The Mortgage Mess: Countrywide Feels the Heat

August 29 2007 BUsinessWeek.com Embattled CEO Angelo Mozilo answers critics who claim the lender helped bring on the housing crisis. Angelo Mozilo, CEO of Countrywide Financial (CFC), is taking serious flak for the mammoth mortgage company's role in the housing meltdown. Now sources say the embattled Mozilo will soon announce layoffs of about 10% of Countrywide's 60,000 employees in the face of a 20% decline in the mortgage business. In addition, Countrywide may be looking for further financing and that the next investor will likely come from private equity. Countrywide's stock has lost about half its value since June 1. That was the same day that Senator Chuck Schumer (D-N.Y.) urged Countrywide to halt "predatory" lending practices.

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The mad dash for housing help

August 29 2007 Money.CNN.com States and nonprofits rush to provide help to those victimized by subprime loans, and borrowers rush to accept. Tens of thousands of frightened homeowners looking to get out from under the crumbling walls of the subprime mortgage collapse have found refuge in a variety of programs.When Senate Banking Committee Chairman Christopher Dodd mentioned the national Homeowner's HOPE Hotline in comments Tuesday, it triggered some 3,000 calls. An announcement in April that the Neighborhood Assistance Corporation of America would be offering $1 billion in rescue money to beleaguered borrowers has prompted more than 50,000 inquiries, according to the organization.

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Mortgage Applications Decline Despite Drop in Rates

August 29 2007 CNBC.com Mortgage applications in the U.S. declined to a four-week low as the rate on one-year adjustable loans jumped by the most ever. The Mortgage Bankers Association's index of applications to buy a home or refinance a loan fell 4 percent last week to 615.2 from 641.1. The group's purchase and refinancing gauges each decreased for a second week.Banks may be jacking up short-term rates to dissuade buyers from choosing riskier mortgages as defaults on subprime loans climb. The housing slump will worsen as banks restrict credit availability and falling real-estate prices prevent owners from tapping home equity for extra spending money, economists said.

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Fed Underestimated Debt Impact, Focused on Inflation

August 29 2007 Bloomberg.com Federal Reserve officials, underestimating the impact of credit-market turmoil, focused at their Aug. 7 meeting on inflation and slowing productivity. Minutes of the session released yesterday showed that the Fed was intent on securing credibility as an inflation fighter just 18 months into Chairman Ben S. Bernanke's term. Even though the central bank cut the discount rate on Aug. 17, the emphasis on prices forms the backdrop for deliberations next month.

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Consumer Spending Gains, Home Sales Fall

August 26 2007 Bloomberg.com Consumer spending in the U.S. picked up in July while mortgage sales fell, a sign income gains are sustaining demand even as the housing recession deepens, economists said before reports this week. The forecast decline in sales of previously owned homes would be the fifth straight drop reported by the National Association of Realtors. Higher borrowing costs and stricter lending standards are making it more difficult to qualify for loans, causing a rise in the number of unsold homes and pulling prices lower.

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Countrywide Rating Watch Revised By Fitch

August 24 2007 MortgageNewsDaily.com Fitch Ratings announced Thursday that it has revised its Rating Watch on Countrywide Financial Corp. (CFC) and its related subsidiaries from "Negative" to "Evolving." This revised rating signifies that Fitch may upgrade, downgrade or affirm the current rating once they have gathered additional information. The downgrade of CFC by Fitch came on August 16, 2007 as a result of the company's announcement to fully utilize its $11.5 billion credit line due to increasing liquidity problems. Countrywide stock was down 5% early in Friday's trading session as fears of subprime fallout grew.

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Beware of foreclosure rescue scams

August 24 2007Money.CNN.com Scammers are taking advantage of mortgage holders at their most vulnerable - when they're about to lose their homes. As foreclosure rates rise, evidence from many parts of the country indicates the number of rescue scams may be increasing. According to Alison Preszler, a spokeswoman for the Council of Better Business Bureaus, the BBB for Clearwater, Florida, received 508 complaints about local foreclosure rescue companies in the past three years with 322 coming just within the last 12 months.

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Fed Discount Lending Rose to Average of $1.2 Billion

August 23 2007 Bloomberg.com The Federal Reserve said U.S. banks borrowed a daily average of $1.2 billion in the past week, swollen by the four biggest lenders seeking to display support for the Fed's discount-rate cut. The number, while the largest since 2001, showed banks are turning to the discount window to supplement the ample funding available to them from their own creditors. Bank of America Corp., Citigroup Inc., Wachovia Corp. and JPMorgan Chase & Co. said yesterday they tapped $500 million each. Other, unidentified firms accounted for the remainder and repaid the money before the week ended.

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Countrywide, too big to fail?

August 20 2007 BusinessWeek.com Did Countrywide Get a Hand from the Fed? The central bank's discount-rate cut probably wasn't aimed directly at the lender , but the move may have helped save it from bankruptcy. The question was all over Wall Street last week: Was the credit crunch threatening the survival of Countrywide Financial (CFC) (see BusinessWeek.com, 8/15/07, "Mortgage lenders: Close to the Edge?")? A bankruptcy filing by the largest U.S. mortgage lender would have jolted the economy, squeezing Countrywide's many creditors and tormenting the already wounded mortgage and housing markets.

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Subprime Effect on Consumption May Be Modest

August 20 2007 Bloomberg.com Federal Reserve Vice Chairman Donald Kohn said the effect of the subprime-mortgage crisis on U.S. consumer spending will likely be modest though there's risk of a bigger slump. The number of troubled subprime borrowers may be sufficiently small that the direct effect will be "modest", Kohn wrote in a research paper for a conference hosted by Australia's central bank in Sydney today. Still, delinquencies may make investors less willing to provide credit, prompting a more significant effect on aggregate spending.

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Where Housing Remains Strong

August 16 2007 BusinessWeek.com As home sales slide, foreclosure rates rise, and big lenders go bankrupt, it's not easy to remember that the glass is half-full, not half-empty, when it comes to real estate these days. "Although home prices are relatively flat, more metro areas are showing price gains with general improvement since bottoming out in the fourth quarter of 2006," said NAR Senior Economist Lawrence.

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Fed Cuts Discount Lending Rate in Surprise Move

August 17 2007 CNBC.com The Federal Reserve, declaring that increased economic uncertainty poses risks for U.S. business growth, announced Friday that it has approved a half-percentage point cut in its discount rate on loans to banks. The action was the most dramatic effort yet by the central bank to restore calm to global financial markets which have been roiled in the past week by a widening credit crisis. The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks will be lowered to 5.75 percent, down from 6.25 percent.

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California cities fill top 10 foreclosure list

August 16 2007 Money.CNN.com The binge that many housing markets went on in the early- to mid-2000s is over, and some of the hottest markets like California are now experiencing the worst hangovers. But other areas, especially many that recorded slower home price growth earlier this decade, have seen little increase in foreclosure rates, according to the latest data released Tuesday from RealtyTrac, the online marketer of foreclosure properties. "While foreclosure activity has skyrocketed over the past year in many cities, particularly in California, Ohio and the Northeast, foreclosure activity seems to be subsiding in parts of Texas, South Carolina and other states."

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Worst of U.S. Home-Loan Crisis May Be Over

August 13 2007 Bloomberg.com Japan's Finance Minister Koji Omi said the worst of the U.S. housing loan crisis may be over, thanks to steps taken by the world's largest central banks. Central banks injected $290 billion into money markets last week as concern that U.S. subprime mortgage losses will curtail lending drove up short-term borrowing costs. The Bank of Japan and U.S. Federal Reserve have since resumed regular refinancing operations. European Central Bank President Jean-Claude Trichet said yesterday financial markets are going back to normal.

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Dems take on mortgage meltdown

August 13 2007 Money.CNN.com In the wake of the subprime mess, Democratic presidential candidates are grabbing hold of the issue and offering their own solutions. And the problem, according to many of them, lies with the mortgage broker. Sen. Barack Obama has introduced legislation targeting fraud and predatory lending. John Edwards, the former senator from North Carolina, has said he wants to ban certain fees, establish uniform broker licensing standards and start a national database for disciplinary infractions. Last week, Sen. Hillary Clinton came out with a plan to address lending abuses. One of its main policy planks was to "crack down on unscrupulous brokers."

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Countrywide, Washington Mutual Fall on Mortgage Slump

August 10 2007 Bloomberg.com Countrywide Financial Corp., Washington Mutual Inc. and MGIC Investment Corp. led shares of U.S. mortgage companies lower as demand for loans and sources of new money dried up. Shares of Countrywide, the biggest U.S. mortgage lender, have lost a third of their value this year, wiping out $8.8 billion of market capitalization that took three years for the Calabasas, California-based company to generate. They fell 2.8 percent today. Washington Mutual, the largest U.S. savings and loan, lost 2.2 percent and MGIC, the No. 1 mortgage insurer, fell 13 percent.

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Fed Is Facing Growing Pressure to Cut Interest Rates

August 12 2007 CNBC.com Growing worries about a world-wide credit crunch are fueling speculation that the Federal Reserve may be forced to abandon its anti-inflation stance and cut interest rates. Traders already are betting that the Fed, along with other central banks around the world, will have to start easing credit sooner than later. That's particuarly true if the current efforts to inject liquidity into the banking system fail to stem the credit crunch.

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More homes are on the market with more discounts for buyers.

August 10 2007 Money.CNN.com The number of homes for sale around the nation jumped over the past year, according to figures from ZipRealty, a California-based real estate broker. Zip monitors 18 metro-area markets from all four regions of the country. For the 12 months ended July 31, only Boston and San Diego showed drops. Boston's inventory fell 5.8 percent and San Diego's dropped 2.1 percent. The average for the 18 cities was a 19 percent increase in homes on the market, a total of 810,566.

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Who can't get a mortgage now

August 10 2007 Money.CNN.com Buyers with good credit and a down payment will make out well - all others, prepare to pay. The stock market is going crazy. Hedge funds are going under. But for the average American looking for a home loan, the crisis in the subprime mortgage market may actually be good news."Not only is it nothing to worry about, it's an absolute positive," said Loni Graiver, president of the Maine-based Cumberland County Mortgage. "Not only have [home] valuations come down, but interest rates are still historically low."

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Bernanke Was Wrong: Subprime Contagion Is Spreading

August 10 2007 Bloomberg.com Federal Reserve Chairman Ben S. Bernanke was wrong. So were U.S. Treasury Secretary Henry Paulson and Merrill Lynch & Co. Chief Executive Officer Stanley O'Neal. The subprime mortgage industry's problems were contained, they all said. It turns out that the turmoil was contagious. The $2 trillion market for mortgages not backed by government- sponsored agencies is at a standstill.

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Countrywide's Mozilo Says Fed "May Change Everything"

August 10 2007 Bloomberg.com Countrywide Financial Corp. Chief Executive Angelo Mozilo said the U.S. Federal Reserve's decision to pump more than $38 billion into the banking system may bolster confidence and help restart stalled credit markets. "The action of the Fed today may change everything,'' said Mozilo, 68, head of the biggest U.S. mortgage lender, in a telephone interview. "It certainly provides liquidity to the banks. I feel very positive about the move.''

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Bad Mortgage Servicers

Recourse against bad servicing

How to file a complaint

When a mortgage loan is closed, the origination file is closed and a servicing file is opened. It remains open for the life of the loan. Whether the process goes smoothly or badly depends on both the borrower and the servicing agent.

The servicing agent is the entity that receives the mortgage payment, keeps the payment records, provides borrowers with account statements, imposes late charges when the payment is late, and pursues delinquent borrowers.

In many transactions, servicing agents also pay property taxes and insurance with money placed in escrow by the borrower.

Borrowers can choose from whom they borrow, but they can't choose the servicing agent. The agent may or may not be the lender who originated the loan. Servicing is frequently sold. Borrowers must be notified of transfers, but cannot prevent them.

If you have been mistreated, you should file a written complaint with the lender addressed to Customer Service. Do not include it with your mortgage payment, which you should continue to make separately.

State:
Your loan number
Names on loan documents
Property and/or mailing address

This is a "qualified written request" under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I am writing because:

[Describe the problem and the action you believe the lender should take.]
[Describe any previous attempts to resolve the issue, including conversations with customer service.]
[If it is relevant to the dispute, request a copy of your payment history.]
[List a day time telephone number.]

I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business days and must try to resolve the issue within 60 business days.

If this doesn't do the trick, you can file a complaint with HUD. You can also sue. According to HUD, "A borrower may bring a private law suit, or a group of borrowers may bring a class action suit, within three years, against a servicer who fails to comply with Section 6's provisions."

You can also file a complaint with the government agency that regulates the servicing agent. Here are web sites you can use to contact these agencies:

For national banks
For Federally chartered savings and loan associations
For state-chartered banks and savings and loans
For mortgage banking firms

If you don't know the proper agency, you can send the complaint to the Consumer Protection Division of the state Attorney General. It will forward it to the relevant state or Federal agency.

Any borrower who does not receive a complete transaction statement at least annually should periodically submit a "qualified written request" for one using the form described above.

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Is Countrywide still a good mortgage company?

Share your opinion!

Some mortgage companies have been accused of contributing to the spike in mortgage defaults and foreclosures by encouraging borrowers to take risky loans and by charging excessive fees.

Here is what a consumer had to say about Countrywide:

"How can the average person trust anyone in the mortgage industry when you are listed on the internet promoting the worst mortgage company left in the industry? Countrywide Home Loans is the reason for the industries failures.

Why don't you people check out what you are saying first. Countrywide has a horrible rating. Their CEO himself said it in a Forbes Magazine interview. Everyone in the industry blames them for illegal loans, defaulted loans and the list goes on.

We will not ever trust this web site."

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