There seems to be so much confusion between Wall Street, the SEC, congress, media, non-profits and homeowners lately in regards to loan workouts and
loan modifications. It appears that there is absolutely no clear and concise rule or procedures on how these can be done and who qualifies. It’s as if the formula for approving a
loan modification is locked in a vault somewhere and only one person has the key.
It’s a complicated process on why there is so much confusion, so I wont go there in this post. Where I will go is to prove that Countywide is ripping off it’s investors and foreclosing on homeowners that it should give a second chance.
Why is this happening? Read on and I’ll tell you why!
Countrywide just announced yesterday that Bank of America agreed to invest $2 billion in Countrywide, buying preferred shares that carry an interest rate of 7.25 percent and can be converted into common stock at $18 each.
“Bank of America’s investment in Countrywide represents a vote of confidence and strengthens our balance sheet, enabling us to position Countrywide for future growth and success,” Angelo R. Mozilo, chief executive of Countrywide, said in a statement.
Many of my readers know that I research the market daily and in particular I have been following Countrywide because of the amount of subprime loans they made over the last few years and the amount of homeowners that are struggling to work with them to modify their toxic adjustable rate mortgages. Many of these borrowers have had great payment history but as soon as that first adjustment hits, their financial situation goes into shock and they do what they are instructed to do, they call Countrywide’s Hope Department and ask for help.
What they are greeted with when they call is far from help.
The problem is that they aren’t helping their borrowers. Anyone who has dealt with them understands that when you call, you never get the same answer. You ask for a loan modificationand they act like your talking a foreign language. I have had people tell me that they laughed at them and they need to pay what they owe and they can’t help. It’s almost as if their system is set up to confuse and frustrate borrowers, who then just throw their hands in true air and give up. Becoming another foreclosure statistic and further depressing are already depressed real estate markets.
I have dealt with many lender’s loss mitigation departments and I would have to say that Countrywide is the most poorly ran and difficult to deal with. Often, I would research and try and discover why such a
mortgage giant with so much to lose is not modifying these loans of borrowers that clearly deserve it and would not be a big risk. It didn’t make sense until I found this
New York Time’s article that explained it all to me.
Here is an excerpt from that article:
“The possibility that Countrywide may have to buy back mortgages that it sold comes on the heels of its announcement last week that the tightening credit markets had forced it to draw on its $11.5 billion line of credit from a consortium of banks, a move that sent the market plummeting.”
This is interesting I thought. Buy back loans? I had to read more!
“The repurchase obligations are discussed in Countrywide’s prospectuses and pooling and servicing agreements that cover about $122 billion worth of mortgages packaged and sold to investors from early 2004 to April 1 of this year.
The agreements said that Countrywide Home Loans, a unit of Countrywide Financial, would buy back mortgages in the pools if their terms were changed to help borrowers remain current. Such changes are known as loan modifications. In general, it is difficult for homeowners to get loans modified if they are in a securitization pool.
It is unclear how many modified loans are involved. But it would cost $1.2 billion for the company to repurchase 1 percent of the loans in the pools at issue. Repurchasing 5 percent would cost $6.1 billion. When such buybacks are made, the original amount of the loan is paid into the pool and divided among the investors.
Under the terms of the loan pools, the decision to modify a mortgage is left to the company that services it. Servicers deal directly with borrowers, taking in monthly mortgage payments and sending them out to the investors in the pools. Most of Countrywide’s loans are serviced by its Home Loan Servicing unit.
But Countrywide’s servicing unit may have less incentive to help troubled borrowers who are interested in working out their loans, analysts said, because doing so could put the parent company on the hook to buy back a loan.”
OK, for those of you that don’t understand the above, this means really bad news for Countrywide borrowers, investors and our economy.
The key paragraphs for me are:
“Under the terms of the loan pools, the decision to modify a home mortgage is left to the company that services it. Servicers deal directly with borrowers, taking in monthly mortgage payments and sending them out to the investors in the pools. Most of Countrywide’s loans are serviced by its Home Loan Servicing unit.
But Countrywide’s servicing unit may have less incentive to help troubled borrowers who are interested in working out their loans, analysts said, because doing so could put the parent company on the hook to buy back a loan.”
This explains it all for me and I hope for everyone reading this. They don’t want to help struggling borrowers with loan modifications because they have to “buy” back these loans if they do. So they don’t have much incentive at all to do loan workouts with homeowners. In fact it’s the exact opposite. They would rather just foreclose then give people a second chance because if they do that then they are off the hook.
Everyone loses this way, except Countrywide!
“But Countrywide’s servicing unit may have less incentive to help troubled borrowers who are interested in working out their loans, analysts said, because doing so could put the parent company on the hook to buy back a loan.
“With the volume of adjustable-rate mortgages that Countrywide has originated, their liquidity crunch potentially eliminates a viable tool to keep mortgages affordable in the face of impending interest rate resets,” said Kevin Byers, a principal at Parkside Associates, a consulting firm in Atlanta and an authority on securitizations.
According to company figures, last year 45 percent of Countrywide’s loans had adjustable rates; many begin with low rates and adjust to much higher levels.”
Of course they have less incentive to help borrowers! They stand to lose money if the modify these loans. That is the only reason why! 45% of their loans are ARM’s! Imagine the affect it will have on the economy if they continue railroading our system for their benefit!
“Agreeing to buy back loans that are modified is highly unusual and perhaps unique among pools issued by companies like Countrywide, Mr. Byers said. Pools backed by mortgages issued by Fannie Mae and other government-sponsored entities typically include such language.”
Yes, agreeing to buy back modified loans is unusual especially when you have no intent to modify loans, thus you don’t have to buy them back!
“It is likely that Countrywide put the language into its agreements as an incentive to make its mortgage pools more attractive to investors, in turn generating more money for Countrywide when it sold them.”
Of course it looks attractive. Until you open the wrapper and see the contents of how ugly it truly is!
“But servicers must also consider the interests of investors who bought the mortgage pools for the cash flow they generate. If the cash flow drops because of loan modifications, some investors will be unhappy.”
Investors are already unhappy guys. Cash flow has dropped because of foreclosures, not because of loan modifications! Loan mods would be saving homeowners and investors, BUT NOT COUNTRYWIDE! Do you understand now? It’s not about helping people or saving their investors. It’s about their bottom line and they are RIPPING OFF AMERICA!
“Mr. Simon would not say how many loans Countrywide had modified and bought back as a result of the pooling agreements. But Countrywide’s financial statements from last year show that it bought fewer delinquent loans out of securitization entities than in previous years. Those purchases totaled $1.5 billion last year, down from $3.8 billion in 2005 and $3.4 billion in 2004.
Under most agreements, the amount of loans that can be modified in any pool is limited to 5 percent, unless the mortgage borrowers are defaulting or seem to be about to default. Mr. Simon said that the pooling agreements indicating that Countrywide was obligated to buy back modified loans applied only to mortgages that are not in danger of defaulting.
But the language in the pooling agreements from 2004 through much of 2007 does not state this clearly. Only as of April 1 do Countrywide’s pool terms begin stating that the company is not required to repurchase modified loans.
Mr. Simon said this change in language was made to clarify the original intent of the agreements.
Many subprime loans being serviced by Countrywide are in trouble. As of June 30, almost one in four subprime loans serviced by the company were delinquent, up from 15 percent in the period a year ago. Almost 10 percent were delinquent by 90 days or more versus last year’s rate of 5.35 percent.
Loans can be modified to try to keep homeowners from losing their property. Major changes like reducing the interest rate are considered a loan modification.
Lesser changes are not, strictly speaking, modifications. Getting a delinquent borrower current on a loan by adding the payments that are owed is considered a forbearance, not a loan modification.”
I hope this open some eyes and gets people talking because this is a travesty and they need to be stopped. How much longer are we going to let t
hem hold our country’s welfare and the good of the American people in their hands?
Tagged as:
Countrywide Home Loans,
Countrywide Home Loans Lawsuit,
Home Loan News,
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{ 14 comments… read them below or add one }
I actually contacted countrywide yesterday. I spoke to their home retention division. And they pretty much told me Im out of luck with a modificiation. My situation is I did a refi back in January of 06. with a 2/28 ARM. I did this with homeloancenter(lending tree) who sold my loan within 2 weeks of closing to countrywide. My original interest rate is/was 8.29% Till feb 1 2008. I contacted countrywide because My interest will adjust to around 11.89% on that date and will continue an uphill climb since the note is 7.29% above the 6 month libor. This will increase my mortgage payment about 600 dollars on 221,000 loan. And i explained my situation since my wife has been out of work since january with a complicated twin pregnancy and now that the twins are born she cant return because she has to care for the kids. And if she did we would owe more in childcare then she would make.
so essentially we are screwed again by Countrywide. I’m not at all surprised. We went through the preforeclosure stages with them and they totally raped us on attornies fees and other BS fees. We ended up having to cough up $6,500 cash to get our home out of foreclosure. Our loan is due to reset in March 2008 and I’m guessing we don’t have a chance in hell to refinance or modify our loan. It’s just all so depressing. I can really understand why some people just walk away and go back to renting. Everything was fine for us until the economy in Michigan completely crashed and my husband went from working 60-70 hours a week to barely getting 20. Yeah I already know we were stupid for relying on both incomes for us to survive. God I just don’t know what it’s going to take for people to get through all this.
Anywho thanks for posting this! I like reading about all the crappy things that Countrywide is doing to it’s customers.
I responded to you in the forum over at http://www.LoanSafe.org.
Thanks for your story!
You’re welcome and I wouldn’t say your screwed. We all need to unite and stay active. These are our homes, our lives. The purpose of http://www.LoanSafe.org and this blog is to educate and inform but also to unite American Homeowners in the fight to protect our rights!
Moe, I am in the lending industry. I got in to it with the intent to help others so they wouldn’t get screwed by people who are in it to make the most money off of someone’s dreams. I have to admit if the banks and lenders did not have all of those special programs that make the move rebates for agents easy for people who truly could not afford the payment. we truly would see less of the foreclosures there are now. But I even for someone who knows the system I found my self losing both my properties, why because the declining market has made it difficult to refinance my homes. I do have a Countrywide loan and I have falling behind in payments and called ask to modify my loan if at least temporally using some of my own advice I tell my clients to do to help themselves in saving their homes. Would you believe I felt like they did everything possible to nix the idea of assisting me in saving my loan. I asked for a repayment modification of my late payments. this is what they did asked: all the TRUE NET INCOME, then for all debt including utilities,tuition, food,gas,entertainment, phone bill,eating out,misc spending. Which as you all know is not even asked when you purchase or refinance loan, not to mention you use GROSS INCOME. Do you know what they said, we don’t qualify for a repayment plan we do not make enough to cover all our debt. If we made enough we wouldn’t be calling to ask for a repayment plan or modification. GENUIS!!!! So now they said we need to fill out this form which basically is the same questions ask for the repayment plan, which I didn’t qualify for. So I sent in a payment to them to let them know my intention are to try every means possible to catch up on my late payments, low and behold we received a letter from our bank and said we were credited back what we paid to Countrywide. I called them up and was told since I did not pay all the payments due that was not going to be accepted. WHAT KIND OF LENDER SEND BACK A PAYMENT WHO THEY ARE SAYING ARE SUPPOSE TO BE TRYING TO HELP OUT. Mind you I am in the industry I was following my own advice something I would tell my clients to do. Its at the point where none of the lenders are doing anything for the clients they would rather you lose your home then they take the time to help you save it. I see the end result, short sales that if were lucky have a buyer who will qualify for the purchase but for the most end up in foreclosure. Then I see the REO end when the banks own the home and have to list the homes and sell for less. It is ridiculous on what it gets sold for. They would make more sense to modify the loan at least for a 2 year period to help the client get back on feet or sell it for enough to pay off the actual loan balance. But they don’t so much for the AMERICAN DREAM OF HOME OWNERSHIP that they so much advertise . The Gov’t is not going to do much unless more lenders lose more than what they can afford to. So how many more people need to lose homes?????
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So Linda, was the person in “Home Retension” a “pull start” or a “push start”? These F’er farm this out to India as the final slap in the face. I went through this BS question asking session knowing what the answer was going to be. Screw em, I have decided to stop making my rediculous payments put that money in the bank until they kick me out. Then I will rent a house just as nice or nicer than the one I’m in for half the price. Double screw em, my house was just hit by a tornado recently. They can fix it too!
Damn Doug ! you tripled screwed them.
save that money for the next 8-12 months because their foreclosure system & the courts are so far backed up it’ll take about that long. & because they didn’t want to help you they will probably have to sell the house for way under what you owe because they didn’t want to modify & restructure your loan.
so i guess then
Good Luck man.
WOW! I feel really stupid! Just went through the give Countrywide your budget and write a hardship letter. They told me they couldn’t talk to me until around the middle of July because the loan doesn’t modify until September. They said they were working with people that were in trouble right now.
I’ m not behind and haven’t missed any payments. I was thinking they might work with me, but I too get a different answer each time I call. After reading each testimony I now know I’ m getting a very rehersed run around. Just don’t understand the logic. Why not change a few numbers and let all of us continue to pay payments and keep our homes. Why get it back and sell it for alot less than we owe. I like the idea of living here and saving the money we pay each month until they kick us out.
Are any of these companies and attorneys advertising to help us out on the up and up?
What is going on with this company????
Countrywide agreed to modify our Freddie Mac loan and sent us notice of the first payment due April 1. Paid as instructed only to find out today April 21 that they returned our online payment to our bank account. What NOW? The customer service desk doesn’t seem to have a clue either.