HomeBanc Corp., the Atlanta-based lender that has been hit hard by the housing downturn, said Tuesday it is closing its mortgage loan business and selling some of the assets to Countrywide Financial Corp.

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HomeBanc will continue to service existing loans and the change should have little or no affect on HomeBanc's more than 42,000 mortgage holders.

Still, with the scale-back, HomeBanc becomes another domino in a cascade of failures and cutbacks in the teetering mortgage industry. The impact has roiled the economy, upset stock markets and made buying or selling a house a lot harder.

As lenders nationwide fight off the impact of easy credit policies of recent years, deliquency rates and foreclosures have soared. Georgia's delinquency rate is eighth in the nation.

The announcement comes a day after American Home Mortgage, once one of the nation's biggest lenders, filed for Chapter 11 bankruptcy protection. Also on Monday, two other large mortgage firms in Houston and Cleveland said they were suspending new loan applications.

HomeBanc lent about $5 billion for home purchases in 2006, primarily in Georgia and Florida.

The company's share price has tumbled nearly 93 percent since Jan. 1. Its market capitalization, which was $424.4 million last August, had been whittled down to $51.4 million as of Friday, when the Nasdaq Stock Market suspended trading of HomeBanc shares.

HomeBanc, in a statement on its Web site, said it is unable to borrow on its credit facilities and was unable to meet its mortgage loan funding obligations as of Monday.

"Accordingly, the company does not anticipate funding any future mortgage loans and is no longer accepting any mortgage loan applications or funding any mortgage loans previously originated but not yet funded," HomeBanc said.

"The company is seeking the most appropriate course of action to preserve the value of its remaining assets."

HomeBanc is keeping its investment portfolio, which is valued at $4.5 billion. It also is retaining its mortgage servicing rights portfolio, which is worth $8.6 billion. Mortgage servicing rights entitle a company to collect payments and provide other customer service on loans for the life of the loans. Servicing generates fee income.

A HomeBanc spokesman said Tuesday the company will have no comment beyond its news release.

Countrywide, based in Calabasas, Calif., said it will hire a "significant" number of HomeBanc's retail loan orginators and acquire offices in Georgia, Florida and North Carolina.

HomeBanc has about 1,100 employees but it is unclear how many of them are loan oriniatiors. A Countrywide spokeswoman said the company had no further comment beyond what it said in a news release.

Mortgage loan applications currently in process will be reviewed by the Countrywide's underwriters, HomeBanc spokesman Mark Scott said.

The deal is expected to close by Aug. 10.

That HomeBanc decided to exit the mortgage origination business is no surprise.

The company, which originates prime mortgage loans that are sold to investors through mortgage-backed securities, has been struggling for a few years.

Like other firms with similar problems, including SouthStar Funding, an Atlanta-based mortgage lender that shut down earlier this year, HomeBanc was socked on two fronts. There's intense competition for customers, and lenders are more more hawkish with underwriting and are making it harder for originators to get capital to fund loans.

Another issue for HomeBanc is that it isn't a bank or a thrift and doesn't offer the other products such as credit cards or business and auto loans that financial institutions have. It's wholly dependant on home mortgages.

That explains why Countrywide isn't paying a premium to acquire HomeBanc's assets.

HomeBanc had made a number of big moves to get itself back to profitability. Executives have said they will consider all options, including an outright sale of the company to get out of its slump.

It underwent a reorganization that included layoffs and the replacement in January of CEO and founder Patrick S. Flood with Kevin D. Race.

The company also announced plans to stop operating as a real estate investment trust at the end of this year which would free it from having to pay dividends.