Wassup with Countrywide?

October 12th, 2007

CW3It seems that Countrywide is to the Mortgage industry what Microsoft is to computer and gaming technology. Since co-founding Countrywide in 1969, Angelo Mozilo has built Countrywide into the largest originator of home loans in the United States. Many don’t realize that Countrywide also services loans originated by other lenders totaling a servicing portfolio of about $1.5 Trillion!

It seems that many are looking at Countrywide as a barometer of the industry as a whole. As Countrywide goes, so goes the industry. If they appear on the road to recovery maybe the mortgage and real estate industries will have bottomed out as well.

So, what is happening with Countrywide? Will they follow the path of the 165 other lenders who have closed their doors?

In August we heard Countrywide had maxed out their line-of-credit and received a $2 billion infusion from Bank of America. There was speculation that the feds had some involvement and pressured Bank of America to assist in bailing Countrywide out. But, in an interview with BusinessWeek, Angelo Mozilo refuted the rumors and stated it simply showed Bank of Americas confidence in Countrywide after their extensive due-diligence. During August Countrywide also announced it’s intent to layoff around 12,000 employees and suspend it’s “sub-prime” business. The announcement of Countrywides problems started a decline in stock values from $35 share in July to about $19 per share at the end of August.Â

Down graphWhen asked about is forecast for the future, Mozilo commented that we were in an unpredictable environment. We have seen falling home values for 12–16 months which is certainly indicative of a recession. He did not expect a recovery until early 2009.

In September Countrywide cut 4,935 of the anticipated 12,000 reduction. The reductions were certainly the result of Countrywide getting “out of the sub-prime business” and the reduction in the mortgages in their pipeline. It’s pipeline of loans-in-progress was $42 billion as compared to $65 billion for the same time last year.

September saw the feds cut the federal funds rate to 4.75% and announce a Bush/FHA bail-out program for homeowners affected by rising rates on their variable rate loans. The news has had little impact on home-buyers confidence. Home sales in Salt Lake dropped to 835 units in the entire county. The lowest September sales volume in over 10 years.

The bad news seems to be that investors of security-backed loan packages are still reluctant to get back into the market. That reluctance is not expected to soften much through 2008.

The positive news is we still closed 835 purchase loans in September. Sellers are finally adjusting their prices to the market and buyers are seeing value opportunities.

“Conforming” loans are available! People who qualify with modest to good credit scores, money for a down payment, and verifiable income can buy a home. We’re back to where we should have been before this real estate frenzy began.

I believe Countrywide will survive this debacle. It will Morph to meet the market and remain the kingpin in the mortgage market.

This entry was posted on Friday, October 12th, 2007 at 2:24 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

  1. mortgage » Wassup with Countrywide? said at October 13th, 2007 at 6:19 am

    […] Read the rest of this great post here […]

  2. Carin said at November 27th, 2007 at 2:46 pm

    When it comes to your mortgage, consider a term life insurance policy instead of the coverage offered by the lender. Not only will you save money, you, not the lender, names the beneficiary. Talk to your insurance agent about all your options.

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