It seems that Countrywide has been stealing the spotlight lately, but it’s hard not to when you’re the largest mortgage lender in the United States amid a housing bust. Bloomberg is reporting that Countrywide Financial Corp. is planning to restructure up to $16 billion of debt for home buyers with adjustable-rate mortgages.
Countrywide has already refinanced $5 billion of loans and plans to contact 52,000 subprime borrowers with $10 billion of debt to offer new loans, the Calabasas, California-based company said today in a statement. It may modify terms on as much as $6.2 billion of mortgages for borrowers ineligible for refinancing.
At least with this bailout plan, there doesn’t seem to be any involvement of public tax dollars. In addition to Countrywide eating the cost, Investors owning CDOs which these loans were a part of may also be footing the bill, but that’s a risk you take when you make an investment. The reward for that risk (of investing in mortgage-backed securities) has been enormous over the past few years. Future investment in mortgage backed securities may never be the same, at least for a few years until history is forgotten again.
“Countrywide believes that none of our subprime borrowers that have demonstrated the ability to make payments should lose their home to foreclosure solely as a result of a rate reset,” David Sambol, the company’s president and chief operating officer, said in the statement.
It might be a bit difficult to find ’subprime borrowers that have demonstrated the ability to make payments,’ especially in some of the hot bubble markets. With home prices so far above fundamentals, prime borrowers are having difficulty making payments.
Despite helping Countrywide, this move simultaneously screws existing customers with fixed rates who are current on their payments and rewards the financially irresponsible. On the other hand, they may be attempting to do this for Public Relations management to save what’s left of their good name and appear that they’re helping the little guy. In reality, this might only save a fraction of subprime borrowers in or near default from foreclosure.
Not only is Countrywide trying to look like they are helping out the people who are in trouble (due to their OWN financial irresponsibility), but they are trying to cover their own a$$es. I recently heard a report on NPR(national public radio) where a judge ordered the restructuring of a sub-prime loan into a modest fixed rate. These loans were being given away with little or no need to prove credibility. The Judge’s order was most likely in response to the borderline fraudulent representations of these amazing loans by the big lenders. Granted, you should read the fine print, but these giants wanted to pull the old Sleight-of-hand and pull the wool over our eyes. This Judge saw the shady practices being employed. The response to the judge’s decision was not taken lightly by the lender. They were very upset because the courts got involved and backed up one of the suckers, I mean customers. It’s funny, though, that the FRB is being the guiding force behind the recent moves by these lending giants. Although not implicitly directing the moves, they are being very influential. So much for being independent.
Seems like a good way to flood the economy with money and keep consumer spending up.( By the way, I love those trendy phrases…”get your no-hassle ReFi” Sounds cool.) So many foreclosures, ruined credit ratings, and an abundance of debt. Where will all the people go who are losing their houses to foreclosure? Rent somewhere? Move to rural America? What about jobs, gas prices, education systems? Oh god I’m getting a headache.
Where is economy heading? If anyone is keen on history, it’s quite clear that a decline, gradual or sudden, is imminent.
Save your money and live within your means.
This is the only way not to get sucked into ridiculous loans. But wait, wouldn’t that mean the big lenders would not get as much business. Isn’t it bad for the economy if people have their money tied up in savings. Free-for-all spending habits are what drive the profits of large corporations.Want that new house….here’s a loan….a car?…got a loan for that….education?….more loans….want to go on vacation….here’s more money, and a little Kool-Aid to go with it. Does the blame lie on the individual or the lender?
Both.
Suck it up, move out of your 3000sq.ft. home and get a little A-frame house in the woods somewhere. That is, if you are able to sell it.
Where will all the people go who are losing their houses to foreclosure? MEXICO!!!