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American Home Mortgage.....what do we do now?

Today, for the first time in a very long time, I actually have three post topics floating around in my head!!!! The first one I was going to write today was a follow up to "Are you hulking up your business plan". I had said I would write a post outlining things you can do to improve your business that do not cost much time or money. I promise to write this post later this week. Today, I'm going to be a little self indulgent instead.

I woke up this morning with some questions on my mind and I want to try to get some answers from you guys. I know a lot about listing and selling properties but have to say I lack in my knowledge of the mortgage business. So this is where I need help.

Just about everyday I get phone calls from folks wanting me to list their properties. As always, I start the conversation with some qualifying questions i.e. When did you purchase the property? How much did you pay? How much do you owe? Are you current on your payments? And, Who are your lien holders? More times than not the answers are not good. We bought it 14 months ago. We paid $285,000(it's now worth $225,000). We are three months behind on our payments. We have a 1st with Countrywide and a 2^nd with American Home Mortgage.

Now folks, I'm very good at what I do BUT I can't perform miracles so, I pass on the majority of these listings and tell them they need to speak with an Attorney. I have however listed a few of these in the hopes of being able to negotiate a short sale. And that brings me to my questions.

As we know, American Home Mortgage just went belly up. I've read a few press releases on this, this morning, trying to figure out how this affects my Sellers. All I can find is "Current mortgage customers will not be affected". Well OK then. All is well with the world. But..................

Real life example #1. One of my pre-foreclosure/short sale Sellers had just agreed, about 10 days ago, to give American Home Mortgage a "Deed in lieu of foreclosure". Well the obvious question is...How is he affected? Can AHM, now that they have filed bankruptcy and are insolvent, still accept his DILOF? I don't have a clue.

Real life example #2: Countrywide, as the first lien holder, has just started foreclosure on another of my listings. The 2^nd lien holder, again, is AHM. My Seller received foreclosure papers from AHM this week and has 20 days to respond. Well...what does he do now? Does the fall out of AHM buy him more time?

Now a bigger question looms in my head. When is Countrywide going down? My market was big time sub prime territory and just about everyone I speak with has a Countrywide mortgage. Heck, I've got two of them myself. It's my understanding that CW was doing a whole bunch of 80/20s and then selling the 2nds to AHM. Almost all of the builders in Poinciana use/used CW. There were 1,000s of new homes sold in Poinciana from late 2004 to late 2006 using CW mortgage. ALL of these properties are now worth anywhere from 20% to 35% less. If Poinciana is any indicator then CW is going to be in a whole heap of financial trouble by the beginning of 2008.

So there you have it, inquiring minds want to know. I've given you some questions, do you have the answers? I sure don't.

*** Image compliments of Rich Schiffer. Thanks Rich!!

****EDIT*****

KURT JACKSON JUST POSTED THIS EXPLANATION OF WHAT'S HAPPENING. READ IT!!! IT'S VERY GOOD

Posted by Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc on 08/05/2007 02:27 PM

Comments (74)

mortgage, subprime, opinion

74 Comments on American Home Mortgage.....what do we do now?

AUG

2007

Reserved Parking For "The Lovely Wife"...TLW...ROAR!

Blog Boy...

Like you I would to find out how this effects the mortgage holders in spite of the fact that all is right with the world :)

Lisa...

That was a 'parked hug' to hold him over while I commented on his post. As always, the first comment belongs to "The Lovely Wife" :)

TLW...ROAR!

LOL at TLW's comment. I guess you guys really DON'T give a hoot about what comments are left!

As for my response, I didn't know Countrywide was selling a lot of 80/20s to AHM. Holy crap! This IS going to get ugly! I'll have to check back to see what everyone else says since I'm not going to be much help here.

This does not look good. Good questions, wish I had the answers.

In June 2007, Countrywide's "Delinquency as a percentage of unpaid principal balance" was 4.77%. Their "Foreclosures pending as a percentage of unpaid principal balance" were 0.96%. I don't know whether these numbers are high or low relative to other lenders.

Countrywide is publicly traded, so they have many reporting requirements. You can find the latest reports, statistical data and press releases at their Investor Relations page.

There are plenty of horror stories in my area this week about closings last week where AHM was the lender. The loans were not funded for settlements that had occured. Luckily there are plenty of good lenders in the area that funded these loans.

I am the listing agent on a house that is supposed to settle next week, the lender was AHM and I was freaking last week when I heard what happened to them. Thank goodness for a sharp Loan Officer there - when I called to ask the selling agent what was going to happen, she informed me that this LA had already switched the loan to FNMC before last week and everything was going as planned. WHEWWW!!

That's a good question you asked about the DIL's - I am curious too?? I guess just like any other thing- SOMEONE will still be collecting those loan payments?

I am like you Broker Bryant - I can list and sell houses - but I don't have too many CLUEs about how the mortgage business works. My trusted loan officer from FNMC told me that we are going to start seeing things that we haven't seen for years - like FHA & VA loans, creative financing and seller held 1st and 2nd trusts.

All very good questions BB. I think Countrywide will be fine, but will take a big hit because they bought a lot of subprime loans. They are the biggest, and most likely have the most working capital, but it would depend on how balanced their loan portfolio is. I think the only lenders that won't be hurt completely by all of this are the large A- Paper banks. BOA, Wells, etc. They are the ones that have mainly funded good loans, and can continue to fund good loans. BOA I have been told has funds to ride out the wave and be in it for the long run. Truth is, you never know. This next year is going to be interesting, and I don't think anyone can predict how bad it will get.

Due to major problem with an AHM loan officer not following through I haven't used them in a couple of years. But at least one of my clients used them on a loan a few years ago. I am curious to see how this continues.

Bryant

Here are my thoughts on the predicaments faced by your sellers.

Typically, a trustee in bankruptcy is obligated by any contractual obligations of the debtor. It might apply to a deed in lieu if the agreement is in writing. Ask your title company to check Pacer for the name and address of the trustee. Send a certified letter outlining the details of the situation. You may want to call the trustee's office and explain the situation to the receptionist. There may be people on standby to answer specific questions since the scenario is such a huge mess.

With your second seller, it's probably just a matter of forwarding the response to the trustee as well as the lender, now in bankruptcy. Your seller probably should have retained an attorney by now who would draft the response. A personal bankruptcy, Chapter 13, is the only option that will buy your seller time since Countrywide is foreclosing as a senior lienholder and only needs to give proper notice to extinguish the second lien position. Excess proceeds, if any, would be placed in the bankruptcy estate.

I would leave the big questions up to the attorney...like you said. The rest? I deal with both buyers/sellers but still would not even attempt to answer these...as I am not a LO. so.....I will keep coming back to get more educated as well. From talking at length to an LO I have worked a lot with over the past few years the other morning...I believe somewhere things will turn around..just like the market ....the thing about Hawaii is that we're behind the continental U.S. in RE..... but not in the mortgage dept. No 100% financing....have to have something to put down....VA and FHA are getting more popular right about now. Money down is mandatory and banks are the in thing locally.

Like other Realtors, way over my head. But, that rarely stops us from thinking and asking questions.

1. Did CW sell the "LOAN" to AHM? Or, did CW sell the "servicing" of the loan to AHM? Big difference.

2. The "Deed in Lieu" of is, I believe an Executory Contract and can be voided by AHM as the "Debtor in Charge" in bankruptcy, That one would take some time to shake out but I doubt that AHM is going to be taking much action on anything immediately. They have the protection of the "Automatic Stay" under Section 362 of the Bankruptcy Code and they can take up to 6 months to file a plan. I'm sure there will be a quickly ordered creditor's meeting and it will be interesting to watch.

Does that remind anyone of Enron???

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Seen in the news today: As news emerged Friday that American Home Mortgage would file for bankruptcy, it was revealed that founder Michael Strauss sold almost $3.5 million in company stock the day before employees found out they'd be losing their jobs. Newsday.com

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

When is Countrywide going down?

Within 6 mos. unless something drastic changes in the rates of default in their subprime and Alt-A paper. I expect they'll project the standard "There's nothing to worry about" attitude until the very end.

This contagion is spreading extremely fast.

Parked....eating popcorn...with a note pad.. good question.

The amount of insider sleaze is disgusting. I'd love to see (and I expect it) eventual SEC action against Strauss and Mozilo.

Bryant--- I would be absolutely shocked if the nation's #1 independent lender Countrywide goes down. Now, #2 IndyMac is certainly a possibility, but once again, unlikely.

The government will stay out of this for now but once those two start talking about closing, I think you will see intervention, like we did with the airlines after 9/11.

This is about survival of the fittest. AHM is JUST a conduit - NOT a direct lender. A good friend of mine at Wells Fargo, a major buyer of AHM paper told me that this is NOT a spill over into the conventional market, but it is about mitigating risk and reward.

AHM underwrites the loans and sells them to 1 of 4 major buyers, At that point, they initially make the VAST majority of the revenue and then pass on the loan.

That is what they are a pass thru, just look at the dividends they paid out. Everyone saw how much they made and now its tightening AND now the big 4 better control their risks without sharing in the rewards.

Catch all the updates at: http://americanhomemortgageinvestmentcorporation.consumermortgagereports.com/

Aaron, You know I just don't know about CW being too big to go down. Being too big may be exactly why they go down. They have an awful lot of liability floating around out there. Now I know all markets are different but in my area all those 2 year adjustables have not even adjusted yet. But they will be later this year come around October. You wouldn't believe the amount of calls I get from homeowners trying to sell before this happens......and they can't because their house is only 18 months old and the value has dropped drastically. These houses WILL be foreclosed on.

Lenn, Bailing out is what CEOs do. Didn't the Countrywide guy just cash in about 140mil in stock? Do you think that's one of those clues? Lenn, to your number 1..I don't know. It's my understanding the loan was sold but I'm not 100% certain. Actually I guess I am if they were taking a DILOF. Wouldn't they have to have the paper to do that?

Bob, Can I have some of that popcorn? Extra butter please....and a snickers.....and some nachos:)

Robert, We ain't seen nuttin' yet! It's the same old song and dance. No problem...no problem...PROBLEM.

Sally, Sounds like Hawaii has the right idea. That could be related to your price point too. Remember Poinciana is all in the $200,000 range.

Ed, that makes sense. My only advice to the seller is contact your attorney. Way out of my area of expertise or responsibility. I wouldn't touch it with a 10 foot pole.

Ashley, It should be very interesting to see how this all plays out. It's a good time to become real familiar with FHA products.

Jonathan, I hope you are right. I have a pending right now with BOA and just closed a Wells Fargo. I've had more FHA this year than the prior 13 years combined!

Debbie, That's a good LO you are working with to get on it like that and get it sorted out.

John, I wonder how "real" those numbers are? They sound low to me.

Judi, Thanks for stopping by. I'm looking forward to the responses.

Lisa, I hope the comments in this post will shed some light on this stuff. I'm clueless.

You're right. They would have to have the Deed of Trust Note if they tood the Deed back. Good thinking.

Scott, Thanks for the link. Aren't ALL lenders including Wells Fargo and Countrywide "conduits" for the securities market? Isn't that really where all of this get's down to? And eventually Mr and Mrs Average Joe's retirement fund?

I heard that Countrywide pulled a fast one last week on one of their subsidaries.. Story is that this company made the higher risk loans and Countrywide was supposed to buy them back as an investment package.. but didn't.. basically told them to whistle Dixie and they are in trouble..

I think there is much more to this story then what we have seen this week.. Brian Brady just posted a number of articles about what's happening..and he has some interesting observations..

Wish I did have your answers. Then again, you answered your own question: you need to perform miracles!! :)

I am caught in the throws of this mess as of Friday - have a person going through a loan with them (Alt doc due to a divorce and other factors, but a viable loan) and we are under contract due to close in less than 2 weeks. What happens now? Does another company pick up the pieces - what a mess. Oh, well, sort it out tomorrow when the press lets us know, cause they sure aren't!

Wow - thanks for such an insightful post - not as FUN as your others but no less a BIG REALITY check - buckle up we're in for some bumps ahead!

My company is getting many calls like this now

OK, now even I am getting worried and I don't worry easily!

BB, Have just forwarded this to one of my lenders. Will let you know the response.

Look forward to your other two posts floating around in your head! Always enjoy your writings.

BB - Was that a .410 that TLW was using to draft that counter offer?

My son-in-law who is a LO is predicating CW will shut their doors very soon, possibly in the next week or so. If that is in fact true, this will make the Saving and Loan debacle of the late 1980's look like a tea party. As a Realtor, I saw interest rates skyrocket to 17%! I tend to be a little more optimistic however things are looking very dicey with the recent fallout and subprime garbage!

Patrick, Nope. She used a good ole' 10 gauge. Pretty good shot!

Margaret, Good to see you my friend. Let me know what you find out. I owe you a call.

B & B Jo, Never worry about things we can't change. Find new ways to do business instead:)

JR, I think we are all getting calls right now. The consumers are in bad shape(at least in my market).

Cyndee, It should be fun to say the least!! Strap in tight!

Liz, Best find a new lender tomorrow. It will not be happening with AHM.

Jennifer, I wish I could sometimes. I have several sellers that need one.

Kaye, I bet there will be some big news coming out next week. We'll see.

Lenn mentioned Enron. This whole mess stinks of Enron, Worldcom etc. If the domestic diva went to jail for insider trading on the advice of her broker, I hope, if improprieties are proven, that Strauss and Mozillo et al never get out of jail.

Why are all the comments here by REALTORS®? Aren't lenders worrying today also?

Bobby, I hope he's wrong!! It certainly wouldn't be a good thing.

Just went through a situation with a seller. She did not tell me she was behind in her payments. We are working on a short sale right now and waiting for bank approval on it. if the bank says no then she will do the DIL

Jim, Good observation about the absence of the mortgage crew. Maybe it's early.

OK IT'S TIME FOR ME TO SHUT DOWN. I'LL BE BACK IN THE MORNING. THANKS!!!

BB,

I just began a post earlier today, about Countrywide. It's based on a Countrywide presentation in SoCal last Friday. CW's reps. claim to service 8 trillion (with a T) in the U.S.

It was not my plan to read any other posts which might influence my report, but I just came across this one and since Countrywide was mentioned, I thought I'd go ahead and comment. I've only skimmed your own comments and will re-read once I'm finished.

I was around when Countrwide first began in the early 70's, the Mazillo brothers were quite the talk of real estate back then. Looks like some things come full circle.

****EDIT*****

KURT JACKSON JUST POSTED THIS EXPLANATION OF WHAT'S HAPPENING. READ IT!!! IT'S VERY GOOD

I been bad for the borrower's, but what about all the employees. Where are they to go? This has been my 7th job in 7 yrs, because of bankers and brokers going under. I need a job

BB - we had some scheduled closings that were to have happened past week with AHM that did not close with them. We have had, however other local mortgage companies that stepped up to the plate and helped get these closings back on track. Some have already closed, some are due to close in the next couple of days.

I sure do hope that Countrywide does not get caught up in all this. My favorite lender in my area is CW - great service, great products, great loan officers.

Thanks for the link to Kurt's post - that was great to re-read and I need to re-read it again to fully understand what he wrote.

Ann

Bryant;

I'm sure glad to see that this community is beginning to wake-up. Your post must have an effect of a 2x4 for a lot of the people who read it. Sometimes, I guess that's what it takes.

This isn't anything new, we all have seen it before. When, Corporate America goes too far with control and greed an adjustment takes place. This is the beginning of that adjustment. And yes, pay special attention to senior management of these financial institutions running off trying to save their hide and money.

When I use to work for Wells Fargo, they were always proud of their "balanced business model". They said if the mortgage business goes bad, they can always fall back on their banking and servicing portfolio. These times will definitely test it.

If you look at the stock market, all the big bank's stocks are dropping, some as much as 56%. As you have said it before-we are in for a ride and this time we are all going downhill, but after this cleansing business will be back as usual.

http://activerain.com/blogsview/120462/It-s-YOUR-fault

http://activerain.com/blogsview/137373/The-Healing-of-the

To Your Success,

Coach Steve

Both of these companies are/were big lenders in the Hilton Head and Bluffton real estate market. I hope Countrywide survives--time will tell.

Bryant - You pose some very interesting questions, which I believe we will all need the answers to in the near future. I don't have the answers, but will check back for more info. Off to read the link..........

I have absolutely no knowledge to contribute to this conversation but this is one of the most interesting exchanges we've had on here in ages!

Too bad it's on such a scary subject!

Interesting post. Thanks for sharing the information.

Good questions, BB. I know I don;t have any answers, but I have some good contacts at Countrywide. Will see what I can find out.

Jeff

Wow,,,,, now you have me thinking.......I would like to know the answers as well.

I'm hearing from the people in Countrywide that they are in jeapardy. They are concerned because they don't have a myriad of income streams. In other words, Wells, WAMU, BOA, Chase, etc all get income from over 20+ revenue sources, but CW is primarily all mortgages....I hope that this does not happend. This would speak volumes as to the security or non-security of our industry.....let's hope that this doesn't happen.

BB,

Finally just got through all these comments (well most of them) and I'm filled with mixed emotions. In some ways it's sort of sounds like a lynch-mob,...talk of of Enron and doing time. Let's not panice here folks! Sure sounds to me like rumors (or maybe the truth only time will tell) may be flying around here.

Last Friday I attended a session with Countrywide in So Cal. I posted a blog late today about the same thing.

To have a short anser to your questions,... I'm not an attorney, and obviously we're talking about foreclosure laws in different sates. Yet I've experienced this a few times in the past.

#1 Normally a lender will accept a deed-in-lieuas long a they get a title policy ...no bagage accepted with the deed. The borrower normally pays. Most (net not all) lenders report "settled". IRS could always be another issue...yet I've never seen it happen.

#2 Answer, depends, how'z that? The 2nd t.d. holder will most likely be out of the picture, if not now, in a matter of minutes. Assuming your clients have 0 equity, talking with the 1st.T.D. holder is important. If CW had the loan, it makes sense to talk with them ASAP.

Hope this helps in any small way, I'l try to reach you in the a.m. CA time of course!

I expect to see fewer 2nd t.d. filings in the future, ESPECIALLY on 100% financing. Not a good idea to throw more $ at the situation.

If I could say anything here, this is not the time to panic, by any means. As r.e. professionals we need to be informed to do the best job we can for our consumers. And what a better place than AR to learn.

As much as I'd love to have all the answers, it seems like the more I read and the more I try to wrap my head around the possible fallout, the more confused I get, so I'm just going to park it here and keep reading. Thanks for the post!

AUG

2007

What these banks do it sell off their portfolio of loans to other major services (like chase, citibank, etc.) I would be surprised if countrywide goes under, but I DO see them either filing for Bankruptcy protection or merging with another back. This is what many lenders did in the 90's.

As I mentioned earlier, check out the Mortgage Implode site for 'mentions' of new companies with troubles, this will at least give you a heads up! We are up to 109 MAJOR lenders out of business since LATE 2006.

Bryant, fortunately none of my contracts are working with mortgages through American Home Mortgage. Early last week, our broker informed us that AHM was no longer funding their loans and to be aware! Very sad all of this belly up business. So many short sales and foreclosures!!!

We were also advised that we were to check with our clients' lenders who have a 100% stated income loan to make certain the loan is still approved for financing. Some lenders are backing out.

It appears that we all need to be very watchful and keep our ears to the ground. This is certainly a different market.

It looks like I'm in the same boat you're in. I'll keep my fingers crossed.

Hi Teresa, Thanks for stopping by. Good luck with the short sale. They are not easy to get through right now.

Lynda, I'll look forward to reading your post. This should be a hot topic for a while.

Bernie, You are right. Yours is the story that gets lost in the mix. These big mortgage co. don't give a crap about you. And that's very sad. I hope you find a more stable job next time around. Thanks for stopping by.

Ann, Glad you got them closed. I too love CW. Very easy to work with. Whenever I see a preapproval from CW I have a lot of confidence on the transaction. I don't think I will for the next weeks though!

Coach Steve, Whenever there is a market boom like we had in RE it's always followed by a down slide and then we do it all over again. Funny how we seem to forget this trend when things are good. We feel it will last forever. Thanks for the additional links. I'll be over shortly to check them out.

Diane, Paula, Joan, Bob, Jeff, Leo.......Thanks for stopping by guys. Did you go over to Kurt's post? Really good info he posted. Helped me a lot in understanding this stuff.

Larry, That's an interesting point. CW does have all of their eggs in the same basket. And they are rotting quickly.

Ryan, I'm with you my friend. That's why I posted this. Trying to learn.

Katrina, Thanks for stopping by and the link. We'll see..............

Teri, One thing is certain right now and that's that nothing is certain. Unless the deal is signed AND funded it can kick at any minute.

Ray, Thanks for stopping by. The boat is filling up quickly!

Thanks, BB, for tossing this subject on the table. Lots of great advice and insight in these comments!

Where this ends, nobody knows. I fear there are dragons beyond this point. But just as things looked as if they would never go down and did this market will rebound. Next year? The year after? Ten years? Look at the Japanese economy. After unbelieveable growth through the '80's they were basically stagnant through much of the '90's. Or at least that is my understanding.

Hi, BB- while the subprime appears to be taking the rap, my reading indicates that part of the problem- a LARGER part, is the fact that A paper applicants were provided with loans that required little in the way of documentation. It's not simply subprime (a smaller percentage of defaults)- it's the good buyers that were able to buy TOO MUCH. The point: lenders that are NOT equated with subprime are in jeopardy, which requires that we stay VERY on top of lender status- something most of us aren't accustomed to doing. VERY SCARY. THANK YOU- while no answer is forthcoming from my end, you've opened my eyes!

BB,

I think it's only a matter of time before Countrywide goes belly up, they are writing anything write now, good luck to them..

Tom Weiss

I think Laurie Mindnich has a good point: we have to keep on top of ALL lender's status now. The lender market will shake out, but it will be a bumpy ride for a while. I am already seeing that loans now have to have full docs, higher FICO scores, 2-6 months financial reserves: in other words, stricter guidelines for borrowers. The 2 words I think we are going to hear a lot of in the mortgage industry is "due diligence": on lenders AND borrowers.

Mary Ann, Thanks for stopping by. I'm really glad I threw this out here. It sparked Kurt Jackson's post that I thought was just awesome and really gave me a better insight to what's going on. If you haven't read it the link is in the bottom of post.

Chris, I think we are in for a long ride. I know it's going to take several years for my market to rebound. But hey I guess we really never know. Things can change quickly.

Laurie, Alt-A has certainly been impacted as much as sub-prime. This crisis is going to have broad reaching ramifications.

Tom, We'll see......

James, Yep...we better up our game when it comes to following up on transactions. I've got 2 closings this week and you can believe I will be nervous until my sellers have a check in their hands. Actually until the check clears the bank:)

I believe that Countrywide will be fine.

They are a bank (like Wells Fargo, BOA, IndyMac, etc). They may suffer from the drop in loan volume, but they will weather the storm. Most of the 109 lenders who have failed in the last year have been conduit lenders, or pass-throughs, or whatever you want to call them. Most of them didn't have the ability to service the loans that they made - they sold everything on the secondary market. Countrywide services a large portion of their loans, and doesn't depend on the sale of loans to survive, as these other wholesale lenders did. There's a difference between a direct lender and a wholesale lender - and the fact that a lot of the wholesale lenders are suffering will put many mortgage brokers out of business. The mortgage bankers will have a better chance of survival, but will be stuck doing the Fannie/Freddie stuff for the most part.

Just my opinion! =)

Check out www.eyeoncountrywide.info , an independent consumer resource examining sub-prime lending and Countrywide Financial Corporation

BB, Somebody asked "where are the mortgage guys?" Well, I'm one and I'll chime in. I'm associated with the #2 mortgage broker in the nation. They recently signed an "affinity banking" agreement with Countrywide to be our primary sub-prime (or other-than-prime) lender. I don't think this would have happened if CW was in any kind of jeopardy.

Everybody needs to relax. Most of the mortgage company bks have been about recourse loans, and who is going to end up with them. Rest assured somebody is going to hold those loans and they will need to resolve ALL THE COLLECTION ISSUES asap. If you have a deal for a deed-in-lieu the "new" owner of that paper will probably honor the agreement and move on.

Good luck.

Bill Roberts

BB, Here is the response from one of my favorite lenders.

"Margaret, the industry has never faced this liquidity crunch. I am not sure who is going to pick up the servicing of the AHM loans. However, in the shorter term, I do know that AHM still has about 750 employees, most of whom are handling the servicing issues going forward with the company. In the past, whenever a servicer of mortgages has gone out of business, another entity comes in and handles the receipt of payments and payments of taxes, insurance, etc... until there is another servicer who purchases the servicing rights. I don't think notices sent to any homeowner by a firm that goes out of business will "extend" the window of time they need to take action with the property. I can tell you that we here at National City are very secure in that my office has not be a party to the "wild, wild west" of lending that went on over the past few years AND we will continue to lend "good" money, so although some players in the industry are in big trouble, we are rolling along here in my office. "

Dave Meurer
Mortgage Banker
National City Mortgage
A Division of National City Bank
10400 Little Patuxent Pkwy.
Suite 470
Columbia, MD 21044
Office: 410-997-7212 xt. 227
Office: 800-422-3995 xt. 227
Fax: 410-740-2461
dave.meurer@ncmc.com

Great info Margaret! Thanks.

Bill, I hope you are right my friend. But we'll see.....

Thanks for the link Molly.

Gareth, I don't think anybody is safe but I do hope you're right. I love Countrywide!!! They're huge in my market.

Before I go over to Kurt's post...I just wanted to drop a quick comment and say that thinking about Countrywide going under is well...let's say, it will make everything that has been happening up to now seem like a walk in the park. Now...off to Kurt's...

Your blog is the place for LO's to find out what's going on in our industry.

Greg Z

AUG

2007

Hi Lola, THanks for stopping by. Yep the demise of CW would not be a good thing. Most folks seem to think it will NOT happen. I hope they are right.

Hi Cheryl, Stay tuned my friend.

Well thanks Greg. I do my best.

AUG

2007

I'm a little late to this post ... just found it tonight, but thought you might want some perspective on the Am-Home/Countrywide connection. As recently as 2003-2004, American Home had no servicing portfolio. They were selling large lots of loans to other lenders ... the main 3 being WaMu, Wells, and Countrywide. How do I know this? Am-Home acquired the mortgage company I used to work for. (It took me 6 months to realize all was not as promised and escape)

So, when you talk about loans being purchased, remember who the large portfolio lenders are ... Am Home was not BUYING from Countrywide, Wells, WaMu, and others ... it was selling their loans TO those lenders, sometimes retaining the seconds in order to start building a portfolio. Towards the middle of 2004, Am Home actually began keeping more first mortgages than it sold, for the first time in it's history (I was long gone by then). Problem is, they didn't realize the nature of the loans they were writing.

Back when Am Home purchased the company I had worked for (in Feb, 2003), they were offering loans and doc types I had never even HEARD of. They were on the cutting edge of the Alt A product ... and they paid the price for being innovative. Using only credit scores as a mechanism to determine risk, they had found a group of wall street investors eager to capitalize upon the rising home prices, low interest rates, and what seemed to be an unshakable model.

Oops ...

Where does that leave CW, Wells, and others who purchased large lots of loans from AHM? Well, one of the reasons AHM was low on cash was the forced buy back of loans that were defaulting ... that left them low on cash reserves, causing them to miss a dividend payment, causing their creditors to pull back warehouse lines, causing them to be unable to fund loans, ... you get my point.

Will Countrywide make the same mistakes? Given that AHM was a relatively small player in the mortgage market until they undertook the acquisition of multiple other companies, usually targeting smaller lenders with financial trouble or lenders who didn't have the will to stay in the business (as was the case with my company) during a market that might be on a downturn, they never had the capital in place to become truly stable. While they were full of brilliant, innovative, creative minds who had a great vision in place, they just didn't have financial stability behind them. (you've heard the phrase "one check away" applied to people ... with AHM it was one warehouse line)

Countrywide, on the other hand, according to their SEC filings, does have not only stable warehouse credit lines in place, but also billions of dollars of their OWN assets. They made a profit in the second quarter, albeit a smaller one than expected due to the changes in the market. I'm going out on a limb here and saying that I fully expect them to make a year end profit as well.

The naysayers will be shocked, the greedy buggers hoping for a crash will be disappointed, and thousands of CW employees will not ... and mortgage brokers everywhere will breathe a huge sigh of relief, because, as big a pain in the butt (yes, I know it) as CW can be to deal with ... they do come through ... and the money is always there at the closing table.

AUG

2007

Hi Bryant;

Remember when I said in my earlier comment: "And yes, pay special attention to senior management of these financial institutions running off trying to save their hide and money."

Here we go:

by Mish's Global Economic Trend Analysis

The associated press is reporting Countrywide Financial Chief Executive Angelo R. Mozilo Exercises Options for 92,000 Shares.

The chairman and chief executive of mortgage lender Countrywide Financial Corp. exercised options for 92,000 shares of common stock under a prearranged trading plan, according to a Securities and Exchange Commission filing Wednesday

In a Form 4 filed with the SEC, Angelo R. Mozilo reported he exercised the options for shares on Wednesday for $14.69 apiece and then sold all of them the same day for $28.74 apiece.

Let's do the math. $14.05 * 92,000 = $1,292,600

That's a pretty big vote of no confidence. And it's surprising too given the August 2 statement by Eric P. Sieracki, Chief Financial Officer: It is important to note that the Company has experienced no disruption in financing its ongoing daily operations, including placement of commercial paper.

Aug. 9 (Bloomberg) -- Countrywide Financial Corp., the biggest U.S. mortgage lender, said ``unprecedented disruptions'' in the nation's home-loan market may curb its ability to lend, leading to an erosion in profit. Shares fell as much as 13 percent in after-hours trading.

To Your Success,

Coach Steve

I love seeing your face on your posts. You make me smile all during my AR visit. Thanks

Oh and great post.

Jennifer, Excellent info!!!! I appreciate you coming here and sharing it. You should write a post about it. It's very interesting.

Coach Steve, "and the rich get richer!" I wonder if I should dump some Tutas Towne Realty stock? :)

Hi Rosemary, Are you having a Broker Bryant day? I really appreciate you taking the time to read and comment on my posts. Thanks!!!!

Bryant, I am having a Bryant moment or two. I felt I needed some pepping up in the knowledge department and I counted on you. You did not let me down! Thanks

AUG

2007

It's sad to see so many industry people perpetuating the misinformation and fact lacking posting (Jennifer in particular).

I won't bore everyone with the blow by blow rebuttals to the fact-lacking statements here, but to get down to the heart of it, an example of such statements is this one:

"Well, one of the reasons AHM was low on cash was the forced buy back of loans that were defaulting ... that left them low on cash reserves, causing them to miss a dividend payment, causing their creditors to pull back warehouse lines, causing them to be unable to fund loans, ... you get my point."

AHM's issues had nothing at all to do with the performance or quality of their loans, but as very well documented in countless reports, filings, etc., the collapse was caused by a securities credit quality downgrade by the rating agencies (Fitch, Moody's & S&P), which triggered significant margin calls (in lay terms - the demand for a reduction in collateral leverage - i.e. your collateral is worth less, so give us additional equity in it). AHM's portfolios (as can be confirmed in the securitization vintages available on the ir site) were actually performing better than industry and tranche average.

And last, but not least, when the company you worked for was acquired (Principal Residential's retail division) AHM had already acquired a servicing portfolio of approximately $1billion via CNI.

SO, let's stop throwing misinformed speculation and gloating around about our industry peers and their perceived missteps and show a little compassion. Nobody caught in this liquidity crisis has done anything wrong. It's like saying that the victims of the 9/11 attacks on the WTC should have known better than to work in a high rise building. This is just the world we live in today. Consumer demand is as much to blame for this crisis if not more so than the lenders supplying the product.

Disapointed, Thanks for stopping by. Your comments are appreciated. And you are right it is important that we remember all the jobs that have or will be lossed and the hardships this market is creating for many families. These are folks just like us that are just trying to make a living.

JUL

2008

AHM, what a joke! Hopefully these people found a better place anyway.

NOV

2008

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2008

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2008

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2008

DEC

I've started to lose track of what banks have gone by the wayside. It is so disappointing to say the least.

DEC

MAR

Seems like attorneys would be standing in line to do a "CLASS ACTION LAWSUIT" for all those borrowers who were told they could Refi out of their Subprime loan in a couple years, and PMI would cover the loan if the borrower defaulted on the loan, which was not true ...

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