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  • 21 AUG 2007

    Countrywide Bailout…or Just Good Timing?

    A post by Scott Schoberg as Industries, Mortgage

    I’m sure you’ve seen the headlines, and the question:

    Was the Fed action on Aug. 17 effectively a Countrywide bailout, saving a company many saw as too big to fail?

    Fed watchers and banking experts say far more is at work here. The Fed wasn’t reacting to Countrywide’s plight as much as the conditions that put the lender in such deep trouble.

    I’d love to get your thoughts. Was the fed reacting to conditions or to Countrywide, the last giant standing?

    You just read:

    Countrywide Bailout…or Just Good Timing? by Scott Schoberg

13

    Bill Rice 1631 days ago

    If you want to get conspiratorial it might be motivated deeper: http://tinyurl.com/2nyzzo.

    How ironic I just reflected and wrote on a similar line of thought today.

    I love your guys blog and email (except that blasted Leads360 ad :) )! Keep up the good work.

    double g 1631 days ago

    Hey, is histroy trying to repeat i self? or are we doing it to our self?

    Judy Carroll 1631 days ago

    They’d have to do more than thay did to bail them out & Countrywide wasn’t coming clean with their problems last week. However, bailing out Countrywide-no matter its size-is the last thing we should do. They & the other lenders made this mess while racking up billions & running their outfits like sweatshops, although they did provide lunch/dinner while their people worked & Red Bull whenever you needed it for an energy pickup to keep working.
    The real estate market needs to get back to reality wihtout interference from the Feds.

    Jeff Evans 1631 days ago

    The Fed will have to do much more long term to provide a confidence in our market in addition directing support to both large and smaller companies who provide the source of funds to our borrowers. Mortgage brokers and mortgage bankers (those who stay) will need be more proactive educators when dealing with first time homebuyers or those who dream of becoming an investor without proper education themselves.

    Noel Collins 1631 days ago

    Oh common Bill, I work for them now! LOL Love LEADS 360! WOOHOO..

    On a more serious note most of us talking shop while drinking coffee asked what was next for CW and the feds and to a tee called it 100% right by the actions of both parties. I would suspect no one is going to allow CW to go under without the restructuring package they’ve put together succeeding. Way too much attrition for our economy. Personally i’m all for it as it will lessen the impact to those of us left in this vertical. Time to diversify?

    MDarling 1631 days ago

    Not a CW bailout- a market assist to give liquidity or the appearance of liquidity (same affect) at a time when the market won’t can’t.

    It’s not retail that needs fixing- it’s secondary. And if a bailout or gov’t assit or Fed assist comes (the fed isn’t a gov’t agency) it will likely focus on secondary.

    Jay 1631 days ago

    Please explain – I don’t follow – how has Countrywide been bailed out?? Because the Fed cut the discount rate? Or was there something else I missed? How does a cut in the discount rate “bail-out” Countrywide. Please explain. It might help but I don’t know how it can “bail them out”.

    Mike D. 1631 days ago

    I dont think the feds decreased the discount rate for Countrywide. If they were going to help them in any way they would of lowered the prime rate. I do believe that lowering the discount rate is a sign of good things to come though.

    gary 1631 days ago

    If most people owned a company that made bad decisions do you honestly think the Feds would care? Countrywide made tons of money doing many things wrong so why should it be the taxpayers problem. Who cares if they go out of business. It is there own fault and the Feds need to stay out of it. How do you think they will recoup this money?

    Tim 1631 days ago

    The american public has been duped by fast talking Loan shark Mortgage lenders selling them bad loans and setting up the home owner for failure from the moment of signing the bad loan program to begin with the problem is these borrowers didnt know what they were sigining and the fast talking loan officer would reassure them every thing is fine. The public needs to be educated even the big banks like wells fargo and washington mutual are putting people into these bad loans. the banks say we dont want to foreclose on properties. when you look at it closely its a load of crap they have these huge portfolios of property that they are just waiting for the market to correct. And billions of dollars in their pockets, and here in the usa have another problem what about all the Illeagls that bought homes useing fake documents and are being deported who is to blame there? again banks lending money to people that were not qualified to buy to begin with and a home bought under fraudulent terms. another bone headed move on the lenders part. the concept of economic slavery is live and well. wise up america the bank does not have your best interest at heart.

    KD 1631 days ago

    Hi Tim,

    It’s time people who get a loan be responsible for their own decision. We are a society of let’s blame someone else!

    If I wanted to give you a loan for 1 million with a $50,000 a month payback, but you only make $3,000 per month, would you take it?

    Anyone who takes such a loan is a bone head and probably should have the state handle their finances for them!!!

    It’s the borrowers own fault to take a loan they know they can’t afford.

    What idiot buys something they can’t afford, and then blames the seller when they can’t make the payments!!

    It’s not the banks or mortgage company’s responsibility to manage your finances. If all banks or mortgage companies started to decide for people
    What they should or shouldn’t do, the amount of lawsuits would jump in this country. The people like you would blog, that people have the right to decide for themselves!!

    You think communism would work better for the bone heads who can’t think for themselves? There is a thing call TRUTH-IN-LENDING! and a thing call a final disclosure (HUD1) — If at that point people still don’t know what their monthly payments is going to be and what they are making (minus bills they currently have), then we really need to send the government in to manage things for them.

    Don’t Blame the Banks!! Blame the 2 million boneheads who are now in trouble!!!

    also blaming illegals for everyone’s problems is also a bonehead move!!

    What America’s lower middle class or poor need to wise up to is how to better manage their money!!!

    Lori Krueger 1631 days ago

    I believe it is as much my job to educate the consumers that I shop loans for as it is to find them a decent product.

    I believe the we need to start looking a buying a home more responsibly for the sake of your customers and do the right thing for them even at our own expense. I’m not a goody-two shoes, just someone who believes that you can’t fix everyones ignorance but you may be able to establish a better relationship with your clients by being an educator as to how and why they do or don’t get the results they want when shopping for a loan.

    I have had referrals before deals even closed from people who were grateful that I took the time to explain not only the process, but the choices they make is spending and how they ultimately affect their satisfaction at the lenders door.

    I will make money by trying to do the right things for my clients and if they choose not to listen or understand I will still make money and sleep well at night. Loan Origination is not a function, it is a process involving the well being of ALL parties, as it should be in my opinion.

    MJ-CMPS 1631 days ago

    KD, you are right, the blame game is in play. There are several parties responsible for this mess. I am a mortgage planner and have been for over 10 years. First, I want to say, there are NO BAD loans. Period. It is a matter of suitability. If a mortgage is not being used as an appropriate financial tool, for the clients given situation, that tool will cut you like a knife. These “sub prime loans” have a place. If the client can only qualify for this type of loan, it is because they are a higher risk client. They ARE more expensive. Hey, if you were lending someone money who did not have a good history of paying back loans, would you want to be compensated for your risk? Or should we just deny homeownership to people who’s scores are suppressed or who are going through a tough financial time? The goal should never be to stay in a “sub prime loan” It is a tool to get someone through a period of time while their situation resolves. The Mortgage Planner should be helping the client plan for this future event. I do it all the time.

    Responsibility for this mess lies on several shoulders. The lenders wanted to make more money, Wall Street said you bet! Riskier loans were created higher risk = more profit. Then, in order to promote those loans and get the Brokers selling them the lenders said “Hey if you sell my high risk loan, I will pay you huge to do it” AND if you want to stretch the truth, I will turn a blind eye, and so it went. Greedy Brokers and Bankers did their part.

    Oh and by the way, since the media had mislead the public to believe that the only thing to look for is rate and cost on a mortgage, a 1% start rate with no points must be the best, right? WRONG. What they do not see many times if the loan is being banked instead of brokered (brokers must disclose more than banks) is that the loan officer got paid many times upwards 5 points on the back for selling this loan! (5 points is equal to 5% of the loan amount). Heck yea the Loan Officer or broker will pay your appraisal, title, escrow etc. fee. So the client thinks they got a “No Cost, No Fee” loan with a 1% rate. Very easy sale. The client didn’t realize is these loans in the wrong hands will be the most costly of them all. Again, no bad loans just not suitable for all situations.

    What would you rather have, a 5% rate with no costs that you pay MORE THAN DOUBLE what you borrowed when you pay it off, or a 9% rate where you pay your own costs and have a total loan cost of half of the above. The total cost of a loan is not calculated off the Good Faith Estimate or the final closing statement. If your Loan officer does not know this….NEXT!

    Folks, a traditional, vanilla 30yr fixed rate can hurt a client if they do not have a long term plan in place. You can not shop for the largest debt in you life like it is a commodity. This is a matter of you get what you pay for. You want a sales person, who offers “the lowest rates” you get a guy or gal that was selling shoes or waiting tables last week. When you get to the closing table, things are most likely not what they promised any way.

    Brokers and bankers need to eat and feed their families too. Nothing wrong with getting paid to do your job, and if I am spending 30+ days on your loan and mortgage plan, and not just jamming you into what pays me best, (that you can’t see), I need to get compensated for that. I cannot slam a bunch of loans through with the mortgage plan approach. So quality, not quantity is what I should and the client should be after.

    That being said, YES brokers and bankers NEED to spend more time and education actually learning about money. Getting certified as a Mortgage Planner is very important. Many loan officers have taken on this moniker without getting any more education or certifications. Buyer beware. However even that will not stop the crooks and flakes.

    Unfortunately, more regulations are not the answer. It simply means more disclosures and paperwork for the client written in legalize. Clients and even many loan officers do not understand what is written in those closing documents. Taking these loans off the market is not the answer either. It will deny homeownership to many who can afford it.

    I also have to say that over my past 10 years I cannot count the number of clients I have turned away, not because I could not qualify them, but because what they wanted was a road to disaster. I KNOW they went elsewhere and got what they wanted, knowing what the potential downfalls were. So clients have their responsibility to bear as well. This is a very emotional issue and way to close to an election year for most politicians to ask the client to take any responsibility. Those with the least voting power and fewest lobbyists will always be blamed. OH, and the Fed cannot keep recklessly pumping money into the system, that was also a contributing factor. For an eye opening experience read the GREAT BOOK “The Creature From Jekyll Island”.

    Like Lori, I can sleep at night and I will not only survive this crisis, I will thrive. This will be a time of innovation in loan products and cleaning out of at least some of the bad apples. Sad to see some, good apples are going down too.

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