San Diego Housing Bubble News and Analysis

Unbelievable! NY Times also had an excellent article on Countrywide's mortgage practice, incentives that are full of conflict of interest, and its hefty fees. I wonder if some state AG will investigate them seriously. Some borrowers got over their heads, but the behavior from countrywide is predatory. There is an article on LA times talking about countrywide CEO's stock selling program - he certainly sold and sold fast prior to the crash. Now he wants to salvage what they did wrong by making it harder for their customers.

No wonder mortgage servicing is considered a profitable steady business. They made fees left and right on their customers' misfortunes. With their mortgage origination business going down the drain fast, they probably are trying their best to squeeze out every penny from the servicing business.

Countrywide is an incompetent company, but this article bugs me. If you truly were defrauded on your loan or screwed over by your servicer- get a lawyer. Lots of laws protect you and a lawyer will take your case for free if its a good case.

But if you can't afford your home- leave!

These loan "modifications" just keep someone on the treadmill of excessive debt and tied down to a house worth less and less every month. Instead of owing 110% of your income for house payment, let's modify so you only owe 100% each month! No money to save for your retirement, your kids education, your vacation, etc.

Foreclosure is the smartest decision for lots of people, even if they don't know it. They could spend half as much renting the same house and not be in fear of the calls from bill collectors each month. They can try homeownership again after saving money for the next seven years while home prices fall and their credit report gets cleaned up again.

re: lawyers

it is my opinion that poor people do not know they are being taken advantage of. Their lives are pretty much hard to begin with, plus they lack education and basic business experience. Therefore the notion that they should just hire a lawyer to take care of their problem is a little naive. If they don't have the money to pay the bills, how would they ever have the money to pay an attorney - or at least I'm sure that's what they think.

Um, I bet no one would be suing for predatory lending if real estate went up forever.

Nobody *has* to buy a house. I've been renting for the last 7 years not because I couldn't afford to buy, but because I *chose* not to based on the economics of it.

I say let everyone involved in this mess burn.

kewp, if you have time, read the article. Not everyone was trying to get rich quick. Some folks just got in over their heads due to job lay-offs or illness, and that's life. How many of us have a year's worth of savings in the bank should something drastic happen to us? I'm not saying there were no scumbags in this mess, but read about what happens to normal people just trying to live the American Dream.

Certainly more than a few took advantage of e-z lending standards, but read about those that didn't and how they've been treated.

This is going to be the biggest mess ever.

At least somebody at Countrywide saw it coming

http://www.latimes.com/business/la-fi-mo...

Sure a lot of innocent people got caught in the line of fire. They were collateral damage in the originators' quest for fat fees.

You'd be surprised how many people only understand their monthly payments today. That's why ARMs and Option ARMS are such bad ideas for the average borrower. Loan officers should be held to the same standards of "know your customers" as stockbrokers.

An OK article in the Times. The reporter doesn't seem to have a full grasp of the mortgage industry, but the article certainly highlights the problems going on now.

Calculated risk has good summary of the deficiencies of the article.

http://calculatedrisk.blogspot.com/2007/...

The Calculated Risk blog author does not hold back criticism of anybody, if they deserve it. Very sharp blogger. One of the best finance blogs out there.

Bubblesitter

Yeah, I love CR, and Tanta. Her posts have been very enlightening these last few months.

Everyday I get more and more disgusted by this side of the business. The RE Agents are nothing compared to these big fat loan biz operations.

Oh, and then there's those folks on Wall Street just going by the Moody's ratings.... don't even get me started.

Am just disgusted.

@lindismith

I would have to agree with kewp on this. A lot of people were sold on the premise of it being the American Dream. That people could be invisibly building equity that they could later tap if they needed to. It is a dream that the RE industry uses to justify and support the high prices for housing.

Best thing to really do is look at it as a rent-buy decision, and go by the numbers. I do have to agree with the issue of lack of financial education. My personal opinion is that financial education should be one of the focuses of our K-12 education system. A person may have live with the consequences of bad or poorly informed financial decisions for years. It would be money well spent.

I did note in the referenced article, that the interest rates were rather high (avg noted about 10%). The only way you get those rates, even from Countrywide, is if you have a really bad FICO and negligible assets. Recently (Aug '07), a friend of mine refi'd her place with Countrywide at about 5.8% for a fixed Jumbo amortizing loan. She has a FICO in excess of 700. I think she finally realized what I told her about her previous mortgage broker taking her to the cleaners (the refi ended up being at a lower rate than what her mortgage broker's ARM would reset to). Even still, Countrywide pushed her to do a cash out. She did limit the cash out to a small amount.. but it looks like I still have to do some financial education with her. The cash out allowed Countrywide to increase the interest rate on the loan. (See Calc'd Risk section on Mortgage finance/Risk based Pricing, check on the pricing of points on the sheet shown.)

I am absolutely fascinated by people's ability to hold home buyers virtually harmless in this last great price run-up. When a homebuyer in 2005/6 gambled with someone else's money, in the hopes of keeping 90% of the future upside profits, is it really "predatory" if they get stuck with 10% of the downside losses? I'd call that a nearly free call option, and it was an incredibly sweet deal for the homebuyers, many of whom committed fraud to get the loans. Quibbling over whether the buyers paid 3% more or less for these call options is like asking if the bank robber had to pay too much for gasoline for the get-away car.

You say homebuyers are losing "their" houses? They never paid for more than 10% of their houses in the first place, if that. I'm sorry that they lost their garages to C'wide. And I'm even sorrier that C'wide's MBS investors lost 25% of the value of the rest of the houses to the previous sellers.

Sure, all those middlemen share some blame, but the big bucks and blame rests firmly with the buyers. They could always have rented if shelter were the only issue. Even the dumb ones were speculating, and they knew it, and now they want to shine the spotlight somewhere else.

/End rant

Patient renter in OC

Sure, all those middlemen share some blame, but the big bucks and blame rests firmly with the buyers. They could always have rented if shelter were the only issue. Even the dumb ones were speculating, and they knew it, and now they want to shine the spotlight somewhere else.

I second that. Even the much heralded strawberry picker in the Bay Area isn't innocent. They all were depending on a refi in the future to keep it affordable.

That said, there will be a few that were genuinely lied to about what they were getting, but it is pittance of people compared to the masses that willingly gambled on the great bubble.

I think both parties are at fault for thinking anything has the ability to appreciate at 100% a year indefinately.

People are most emotional in the one facet of life that should be the handled with more common sense and logic than any other - money.

Countrywide is the poster child of bad mortgage banking and I won't be surprised to see them go under.

If you can prove that your broker, unbeknownst to you, falsified documents to get you into a house you can't afford then get a lawyet.

Otherwise laissez faire and let them learn.

Wow. "Countrywide is a disaster", the "poster child of bad mortgage banking" an "incompetent company".

Not to be rude, but this thread is a bit ridiculous. I've been in the mortgage business for almost 20 years, and I promise you (despite the recent bad press) that you can not gain the market share that CW has by being "the poster child of bad mortgage banking".

All of your arguments are valid.

I do think something needs to be done about the education of the borrower though. For example, in plain black and white, the math that shows them each year what their payment is going to be, clearly stated, with an area for them to sign off on. If there is a policy that comes from a lawsuit that does that, that would be good.

Or how about stated income loans go away? I have a friend in the mortgage biz, and I remember him telling me about the Vons checker and her Trucker husband that finally got a home using a stated income loan (for $500K no less) - how is it that someone gave them that kind of money? That's just so irresponsible.

I have personally never had a mortgage, but I understand the volume of paperwork that comes with your loan, and the way it's written, is very difficult to read. It needs to be clearer. The people at the top cannot take advantage of the people at the bottom. Conversely, the people at the bottom cannot lie their way to the top. I guess that's what really disgusts me: that all this happened in the first place.
I thought we were all more enlightened than this.

"you can not gain the market share that CW has by being "the poster child of bad mortgage banking"

speaking of which, anyone good at linux? win 2k is showing it's age and i'm not interested in xp or vista...

I'll add that companies like Enron and Lucent were big players before their swift and disastrous demise.

I could spend all day writing on the ignorance of the posts above. But time will tell, and we will see who is correct.

i thought you weren't going to be rude?

Read about how I started the "I'm short CFC" thread back in March.

http://www.websitetoolbox.com/tool/post/...

Mozilo is a crook in my book.

Krugman's on him today:
"There is one big difference this time: the number of victims — misled borrowers, homeowners whose neighborhoods are being destroyed by foreclosures, investors who thought they were buying safe assets — is even larger."

Read more here:
http://tinyurl.com/362sus

Since I think my comments above started some of the back and forth here, I thought I'd clarify a few of my thoughts on this.

I think its these "non-profit housing counselors" who are bugging me. If their client truly was misled or defrauded, or the loan servicer is making a mistake, these "experts" should get a lawyer on the phone ASAP to save the person's house and possibly get them a ton of money back. Don't just parade them to the press as a "victim" if they really are one- do something about it.

But these "housing counselors" are not doing any favors for their clients if all they do is yell and scream and demand that the mortgage payment be lowered 10% a month. Even if they negotiate this change, they still have a client drowning in debt and unable to save for other needs. Sending the keys to the lender is the best "modification" lots of people can make, and they need to start getting that advice. Too many people are going to be slaves to bad financial decisions they made in 2005-2006.

I just opened an account at Countrywide Bank and deposited less than FDIC limit. Hard to pass up risk free 5.5%. I am going to roll over my cash among highest paying FDIC/NCUA institutions. I like these disasters. If they all develop hunger for funds and give good rates for FDIC/NCUA insured deposits, savers should rejoice.

I understand that they are currently receiving over 50 million a day in savings deposits.

50 million a day

I think there are enough rational depositors who want to leverage FDIC protection. Once insured, there is no sense in shopping around for banks for reasons other than APR. Let the bank loan to highest risk and pay you high rates; if they go belly up, you get your money from insurance.

Countrywide and similar poorly managed Mortgage Banks are the S&L's of the 21st century IMO. Many are already gone, I expect Countrywide to follow. If I'm wrong, I missed a great buy opp, but I'm sure I'll get over it.

Mozilo sold his XXmillion shares at $28/pc.

Perty Shoddy Reoprting......

many on this blog know more and write better than what was in that article...

knowing enough to know that I know nothing I seemed to know ( thanks to Piggington) more than the author

What matters most
is how well you
walk through the fire...

Rubberbands to save Countrywide?

http://money.cnn.com/2007/10/03/news/companies/countrywide_pr/?postversion=2007100314

The internal campaign will feature a series of town hall meetings where employees will be asked to sign a "Protect Our House Pledge." Wristbands stamped with the slogan "Protect Our House" will be distributed in exchange for signing the pledge.

I would like to have one of those bands as a souvenir of the times. Tell me if you see it on ebay.

Here is the transcript of the rant:
http://online.wsj.com/public/resources/d...

Reminds of that RBS commercial where the guy who took a positive thinking course thinks his positive thoughts rescued them from death.

What they should do is go around to all the people they put in homes they couldn't afford and restructure their loans to fit something they can afford, and take huge losses in the process.

It's that or take the losses later on when they sell one of their 319 REO's in AZ, 367 in CO, 545 in NV, 660 in OH, 773 in FL, 1550 in MI, or 2847 REO's in CA. And those are just the states I looked at.

http://www.countrywide.com/purchase/f_re...