San Diego home buyers who are counting on Countrywide Home Loans to fund their loans need to read this. If your mortgage is locked with a broker, or lender, whom has forward locked with Countrywide or any of their correspondent banks, you'll need to reconsider your choice.
This crisis has gotten so bad that I'm advising borrowers to lock with two lenders- I am locking my clients' loans with two lenders from this point forward. It's not fair to the good lenders but the Countrywide effect could be devastating in the next 30 days. If Countrywide goes under, the ripple effect will spill over to the conforming and government loan products. Less lenders mean higher rates.
Countrywide is in trouble...big trouble. Merrill Lynch advised its clients to stop buying Countrywide and start selling it yesterday. In response, Countrywide issued commercial paper at 12% yesterday. That means that they borrowed short-term money at 12% to fund loans at 7%.
This means that they are selling money at 7% that they bought at 12%. That's not always a bad thing if you can sell loans quickly to Wall Street. Countrywide can't sell their loans that fast; they are like an aircraft carrier, trying to maneuver in a tiny river. It takes 60-120 days for them to deliver their loan pools.
Mortgage brokers and small mortgage banks, however, are like speed boats. We can't always absorb the waves that hit us but our small size and speed allow us to dart in and out of those waves to get you to a safe harbor.
We think you should be locking all of your loans, at application, through a mortgage broker, who should be locking them with two different lenders on your behalf. While this isn't fair to the healthy lenders out there, someone has to look out for your interests.
