Countrywide: The Lender Who Helped People Save Their Homes

Even though I think CEO Mozillo sold shares based on the upcoming credit issue, and will be found guilty of doing so, this move by Countrywide (CFC) will buy them a level of goodwill with consumers that will benefit them for years.

Countrywide has enacted a "Home Preservation" program aimed at helping some 82,000 customers holding approximately $11.4 billion in loans. There are three facets to the program for customers who qualified for a subprime, adjustable-rate loan and are facing a rate rest through the end of 2008.

The first, aimed at Countrywide customers with a strong payment history, will offer borrowers options to refinance into prime or Federal Housing Administration loans. For those with credit issues, Countrywide will offer Fannie Mae (FNM) or Freddie Mac (FRE)'s expanded criteria programs.

The second is for Countrywide borrowers who have both prime and subprime loans, but are unable to qualify for a refinance and are likely to have difficulty affording an upcoming reset. Countrywide will supplement its early notification letter to borrowers by calling no later than three months prior to the reset to determine their financial circumstances and develop affordable solutions.

Finally, for subprime borrowers who are currently delinquent and are experiencing financial difficulties as a result of a recent reset, Countrywide has a simplified loan modification process, and is in the process of sending letters to these borrowers offering a pre-determined and pre-approved rate reduction.

Think about it. Is there anyone out there who will not at least contact and inquire into a Countrywide mortgage next time they are looking? Countrywide is the first lender to voluntarily offer to assist homeowners facing resets that will eventually cause them to lose their homes. It is a double win for Countrywide because they can stop foreclosure on a home, a situation in which nobody wins, and they now become the "lender who helped people save their homes". That is a reputation that you just cannot place a price tag on.

It will also force the other banks now to follow suit to help additional borrowers. If this effort takes hold at other banks, it actually buys Countrywide even more goodwill, as the effort will gain even more publicity and Countrywide's actions will become known to more people as every news story about it will undoubtedly mention Countrywide's leadership in the effort.

I do not have a subprime loan nor am I am a subprime borrower, but if I do decide to refinance when rates fall, I will take a look at what Countrywide has to offer. I will do this not because I feel my ability to repay would be at risk, but I do recognize that bad things happen to people all the time and having my largest monthly obligations in the hands of people who have demonstrated a willingness to help would give me a certain level of comfort. Like I have said before, most people tend to think similarly and I would be willing to bet there are a whole bunch of folks out there who, when the time comes, will at least see what Countrywide is offering for mortgages.

Brilliant.... I wonder how long it will take Bank of Amercia (BAC), Citigroup (C), Washington Mutual (WM) and other to respond in kind?

Comments

[mike1981:]

Recent political pressure in the form of proposed bankruptcy law changes that would force lenders to accept loan modifications in connection with homeowners filing Chapter 13 bankruptcy may be having an influence on Countrywide's position.

The recent protests against Countrywide around the country by consumer activists (NACA & ACORN) may also be having an effect on Countrywide's attitude adjustment.

The proposed Federal class action lawsuit against Countrywide filed in Massachusetts alleging race discrimination might also be contributing.

I wonder if Countrywide is simply just posturing to take the heat off it and the industry?

For links to additional information on the above, see HomeEquityTheft.blogsp...

2007 Oct 24 09:28 AM

[Todd Sullivan:]

i think they probably are. that being said, being the first to do so will make them the guys who were first to help so to speak..

2007 Oct 24 01:19 PM

[mike1981:]

Recent political pressure in the form of proposed bankruptcy law changes that would force lenders to accept loan modifications in connection with homeowners filing Chapter 13 bankruptcy may be having an influence on Countrywide's position.

The recent protests against Countrywide around the country by consumer activists (NACA & ACORN) may also be having an effect on Countrywide's attitude adjustment.

The proposed Federal class action lawsuit against Countrywide filed in Massachusetts alleging race discrimination might also be contributing.

I wonder if Countrywide is simply just posturing to take the heat off it and the industry?

For links to additional information on the above, see HomeEquityTheft.blogsp...

2007 Oct 24 09:29 AM

[Markham Lee_:]

I have to disagree Todd.

The NY Times investigated Countrywide's previous loan modification programs (this one isn't really different) and it had very limited results and for the most part, only served to irritate their customers.

The other side is that by the time many people "need" a loan modification it's already too late and they can't be helped anyway.

I would hold off on celebrating this move until it actually shows some results, as CFC has a rather dismal track record in this area.


-M

2007 Oct 24 02:31 PM

[Todd Sullivan:]

markham,

i know about the previous effort but this one, based on what the advocacy groups say is helping folks before it is too late. they are saving their own hide also in this so it is in their interest here to help as many folks as possible

2007 Oct 25 02:54 PM

[GigEm:]

Countrywide is NOT the first to do this. Chase, without fanfare, has been converting ARM's into fixed rates for months without charging the consumer a dime. What Countrywide offers is a refinance. Well guess what? Borrowers with a strong payment history can go anywhere and get a loan, Countrywide isn't offering anything to them they can't get elsewhere. As far as the other borrowers, I have an idea. Just sit down and look at the note. If it's predatory, like many are, just modify it at no cost to the borrower. If an ARM is about to re-set modify the note to a fixed rate at no cost to the borrower. All Countrywide wants to do is generate fee's and that's sad.

2007 Oct 25 01:11 AM

[GigEm:]

Countrywide is NOT the first to do this. Chase, without fanfare, has been converting ARM's into fixed rates for months without charging the consumer a dime. What Countrywide offers is a refinance. Well guess what? Borrowers with a strong payment history can go anywhere and get a loan, Countrywide isn't offering anything to them they can't get elsewhere. As far as the other borrowers, I have an idea. Just sit down and look at the note. If it's predatory, like many are, just modify it at no cost to the borrower. If an ARM is about to re-set modify the note to a fixed rate at no cost to the borrower. All Countrywide wants to do is generate fee's and that's sad.

2007 Oct 25 01:11 AM

[Todd Sullivan:]

gig,

i think at this point it is more in their interest to stop the foreclosure and further write offs. not fees..

based on what i read the early indications is that any fees will be very minimal

2007 Oct 25 02:57 PM

[Bajatexas:]

As someone who repays his debts, lives within his means and honors his commitments, no matter how ridiculous they are, this is insulting on so many levels I don't know where to begin.

Many people who have obtained mortgages on unfavorable terms were lied to, but it doesn't take an MBA to look at the worst case scenario before signing on the bottom line. Those that chose to do so didn't want to do so, and now that it has blown up on them want everyone else to bail them out. I lost money on Enron. Can somebody send me a check and make it right?

This is ridiculous.

2007 Oct 25 10:42 AM

[Bajatexas:]

As someone who repays his debts, lives within his means and honors his commitments, no matter how ridiculous they are, this is insulting on so many levels I don't know where to begin.

Many people who have obtained mortgages on unfavorable terms were lied to, but it doesn't take an MBA to look at the worst case scenario before signing on the bottom line. Those that chose to do so didn't want to do so, and now that it has blown up on them want everyone else to bail them out. I lost money on Enron. Can somebody send me a check and make it right?

This is ridiculous.

2007 Oct 25 10:42 AM

[Chancer:]

outback:
I agree. Like saying there "is" a "free lunch."
I believe the vast majority of the really bad deals resulting in defaults were either (1) no-money-down property "flippers" gambling on price increases, and (2) those who should obviously have never obtained loans, and should have remained renters. I have read some of the sob stories, and many do not deserve sympathy. Those who really deserve help are few, IMO. That does not show up in the huge numbers reported by a liberal press, which has a mantra that there should never be consequences for bad decisions, if you can find private or government funds for a bailout. (Illegal immigration is another good example.)
CFC is acting in their own self interest with this program.

2007 Oct 25 12:12 PM

[Todd Sullivan:]

i agree, and the only way they help themselves here is to actually help others

2007 Oct 25 02:55 PM

[kurt walter:]

Since Angelo Mozilo says CFC has a bright future, shouldn't he be BUYING THE STOCK WITH HIS OWN MONEY RIGHT NOW? Not exercising those cheap stock options and selling the stock as fast as possible? Well, are you buying, Angelo? Or just blowing smoke.

2007 Oct 25 02:51 PM

[Paul Meisel:]

"Even though I think CEO Mozillo sold shares based on the upcoming credit issue, and will be found guilty of doing so, "....

Todd, if you are going to lead with this, you should put in some of your rationale for the opinion.

The fact that Mozilo has been selling a lot of stock for a long time, and that it increased about a year ago, is not news to those following the stock. (Disclosure, I own none and have not.) A lot of executives sell a lot of stock to diversify, to send grandkids to college, to buy vacation homes and retirement hobby businesses...

I just think that if you are going to express an opinion like this you should follow up with your rationale so there is no wondering what information or insight your opinion is based on.

Although experience has taught me not to underestimate greed, in Mozilo's situation, to do anything overtly illegal would be colossally stupid -- given the visibility of his stock and his previous selling he would have to know that any change in his plans would be subject to scrutiny. Maybe I just wear rose colored glasses but I just see a rich guy who has too much of his money in one basket and is trying to move it in an orderly fashion......

2007 Oct 25 07:49 PM

[Todd Sullivan:]

Paul,

my assumption is based on the acceleration of the sales prior to the company's troubles (odd timing?). now that being said, to assume he would not do it because it would be stupid, well, if that was true there... think Martha, milken, boesky etc...

smart people do very dumb things all the time

2007 Oct 25 09:04 PM

[rapunzel:]

If you think that this is actually what is happening, you are sadly mistaken. Instead of parroting the nonesense spewed by the big lenders, you reporters might try going under cover and finding out how many folks are actually getting this "help" and you might also wonder why they are being so quick to put into the public that they are helping? Has it occurred to anyone yet that these loans are far more encompassing than those given to the credit challenged? That these loans were made solely based on good credit and totally ignored layers of risk? I could go on and on but in the end, you can hide your heads in the sand, you can buy into the lies told to you by the same companies that put us here in the first place but sooner or later, all of this will come out in the end. That ought to be quite an interesting day.

2008 Feb 26 07:51 PM

[rapunzel:]

I also want to say congratulations to all of you who are patting yourselves on the back for not being a part of the problem. Living beyond their means and many other accusations do not begin to cover the stuff hitting my desk. Once again, we shall see how this all shakes out in the end and how many of you holier than thou folks react when the magnitude of the mess perpetuated on consumers as a whole, and CONTINUES to be perpetuated even now by the these guys....pat yourselves now because you might find like so many before you, there really are things bigger than you and beyond your control that may affect your lives.

2008 Feb 26 07:56 PM