Have you ever felt your stomach drop?
I received an e-mail, from reader Robert Kerr today, asking if I had seen Merrill Lynch’s downgrade of Countrywide Financial. Merrill Lynch believes that Countrywide might face bankruptcy. Make no mistake about it, a collapse of Countrywide Financial will give everybody in the real estate and mortgage industry a case of the “awshits”.
The Secret be damned! I said this was plausible back on April 1, 2007:
Here are some warning signs the painfullly paranoid (like me) might feed upon:
1- Countrywide Announces Change in Board Of Directors
2- Fitch Ratings Agency Downgrades 33% of Countrywide Loan Pools; particularly their “expanded criteria” guidelines which include Pay Option ARMs
3- Methinks he doth protesteth too much; Chairman and Founder Angelo Mozilo sold $140 million worth of stock last year while literally screaming that Countrywide should not be penalized by stock traders because of the subprime meltdown.
Negative amortization loans are an excellent financial planning tool. Countrywide has long been a favorite of originators because of their adaptability and innovative lending products. This time, I think they may have overreached. I’m raising our readiness condition to DefCon-4.
