By John Poirier

WASHINGTON (Reuters) - Thrifts and savings institutions lost a record $5.24 billion in the fourth quarter of 2007, mainly due to write-downs of good will, the U.S. Office of Thrift Supervision said on Wednesday.

The thrift industry, which is largely comprised of mortgage lenders, is facing a major downturn in the U.S. housing market and losses stemming from home loans to borrowers with poor credit histories.

The loss in the October through December period of 2007 was the first for the industry since the third quarter of 1996, the OTS said. By comparison, the U.S. thrift industry had net income of $657 million in the third quarter and $3.14 billion in the fourth quarter of 2006.

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"2008 is going to be a very difficult year for the industry," OTS Director John Reich said at a briefing with reporters.

Record provisions totaling $5.1 billion for loan losses in the fourth quarter tamped down earnings. It was the highest loan loss provision level since thrifts put aside $4.2 billion in the second quarter of 1988, said James Caton, OTS director of financial monitoring and analysis.

Profitability, as measured by return on average assets, fell in the fourth quarter to a negative 1.38 percent. By comparison, the return on average assets was 0.17 percent in the third quarter and 0.89 percent in the fourth quarter of 2006.

For all of 2007, thrifts saw their net income plummet to $2.87 billion compared to $15.85 billion in 2006, reflecting write-downs, restructuring, loan loss provisioning and losses on asset sales.

The thrift regulatory agency said new mortgage originations dropped 10 percent in the fourth quarter from the previous quarter. The number of problem thrifts rose to 11 at the end of 2007 from 6 a year earlier, the agency said.

The OTS regulates more than 800 thrift institutions with assets of $1.5 trillion, including big mortgage lenders Countrywide Financial Corp <CFC.N> and Washington Mutual <WM.N>.

(Reporting by John Poirier; Editing by Tim Dobbyn)