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 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?
NEXT TIME YOU TALK TO A CHL LOAN ORIGIONATOR, GO EASY AS THE ORDER TAKER AT MCDONALDS IS MAKING AS MUCH OR MORE MONEY.
I have promised my readers that I would follow this new deal that the Neighborhood Assistance Corporation of America (”NACA”) has with Countrywide.
Mr. Mozilo~ “What we have here is a failure to communicate people. Our earning reports are coming out Friday and we have lost over a billion dollars on paper and gazillions in losses that have not been reported and recognized as of yet. I can only do this dog and pony show for a little longer and we need to keep pulling the wool over the sheeps eyes.”
billions and they just shudder at the mere thought of the word. Let’s say it together, “BILLIONS”! I get goosebumps when I hear that word. How does $16 billion sound?” Angelo scribbled the number on a napkin.
The media needs to get their head out of their you know what and do their job. Where is the REAL investigative reporting? Where is the common sense? Let me help all of you. It’s real simple, trust me!
Another disturbing fact from the Countrywide school of subprime horrors. One that I have not seen in the media and hopefully this will get some attention.
These fees continue as these borrowers become delinquent on their loan and their collection departments squeeze big fees from strapped borrowers. Again, there are a lot more delinquent fees to be collected on a $500,000 loan than a $50k loan. A LOT!
Thanks for the car California! I’m outta here.
Didn’t Countrywide just announce that it had terminated some 12,000 employees?
Countryfried Loans, led by Kernel, Angelo Mozilo has been cooking more “Toxic Original Recipe Loans” then any other lender is US history. The reports that are coming out daily, confirm that yes indeed the mortgages were tainted and the majority of customers that frequented Mr. Mozilo’s establishment are dying from Toxic Loan poisoning.
What you don’t believe me?
Countyfried Loans coming to a street corner near you.
Re: 
