Fin

Why Countrywide Is Cutting Ad Spending

Heh Prince, great article, it read really well. The only problem is that virtually nothing in the article was true.

First your article states that lenders have cut back on advertising because they are currently experiencing unprecidented refinancing demand, and they do not have the capacity to handle that demand.

Second you attribute the current demand and refiance boom to the stimulus package which will raise loan limits for GSE's.

Third you state that CFC is fighting for its survival and that their online advertising has to go.

Well Prince, hate to burst your bubble, or get you a clue, but please be advised of the following:

First, the current mini-refiance boom you refer to was last month's news. Interest rates dropped sharply during the first three weeks of January, and then rose sharply since January 23rd. Mortgage rates on conforming loans (GSE's) have risen about 75 basis points since that time. Jumbo mortgages have risen even more since the market liquidity of these securities is still significantly impaired. As a result of significantly higher interest rates the current refinancing demand has all but dried up. For this reason alone, lenders including CFC have appropirately cut back on advertising costs.

Second your article stated that the sudden demand for refinancing is mainly due to the stimulus package which raised the loan limits for conforming loans (GSE's). Nice one Prince, but unfortunately, beyond ridiculous, even for you! The mini-refiance boom was during the first three weeks of January, and the stimulus package had not been signed by the President at that time! Furthermore the higher loan limits have yet to be implemented to date. In fact it is very unclear exactly how and when these loan limits will be implemented.

Third, your article implied that CFC and other lenders do not have sufficient capacity to handle the current boom. There is a current bust (see above) and these lenders have more relative capacity now (capacity relative to mortgage demand) than ever before. They are literally frothing at the mouth for these loans and will jump at the chance to advertise whenever market conditions are favorable. Your assetion that CFC is not advertising because BofA is prohibiting it, is once again, totally ridiculous. CFC is looking to maximize their employee (sales staff) retention, and mortgage volume even if profitability temporarily suffers. Furthermore this type of advertising is very cost effective when market conditions are right. BofA will no doubt insist that CFC change their business model (i.e take away local execution and perhaps their wholesale channel) but to imply that a mundane operational item such as advertising falls into this cateogary is...well Prince...ya did it again buddy !!!

Anyway Prince, another great article, keep up the good work. Entertainment value.....priceless !