by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Have you ever felt your stomach drop?
I received an e-mail, from reader Robert Kerr today, asking if I had seen Merrill Lynch’s downgrade of Countrywide Financial. Merrill Lynch believes that Countrywide might face bankruptcy. Make no mistake about it, a collapse of Countrywide Financial will give everybody in the real estate and mortgage industry a case of the “awshits”.
The Secret be damned! I said this was plausible back on April 1, 2007:
Here are some warning signs the painfullly paranoid (like me) might feed upon:
1- Countrywide Announces Change in Board Of Directors
2- Fitch Ratings Agency Downgrades 33% of Countrywide Loan Pools; particularly their “expanded criteria” guidelines which include Pay Option ARMs
3- Methinks he doth protesteth too much; Chairman and Founder Angelo Mozilo sold $140 million worth of stock last year while literally screaming that Countrywide should not be penalized by stock traders because of the subprime meltdown.
Negative amortization loans are an excellent financial planning tool. Countrywide has long been a favorite of originators because of their adaptability and innovative lending products. This time, I think they may have overreached. I’m raising our readiness condition to DefCon-4.
I’ve been getting a lot of traffic on my home weblog. The reason is simple; I’ve been writing a lot about Countrwide lately. If you Google, “Countrywide In Trouble”, I’m close to the top. This is not a pat on the back for my SEO technique, it’s a realization of how severe the reach of a Countrywide collapse may be.
Two weeks ago, I questioned why Angelo Mozilo wasn’t owning up to the severity of the problem and getting the bad loans off of the books so we could move on with our lives. More traffic on the weblog. That’s a bad sign. I followed up and wrote a little joke about a federal bailout of Countrywide by President Fred Thompson in 2009 and likened Countrywide to Chrysler. I played with fuzzy numbers and determined that Countrywide’s net worth could conceivably drop some 70% from defaulted loans. Huge traffic on the weblog! Google finance and Yahoo finance picked it up. I think I struck a nerve.
This is not a joke. If Countrywide is allowed to fail, the ripple effect will be staggering. Now, the bubble bloggers and libertarians among us will scoff at the idea of a federal bailout of Countrywide Financial but I will vehemently disagree with them. Removing that amount of liquidity from the markets will be disasterous. The jobs lost will be monumental.
The vertical integration they practiced this decade was certainly the reason for their woes. They established a securities firm to securitize the whole loans and peddle the product. They own a property and casualty insurance firm to sell ancillary products to their servicing portfolio. They even own a federal bank so that they can portfolio the high LTV second mortgages accompanying their first mortgage products.
Mozilo’s never ending quest for market domination (they were planning to control 30% of the originations by 2009) caused them to overreach. He negligently expanded when he should have been tending to his knitting. That doesn’t matter today.
Countrywide Financial can not be allowed to fail. A Chrysler-like bailout will be necessary. Coutrywide will emerge a much smaller player, focused on mortgage banking. There will be no securities firm, bank, nor insurance company. Just a mortgage banking firm with innovative product developers and marketing muscle. After the bailout, Countrywide will probably merge with someone who wants their strong Mid-American franchise- just like Chrysler did.
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curtis says:
What happens to the notes that Countrywide owns if they go belly up? Do they get sold to other lenders? Do they call the notes?
Call me a interested Countrywide Mortgagee!
August 15, 2007 — 8:17 pm
Brian Brady says:
Curtis-
The loans (notes) have been sold. Countrywide retains the “servicing rights” which are contracts to collect payments from the mortgagees and remit them to the investors:
http://www.investopedia.com/terms/m/msr.asp
That is the crown jewel of Countrywide. Those contracts can be assigned by a bankruptcy trustee within days or sold to an interested party.
Your payment would be redirected to the new servicer. My guess is that you probably wouldn’t notice the disruption; you’d receive a letter from the new servicer within days of hearing about a Countrywide demise.
I hope that answers your question. Thanks for the comment
August 15, 2007 — 8:31 pm
Robert Kerr says:
I don’t think it’s just possible, I think it’s likely.
The default rate on their Alt-A paper is almost 6%. Combined with no cash base and a 20% default rate on their sub primes, if things don’t improve dramatically in the next few months, CFC will be seeking protection by year’s end.
August 15, 2007 — 9:10 pm
Brian Brady says:
Thanks for the heads up about Merrill, Robert.
I so wished we were wrong on this one. One of the links is broken above (the one to my fuzzy financial analysis):
http://delmar.typepad.com/brianbrady/2007/08/will-countrywid.html
I guessed that they could lose $10B of their $14B net worth in a year. What I didn’t realize is that in the information age, years becomes months.
I hope we’re wrong; I doubt we are.
August 15, 2007 — 9:17 pm
Todd Carpenter says:
In the last week, I’ve had three different PR companies offer to set me up with several bankruptcy experts to get their opinion on Countrywide’s situation. No thanks. It doesn’t take a so-called “expert” from a law firm to see the writing on the wall.
August 15, 2007 — 10:07 pm
Matt Heaton says:
I don’t think a federal bail out of Countrywide would take place in time to do any good. The FED flately stated they will not bail out the mortgage lenders in pretty plain english today though they will try there best to stabalize the banking system. A CFC bailout likely would take congress getting into the act, and you know how fast they act.
It is going to have an unbelievable impact on financial and housing markets, but the problem is there are many more ticking time bombs out there besides CFC. We may see one or more major money center banks (Bear Sterns, Lehman, Goldman, JP Morgan, etc) get taken down as this ripples through the system. The problem isn’t liquidity that the FED can help with, it’s insolvency as assets are marked to market and the massive leverage in the system has to be unwound.
As hard is it is to stomach, we may be looking at something several times the scale of the S&L crisis back in the 80’s.
August 15, 2007 — 10:58 pm
The Last Honest Appraiser says:
“…A Chrysler-like bailout will be necessary. Coutrywide will emerge a much smaller player, focused on mortgage banking.” Where will that leave those of us OWED money by CountryWide/LandSafe for services? Are we going to be stuck holding rubber checks like those from the now-bankrupt American Home Mortgage?
I hope CountryWide/LandSafe and others will learn that always going for the fastest and cheapest appraisal only gets you in trouble.
August 15, 2007 — 11:11 pm
Jeff Brown says:
The Chrystler bail-out was, in my view, the exception that proves the rule when it comes to gov’t intervention into failing big business.
The threats back then were many, but the potential of so many lost jobs was the catalyst generating the perceived need for the bailout.
Like Chrystler, Countrywide’s failure would have more than a little ripple effect. Also like Chrystler, the perception resulting from such a failure would probably be enough to create adequate inertia for dire consequences. This isn’t a pothole in the street. This would be a giant sinkhole.
I can’t believe Bernanke, if he’s been asked, isn’t whispering to those with the power to take action.
Great post Brian – and thanks to Robert too.
August 15, 2007 — 11:43 pm
Brian Brady says:
Matt-
A bailout is possible if Countrywide files. It can be in the form of loan guarantees like Chrysler and it’s easy enough to execute. The Fed says one thing publicly and does another behind the scenes. One easy solution is to place Freddie in charge of the receivorship (Fannie is too tainted). Freddie virtually unlimited capital resources available to them via the LOC at the Treasury.
Jeff-
It’s the jobs; they riplle beyond the Cwide employees- you’re correct.
I hate to stomach the thought of yet another tax payer bailout. The S&L mess worked well because the RTC bonds guaranteed the losses and rates dropped.
The Fed will be aggressively ease-sooner than later if Cwide files
August 16, 2007 — 1:18 am
trav.is says:
Actually, no. The government (read: the taxpayers) must not be allowed to step in and save a business on the verge of collapse. Businesses that make bad decisions, such as issuing loans to risky individuals that don’t pay off, must be allowed to fail.
If the government steps in it will mean that people having nothing to do with the meltdown (i.e. you, me, John and Jane Public) will be forced to pay for the bad decisions of the board of a corporation.
That is theft. That is not fair.
August 16, 2007 — 1:21 am
Tony Gallegos says:
Brian – Not to mention the class action lawsuit filed by Schatz Nobel Izard P.C. yesterday against Countrywide on behalf of investors that “certain officers and directors violated federal securities laws by making false and misleading statements regarding the changing quality of the Company’s mortgage loan portfolio.”
Additionally, a county in New York announced based on Countrywide’s financial position, they will no longer accept checks for mortgage filings…only certified funds.
As a sidenote, I always respect your well thought out statements, however, I truly believe the remaining STRONG lenders could efficiently encapsulate all the mortgage operations/production of Countrywide if they went out of business. I also believe it could be done without major distruption to the industry. While Countrywide is the largest lender in the Country, most of their volume comes from Correspondents and Brokers. Countrywide has never been the number one retail lender in the country (over the course of all four quarters during the year). All brokers and correspondents would have to do it switch investors to buy or fund their loans. I don’t know of any mortgage company who’s existence is based off of Countrywide’s continued existence? Actually, the area I believe it would hurt the most is their warehouse line division.
August 16, 2007 — 6:16 am
Chuchundra says:
In the immortal words of Rockmaster Scott
August 16, 2007 — 6:24 am
Robert Kerr says:
More bad news today:
Countrywide Borrows $11.5B From 40 Banks
If the link above doesn’t work: http://tinyurl.com/2debkq
And, for the record, I don’t see CFC with a bailout package. More likely, Fannie and Freddie will be uncapped and be allowed take over much of their new business, with more restrictive guidelines, of course.
August 16, 2007 — 6:34 am
Michael Cook says:
To further explore the Merchant banks like Bear Stearns, what happens when these banks start raising their prices to purchase loans or worse, stop buying repackage loans all together. These banks are already putting a halt to many of these business or significantly decreasing their offer price.
We have already seen this in the Jumbo loan market, and have seen the subsequent results in interest rates, which will obviously have an effect on the housing market.
If this repricing of risk leaks over to the conventional market, it could really be devastating to the real estate market. Not sure what the thoughts out there are of the likelihood of this, but as more companies go down and as defaults increase, we could see this scenario as well. Even Fannie and Freddie will eventually have to reprice their risk structure on the outstanding loans.
August 16, 2007 — 7:03 am
The big Dog says:
Instead of bailing out another corporation why not bail out the homeowners directly?
This “liquidity” crisis wasn’t caused by the corporations defaulting but the homeowners. Without them there isn’t a housing market. The banks, lenders and brokers still won’t have any customers for their products given tighter lending standards.
These same homeowners will be the ones who decide that their retirement $$$ are safer in savings acct., gov’t bonds (not realestate backed), or even take out a loan against a 401k pay themselves back at 4.75% in which they are guarenteed to get something. Which creates even less liquidity in the equity markets.
Burn the base of the mortgage industry (the buyers), crash the stock market holding their retirement $$$ and they won’t come back easily.
August 16, 2007 — 9:14 am
Dan Green says:
Well-argued point, Brian. The danger of a Countrywide Collapse wouldn’t be in the fundamentals to the market — there are players that can fill-in the spaces where Countrywide once lived. The danger is in the psychological impact that a bankruptcy would have on the markets.
We all need to remember that the industry’s collective concern about mortgage lending right now is being supported and heightened by the press, the analysts, and other bloggers.
It’s self-reinforcing and is making the cries even louder.
There are still plenty of people qualifying for loans, and plenty of homes still being bought. Fannie and Freddie are performing the job they were created to perform and that is why everything will be okay.
Like you said in another post, though, the safest place to be buying right now are areas in which the area home sale price puts a buyer in the $417,000 or less loan size range.
Let’s all keep our collective chins up. It’s not so bad out there.
August 16, 2007 — 9:34 am
Robert Kerr says:
Instead of bailing out another corporation why not bail out the homeowners directly?
I see no reason to bail out homeowners who were reckless with their credit.
I think it’s much better for the economy as a whole to let them go under, learn their lesson and then let the market reabsorb their homes as REO sales.
There are plenty of buyers out there, just not at these prices.
In the end, normal affordability will be restored and that’s a much healthier market than the bubble we’ve had since ’03 or so.
August 16, 2007 — 10:58 am
Minimum Wage says:
I’ve never been able to buy a home; why should I bail out these people?
August 16, 2007 — 1:15 pm
Brian Brady says:
“I’ve never been able to buy a home; why should I bail out these people?”
Great question…what’s in it for me? The ultimate question for all Adam Smith disciples (of which I’m one).
The Feds need to step in an seize Countrywide from Mozilo before he wrecks the economy. They can restore order to a tumultuous marketplace and sell the reduced but valuable asset off to a willing buyer (they’re out there).
The answer to “what’s in it for me”? Your job. A Cwide collapse will spread to non-housing related industries.
August 16, 2007 — 2:13 pm
Michael Cook says:
I find the moral hazard arguments very intersting. If the baby doesnt get burned by the stove, how does he know its hot? The question I have though is what about the fallout affecting the many people who had nothing at all to do with the situation?
This goes beyond the people who were defrauded. What about the effects on interest rates and the general economy. I had nothing to do with this situation, but I have to pay an extra 1% on my Jumbo loan and my mutual fund portfolio is in the tank(thanks a lot guys).
While I dont like using tax payer money to bail out the industry at all, if using the money prevents even greater harm to me in the future, would it not make more sense to provide some kind of relief?
August 16, 2007 — 3:13 pm
Morgan Brown says:
Dan –
I think the argument that you present:
“We all need to remember that the industry’s collective concern about mortgage lending right now is being supported and heightened by the press, the analysts, and other bloggers.”
Is a little too simplistic. While the media is definitely looking for fire in the midst of a massive smoke screen bloggers, media and the public did not create overly-leveraged securities that were created on a psychology associated with very low aversion to risk.
The psychology a few years ago is what we are paying for now; its not the psychology today that is killing us. The years of cheap credit and no fear of credit risk is the psychology to blame here – not the bloggers/media reporting the demise of these lenders.
August 16, 2007 — 8:28 pm
Morgan Brown says:
Just as an FYI – 11.5 billion is 4.25 days of funding for Countrywide at its normal run rate. Just to put it in perspective.
August 16, 2007 — 8:32 pm
Robert Kerr says:
I had nothing to do with this situation, but I have to pay an extra 1% on my Jumbo loan and my mutual fund portfolio is in the tank(thanks a lot guys).
I had nothing to do with it, either! So why should I be taxed to help you get a lower jumbo rate?
Let the Invisible Hand do what it does best. Your jumbo rate will soon reflect actual risk, if it doesn’t already.
August 16, 2007 — 10:05 pm
Minimum Wage says:
The answer to “what’s in it for me”? Your job. A Cwide collapse will spread to non-housing related industries.
People will spend money, esp on essentials like food. They’ll just downscale the goods and services they buy.
Their idea of dining out might change from an upscale (or more likely, middling) restaurant to McDonald’s. Many minimum wage jobs are found in sectors which do quite nicely in a recession.
August 16, 2007 — 10:58 pm
Morgan Brown says:
OH – and put me firmly in the no bail-out camp. If we want to do a bail out; just give everyone in a Countrywide loan a waiver voucher for the full amount of their prepayment penalty so that they can attempt to secure financing elsewhere if they still can.
While I think that is a terrible idea at least it helps people who are going to lose their homes; as opposed to Mozilo, who already has half-a-billion dollars from stock sales alone.
I know I am over-simplifying 😉 but I don’t see why we need to bail out a company that may falter due to poor cash management (they were buying back stock as recently as 2 weeks ago and just bought up more retail branches) and over-aggressive underwriting. While they were number 1 – they were obviously part of the over-supply problem.
Note that I also agree that it will be like the meteor and the dinosaurs for many in the industry and will rock the economy.
August 16, 2007 — 11:04 pm
Brian Brady says:
Morgan,
I think the $11.5 B last a little longer than 4.5 days- Wall Street is still buying Cwide’s paper- just not all of it.
The real problem is that their borrowing costs have skyrocketed to some 5-600bp over their lending rate. They issued Commercial paper at something close to 12%.
54,000 people work for CFC. Another 30,000 families for CFC conduits. Another 200,000 homes lost to foreclosure because of the collapse. Another 100,000 people who lose jobs because of a deep recession.
Could you imagine preaching the virtues of Adam Smith to some 400,000 voters in an election year.
The “bailout” will be done behind the scenes. Step #1- say goodbye to Angelo & Co Step #2- value the rubble left over Step #3- Ask which money center bank wants the company at five bucks a share.
The Bawld Sage laid it out:
http://www.bawldguy.com/everybody-take-a-deep-breath-countrywide-isnt-chrysler/
August 17, 2007 — 12:46 am
Robert Kerr says:
re: Brian
Step 4: The SEC starts a very public investigation of Mozilo’s well-timed 2007 stock sales.
August 17, 2007 — 4:48 am
Robert Kerr says:
If we want to do a bail out; just give everyone in a Countrywide loan a waiver voucher for the full amount of their prepayment penalty so that they can attempt to secure financing elsewhere if they still can.
Insanely brilliant! I would support that.
August 17, 2007 — 4:56 am
Zoe says:
Absolutely no bailout!
August 17, 2007 — 7:59 am
renthusiast says:
no way should the government bail countrywide and the market out for being greedy, overzealous or overambitious. let the market correct itself, and the chips fall where they may, no matter how painful. no pain, no gain.
the situation with Chrysler was exceptional, the automobile business is a manufacturing industry and besides there only 3 auto manufacturing companies to bail out if the whole industry collapses.
but to bail out countrywide would prove more disastrous to the overall economy, because so many companies are also affected and will begin requesting handouts once the government sets the precedent. in the long run it will prove more disastrous for consumers and the real estate industry as taxes will have to go up to support the bailouts resulting in consumer spending and housing market slowdown.
August 17, 2007 — 10:55 am
Michael Cook says:
The bailout seemed to work well for the airline industry. I am just being a devil’s advocate because I really agree with the no bail out people. Its just such a shame that so many hardworking people, who had nothing to do with this will lose their jobs and their homes. Perhaps that is the American way? See Detroit for a recent example.
August 17, 2007 — 3:17 pm
Jann Linder says:
Bailout the consumer (loan customer)?
Why?
I will tell you why…In most markets (I am in San Jose, CA) where the pricing is outrageous, we saw a house at a certain price, made an offer on the house with the contingency that it appraised at that value. We then made the loan payments on that house. Until….
These countrywide CEOs and board of directors (and those at other sub-prime lenders) made such HUGE ERRORS IN JUDGEMENT that they caused the entire housing industry to go downhill because some/most of the people could not pay their loans.
I am not with Countrywide, but my friend is. He is now stuck in a house that is worth SIGNIFICANTLY less now than it was 1 year ago! This is wrong. Seeing where the house is: Silicon Valley, it was also extremely wrong to *expect him to know that this would probably* happen in the space of time of 1 year.
He is stuck in a house that he cannot possibly sell for what he owes on it.
He should be the one bailed out — not Countrywide! Can anyone say “Offer and Compromise?” The IRS takes it. In the real estate industry it is called either a short sale or a deed-in-lieu. The difference is that in the IRS’s case, it was generally the taxpayer’s fault (his own…not all US taxpayers). In the case of real estate it is not necessarily the buyer’s fault. AND in the case of real estate, the short-sale or deed-in-lieu will appear on the borrower’s credit report–punishing him for something the lender actually caused.
So, who is wrong? The owner for buying a house that they had NO WAY of knowing would drop 15-20% or the lender that employed a appraiser whose JOB IT IS is to tell both the lender and the buyer that property IS actually worth $590k!?
I am torn on this one. I feel sorry for the buyer (for obvious personal reasons). On the other hand, the appraiser is just stating what the market will bear for pricing on that property. However, isn’t it the job of the lender to say “Not how much is the house now, cos obviously the buyer can buy it if they have enough down-payment, etc…but what would the projected value of the house be in 5 years when this ARM comes due for re-evaluation?” Maybe the Appraiser should have to be insured for a certain period of time against their appraissal being incorrect.
I don’t know. Just my $.02
Take it or leave it.
August 17, 2007 — 4:53 pm
Robert Kerr says:
More problems for Countrywide – a depositors’ run on their bank offices today:
A rush to pull out cash
August 17, 2007 — 6:52 pm
Jeff Brown says:
Jann – Is it your position the lender should have let the borrower use their crystal ball?
August 17, 2007 — 7:18 pm
Robert Kerr says:
Jeff B., have you acknowledged that lenders have any responsibility at all for this mess?
I just realized that I don’t think I’ve seen any such admission. Yet.
August 17, 2007 — 7:56 pm
Jeff Brown says:
Robert – You haven’t seen such an ‘admission’ because I assumed it would be a self evident truth. 🙂
The borrower who was improperly put into a loan, either for a residence, or an investment, wasn’t involved with me.
That said, the buyer of a home in San Diego in 2005 who used a traditional neg/am loan with a 1% payment rate, thinking they’d understood all the explanations of the fine print, was very possibly either the victim of the lender, the real estate agent, or both.
The lenders, you and I will surely agree, were not innocent bystanders by any rational analysis of the ongoing situation.
How a neg/am, stated, no/doc, loan is underwritten with a straight face when the loan app clearly states the borrower is an 8th grade teacher making $125K a year, is incompetent at best, and closing in on criminal at worst.
We agree here Robert.
August 17, 2007 — 8:08 pm
Jason Fox says:
If CWBC goes out the whole market is in big trouble. I can’t see a gov bail out but it is possible…
August 18, 2007 — 3:46 am
Jann Linder says:
Jeff: You asked: Is it your position the lender should have let the borrower use their crystal ball?
I think nothing of the sort. I just get ticked when the lender then puts 100% of the fault on the borrower when they end up with a lousy loan that they cannot pay when the rates climb several hundred dollars/month.
August 18, 2007 — 8:16 am
Jeff Brown says:
Jann – I get it.
In that case, I’m with you most of the way. The media has successfully bred a perception saying it’s all the lender’ fault, which is poppycock. Sure, there is a segment of borrowers who truly were unaware of the terms of their loan. I empathize with those folks, and think the lenders found guilty of misleading their borrowers should pay the consequences.
That said Jann, there are probably just as many, if not more home buyers and investors who knew what they were getting into, and thought they were more savvy than reality now reveals.
Borrowers AND lenders are rowing in the same boat together here.
Again, I agree with you there are many innocent victims here.
August 18, 2007 — 9:43 am
Brian Brady says:
We need to move past the blame game if we are to proactively resolve this problem.
Both lenders and borrowers acted exactly as market forces dictated them to. Wall Street wanted yield. Everyone in the world wanted to bet on the American homeowner as a good investment. Wall Street threw money at lenders who, in turn, threw it at the American homeowner.
Then, instead of tightening up on the faucet, they shut it off as the American homeowner was about to walk through the Mojave desert (ARM resets).
Everybody overreached. Now we’re stuck. The Fed needs to turn the spigot a bit to the right or they’ll see tumbleweeds rolling down the Vegas Strip- it looks like that’s started with the open discount window.
The Fed will bailout CFC; Jeff’s guess is as good as any about how it will happen:
http://www.bawldguy.com/everybody-take-a-deep-breath-countrywide-isnt-chrysler/
August 18, 2007 — 11:34 am
NYCJoe says:
I REALLY hope that this doesn’t happen. Bailouts are the complete anathema to capitalism.
The next logical extension of this logic is to bail out people who go to Vegas and put everything on black.
The banks knew what they were doing. They just chose to ignore the potential consequences.
Yes, the fallout will be tough. Too bad. That’s how the system works.
August 18, 2007 — 1:27 pm
Brian Brady says:
Joe-
Yes, that’s how the system works… until…
your neighbor who works at Home Depot, your cousin who owns a construction company, and your aunt who relies on her properties for retirement income need jobs and they aren’t there.
The Fed is supposed to avert such crises.
August 19, 2007 — 11:41 am
Robert Kerr says:
Both lenders and borrowers acted exactly as market forces dictated them to.
Market forces? That’s a cop out for unethical behavior, Brian.
Not to point fingers at anyone here, but a lot of lenders knowingly wrote a lot of toxic paper because they forgot their sense of right and wrong and only remembered their fee structure.
August 19, 2007 — 5:25 pm
Sandy says:
The Fed exists because in 1929 – 1933 the US government learned that laissez-faire capitalism isn’t the right answer for dealing with global economic collapse.
Is that what we’re looking at now? Not yet, but if credit dries up and the American Consumer no longer has money to spend, it very well could be.
The problem with the “let the market sort it out” approach is that the market will do just that, with impunity, and I doubt there are many people who will like where we’re at when all is said and done.
August 19, 2007 — 6:01 pm
NYCJoe says:
>The Fed is supposed to avert such crises.
No, that’s actually not their job. The Fed’s job is essentially to regulate money supply, not regulate the economy.
The fact that all those people might lose their jobs is really harsh – I realize that. I also realize that unless you allow “creative destruction” to run its course, then you just get more market distortion.
If you’re going to bail out Countrywide, then doesn’t it also make sense to bail out people who bought their bonds? Oh, and the common stock too?
Oh, wait, what about the poor folks who bought options? And the people who bought derivatives based on those options?
The problem is that we’re just at the very beginning of this crisis, and it’s quickly going to be too big to bail out. Saving Countrywide is just a finger in the dam – and a whole bunch of new leaks are about to spring.
August 20, 2007 — 12:06 am
Robert Kerr says:
Countrywide has begun laying off originators.
Report: Countrywide laying off loan originators
August 20, 2007 — 10:46 am
NYCJoe says:
SunTrust is jumping on the layoff bandwagon too. Expect to see a LOT more of this…
http://news.yahoo.com/s/nm/20070820/bs_nm/suntrust_dc_4;_ylt=Ak.abASzfYAaz7GhexC1d3ME1vAI
August 20, 2007 — 11:28 am
dwmordue says:
there won’t be any bailout.
Countrywide still has billions in commercial loans that they could sell. Not to mention, they have a huge amount of government loans that they service, and those can be sold off easily.
WAMU used the sale of their government loan portfolio to prop up their otherwise ailing portfolio last summer, when they sold their government loans to Wells Fargo.
Countrywide has 60,000 employees, but unfortunately, the government is not concerned about that. The only thing that the government is concerned about is the effect that Countrywide failing could have on the stock market.
If they can time their interest rate cuts with a bunch of positive b.s. employment economic data and/or oil price publicity at the same time that Countrywide they might be able to lessen the blow.
I think that’s the only thing that they’re pursuing right now, trying to figure out a plan to keeping any more negative mortgage news from rocking the DOW.
August 20, 2007 — 9:24 pm
Lori McGinnis says:
Do you see a marked interest in the Reverse Mortgage for CFC as a means for recovery?
August 28, 2007 — 9:20 am
Morgan Brown says:
Reverse mortgage is the hottest buzzword in the lending industry, battling with FHA and expanded approval as the top three in terms bandied about by those supposedly “in the know.” (/sarcasm)
Yes, I think anyone who is looking to replace refinance and one-off client business is looking at reverse mortgage as a profitable alternative to the dried-up pipeline.
I’d tell old people to look out – will we have some mortgage pretexting issues? I’d bet on it.
August 28, 2007 — 4:13 pm
Fred says:
Ok where does Countrywide stand today? Are they Bankrupt? Do they still collect mortgage payments after they declare bankruptcy? IF so how is that legal.. Their debts have been forgiven-dismissed. Therefore that would make all the future money they collect pure profit?
February 14, 2008 — 8:57 am
neema says:
I agree with You, But i would love it if the federal government passed the federal bailout plan and if you want a way to pass the federal Bailout plan then I would suggest to read this article at LooseKannon.com – “Don’t Think Outside The Box, Destroy It”… I read it and I agree with it 100%. It presents a very smart way to get the fed Bailout to pass.
October 2, 2008 — 9:42 am
Jerry Cooper says:
How do I find out who voted for the bailout? Which Senators and Representatives from my state (Texas) voted for this Proposal? My vote will be my show of disapproval.
October 7, 2008 — 11:04 am