Countrywide in Trouble: how will this affect you?

Countrywide is in serious trouble! As the largest U.S. mortgage lender by volume, their problem is your problem. You may ask yourself how Countrywide’s problems may impact you, and why are they in trouble? By now everyone should be aware of the mortgage problems that have escalated recently. Things have not looked good as many lenders have gone belly up because of what began as a Wall Street ‘risk-adjustment.’ Initially this affected only the subprime mortgages, but then seeped through the whole industry, resulting in the Fed’s action to liquefy markets by injecting billions of dollars. This is particularly eminent now as Countrywide had to draw down $11.5 billion in order to increase their liquidity. On top of that, Merrill Lynch just downgraded Countrywide and their stock has plummeted roughly 30% over the past week. Not a good sign for the leader in the mortgage industry. But how does this affect you?

Well, Countrywide is to the mortgage industry as Coke and Pepsi would be to the soft drink industry. If you are craving that Coke or Pepsi product and they are having major liquidity problems, as Countrywide is, you may see your favorite products (maybe Sprite or Mountain Dew) disappear. It is the same with Countrywide, except their products consist of an assortment of loan programs. Due to these troubles, you may not be able to get that program you qualified for, a much more serious consequence as you may not be able to receive funding now. They are cutting those programs which are risky or are not backed by a select few. The next logical question may be which programs are being cut? I love my Mountain Dew and wouldn’t want to see that gone. Countrywide is now focusing solely on Fannie Mae and Freddie Mac loans, leaving all those who do not meet those guidelines out of luck. They are expecting that in the coming months, 90% of loans issued will be sold to Fannie Mae, Freddie Mac, or meet the criteria of Countrywide Bank.

So does this affect you? Yes it does. It affects the economy, markets, and anyone seeking a loan. However, there is solace somewhere in this mess. For those that are in search of traditional financing and have the money to do so will not be affected as greatly as those looking for 90-100% financing. Now more than ever a mortgage professional is needed to help you find the right program. So keep your eye on the market and don’t panic, yet…

 

By, Joe Brady

Comments

[Faiz]

Hi, I wanted to call your attention to this post we did on Countrywide and the fact that it's still running advertising. It's worthy of a debate I think, but we take the position that they should focus their resources on securing the loans.

http://thinkprogress.org/2007/08/16/countrywide-running-ads/

Leading Home Mortgage Loan Company On The Verge Of Bankruptcy Still Running Ads

[Brian Brady]

Nice analogy, Joe.

Agency paper is the colas while the Alt-A is the "niche" soft drinks.

[Mortgage Mark]

I used to work for Countrywide. We were approving loans that had no business getting done. The NINA and SISA programs were a joke.

[Cheap Louis Vuitton Bags]

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