Countrywide

[maxtower]

A lot of the ones blowing up this year are probably the 2 year variety. Next year, you'll see the 3-yr ARMS blowing up. Were there more 3 yr than 2 yr?

[Tien]

From talking with American investors for the past year (I am from Canada) they repeatedly have told me how rediculously easy it was to finance people during 2003-2006.

They would simply advertise the "0 down, No banks needed" hoopala and cash out with those B and C credit buyers out of their house flips.

During 2007, months and months before the subprime fiasco you see on wall street last few weeks, the investors during the conference calls were telling me how much more difficult it was becoming to finance these people and how property values were dropping long before the wall street fiasco.


There are still a TON more of ARMs out there that are going to be re-adjusting next year, and with interest rates rising as well as the increasing amount of ARMs that are going to be adjusting, the real estate market is gonna be taking a hit from 2 sides.


That is just my speculation. I predicted myself 5-6 months ago from talking with real estate investors that the general market is going to slump down even more, I didn't predict it to be such a disaster with banks and hedge funds going bankrupt left and right and going as far as the central banks pumping money to keep the boat from sinking.

Housing will continue to take a hit I predict, but it won't be as hard as a hit that wall street will take.

More disaster to come, it's not over yet.

[Chrisman886]

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booya just bought 10000 shares

suck it dudes

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[pig4bill]

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Is Countrywide too big to go bankrupt? (meaning someone or the govt would bail them out)

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No. Nobody is going to bail them out. It's not like they're the only mortgage company in the country. The slack caused by their departure will be easily taken up.

[Fishhead24]

I doubt they will go bankcrupt.........

[Fishhead24]

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I doubt they will go bankcrupt.........

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Bankrate.com..........


Friday, Aug. 17
Posted 8 a.m. EDT


It has been a difficult year for mortgage lenders.

The subprime market went into a tailspin in February and March. Then, in late July, a classic credit squeeze developed, brought on by fears that jumbo and nontraditional mortgages might end up having higher-than-expected delinquency rates. Investors in mortgage-backed securities suddenly realized that they didn't know exactly how much their investments were worth -- but they suspected that they had overpaid.

The nation's biggest mortgage lender, Countrywide, was caught up in the uncertainty in the middle of the week. An analyst for Merrill Lynch wrote that Countrywide might face so much financial pressure that it might lead to "an effective insolvency."

"If liquidations occur in a weak market, then it is possible for Countrywide to go bankrupt," Merrill Lynch analyst Kenneth Bruce wrote.

When the words "Countrywide" and "bankrupt" appear in the same sentence -- even as a hypothetical -- people take notice. (Countrywide didn't respond to a request for comment.)

Here are some common questions that consumers have, and some answers.

Why should I care about Countrywide's fate?

Countrywide is the nation's biggest mortgage lender. It funded $39 billion in mortgage loans in July.

It's also the biggest or second-biggest loan servicer. The servicer is the company that you send your monthly mortgage payment to. Then it distributes the money to whomever is entitled to the principal, interest, taxes and insurance.

Americans owe about $13 trillion in mortgages, and Countrywide services about $1.4 trillion of that. So around 10 percent or 11 percent of mortgage-paying homeowners send a check to Countrywide every month.

(Wells Fargo services about $1.4 trillion in mortgages, too. Wells Fargo isn't in any financial trouble.)

What sort of problems does Countrywide have?

For the most part, Countrywide doesn't keep the mortgages that it underwrites to borrowers. The lender sells the mortgages to investors who form the loans into pools, then issue bonds called mortgage-backed securities. When Countrywide sells closed mortgages, it gets the cash it needs to lend to more borrowers. That's how it can pump out $39 billion or more in loans every month -- by selling its loans and keeping the money flowing in. The flow of money is called liquidity.

In the last few weeks, investors have pretty much stopped buying loans from Countrywide because investors lost confidence in their own ability to figure out how much the loans are worth. Defaults and foreclosures are rising, making it difficult to price loan pools correctly.

"The entire issue here is there's total uncertainty about the value of mortgage-backed securities," says Dick Lepre, senior loan consultant for Residential Pacific Mortgage in San Francisco. "Nobody knows the value of MBS. Period. Nobody."

With no one buying Countrywide's loans, the flow of money is cut off. Liquidity dries up. Creditors have raised the interest rates that Countrywide has to pay on short-term debt. On Wednesday, a Merrill Lynch analyst floated the possibility that Countrywide could end up in bankruptcy. That put even more pressure on Countrywide, which says it has ample liquidity.

I'm supposed to close on a Countrywide mortgage in just a few days or weeks. Should I worry?

The answer to this question depends upon whom you ask, how soon you plan to close the loan, and what type of mortgage you're getting.

If in the next couple of days you're getting a plain-vanilla, fixed-rate, conforming ($417,000 or less) mortgage and you're fully documenting your income, you almost surely don't have to worry about Countrywide's problems causing a delay or cancellation of your closing.

What if you're a week and a half or more from your closing date with a Countrywide loan? Most experts say that you shouldn't worry at all if you're getting a plain-vanilla, conforming loan. Christopher Cruise, a loan officer trainer and industry observer, reluctantly disagrees. "If it was two days, maybe," he says. "But the way this is accelerating ... it's moving so fast, that if it's not closing with Countrywide in the next couple of days, I'd ask the broker to shift it to Bank of America or Wells Fargo. I only say this because Countrywide says the liquidity is just not there."

Lepre says: "It behooves everybody out there who's getting a loan to get funding from a lender who will close the loan. How do you do that? I guess my first take would be to say you want to do business with a lender that isn't depending on selling this mortgage to somebody else in the present environment."

And that means it's safer to get a mortgage from a bank that accepts deposits and thus has another source of liquidity. Lepre doesn't name names, but Cruise mentioned two of them: Bank of America and Wells Fargo. Washington Mutual is another, and there are dozens of regional banks, such as National City and SunTrust, that underwrite mortgages.

If you're getting a mortgage (from Countrywide or another lender) that's for more than the $417,000 conforming limit, or has a complexity such as stated-income, you'd better act fast, Cruise says. "Hold your breath and see if you can move the closing up," he advises. "Provide whatever documents. Take a quarter-point hit in the rate. Do whatever you can to get it closed before the window closes. Deal with what clearly is an overreaction here, but just get that sucker closed."

Dan Green, mortgage planner with Chicago-based Mobium Mortgage, says: "If you're worried that the money won't be at your closing because the lender closed its doors, put in a phone call to somebody that can give you a strong referral to a loan officer who can help you."

You want a referral to someone who has been in the business for several years, Green says, because inexperienced brokers and loan officers aren't familiar with the wide array of loan products that are available. "For a very long time, you only needed your primary colors," he says. "But now you need to use all 64 colors in your crayon box. There are still plenty of products out there -- plenty of people buying homes, still being approved. It just requires more knowledge from the loan officer to make it happen."


Countrywide services my mortgage. Should I worry?

"I don't think anybody should worry about where they're sending their check," Lepre says. "Worrying about who you send your payments to -- that's meaningless."

An economist for a large mortgage-industry player agrees. "Customers shouldn't really encounter any major issues," he says.

Countrywide's servicing rights are worth a lot of money. If Countrywide were to seek bankruptcy protection, it's possible that creditors would insist that it sell some or all of its mortgage servicing rights. If the entire portfolio of servicing rights were sold, it could turn into a logistical nightmare. Buyers of servicing rights would receive tractor-trailers packed with paper and reel-to-reel tapes. They would have to match Countrywide's data on the tapes to their own databases.

"This is uncharted territory," Cruise says. "This is Columbus leaving the coast of Spain, headed for India -- and America comes up."

Countrywide says it services 8.8 million mortgages. If all of those mortgage servicing rights were transferred, and just 1 percent ended up having problems, it would inconvenience 88,000 customers.

"I'd watch the escrow account like a hawk," Cruise says. "Just make sure the money is going into the insurance and the tax authority -- where it's supposed to go."

This all sounds alarming. Should I be alarmed?

Don't be fearful. Be watchful. Countrywide has been well-managed over the years, or else it wouldn't have grown into the biggest mortgage lender. Even if it were to declare bankruptcy -- a big if -- that doesn't mean it would shut its doors. It probably would continue to operate while it got its affairs in order.

[ConstantineX]

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why would anyone bail countrywide out? insiders have sold off 72% of their posistions in the last year, they had to deal with 40 seperate banks just to secure 11 billion in emergency operating funds and their assets are completely toxic (60% of their declared assets are in california, nevada, florida and michigan, the four states hit hardest by the mortgage crisis). bailing them out would be pure charity, and the feds have shown no inclination to help out.

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Apparently 50% of ARMs created in California were outright fraudulent with misstated incomes and such.

[Anadrol 50]

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booya just bought 10000 shares

suck it dudes

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Nice play...up another 11% today.

[DesertCat]

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It's gonna get worse within the next year or so.


The amount of ARMs that are going to re-adjust with higher interest rates are going to be 3-4x the amount of ARMs re-adjusted this year and the last which caused the big fiasco this month.


That's my speculation from talking with a lot of real estate investors.

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Why would the amount of ARMS adjusting be three or four times higher in any one period?

[DesertCat]

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A lot of the ones blowing up this year are probably the 2 year variety. Next year, you'll see the 3-yr ARMS blowing up. Were there more 3 yr than 2 yr?

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The real risk is in 2006 and later 2005 loans. Stuff written in 2004 was written at prices before the bubble peaked, so the homes can be sold for closer to what is owed. And two year ARMs are probably the biggest risk since the borrowers were more likely to choose them because they couldn't afford the higher rates of a 3,5, or fixed. Plenty of two year ARMs left to reset this year and next.