Here is some very interesting data posted by Paul Kedrosky over at Infectious Greed which shows that Countrywide’s (CFC) online ad spending fell off a cliff in January. Yet, it wasn’t just Countrywide that cut back, financial servicers advertising was off by 17% on a month-to-month basis. The Prince isn’t surprised by this since anything that isn’t necessary for the company to survive is going to be cut aggressively, with ad buys falling in this category. Experian (OTCQX:EXPGY) dramatically increased its spending month-to-month. I wonder what the story is behind that.
Nonetheless, Paul does provide us with another interesting indicator of the pain going on in the financial services industry. However, that isn’t the whole story. An alert reader commented that the queue for refinancing (just about the only mortgage originations going on these days) has been full for CFC and other lenders recently. Take a look at this chart the commenter links to from MBAA. Also, check out this post by Paper Economy: A US Real Estate Bubble Blog on the MBA Application Survey. Has some pretty interesting facts about current mortgage industry dynamics.
This huge spike in refinancing is mainly due to the fact that the stimulus package raised the limit on the size of mortgages that can be bought by the GSEs. However, we also have to believe that more homeowners who are distressed and not distressed are just refinancing to take advantage of interest rates that have been recently aggressively cut. Maybe CFC is just so busy doing refinancings that it didn’t think it could handle much more demand for refinancings given its current origination capacity (i.e. number of loan officers, availability to funds at the FHLB, etc.).
So CFC may be making a conscious decision to cut back on online advertising until it needs to stimulate demand or try to grab share again. It’s an interesting theory but The Prince doesn’t buy it. CFC is fighting for its survival as an enterprise and revamping its business model. All non-essentials like online advertising are going to go.