because higher interest rates and reduced liquidity in the market for mortgage-backed securities will crimp its ability to write new mortgages even as old ones become delinquent.

"Softening home prices continued to affect many areas of the country and delinquencies and defaults continued to rise across all mortgage product categories," including loans to prime borrowers with good credit histories, chairman and chief executive Angelo R. Mozilo said.

Worryingly, he added that the second-quarter slump was "primarily related" to prime home equity loans.

In a sign of how fast the situation is deteriorating, Countrywide cut its full-year earnings forecast to between $2.70 and $3.30 a share, down sharply from its January forecast of between $3.80 and $4.80.

At the same time, an Australian hedge fund, Basis Capital, said it had enlisted the Blackstone Group to advise it on how to manage the plunging value of subprime mortgages and collateralized debt obligations held by two of its funds.