Countrywide

[DaisyDuke]

I wonder why they didn’t ask Mozilo why he has been dumping so much of his Countrywide stock . . .

Countrywide Financial CEO Talks About Subprime Mortgage Meltdown, More

Angelo Mozilo (pictured) wants to make one thing perfectly clear:

Countrywide Financial, whose stock is down more than 20% for the year, should not be lumped in with the subprime home loan outfits that are getting hammered. In a wide-ranging interview with Business Week, the CEO of America’s No. 1 lender suggested that panic was gripping the market over mounting distress in the subprime business.

But he also predicted that the bad news is far from over.

How exposed is Countrywide to the subprime mess?
In 2006 subprime loans were about 9% of our total business, now down to 7%. We’re a prime lender…but we also have been on a mission…to try to increase home ownership opportunities for minorities and low-income borrowers. So it’s distressful to me personally to see the piling on that’s taking place by the media and regulators. This was a system that was working very well, providing an opportunity for people to get over that barrier of entry to owning a home.

Now what you’ve had is panic setting in, and [the subprime story] is leading every newspaper. It’s like there’s no war going on in Iraq.

What will the impact be?
When you cut that first-time home buyer out, there’s a ripple effect. I’ll be the first to admit that a lot of players came into the industry that were not banks, not even mortgage banks, and that they exploited a certain number of people. But that exploitation was in the minority. You had 17 increases in the Fed funds rate. Then those [adjustable-rate home loans] began to reset, and that was the tipping point. When you begin to cut off the demand, values start to recede. And there’s an old saying that you never know who’s swimming naked until the tide goes out.

So the industry got a little crazy with some of the lending?
It’s no different than the equity markets and tech booms. Any kind of bubble like that creates irresponsible behavior. And we did have a bubble in real estate.

Do you worry that the subprime fallout will bleed into the prime mortgage market?
I don’t think it’s going to bleed substantially into prime.

You’ve said that you’ve never seen a soft landing in housing.
Never seen it. That’s right.

Is the worst over?
It’s always hard to tell when you’re at the bottom, but I think that there’s more to come out in terms of delinquencies and foreclosures. I just came from giving a speech in Las Vegas, where there are 22,000 homes for sale. That’s a lot of inventory to eat through.

Will the Fed cut rates if the subprime mess spreads?
In terms of the economy, so far I’ve been wrong. I thought that the housing downturn would have an impact on the economy and could be the start of a recession. That hasn’t happened, but maybe enough time hasn’t gone by. Historically, [the housing market] has led the country in and out of recessions. But there’s an argument that the economy is so big today that housing is not as important as it was. I don’t believe it.

Let’s talk more about the ripple effect and your business.
It reminds me of when the S&Ls were beating us up for a while, and then they all went away. Now you have these [bad credit mortgage] guys going out of business rapidly, and that’s all positive for Countrywide. I said three quarters ago that Ameriquest and New Century were distorting the business and taking away rational pricing. That’s why you saw our volume of subprime go down. We just pulled back.

SOURCE: Business Week

Posted by Jed Moss on Mar 19 2007 under Mortgage Lending

http://www.mtgfoundation.com/categories/mortgage-lending/

[barnaby33]

When a CEO sells 190 million in stock, he can pretty much say whatever he wants, I’ll follow his lead and be bearish on the stock.

Josh

[Bugs]

I know a number of the loans I talked my review client out of making because of overstated values in the appraisals ended up being made by Countrywide, apparently with the same appraisals. I wouldn’t call them a prime lender at all.

[kev374]

Spoke to a friend who is a mortgage broker and he laughed with he read this. Supposedly Countrywide is a poster child for subprime lending! He said whenever he has (had) a subprime loan Countrywide is one of the top contenders for the loan!

[Anonymous]

Just look at this delusional statement below. Now he’s blaming the media and the regulators for ruining his grand social plan for minorities! In fact, his recklessness as a CEO in lending to poverty stricken minority and white families without so much as a casual check to make sure they have a job will ensure that they never make it to the middle class or higher. Regulators and the media have had nothing to do with the interest rate changes that are destroying these families. The system only worked well in that it helped fund his $190 million windfall by giving millions of poor and and minority families access to loans for homes that people like him have always known they could not afford.

“…we also have been on a mission…to try to increase home ownership opportunities for minorities and low-income borrowers. So it’s distressful to me personally to see the piling on that’s taking place by the media and regulators. This was a system that was working very well, providing an opportunity for people to get over that barrier of entry to owning a home.”

[Anonymous]

Note to CEO:

Do you also realize that you’ve got a huge Alt A problem on your hands? Or weren’t you aware that you were approving loans for tens of thousands of people who were lying about their income levels and from whom you requested no proof of employment? And it looks like you took a commission of appoximately 1/4% on those $68 billion in liar loans all for yourself. What an interesting way to empower minorities, by ensuring that the white CEO gets richer and the minorities go bankrupt!

“Countrywide Financial (Charts), one of the nation’s largest mortgage lenders, is the No. 2 Alt. A lender with $68 billion in loans, according Inside Mortgage Finance.”

http://money.cnn.com/2007/03/19/news/economy/next_subprime/index.htm?postversion=2007031917

[DaisyDuke]

He’s not sorry for the minorities and low-income families, read between the lines, he’s sorry he might not make that gazillion dollar bonus this year.

[jztz]

Someone told me that countrywide made a loan to her cousin – option ARM loan with stated income. And then she said – aren’t they supposed to be more conservative?

That’s precisely the point. If countrywide is so much more “solid” than subprime, and we know what type of loans they made, then we know what’s yet to come!

[barnaby33]

I thought I would link back to this thread as I feel its totally relevant to our discussion of the toxicity of Alt-a and why I bought puts on CFC.

Market ticker blog
Josh

[HereWeGo]

The scary part about shorting CFC is the possibility that an investment bank, many of which are flush with cash, might try to buy it.

When GS offered its opinion on CFC earlier this week, that was my first thought, that Sachs is trying to jawbone the stock down to make the acquisition more affordable.

[El Jefe]

Someone told me that countrywide made a loan to her cousin – option ARM loan with stated income. And then she said – aren’t they supposed to be more conservative?

That’s precisely the point. If countrywide is so much more “solid” than sub-prime, and we know what type of loans they made, then we know what’s yet to come!

Countrywide was making as many or more toxic loans as the next guy. You need to take there CEO’s comments with a grain of salt. The truth is that they high graded all of the sub-prime loans they originated and held on to a very small % of the total loans originated. Keeping the best of the best in their own portfolio. The rest… the vast majority of sub-prime loans they originated were sold on wall street just like any other sub-prime lender would. The loans that they sold are not part of the 9% talked about in the article.

[Author]

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