Countrywide: SuperBad
Jillayne Schlicke on 08 20, 2007
Has the demise of one of the nation’s largest and well-regarded mortgage lending institutions started? The industry looks up to Countrywide as a home grown success story. They grew from a small mortgage company to an industry powerhouse in 38 years. Over the last several years they went on recruiting sprees within key markets and vacuumed up managers along with their top producing originators and builders. They’ve weathered many storms. Now we’re pondering not if, but when they’ll run out of money to fund prime loans. One of our local subprime lenders here in the Northwest, MILA, went under after, among other things, trying to make the switch from subprime to Alt-A and prime business, then finding out there was just too much competition for prime loans. They tried in vain to find a buyer for the company but couldn’t pull a deal together, and finally filed bankruptcy.
Countrywide, a mortgage banker, is different from many other subprime lenders that have gone under in that Countrywide has (among other divisions) retail, wholesale and correspondent lending divisions.
[photopress:countrywide_1.jpg,thumb,alignright]One of the reasons why the retail mortgage division of Countrywide is so popular with loan originators is because they had so many different loan programs that their retail loan originators never had to broker out. National name recognition, training and education, rewards, recognition, opportunity for advancement, the ability to form RESPA-compliant (we hope) affiliated business arrangements with Realtors and builders, plus a popular, charismatic CEO that we admire(d) all attracted top talent away from banks. Their wholesale lending division aggressively recruited top brokers and sold them on all the subprime products that are now nowhere to be found. I wonder what it’s like out there to be a Countrywide wholesale rep these days? The competition for prime business must be absolutely brutal.
“According to trade publication Inside Mortgage Finance, Countrywide was the nation’s No. 3 subprime mortgage lender in 2006, making $40.6 billion of those loans, and the No. 2 Alt-A lender with $68 billion.”
ARM loans originated in 2006 won’t begin to reset until 2008. Perhaps Countrywide is setting itself up for a sale, with the last option being bankruptcy and an attempt at a reorg. Their founders are near retirement; now’s a good time to check out. Analysts are saying the mortgage bank might be a good acquisition for another bank. But why would a large retail bank such as Bank of America purchase Countrywide when they could just as easily absorb the retail mortgage lending business in their marketplace and cherry pick the laid off employees without having to go through a total acquisition along with acquiring shareholder lawsuits and defaulting subprime loans along the way?
Perhaps Countrywide executives already knew they’d be facing shareholder lawsuits over super bad boy Mozilo’s stock sales and preventively set aside enough corporate dollars to settle. I imagine this was all well orchestrated in advance and the endgame is already known to those in the boardroom. God only knows that they’ve got to keep the 54,000 employees coming into work each day chugging away until the last possible moment.
Countrywide employees: Polish your resumes and quietly begin making inquiries. Nobody will blame you. Do not believe your company is going to look out for your best interests. Countrwide’s Full Spectrum Lending division is already starting to layoff their staff, as reported in the WSJ late on Sunday night.
While we’re all waiting to see what happens with Countrywide, I highly recommend the movie SuperBad. The comical diversion is a needed relief. Countrywide employees could use some of McLovin’s good luck.
About the Author: Jillayne Schlicke
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I’ll pose the same question I asked in a previous thread: does the fate of CFC really matter all that much to the Puget Sound area real-estate market?
Aren’t most of the Seattle area buyers (East Side, in particular) able to qualify for conforming loans even if every issuer of non-conforming loans goes out of business? From what I’ve heard Rhonda, and others say, it sounds as if many of the people who used no-interest, or negative amortization loans, were doing so merely because they wanted more flexibility in asset management, not because they couldn’t afford it.
It’s not as if we’ve seen sales tank in the Puget Sound this summer, even with all the turmoil in the lending markets.
So I wonder, where is the evidence that a collapse of CFC, or the absence of any non-conforming loan products, would have any negative impact on the Puget Sound? It would seem that this is the only really relevant question about the problems at CFC (and elsewhere). Sure, other parts of the country that had a huge number of sub-prime mortgages might be suffering, but why should that necessarily have any impact on the Seattle region?
From a consumer standpoint, what do Countrywide’s troubles mean? They bought my mortgage last year, so they are who I pay my monthly check to. Is there anything I have to watch out for or be careful of?
Thanks for any advice.
Jilayne-
I’ve taken hits for being so critical of a “competitor”. My background, however, was in securities brokerage so I’m analytical by nature.
The stock sales are gross; right out of the Ken Lay play book.
A CFC failure reaches beyond the areas affected by sub prime or Alt A- it has a ripple affect that will be lasting.
Brian,
Why would a CFC failure have any greater impact than has already occured from the tightened lending standards? CFC isn’t writing anything but conforming loans right now as it is, so what would change if they went bust? Consumers would still be able to get conforming loans elsewhere. So how would a CFC collapse cause any greater disruption than has already occured (which seemingly hasn’t impacted the East Side much at all)?
Good morning Sniglet,
I’m going to run my daughter to summer camp and will be back in an hour to comment at length.
Seattle Veggie,
From what I understand, I don’t think CFC’s troubles should have any greater impact on you than they already have. CFC mortgages will continue to be administered no matter what happens (although the company you write the mortgage cheque to might change if assets are liquidated).
The biggest impact of CFC troubles is that they would tighten their lending standards, shutting out large numbers of possible buyers from the real-estate market. But CFC has already dramatically tightened their standards in the last few weeks, so a complete collapse of CFC wouldn’t make much more of a difference.
Further, all the tightening of credit standards doesn’t seem to have much (if any) of an impact on East Side real-estate in the last month (sales haven’t dropped off a cliff, inventory is only slightly up), so all of this might have very little relevance to Seattle area consumers.
CFC is toast.
Matthew,
You say “CFC is toast”. Ok, let’s assume you are correct. So what? Why should a complete collapse of CFC have any greater impact on the Puget Sound real-estate market than has already occured in the last month? CFC has already stopped issuing anything other than conforming loans, and people would still be able to get such conforming products from any number of alternative places if CFC ceased to exist.
So what’s the big deal with a CFC bankruptcy?
Hi Sniglet,
Thanks for answering Seattle Veggie. I’m going to answer your questions from comment number 1
“Aren’t most of the Seattle area buyers (East Side, in particular) able to qualify for conforming loans even if every issuer of non-conforming loans goes out of business?”
Many home prices with a Seattle address and on the swanky Eastside are high. People able to afford these homes are usually able to put down some cash, so the Eastside and Seattle may not be as affected as, say the condo market or the first time homebuyer homes in South King County and South Snohomish County.
Up until recently, we’ve had a market where first time homebuyers with any kind of credit score could purchase a home with zero down, and also with seller-paid closing costs. Seattle and the Eastside do not make up the entire Puget Sound Region.
“From what I’ve heard Rhonda, and others say, it sounds as if many of the people who used no-interest, or negative amortization loans, were doing so merely because they wanted more flexibility in asset management, not because they couldn’t afford it.”
I have never been one of these folks. From what I’ve seen, the homebuyers who used interest only and pay option ARMS with negative amortization did so because it was the only way they could qualify. Even now, I am still receiving mail from local and out of state lenders encouraging me to refinance (into an ARM) and lower my payment by hundreds.
“So I wonder, where is the evidence that a collapse of CFC, or the absence of any non-conforming loan products, would have any negative impact on the Puget Sound?”
I have no evidence. Only instinct. CFCs demise and the resulting media attention would likely scare homebuyers into delaying their purchase. The big winners would be the mortgage divisions of the national banks.
My concerns are about the potential for Countrywide job losses by thousands.
Non-conforming loan products were definitely used by people all over the Puget Sound region. If not to purchase, then for the purpose of serial refinancing.
Yes, sales haven’t dropped off a cliff and inventory is only slightly up. However, homes are taking longer to sell. Without first time homebuyers to feed the THOUSANDS of real estate agents and loan originators, some folks will likely exit the industry within a few months. We also have a slew of parallel industries that are tied to residential purchase and refinance business.
Title insurance
Escrow
Appraisals
Credit reporting agencies
Mortgage insurance companies
Hazard insurance companies
Home Inspectors
Home Builders
All of these kinds of companies are likely preparing for a fall with decreased profit margins, a bleak winter, and an unknown spring, which will mean a pull back in spending.
I think that there is some room for concern, if you are a Countrywide employee. Production is down 14% and the loan origination departments are coming into work today to find out that some will be laid off. Currently (mostly mortgage) the layoff rate for the real estate industries is running at 56% and nationwide construction jobs consume 10% of the labor force with the numbers being closer to 20% in states like FL and CA. The trickle down effect is bound to catch up. The threat that the Seattle area faces is the same that Wal-Mart spoke of last week in its SEC reports. With nationwide labor slow downs less Microsoft software is sold, less plane tickets are sold which leads to plane orders being canceled by air lines and of course less Starbucks coffee at $5.00 per cup sold nationwide. As far as the effect of larger lenders on the whole the issue is returns to investors, consumer confidence, risk to the insurance companies backing loans (if any), and showing the world the need for alternative lending sources.
Hi Apella,
Glad you stopped by. How has the market implosion affected your business? If I recall, you’re in the appraisal side.
Jillayne,
Hello, your welcome as this is one of my fav’s to visit. Your memory is good. The market is slow with no doubt. About 50% on the year as to this time last year for appraisal orders being placed by lenders or AMC’s (appraisal management companies). The trend is consistent in most markets other then a few pockets. FHA loans are becoming the main item including reverse mortgage products for Michigan and Ohio. Other orders are REO or Repo request with some Relocation. From what I have gathered from phone contacts, many lenders are at a “On Hold Status” until they find buyers. The last I had heard the credit rank being bought with little question(s) was closing in on 670 with more seeking at least 10% down money (I have heard rumors that the down may reach the old 20%). At this time I am thinking that it will be similar for the next six months in the Mid-West and South. I hope I am wrong, but it does leave for more blog time
Countrywide decks are awash,abandon ship,all liferafts full or adrift.
Hi R Duke,
I wish we had access to a website where we could view in real time what’s going on inside their offices. Hmm. This sounds like a script for a mortgage survival reality show.
The best I could come up with is the Broker Universe Grapevine:
http://www.brokeruniverse.com/grapevine/
which smells of desperation.
Apella,
Are you in the Puget Sound area? I just want to get an idea as to whether the slow-down you describe is happening in the Pacific Northwest. We haven’t seen many comments by local professionals indicating much of a local negative impact from the recent credit crunch.
Sniglet,
Psychological warefare 101. The largest mortgage lender goes bankrupt, people panic. Look at the rush CFC had on their bank last week… It’s already begun.
warefare = warfare
How many sellers do you think will just pull their listing in frustration and wait until 2008’s spring selling season? I bet come spring 2008 inventory will skyrocket.
Hi Sniglet,
There are different things going on out there in the Puget Sound region and not everyone is leaving comments on blogs about their reality. The real estate agents, mortgage loan originators, and title & escrow people I interact with are reporting that new business coming in the door has slowed dramatically. People are trying to adjust. A certain percentage are in denial mode, some are in panic mode.
My biggest concern is the potential for great fallout among medium to small size mortgage brokerage firms, medium to low producing real estate agents, and layoffs at local title and escrow companies. Because their management is usually on a short stick for profit margins, title and escrow companies will be the first to lay off staff. Watch for this.
I wish I had a source to track local, privately held companies who are laying off. Any suggestions?
Hi Joel,
I happen to agree with you. What might be more frightening is to see more listings happening this summer, fall, and winter because it could be a sign that these sellers HAVE TO sell. Then, we will finally see the sale prices start to come down from the list price. Those that do not sell will go into foreclosure and the foreclosure statistics for Puget Sound will start to rise at that time.
Puget Sound is lagging behind the rest of the country. We are not immune.
The media likes to use the word “Seattle” when reporting on this region, but this region is far, far more than just Seattle and the glorious Eastside.
Sniglet,
Hello, We are based out of Michigan with operations in VA. Our vendor network is in 18 states. We are not in the Seattle area as of right now.
Your area is one of the pockets that is still doing well in real estate with a slight rise in inventory. We are rare as appraisers in the blog world, so there may not be much coming from local appraisers.
From what I can gather from reporting data sources, there is a little bit of a slow down, but I am sure that appraisers are being subject to more detail reporting and quality including a more detailed report of listing history and DOM. There may be some reporting on any REO properties in the market too. The reason I say this is because lenders and underwriters are asking more and more for this type of information.
As of right now I would say be glad that your market is still some what normal while it may be slowing slightly.
Um… There is no “slight” rise of inventory here. We are leading the nation in inventory increases the last few months…
I really hate to break this to anyone,but what you see now is as good as its going to get,the high water mark,as it were.Look what happened to the stock market last week,if not for the 30 some billion injection by fed,it would have been a freefall.Its receession time,plain and simple.I mean really ,how long did everyone think you could inflate the housing market,which was the only thing feeding growth?We have given away our manufacturing base to China,etc.The vultures have come home to roost,its not going to be pretty.
Jillayne,
Thank you for your candid response regarding prices dropping in the Northwest. I am surprised that the “powers that be” who run this blog allowed you to post something so…TRUE!
It seems like every media outlet (especially RE blogs) is reassuring Joe Common that everything is just fine…buy another house, get more loans, buy more Hummers, get a flatscreen for football season, Re-fi so we can get more fees etc. etc. etc.
It is refreshing to see Countrywide getting served this week. Somewhat of a justification for the people they have screwed over in the past few years, although I always hate to see the good people lose their jobs.
Hi Matthew,
I agree that inventory here in the Puget Sound region has nowhere to go but UP from where it is now.
The other thing I’m noticing is a lot of “price reduced” banners tacked onto the for sale signs.
Hi R Duke,
“how long did everyone think you could inflate the housing market,which was the only thing feeding growth?”
Funny you should mention this. About 4 years ago, I started asking this question to real estate students in the classroom:
When you are doing your CMA (comparative market analysis) for a new listing, do you want to know if the sale price your working with on the home down the street had the price increased in order to facilitate “seller-paid closing costs?” Every one of the students answered “yes,” but their MLS system did not break down the data in that way.
Now those agents were basing listing prices on slightly higher “sold” prices. Nobody in the room thought this was any problem until we started breaking down the numbers into the thousands so they could actually SEE the bubble.
Their response was always chilling to me: “but Jillayne, if we didn’t have the ability to offer 100% financing with seller-paid closing costs, nothing in our town would sell.”
“My concerns are about the potential for Countrywide job losses by thousands.”
That’s the answer, Sniglet; except it’s 54,000 employees and another 50,000 related businesses’ employees.
I’m in the epicenter so it feels worse here than there.
Hi Dan C,
Everything is not fine.
I have always highly regarded Countrywide and had not put them in the catagory of screwing people over. Their training, education, managers, and LOs that I know personally have my respect. But my viewpoint is only just that: mine. Others may have had a different experience.
Everything is NOT fine here in the Puget Sound region and people are talking about it; they’re just not blogging about it.
But just like the old saying “real estate is local,” the same could be said for an individual real estate agent’s perspective: it’s local. When you get a group of them in a classroom together from all parts of King County, you get a mix of different market reports. What they are telling me is that it is VERY slow, homes are taking a lot longer to sell unless they are priced way under the competition. Many are worried. A few are not worried. These are the agents who are working on the eastside and in hot Seattle neighborhoods with an established client base.
“Everything is NOT fine here in the Puget Sound region and people are talking about it; they’re just not blogging about it.”
Well, some people are.
Oh, it’s just so nice knowing that the National Association of Mortgage Brokers is conducting a poll to see what kind of car their members drive. Yes, that’s great data to be collecting at this time. I do believe they should have broken out the Hummer and had that as a choice on it’s own instead of lumping it in with the other GM cars.
http://www.namb.org/namb/Latest_News_from_NAMB.asp?SnID=1625448092
I found this while searching for an apparent memo that was sent out to all members talking about the state of the mortgage broker community. I will keep hunting.
Hi LHR,
I’ll never forget the first time the bubble guys came over and grilled me. Ah, memories. Seattlebubble.com is the only place I’ve been able to get industry-contrary opinion and analysis for months. I also like Calculated Risk. Those guys teach me something new every day.
Have you ever thought about WHY industry folks don’t like to challenge the publicly sanatized press releases? I know that if I were still receiving a paycheck as W-2 employee from any of the local real estate companies, I would not be allowed to say anything that would be construed as unsupportive of the company’s goals.
What do you think?
I am just waiting for the next report from the NAR, and it touting once again Seattle is “different”.Homes are sitting here in Magnolia and will continue to do so.
BTW i have been following CFC stock recenlty and it is unbelievable how they have not said anything regarding the state of their business, hence the class action suits that are now coming. Some bad news is due to come from them, they are a major player the FED has proped up with the latest injections believe that. There is just too much at stake for the firm to collapse.
Jillayne, great article, thank you.
Everyone else, fun comments.
Honestly, though, this is all not atypical. It’s easily foretold. Greed, in the end, will ruin any business. Let me have a foreward streak of honesty here. CFC’s Full Spectrum Lending fired me after two months of having worked for them (this was 2 1/2 years ago when I first entered the business) because I told 3 of my cold call leads to contact a friend of mine who would give them a much better rate than I could. I don’t know if he closed any of those ‘deals’, and I wasn’t receiving any kickbacks for it…. Just plain and simple, I was overpriced!
People like banks because there’s a NAME they have, and apparently there’s value in that….so much value that these people who like these banks oftentimes get way overcharged (2-3 points per loan hidden into the rate).
It’s brokers who are the most competitive lot, but an honest broker, who can find one?
“I know that if I were still receiving a paycheck as W-2 employee from any of the local real estate companies, I would not be allowed to say anything that would be construed as unsupportive of the company’s goals. ”
Interesting that the resident agents havn’t popped in on this thread yet with blasphemy like this floating around. What happened to the puppydog and daisy talk, and the not giving a RA about mortgage lending? Without this counterpoint, RCG will turn into yet another gloomy bubble blog.
Would someone please pass the popcorn?
Magnolia,
Mozilo still has shares to unload. It will be business as usual until he has unloaded everything!
Magnolia 44,
Can’t CW just blame it on the market, like every other lender has done thus far?
Hi David,
Thanks for stopping by; always a pleasure. Question: Then who does the consumer trust? Bank, mortgage bank, broker, credit union, consumer loan lender?
I think the players that win with all this are the banks, because they will increase their power position in the market.
Credit unions have never been big players in mortgage lending, and consumer loan lenders will go back to doing what they do best: hard money loans. Come to think of it, consumer loan lenders (consumer finance companies) will also be the big winners.
Matthew,
How can Superbad Mozilo unload any more shares than he already has without getting into more hot water?
Jillayne –
Mozilo has been selling options according to a “10b5-1″ plan filed with the SEC last year. So he can rightly claim all his sales are “pre arranged”. CEOs set up these plans for the sole purpose of avoiding the appearance of a conflict of interest that is is implied by many posters.
It’s the timing of the news announcements and continued share buybacks around these sales that seem to be the source of controversy – and probably rightly so – but that will probably be a lot harder to prove in a court.
Hi deejayoh,
“but that will probably be a lot harder to prove in a court.”
Exactly. That’s why I believe they’ve already set aside funds to settle instead of going to court.
Good thread, Jillayne.
I have high respect for the CW retail and wholesale staff I have worked with over many years.
I can’t say the same about Full Spectrum which was one of the most untrustworthy, fraud ridden, bunch of liars doing sub-prime, that we encountered. CW would do well do just cut that operation off like a cancerous tumor.
I do hope CW survives. I had little hope until these last few days when I get the feeling they truly have switched into a real survival mode.
So, all of you CW regulars, we’re rooting for you.
With this post, I’m officially moving RCG from my “housing” bookmark folder to my “bubble” bookmark folder.
In case it isn’t clear:
Congratulations on the promotion, RCG!
Rumors are swirling that Buffet wants a piece or three of Countrywide.
As an owner of like half a share of Berkshire, I’m not too thrilled about this, unless he gets a heckofadeal.
>>Exactly. That’s why I believe they’ve already set aside funds to settle instead of going to court.
Sooner or later everyone sits down to a banquet of consequences.
-Robert Louis Stevenson
[...] Of course, some people are more willing than others to be frank about the situation facing us today. To her credit, Jillayne Schlicke over at Rain City Guide appears to be one of them, recommending in a frank post about the snowballing troubles at Countrywide, she recommends that employees there “polish your resumes and quietly begin making inquiries.” [...]
Hi Diane,
Thanks, as usual, for giving us the bare naked analysis of what you see from the perspective of an escrow closer!
In my mortgage ethics class today, a student brought forth the following dilemma: How can Countrywide justify charging a Full Spectrum client more in loan origination fees, when compared with a prime client across the hallway? The bank is already making its money with the higher rate….
Hi biliruben,
I’m touched.
I’ll take myself out for a steak dinner tonight and toast you.
Thank you for your continuous, intrepid insights.
Hi Dan C,
“All things are subject to interpretation. Whichever interpretation prevails at a given time is a function of power and not truth.”
Friedrich Nietzsche
I posted this about Buffet in the other CFC thread but I’ll post it here as well…
Buffet is not buying any part of CFC. That is pure Wall St. driven speculation that has absolutely ZERO foundation. Their logic is this:
“Buffet has a lot of money. Buffet likes to buy distressed companies and try and turn them around and then sell them at a huge profit. Therefore, Buffet must be interesting in CFC”.
Fact: Buffet does not disclose to anyone outside of the Berkshire clan what he plans to do financially. He is notorious for not telling anyone what companies he is interested in.
Don’t believe the hype. Buffet is not going to rescue CFC, he knows they are toast.
Agreed Matthew.I see people saying CFC is too big to sink.Really? Thats a Titanic statement.
Buffett would never do something that stupid… when the rumor came out that he was buying HOV (Hovnanian), I bought PUTs on that rumor too and made a quick 15K.
Same thing goes here.
I have found this talk of Buffet interesting.
PR, PR, PR… I am only guessing, but If I was Buffet I would have the companies that I already have influence in do the buying because the tax break on the loss would be a better pay back… of course I could always get some insurance somewhere (maybe AIG?) too if need be that would cover my assets (lets call it a third party buy).
Rule 1 – Pay your self, Rule 2 – Cut your Taxes, staying rich is hard work and you don’t want to tell folks what cards you are holding because then they might get rich too.
Ok so I have had some fun with this post but I think that someone making more money then I am is going to have to be the one to make the buy or no buy call for the Buffet Team that is for sure.
Hi Matthew,
Thanks for the re-post. I’ve been out having a steak dinner so I didn’t see it on the other blog article.
Q: Why would ANY company want to buy CWide?
I have no clue. 70 percent of their loans are subprime/alt-a. Buffet will not bail them out, I could perhaps see someone buying parts of their company once that have gone bankrupt and salvaging the decent loans on their books, but don’t see anyone bailing them out now…
The vultures will deal w/CFC.The market now is desperate to prop this whole mess up.A few billionaires writing checks wont matter now.Good news will be hard to come by as secondary collapse spreads.Europe gets it.
130 http://ml-implode.com/
“In my mortgage ethics class today, a student brought forth the following dilemma: How can Countrywide justify charging a Full Spectrum client more in loan origination fees, when compared with a prime client across the hallway? The bank is already making its money with the higher rate…. ”
Hmmmm, I would say….. Loan originators are given a base mandatory rate/fee structure and they can raise the fees to make more money. It used to be called overage, I’m not sure what they call it now. Retail branches take losses on fees they cut and make more on fees they overcharge.
In addition, the consumer might not realize that each product is priced differently. Rate gives income in the securitization. Base fees are tied to operational costs.
I don’t see the pricing as an ethical issue between prime and subprime because lenders in both categories cut and charge overages as needed.
I think a more interesting ethical question would be why cut for one customer in the same program and not another.
What was your take?
Jillayne,
Thanks for the question. Who does the consumer trust? Well, they should trust people that are ‘word-of-mouth-referral’…that’s how I mainly get my business other than advertising at a local Safeway (trying that out). And, they should SHOP with a LEAST 3 lenders to keep their current lender on target.
As far as banks winning in the end, well I’m fine with a good bank winning in the end. The secondary market will always be around, as long as competition is allowed. Sure, banks make a lot more on retail, but wholesale will still be out there I’m sure.
All in all, the honest have no need to worry. In the end, honesty wins out.
As an aside, I just started a new website. It’s a little cheeseball, but it works its purpose.
As another aside, look for the Fed to lower rates 9/07. They might start focusing on the bulldog of recession rather than the terrier of inflation.
If the Fed raises rates on 9/07 you can kiss the US Peso goodbye. We talk of a strong dollar policy, yet the treasury is doing everything they can to weaken it further to keep Joe Public buying useless crap from China.
This whole s*hitstom does not need government intervention, they will just prolong the problem. It’s like pulling off a band-aid, it will hurt for a little while, but it will be better in the long run. The American consumer needs to be protected from themselves, a rate cut will only allow them to continue this over-consumption we have become used to.
Excuse me…lowers rates
Correct Dan…lower rates would weaken the dollar. But, what do you think has happened already? The Canadian is gaining against the American dollar and, I predict, will surpass it shortly.
If you want a true ‘fix’ to our consumption economic model, we need a money source backed by hard assets. The Swiss has half their monies backed by gold…maybe it’s not so ‘old fashioned’ to do that since the Europeans do it….eh?
David,
Great thoughts. Our dollar has weakend almost 35% (I believe?) since 2000…and is continuing the downward trend. The Swiss system is indeed one to be admired, although we are so deep down the Rabbit Hole that it would be impossible to switch back to the gold standard without a severe economic correction and deflation. This is not the place to discuss politics, but all the more reason to get out and vote in the next election, wheter Republican or Democrat.
The country does not need the Fed to intervene, this monetary bubble (I said BUBBLE!) should never have happened, thereby not requiring Fed action. I think we should be less concerned on the color of a president’s skin, sex, abortion policy etc, but concerned about their fiscal responsibility. Anyone on this site heard of Ron Paul?
With that…I step off my soapbox.
Appella – Interesting idea (56). Warren Buffet is the largest sharehold in Wells Fargo and just completed another major bulk purchase of Wells again. In addition, it’s also Interesting Wells is buying back their own stock while CFC execs selling theirs.
Dan, GO RON PAUL BABY! Yea, I’m a total Paulite. I am also a recovering Republican….and yes, I can still admire Paul with a clean conscience.
Tony, buy Wells Fargo stock. Here I would recommend Jim Collin’s book ‘Good to Great’. Wells Fargo’s an amazing company. Look for them to have some serious profitability shortly with all the lending ‘cream’ that rises to the top out of the CFC debacle (and others like it).
Kindly.
Dr.Ron Paul in 08
Wells Fargo may have created themselves a teensy “smoke-n-mirrors” accounting dilemma for future concern:
http://www.bloomberg.com/apps/news?pid=20601039&sid=aY8m0nta94GA&refer=home
http://www.newyorkfed.org/markets/omo/dmm/fedfundsdata.cfm
Compare the supposed target rate (5.25) to the actual daily rate:
08/21: 4.89
08/20: 5.03
08/17: 4.91
08/16: 4.97
08/15: 4.71
08/14: 4.54
08/13: 4.81
08/10: 4.68
08/09: 5.41
08/08: 5.27
Looks like we’ve got our cut already. I can’t recall seeing them deviate by this much, for this long. OTOH, you can slash rates to zero and it’ll do no good once lenders are tired of lending against depreciating assets, and borrowers are tired of going into debt for them. This is what the Fed discovered after 1929, and the Bank of Japan in the 1990s.
There’s a great article on Countrywide and Fed intervention here:
http://wallstreetexaminer.com/?p=1550
Tony,
(67), Thanks but I forgot the 3rd rule – Use someone else’s money when possible.
I was having some fun there, but who really knows anymore – crazy stuff can happen, I can say this, David (68) should know that I agree with him as I have done work for Wells Fargo for a few years now and I think that from what is seen from the field, that Wells may have stronger portfolios due to the lending guidelines they have had for about two years now. It should be noted to that Wells probably does more FHA volume then others too and have for some time now.
I think that they have been a little more conservative and therefore are in a better spot to wait the crash out. Did I say crash.. I mean thinning.
I think that Wells is hurting no doubt, but I think that they are one of the lenders in better places a running.
Citigroup is the one that I am wondering about, they have been strangely quite. They remind me of Countrywide in many ways as far as operations. Plus they hold interest in Merrill Lynch and Prime America both have had their hand in the mortgage cookie jar with Merrill holding REITs also.
Plus now might be a good time for Wells to buy back, gain some equity for the holders that are staying on with them in troubled times (loyalty) and head off any buyout offers by BOA or Citi, just saying… I am not an expert in the stock fields.
All I can say is that they have had tougher lending standards and reporting quality for a little while now.
The others have stepped up the requirements with in the last 6 to 12 months in all fairness.
CNN reports that Bank of America at $2B Countrywide preferred stock. Is this a sign that the vultures starting to circle? I.e that Bank of America is initiating a buy out? Any other theories?
Sorry for the poor sentence, it should be: CNN reports that Bank of America plans to buy $2B of Countrywide preferred stock.
“I think the players that win with all this are the banks, because they will increase their power position in the market.”
http://www.boston.com/business/globe/articles/2007/08/22/banks_ready_for_old_way_of_business/
‘Banks ready for ‘old way’ of business
By Keith Reed, Globe Staff | August 22, 2007
The subprime loan meltdown is heating up business for some banks.
Unlike many mortgage companies, traditional banks shied away from the high-risk loans that became popular in recent years, such as those that didn’t require down payments or income verification. But now — with many mortgage companies reeling from the credit crisis and consumers seeking stability — conservative lending practices are paying dividends for banks, say industry officials.
“The pendulum is swinging back toward more conventional borrowing, more thorough underwriting standards, the old way of doing business,” said Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association. “Banks are probably going to capture a larger piece of market share again.”
Cuff said many independent mortgage companies that specialized in subprime loans — loans to home buyers with less than stellar credit — were actually run by former bankers lured by the potential for big profits without all the regulations of traditional banking. There’s evidence their former employers may be having the last laugh.’
“The Old Way” vs. “The New Way” circa 1870
“Progress is cumulative in science and engineering, but cyclical in finance.” – James Grant
“Wall Street never changes. The stories change, the pockets change, the suckers change, but Wall Street never changes because human nature never changes.” – Jesse Livermore, 1923
R Duke
From the time you posted that to now, which is just a few hours later, ml-implode.com is now up to 135.
thestreet.com has a brief analysis of WaMu.
http://www.thestreet.com/s/is-wamu-the-next-countrywide/newsanalysis/ratings/10375529.html?puc=_dm
This is called “Death Spiral Financing.” and CFC is likely not to survive this.
BoA essentially got paid $800M to be first in line for CFC’s loan servicing sector, and they get paid 175bp spread over their $2B for as long as the carcass has a pulse.
BoA, every hedge fund in the galaxy, and yours truly will be shorting the pea-green poop out of this stock once the Lumps show up and bid it up another 15%.
Why would BoA short CFC stock? That’s the $800M question.
Think about it. BoA gets 111 million shares at $18/share. As long as the stock is above $18 they can short with absolute impunity. Even if the stock goes to $500/share, they can cover their short at $18. That $18 is well below where the stock closed today, and you can bet every dumb farm animal watching CNBC will rush out to buy this steaming pile of financial incompetance at the open, which only enriches BoA.
The Wall Streeters get another reprieve from the financial meteor heading their way (a day, week, or month), the Treas Dept and FED can look for the next gaggle of bagholders for Wells Fargo, and WaMu, and the IBs stay out of the spotlight for a little while.
Hi Diane,
Regarding comment 61, before the students move into an ethical dialogue, I first have them check to make sure their ethical scenario isn’t a legal issue. If there’s a clear statement of the law that addresses their situation, there is no ethical dilemma.
In the example of charging one customer more for the loan than another, the federal law that the LOs would have to consult are Fair Lending laws, and ECOA (Equal Credit Opportunity Act.)
A customer who’s “naive enough to get screwed by his or her lender” is not in a protected class.
Hi Eleua,
Thank you for the death spiral financing lesson. What is the likely next move for Countrywide? I feel like I’m watching a chess game and CW just lost both rooks.
Hi David and Dan,
It sounds like it might be better to just leave rates alone on 9/07 and let the unravelling continue.
Hi Tony and Apella,
Are there any other banks that are buying back their own stock besides Wells?
Hey Paulie fans,
I just read on Dr. Ron’s website that he opposes abortion. America’s Hope is un-electible. The Republican party needs to shake off the religious conservatives and try again 8 years from now.
I seriously doubt they can get any more financing. Who would take on that risk, now that BoA has first dibs on any assets at CFC? Also, as BoA shorts the stock, it will depress prices of the stock, and many of CFC’s other debt lines might be called for undercapitalization.
I just think we are watching it go through its death rattle.
I may be wrong on this, but right now, I don’t see any upside for CFC.
My guess is that CFC had to take this or file Ch11, and it was going to happen this week.
The scary part is WM and WFC are probably getting very nervous watching this. They have lots of live grenades rolling around on their balance sheets. In the interest of full disclosure, I am neutural on CFC, but WAY short on WM and WFC. I sold out of my CFC position last Friday.
LEND-RON
As far as chess goes, I think the situation is more like a “Smothered Mate.” Either way, it’s really bad.
Jillayne, I really enjoy your posts. Please keep them coming.
BTW, a pro-abortion candidate has not achieved more than 51% of the popular vote in my lifetime. Carter was the only one that came close. Pro-life candidates, like RP, have won 7 of the 10 elections in my lifetime – 4 were blowouts.
RP supports state’s rights in this matter. In our state, the laws would be unchanged
Hi Comrade Chairman Greenspan,
Thanks for the link to the wallstreetexaminer in comment #71.
Yes, banks are going to do quite well when all is said and done. I wonder if they are secretly thrilled to see the majority of the storm clouds hovering over the brokers and wholesale lenders.
What do you think about the second part of my prediction in that the other big winners are going to be the hard money lenders?
Hi Eleua,
What do you think will happen during the next 10 elections of your lifetime?
History has a way of swinging back and forth between conservative and liberal. Maybe the next 10 elections will give us the opposite results when compared with the previous 10.
Eleua,
Thanks for your comments. The smothered mate move is nasty; I’ve never been sandwiched in like that. It leaves black with no option. But that’s what you’re getting at, isn’t it? CWide is backing itself into a corner with each move.
Hey Meg,
VERY interesting article on Wells Fargo’s earnings report back there in comment number 71. Now I’m curious to see what WaMu’s earnings report says.
By the way, I’m going to go see SuperBad a second time tomorrow night. I just have to see the cops pretending their flashlights are light sabers while driving one more time.
Best line of the movie:
McLovin: “What’s it like having a gun?”
Cop: “Like having a second penis.”
#86 – possible, but culture doesn’t change as fast as you might think. I would submit that the past 10 elections took place in the most liberal 40 years in our nation’s history. This is probably due to the ascendency of the Boomer generation and their generally hedonistic and nihilistic view of life. Sociology and the study of generaional trends in the US show that we are probably going to go back to a more life-oriented (and I don’t mean that in an abortion sense – just a rejection of the culture of death and meaningless hedonism) view of the world.
If your world consists of the Left Coast, and the BOS-NY-WAS corridor, you might be right. However, those in “Flyover Country” still get to vote. Even in our state, Western King County is the only real liberal part of the state (and Port Townsend), but every other part of the state is pretty mainstream. Liberals have to steal elections to stay in power out here.
Any other opinions I might give on this subject might run afoul of influencial people on this forum. I don’t feel comfortable being fully candid in this subject on a sensitive forum such as RCG. I know that I’m on thin ice everytime I come over here.
You’re not on thin ice with me. We can respect each other even if we have different opinions. You’ve always treated me with respect.
Your points are well taken. As a business traveler, I have experienced small towns in the flyover states and it is almost like traveling back in time.
Well, now I’m curious to see what Ron Paul has to say about the mortgage market and how he would fix things, if elected. It has to be better than what Hilary came up with.
Jillayne,
Thanks for the encouragement. I try not to put my feet on the furniture when I come over here (although Ardell might disagree).
Also, I like the idea that different opinions can be expressed without making it personal. That’s rare these days.
Anyway…It’s probably better to keep this thread on CFC, WM, and WFC. We’ll talk about the other stuff next year when it’s election season.
————————
In the Spring, Countrywide did a $4B debt offering that had a huge poison pill stuck in the middle of it. That pretty much assured there would be no buyout of CFC as a unit. I think BoA is just trying to get in position to get the mortgage servicing piece of CW, and they are getting it on the cheap.
WM and Wells (as the two articles referenced above show) have serious problems. I wouldn’t be surprised if they got thrown under the bus before Christmas. Everyone and their dog knows how bad WM tortures it’s quarterly releases to show “good” numbers. It was even in the Kitsap Sun as a feature article.
Wells has been far too quiet for the amount of kinky loans it originated. There is NO WAY they don’t have any 15 megaton surprises waiting for someone to stumble upon.
We shall see. If CFC dies a horrible and public death, the next one will slide down the pipe much easier.
BTW, is it me, or does anyone else think that Mozillo could afford a better looking wardrobe?
Eleua:
Thanks for the illuminating comments.
Jillayne,
Good eye on the +5.Please fasten your seatbelts,and keep your arms inside the ride.As for Dr.Ron Paul,hes one of only a couple guys running from either party thats a true Patroit, wants our privacy rights returned,and is not a member of Council on Foreign Relations,the New World Order Crowd.They are backing the proposed North American Union,which bush was pimping in Canada this week.If that happens,this whole country is going 3rd/4th..world overnight.China is the model for that.Say No to Amnesty for illegals!!!Some say that this pending dollar crash will usher in the new currency,the amero.
Mozilo is probably wishing he had taking BofA up on their offer a while back when their stock prices were in the 40 dollar range…
BofA got an absolute steal on this deal… The deal is horrible for CFC.
Hi Eleua,
Mozilo needs to select some softer-colored ties to compliment his skin tone. The bright! red! ties contrasted with the bright! white! shirt and the pinstripes are so Reagan-era. But what do we know? He probably has the suits tailor made. Maybe one of his kids gave him the red tie.
What do you think about what Angie had to say on CNBC today?
http://www.cnbc.com/id/20408981
Matthew,
I wonder if BOA has their eye only on CW’s servicing portfolio.
Naw, the red tie is supposed to be a power color. That’s why presidents and heads of state always wear a red tie. Usually with a blue suit. The pinstripes sounds tacky. Though, my husband had a very nice grey pinstripe suit made in Hong Kong. Wouldn’t wear it with a red tie though. Not his color and he’s sorta vain like that.
R Duke,
Since the good doctor is removed from the political new world order, do you think he is electible, and what does Paulie have to say about what he’d do (if anything) to fix the mortgage market?
For once, I agree with Tanzillo.
Granted, I thought we would get a detailed airing of the nuclear launch codes before CNBS aired any perma-bull admitting that the housing sector will drag us into recession.
Oh, LOL. I finally figured out why you call him Tanzillo. It’s because of his tan.
CNBS aired that because they know they’ll get an increase in viewership which translates into advertising dollars.
Tangelo, Bronzillo, et al.
Either way, he’s got half a bil and evidently needs it to pay tuition for his 9 children. he actually said that in the CNBS interview.
dress for success 101
blue suit
white shirt
red tie
authority
Ron Paul advocates a laissez-faire approach to government intervention in what should be (and was meant to be) a free market economy. One of his major points is eliminating the Federal Reserve in favor of a government regulated entity. (If you are not aware, the Fed is run by private bankers with minimal government oversight. They just make it appear that way. Same as Fannie and Freddie)
“More inflation is, however, never the answer to inflation.
The truth is that business involves risk, and businesses that miscalculate risk should be liquidated (COUNTRYWIDE!), so their assets can be reallocated to businesses that correctly judge risk and make profits.
Instead, the Fed has injected $64 billion into the jittery markets, effectively amounting to a bailout that keeps these malinvestments afloat, but eventually they will become the undoing of our economy.”
-Ron Paul August 2007
Dan C.,
Thanks,I tried to post earlier,that Dr.Paul advocates a re-introduction to gold standard,to replace fiat currency.
Hi Dan C and R Duke,
Is there a democrat candidate that advocates the same monetary policies? Please say “yes.”
I don’t believe any of the frontrunner democratic candidates would feel comforable even thinking about serious monetary policy, same for the Republicans. They can talk about balancing the budget and fiscal responsibility all day, but actually practicing it?….Please.
Frontrunners in any campaign must sterilize their views to appease Joe Public. This is why someone like John McCain or Ron Paul will never be elected. Their views are simply too controversial for the main political parties and general public to accept. People are too scared of massive change. BUT, sometimes massive change is required to fix a broken machine.
I plan to vote libertarian in the next election, even though the platform doesn’t stand a chance. I do this because I can…and that is the beauty the country we live in.
I just urge people to understand who it is they are voting for and not to vote because their friends/parents/CNN told them how to vote.
Jillayne,
I seriously doubt any Democrat will advocate sane fiscal policy like R.Paul does.
Why? Am I just a partisan hack?
The entire point of the fiat currency system, the FED, and the income tax is to give government unlimited spending ability. If any of the three were to be demolished, the government would find itself on a cash budget overnight. That is political death to a Democrat. They need to spend or die.
Republicans are not much better. They figured out how to buy votes when they got the majority.
The only way the system ends is in an economic collapse. Hopefully, the proper lessons will be learned and when we rebuild, we will do so with the proper view of a real monatary sysem in mind.
BTW, that was B. Goldwater’s opinion back in the early 60s.
Hi Dan C and Eleua,
Thanks for the insight. I’m not rooting for an economic collapse, but I will share with you that my economics professor agrees with Eleua.
Here is a link to a story from this morning’s NYTimes that outlines the inner workings of Countrywide based on reports from anonymous employees.
http://www.nytimes.com/2007/08/26/business/yourmoney/26country.html?hp
Sniglet (sorry for my late replies…I’m just recovering from vacation and re-entry is harder than usual!). RE: “From what I’ve heard Rhonda, and others say, it sounds as if many of the people who used no-interest, or negative amortization loans, were doing so merely because they wanted more flexibility in asset management, not because they couldn’t afford it.”
Many of my clients have used interest only products for cash flow and asset management purposes–they would qualify at a fully amortized payment. AND many have also used interest only products for qualifying purposes. I know “many” is vague and my clientele surely do not represent everyone…just my small corner of the mortgage world.
Probably the most popular interest only programs I provided were the 30 year fixed with 10 year interest only payments and the 5 year fixed with 10 year interest only payments.
I HAVE NEVER provided a neg am or deferred interest loan (option ARMs)…I just could not get my arms around that program.
I do highly recommend that anyone with an ARM adjusting 18 months or sooner to meet with their Mortgage Professional to make sure you’re in the best position possible to refi or sell.
Wow! Next thing you know, it will be frogs and locusts around here.
Fla has hit the rocky road head on people are suffering bussiness owners are losing money / some say hurricane worriers are keeping away / some say it was a mexican curse they bought from morgage lenders who took there profits to mexico then the mexican owner abandened the property causing an effect that we have now .
sweet revenge / but us reg americans are once again holding the bag // The answer lies in restucturing the loans to meet what the home owner can afford its the only way to say any kind of economy we have WAKE UP !!! ITS THE ONLY WAY !!! FORGET THE CREDIT SCORES AND GET TO BRASS TACS HARD TIMES HARD SOLUTIONS NO PULL OUT . HELP OUT
Wow. The mexican curse. I have not heard of that one before.
Not quite frogs and locusts but close.
A government bailout is not the answer, at least not in my opinion. What part of Florida are you in there, Troubled Homeowner?
FLA, did you see Donald Trump’s interview when the market took a big one a week ago?
Here’s the basics: BANKS DON’T WANT YOUR HOUSE (if your Loan to Value is over 70%)!!!
So, just give ‘em a call, and say, ‘Hey, if we don’t renegotiate these terms, you’re going to own another house’. Take the rate from 8% to 5% or from 7% to 4%….you’re the one in control, just realise it.
Cheers,
-David
PS–on another note, here’s some prophetic hindsight: http://www.nytimes.com/2007/08/26/business/yourmoney/26country.html?_r=1&oref=slogin
Perhaps somebody with more knowledge on this topic than me can comment, but I was under the impression that since the banks don’t really ‘own’ the loans any more (ie they have been bundled and sold in the secondary market as MBS), they are limited in their ability to renegotiate the terms.
Hi David and czb,
Although it may be true that lenders don’t want to foreclose, it is also true that lenders are not always well situated as to just start modifying the note and deed of trust for everyone who’s in default. If that were the case, there wouldn’t be any foreclosures at all.
If there is a light at the end of the tunnel, with the borrower being able to get back on their feet again financially after a period of temporary financial distress, a lender is often willing to help the borrower get caught up.
If there is no light at the end of the tunnel and we’re talking about true financial distress, it is better not to postpone the inevitable. The homeowner ought to try and sell. A bank can’t just routinely modify the loan terms because they have most likely already sold the loan and have promised investors a certain yield on their investment. Modifying the note/deed of trust is not a given, especially if a borrower is in a position where he or she is not able to repay the loan. Now we’re just making a new bad loan. Banks are not allowed to modify if the person cannot show that he or she is able to repay. Better not to postpone reality.
Homeowners reading this thread, for ALL your options, contact a HUD APPROVED Housing Counseling Agency. Go to hud.gov click on “talk to a housing counselor” right in the middle of the page. Now find your state and county. Look for an agency that offers DEFAULT COUNSELING. (Some only offer first-time homebuyer classes.)
Do not call the phone numbers on the signs by the side of the road. There are no angels on earth that are going to come down and rescue you from foreclosure. HUD.GOV start there.
Jillayne,
Re: “A bank can’t just routinely modify the loan terms because they have most likely already sold the loan and have promised investors a certain yield on their investment. ”
That was my understanding as well. I have heard many comments similar to David’s, about how it is really the debtors who have their banks by the short hairs and are calling the shots. Seems truly delusional.
For those interested, Countrywide released an official statement attempting to refute the information published last Sunday in the NYTimes which contained interviews with CWide employees painting a less than flattering picture of life on the inside of CWide.
Here are some quotes:
“Countrywide’s business processes are designed to prohibit steering borrowers who qualify for prime loans into subprime loans.”
“Countrywide’s loan officers do not receive higher commissions for subprime loans with prepayment penalties.”
“Countrywide does not tolerate steering of borrowers into loans they cannot afford,”
“Countrywide has become the nation’s leading mortgage lender by acting in the interests of our customers.”
Here is the full CWide response. Link opens PDF
http://about.countrywide.com/about/Docs/cfclendingpractices.pdf
If you’d like to read what some brokers are saying (who brokered loans to Cwide,) jump on over to Morgan’s Blown Mortgage and read the comments.
http://blownmortgage.com/2007/08/30/countrywides-official-response-to-the-ny-times/#comment-3493
Jillayne,
Thanks for writing one of the more thought provoking posts on this blog, I am thankful at least one of the contributors uses their head!
If you want to further understand Ron Paul’s views, this is a pretty good video I found this morning (requires sound)
http://www.youtube.com/watch?v=IWfIhFhelm8
I look forward to future discussions!
Hi Dan,
I’m watching it now. Very compelling. The only thing that would turn me back toward the Republican party is if they get rid of all the morally righteous religious conservatives.
Paul has some radical ideas; but he is not electable because of his conservative religious views. Some Americans might vote for another conservative in, perhaps, another 8 years. Don’t count me as one of them.
Jillayne,
I read a really good article in the ‘Stranger’ on Ron Paul a week ago. It cited that he was one of the only (or few) Republicans who would criticize the religious right.
Now, as a Christian myself, I must say it’s high time (late actually) that we start criticizing ourselves and start doing a serious self-assessment. We’re quite hypocritical and rather Pharisaical. Honestly, if Christ came down from Heaven in person, He’d throw likely 80% of pastors out on their ear.
Rather Paul is election-worthy himself or not may not be the question. It should be a lot about principles and morals, considering that is rare in our day.
I wonder what he would do with the catholic pedophile priests. By that I mean Ron Paul not, JC.
What about Sen Larry Craig???
His story makes me wonder how many conservative Republicans are closet homosexuals.
David: You have found Jillayne’s weak spot. She has no tolerance for religion.
Then why associate with a masculinocerous like me? I really like that word actually….and I think I’ll use it more often. Ah well. I’m going to pour a glass (if I can find an opener) of San Sebastian’s muscadine port, and toast you two. Have an excellent weekend.
Cheers!
Frankly, David, I was enjoying the political discourse until the theophobia surfaced. So, from a Pittsburgh born – well actually Homestead born liberterian – registered Republican – student of religions, I’m going for a beer. Have a nice weekend.
Hi David,
Because you’re smart, young, and open to learning more about the world as am I.
Hi Diane,
You’re right. Let’s just say that the Republican party is collecting as many conservative voters as it is losing moderates.
Diane and David, rent the documentary “Deliver us From Evil” this weekend. It’s available through Netflix or at Blockbuster. It was nominated for an Oscar for best documentary. The filmmaker came to Seattle when the movie premiered and I happened to be in the audience. Let me know what you think! I learned so much about the catholic religion that I had never known before. I also came away with a profound sense of compassion for the priests. You must watch the movie to understand.
Got it. I’ll try to rent it.
I also opened the port with a pair of scissors…very useful actually. This, of course, would fly in the face of you accusing me of being ’smart’! : )
Cheers!
http://www.mercurynews.com/breakingnews/ci_6809652?nclick_check=1
everythings fine at CFC.Anyone see Mozilo talking about the recession today?
NO! What did he say? I was out all day teaching. If you’ve got a link, that would be great. Thanks, R Duke.
The link asks for a password. Feel free to copy and paste what you think is important.
Who else here has CFC puts? The 20s are still cheap, IMO. All these bears congregating here in RCG!
For me, the proceeds are going to my Seattle SFH Fund, or, if luck has it, my Depression Survival Fund.
By 2009 or 2010, when all of the 100% mortgage homedebtor poseurs are flushed away and living in their cars or under viaducts, those of us with solid credit and real savings will emerge from our rental bunkers to live as right proper citizens once again.
I’m very excited about the prospect of houses being just homes once more, for the raising of families, instead of ATMs and vehicles for wild financial speculation. I’m so stoked for the Alt-A apocalypse.
Hi christiangustafson,
So you’ve heard: Countrywide cut 900 jobs today in mortgage production
http://www.tickerforum.org/cgi-ticker/akcs-www?post=6465
CG,
In some ways I’m with you and many others that the pending (or in progress) real estate/credit meltdown is a comeuppance that has been a long time coming and that will hopefully recalibrate currently unsustainable and irrational economic/market forces.
One way in which we differ, however, is that I do not look forward to this upcoming, potentially major economic meltdown with anywhere near the same amount of glee as you appear to. I think that a scenario where those who everextended themselves irresponsibly will get completely burned while those who were fiscally responsible can watch the carnage and swoop in and take advantage when the timing is correct would be highly optimistic. If there are the widespread economic repercussions that you (and many others) anticipate, very few will escape getting burned. Those who are more fiscally responsible may be burned less, but 60% 3rd degree burns can be equally as fatal as 100% burns.
There is much more to this than waiting for housing prices (and mortgage co stocks) to crash and cashing in. I think you know that but your last post reflects otherwise. Mass layoffs in the mortgage industry today may indirectly translate to mass layoffs in other industries tomorrow, and so on. I wonder if this might be a situation where the cliche about being ‘careful what you wish for’ would apply.
You are right czb, there will be plenty of collateral damage all around, as the recession gels and worsens. It really gets interesting when the RE crash collides with Boomers’ retirement dreams. I’m a superbear, of course I know this will be grim. I’m starting a family as we sail into this storm.
However, wishing that this will not happen will not make it so. Nor will fighting it by trying to reflate it or preserve current values do anything but drag it out and make it worse. Credit contraction has to happen now before we get into a true “crack-up boom” scenario. The crash needs to be accepted, endured, understood, and remembered.
Then we can get to the important work of building an economy that is not based on RE asset inflation, IO ARM loans, “mortgage brokers”, escalator clauses, bidding wars, liberated home equity, and other ills.
And the beat goes on.
Mortgage lender Countrywide to cut as many as 12,000 jobs.
With my head deep into another project, I missed the news until I saw your comment, GMS. A tip of the hat to you.
What I need right now: Some sort of radio program or RSS feedreader dedicated to the mortgage market implosion.
RCG readers: here is the letter CWide sent to its employees, courtesy of the Wall St Journal. Link opens a PDF:
http://online.wsj.com/public/resources/documents/countrywide-letter09072007.pdf
Fitch just downgraded two of Countrywide’s pass-through certificates:
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070907005754&newsLang=en
This is my first time here and it is interesting to see how your comments progressed right into the news posted by Jillayne. I have been in the mortgage business for a few years now and I have spoken to several people who are in loans they should not be in. I had one man who wanted to lower his payment and was telling me what his rate was, but it did not caculate. He was in an Option Arm loan and had only been making the minimum payment. It turns out that his neese was kind enough to put him in this loan his comment when I explained the loan to him “why would she do that to me”. I have come across several people who want to refinance but they are in Stated Option arm loans and have no equity, many issued by countrywide. Countrywide is still doing option arm loans. They are one of the few lenders that does them now. Another interesting thing about this is that on their wholesale rate sheets they don’t pay the broker for doing the 1 year pre-pay only the 3 year pre-pay. Considering the loan will recast (over the acceptable value of negative interest) after about 2 years, this is pretty ruthless.
czb,
I agree. Gleefully awaiting the demise of others, so one can cash in on their hardship, is clearly going to come back to bite someone in the ass. I’ll have no part in it.
Hi Brian,
Thanks for stopping by RCG. Interesting info regarding countrywide’s payment to brokers. Is it that C-wide doesn’t pay brokers very much or pay a yield spread for selling the 1 year prepay? Or is it that they ONLY pay brokers for selling the 3 year prepay?
Thanks for the clarification.
Hi Ardell,
In a free market economy, we will always have people selecting to make a profit on the misfortunes of others.
It is a wide continuum. Draw a line…..On one end we have the folks with a high degree of resentment who wish for the financial demise of others in order to turn that into one’s own personal self interest.
In the middle, we have basic principles of buying and selling, for example, the people who sell diet products preying on the hopes of others who believe that a pill will magically make those last 10 pounds dissapear.
At the other end, there are people who would want to help keep all foreclosing homeowners in those homes, even if it means dipping into one’s own pocket and paying higher taxes.
There are all kinds of other position points all up and down the continuum.
Ardell,
re: your comment #142, your point is well-taken but I don’t think you understood exactly what I meant in comment #137.
What I was saying was that even those who think they have put themselves in a good position to capitalize on a severe housing bust may find that they do not escape unscathed if said bust is accompanied by significant economic repercussions outside of the housing realm (which would almost certainly be the case). As unpalatable as it may be to you that some may be cheering on the demise of others, my point was that they may in fact also unknowingly be cheering on their own demise. There are as many hypotheses about the global economic effects of deflation of this credit bubble as there are economists and blog commenters, but we are entering uncharted territory and I wouldn’t be anxiously anticipating the fuse to be lit when we don’t really know how powerful the bomb is.
And CG, I think I also get your point (correct me if I’m wrong). If it’s gonna happen then avoid denial, batten down the hatches as best you can and hope you’re in good shape when all is said and done. Not a bad perspective.
Countrywide employees might be interested in how the managers at First Magnus reassured employees that the company was on solid ground while scrambling behind the scenes to save it.
http://www.kold.com/Global/story.asp?S=7047592
Hat tip to ml-implode.com for the link
A friend of mine just left CFC for another bank last month. I think he left in July so it was near perfect timing, although a big portion of his 401k was in CFC which hurts. When I heard how much he was making as a Loan “Consultant” it was incredible.
Hi Onlooker,
I wonder how much he’ll be making in 2008. Hmm. I wonder how much any of us will be making in 2008
iceberg 1- CFC 0
This morning, Tanta over at Calculated Risk gives a nice analysis of Countrywide’s latest move to borrow more money. Bottom line: CWide wholesale reps who are still aboard the Titanic should find a lifepreserver or start looking for a seat on a lifeboat.
http://calculatedrisk.blogspot.com/2007/09/cfcs-august-operational-report.html
Did anyone see the tan man at the meeting w/Paulson yesterday?He doesnt even have to say anything,he’s still funny.Even funnier is CFC stock is up.
Yes, the stock is up…for now. Did you read Tanta’s analysis, R Duke, and do you think CWide will be shedding more employees soon?
CFC can process 1,000 former emp.a week onto the street.Look for that # to continue.With oil at all time high today,and dollar in freefall,word of 12 billion more to the tan man has everyone feeling good.Dont pay any attention to millions of bad loans!!!!!Never been a better time to buy!!!!! Its got granite in every room!!!!!
Word is CFC is doin workouts w/ borrowers,but refusing about 1/2 the apps.,because they are in the weeds.This will be interesting.
If I were CFC, I’d try to do workouts, too. Interesting to hear that about half do not qualify. I wonder if it’s because of property depreciation or borrower’s inability to qualify for the workout or a combo platter?
Jillayne,canada/UK holding a lot of tinder errr paper.Dollar at record low today, oil record highs,this party is just starting.
Blownmortgage is reporting that Angelo Mozilo is going to sell more stock next week:
http://blownmortgage.com/2007/10/05/mozilo-to-dump-tons-of-countrywide-stock-next-week/
Morgan asks us to ponder: will BOA be the buyer of all this stock?
Morgan Brown is reporting that Countrywide is handing out rubber bracelets to employees, blocking access to the website ml-implode.com, and trying to keep everyone in line by having them sign a “loyalty agreement.” So far there’s 69 comments, some from current and former employees. An interesting Wed night read:
http://blownmortgage.com/2007/10/08/phase-2-of-countrywides-protect-this-house-campaign-block-ml-implode/#comments
Jillayane, is that not “super bad”! if they don’t sign a “loyalty oath” they don’t get a bracelet! I cannot imagine working under that type of atmosphere…talk about being branded. Thank gooness Mozzilla didn’t want his faithfull followers to get some “super bad” tattoos!
Jillayne,looks like Tanzilla is going under the microscope,the orange glare should shield him
option arm mess looms for Tanzilla
http://online.wsj.com/article/SB119318489086669202.html
The last line of that CFC statement is a classic
Jillayne, I was at Hattie’s Hat having a late brunch today (I highly recommend their Migas) and had the opportunity to read this article from the NY Times:
http://www.nytimes.com/2007/11/11/business/11angelo.html?_r=1&n=Top/Reference/Times%20Topics/People/M/Mozilo,%20Angelo%20R.&oref=slogin
Hi Constant Readers;
I hesitate posting this link because I’m not sure I can handle the truth. Please tell me stories like this have not happened on a large scale;
http://loanworkout.org/2007/11/12/ex-countyriwde-employee-reveals-a-secret-ingredient-in-mr-mozillos-original-toxic-loan-recipe.aspx
[...] If BOA is buying 1.48 trillion for 6 billion, (they already put 2 billion into CWide so their latest bid is 4bil) perhaps this is a good investment after all, for BOA that is. But not for the 50,000 Countrywide retail and wholesale employees. Matthew at blownmortgage reminds us why BOA closed their wholesale lending division, which does not bode well for Countrywide wholesale employees. Take off the rubber wrist bands and start polishing your resumes and networking skills (like I suggested in August), before the WaMu retail employees land all the decent-paying jobs first. [...]
way to toot your own horn #166… but you were wrong… wrong… wrong… I will save my rubber wristband as we will eventually come out of this and I will continue to cash my nice paycheck…
It is far too soon to celebrate, ace.