Depressing News – Part 3

The news about Countrywide is getting even worse with CEO Angelo Mozilo making front page news with his inadvertent e-mail slip up. A borrower had written to him requesting help. What he got was an e-mail in response that said:

"This is unbelievable. Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the internet. Disgusting."

He wanted to send this to some other executive by hitting FORWARD but what had happened was that he had accidentally hit REPLY. For those who would like to read the whole story, see:

http://emac.blogs.foxbusiness.com/2008/05/22/countrywides-mozilo-calls-borrowers-plea-disgusting/

For a company that is under siege on many fronts, whose executives are being sued, whose foreclosure practices are being questioned, whose stock is 90% off of its high of 2007, which may, or may not, be "rescued" by a proposed acquisition by Bank of America, this was not welcome news.

While the company is still struggling, guess who is winning? Executives, According to Bloomberg News:

"Countrywide Financial Corp.'s 14 senior executives are expected to receive stock-based awards of $28.5 million upon completion of the lender's sale to Bank of America Corp."

As to foreclosures the popular story that Countrywide would have you believe that they are out there helping struggling homeowners. There is no question but what they have a lot of problems. They have 12,766 homes listed for sale.  See details at http://countrywide-foreclosures.blogspot.com/  Whatever else they are doing is not exactly public knowledge unless you are satisfied with pablum statements like, "We are working with borrowers on an individual basis." 

What I do know is happening is that they are calling from of their biggest and best customers and trying to keep them.  They rank their customers on the basis of which ones are most likely to refinance. An example would be someone with a $1,000,000 5/1 ARM which was about to readjust and roll over into a pure ARM.

If a borrower wanted to try to refinance he would pay a market rate of over 7% for a fixed rate loan and maybe 6.5% for another 5/1 ARM. But Countrywide would call you and offer you a new 5/1 ARM at 5% for a small processing fee. What a deal!!! You can't get that anywhere today.

So why are they doing this? The reason is the value of servicing, what our industry calls the process of receiving payments, sending the money to the owner of the loan, and doing the accounting. This is an extraordinarily profitable business, especially for a $1,000,000 loan. It doesn't cost any more to open an envelope with a $5,000 check than one that contains $50. Countrywide is trying to preserve some of its best assets so that they will still be a valuable acquisition target.

Is this OK? Sure it is!  They have no legal obligation to help troubled borrowers. That is a voluntary problem and who knows whether it is working or not.

However many troubled borrowers they are helping, it seems that most of them are silent, thankful, perhaps, but silent. Who you hear from are those who are angry. They even have a website:  http://www.countrywidehomeloansucks.com/