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Bank of America, Countrywide, & A Mortgage Broker's Perspective.

MSN Money had an interesting and relevent article today speculating on how Bank of America will handle the buy-out of Countrywide. Click here to read the article.

I'd like to focus on a few key points that were made in the article:

- First off, the relationship between BOA & Countrywide is not new, it's been going on for 40 years. In my mind, this should give you some perspective on whether it was an intelligent decision on BOA's part and the fact that this news wasn't a 'shocker' to a lot of us in the Mortgage Profession. There is familiarity between the two firms and I believe this decision is an example of the Industry starting continuing to cure itself of the ills that came down on it and within it.

- Countrywide is said to have a heck of a lot of liquidity and the rumors of bankruptcy were probably off the mark. Then again, they were sure itching for something like this because something had to be done.

- Bank of America has said that it will be more selective in acquiring Mortgages issued by other banks or independent brokers. This, in my estimation, is HUGE! This should of been done all along and was probably a major component of the problems that went down with Countrywide. Being a Mortgage Broker myself, we have always run loans through their system, got the approval, packaged it up and sent it on its way. Our files were clean and performed well. I wasn't concentrating too much on what other Mortgage Brokers were doing, didn't have to at the time. Then, the whole Sub-Prime Market started taking a plunge and we began experiencing an awful lag-time once our files were submitted. I found out the reason for this........other Mortgage Brokers were running approvals online that were getting turned down and still sending the files into Countrywide because they had no other place to go with them. What better example of 'Throwing It Against The Wall' than this practice? Also, taking a look at how loans are performing that are coming from this Bank or this Broker should be a regular practice to make sure you are doing business with the right companies. I think BOA will be on top of this to ensure they don't experience similiar problems.

- As far as Mozilo's take home from Countrywide's sale to BOA, it might not be a bad idea for Mr. Mozilo to float a few bucks to do his part in helping out the current Market from a Money Perspective. And Mr. Mozilo, if you don't think you want to do that, you are always welcome to invest give some money to the International Bank of Jason Sardi:-)

Jason Sardi

Mortgage Consultant

1-866-262-8720 ext. 229

jsardi@fcegi.com

Posted by Jason Sardi, Mortgage Banker on 01/16/2008 12:48 PM

Comments (57)

countrywide, bank of america, mortgage brokers, pennsylvania mortgages, adjustable rates

Originally posted at: Real Estate Financing...: Bank of America, Countrywide, & A Mortgage Broker's Perspective.

57 Comments on Bank of America, Countrywide, & A Mortgage Broker's Perspective.

JAN

2008

Following up with the performance of the loans you originate is an admirable way of doing business. And smart brokers and agents are probably already doing this to some degree. But we can't control everything. Though I'd love the chance to control your overseas branch of IBJS :)

Jennifer - As long as you keep in contact with your past clients, you should have a very good grasp on how they & the loan are doing. As far as IBJS....consider yourself hired!

Hey....they can donate to me too! Not only is it great to follow up with clients (and I don't refer in the past tense you notice) is because they become clients in the future as well. It is not only great follow up practice but for me...well, I make friends along the way....I don't forget them when the deal is done. :)

Sis - That is the way to do it!!! (Pssstttt.....if I get the donation I'll float you over some green:-)

Ok, I'll through in my opinion on this, since I can never help myself to comment on something Countrywide related...

Countrywide's actually been inches away from having to file a BK both back in Aug and recently and basically got "stick saved". Back in Aug. it was from about 40 banks coming together to extend lines of credit ($11B) to them followed by $51B in FHLB loans. Basically a lot of the industry has been trying to prevent the discruption would be caused by a collapse of Countrywide.

That being said the lending industry is going go through a very fundamental change over the next few years, back to being ruled by the big banks with the "monoline" lenders like Countrywide going pretty much the way of the dodo. Countrywide one way or another being merged in with BofA is just one example of how this is gonna happen. I would be absolutely shocked if the deal closes with the terms that were made public.

Jason,

Thanks for sharing this information as my customers seem to use Countrywide frequently. Do you think it will change their $500 origionaton fee to 1%?

Jason

This has all become a can of worms don't you think?

Sincerely

Tom Braatz

Matt - Isn't it interesting when a 'Big Dog' gets in turmoil. Personally, I would have been surprised if Bankruptcy was the way they went....with Countrywide being Countrywide I thought there were just too many options available to them for that to be the eventual outcome. Though, one never can tell.

Now, I would hate to see 'monoline' lenders go away because the expertise & specific speciality is something that I believe adds more benefits to the consumer. If Wholesale Lending as we know it goes away, I believe it will prove more costly to get a mortgage across the board and narrow the % of individuals (who rightfully qualify) to own a home.

Anona Large - I have no idea about the Investor Fee and how this will or will not change it. I do think though it will probably take 12 months before you see any significant changes in the products offered.

Tom - Want to go fishing:-)

Nice feature sweetie :))

good perspective, and I agree with your points here. It will be very interesting to see how this all plays out, especially as the market starts to recover

I found two items in that article particularly interesting. The first was that three quarters of Countrywide's portfolio is second lien mortgages and option ARM's. No wonder they are in trouble!

The second interesting item was "BofA says it will be more selective about acquiring mortgages issued by other banks or arranged by independent brokers, traditionally a large part of Countrywide's business. This obviously strikes close to home as I'm one of those independent brokers.

I suppose I should be worried that CWD will do away with their wholesale operation altogether. I'm not. CWD has been in the wholesale business too long. Done correctly, it's hugely profitable. Jason touched on all the brokers who weren't doing it correctly. If any of those brokers are still in business, I think they'll soon find themselves on CWD's upcoming broker blacklist. Good riddance!

Back to my first item of interest, which ties into my second item of interest. I was shocked that CWD had that much garbage in their portfolio! First Choice Equity Group, the broker for which Jason and I work, sends CWD a lot of business. My best guess is that over 90% of it is full doc conforming first mortgages. Throw in a few piggyback seconds and you have all the loans we ship to CWD. Our loans perform extremely well. CWD/BofA is not going to cut us off!

I also wanted to respond to Matt's prediction of the end of monoline lenders. Matt, I truly hope you are wrong. A fundamental law of nature is "As banks get bigger, their customers suffer" Customer service is already an afterthought at several big banks. (You know who you are!) Banks have always, and will always make mortgages but we all know that there are a lot of mortgages they won't make that should be made. There are also a lot of mortgages that they won't make that shouldn't have been made. They need to let the market work that out for itself!

Jason,

I knew of this too...but I just hope that since I have business with Countrywide that Bank America treats their clients as good..I just had some negative dealings with them but that doesn't mean they are not a good bank. Between the two they will be the biggest out there. May I just tell you that this should also be posted in localism in my opinion.It is a good opinionated article. I see you are following what I am doing.

Thank you my dear Jennifer! Kind of surprised but I hope it does drum up some insightful conversation.

Sean - Time is the teller....

Bill - We are on the same page, from the same book. Excellent comment amigo!

Neal - I just changed it Neal, thanks! You know me, a little of this....a little of that:-)

Jason,

Nice post...I see it's every man for himself here on AR...everyone looking for a handout...I thought we were family here...spread the joy!!! Thanks, Fran

Ok Fran, consider yourself in! But keep it quiet:-)

Didn't you love the parachute that Mozilo is getting. The rumors have it running as high as $300M including stock options. I wish someone would fire me for $300M.

Jason, Awesome post and congrats on the well deserved Feature. Great way to explain everything

Jason, thanks for a very good post. It helps to hear things from the horses mouth so to speak.

Lane - Sounds like he's got a nice little set-up.....we'll have to see.

Matt - Thanks man, I think there is an undercurrent in this of how it may affect guys like you and me.....and the Mortgage Industry at large.

Team DiMuria - (In my best Mr. Ed voice)....Hope this gives you food for thought:-)

Jason, As usual you hit the nail on the head, So when should I sell my Countrywide stock?

Good, good stuff here. Very informative post from someone on that end of our business. Thanks for sharing your perspective!

Bruce - I'm no Financial Advisor but you know my thoughts on all that:-)

Jeannie - Thanks for taking the time to read, I hope it will add a bit of insight and understanding to keep you abreast of the Financial end of the Real Estate Industry.

I had 2 loans with B of A last year and they were great. I hope that continues. B of A is expects to make money off this acquisition.

You made some good points in your post. Analyzing the performance of past loans originated is an excellent idea for a lender to embrace as it sets a bench mark. Brian Sacks stated simply that "past credit performance is a good indication of future credit performance". The same is true for types of loans and the level of integrity with which they were packaged. Thanks for the informative and well written post.

I know B of A got out of the broker side of the business to concentrate on the in house side. Do you think they will still allow the CW to function as a broker business?

Jason, It all sounds good to me (sorry, I don't follow a lot of this mortgage company take over stuff and especially not in the USA) and you're the guy to ask about all of this....that's clear to see.

Do you smoke a pipe and have plaid slippers, by any chance?

((-:

Not really weighing in if it would be good or bad for the consumer, just an observation that the banks would love to bring all the lending business back to themselves. They got smacked around the last couple years by the monolines, and now it's their opportunity to get it back. The whole explosion in monoline lenders was brought about by the securitization on debt, which meant they didn't need depositors to back up the loans. This securitization engine is quickly grinding to a half. One way or another, the whole lending industry is going to be very different in two or three years than it is now.

Jason, Great post and thanks for the link to the MSN article. It was good and I like how they ended it that "During the past four decades, the company Mr. Mozilo founded has created tremendous value for shareholders and has provided millions of families with an opportunity for home ownership." But compensation have never been determined by past performance over decades, just the present performance.

Anyway, I have to agree with Matt that we are going to see a lot of changes. Some quite necessary, but am as concerned as you with some of them as well. It'll be interesting to see how all this plays out, but I do see a lot of specialty lenders going by the wayside and the costs of loans increasing in the overall picture.

Time will tell!

Nice to hear your take on this one. Would also be cool if Mozilo did make a contribution to Sardi Savings. Make an appeal to his conscience, that should do the trick.

cheers

And, of course, the local Elizabeth Nieves Branch of the International Sardi Bank!!! ;-)

It is always helpful to hear the take of the "Mortgage Guys" here on Active Rain to bring perspective and clarity to the talking heads we see on the news. Thanks Jason. :)

Jason, great information with nice concise explanations. I don't get it all, but it certainly added to my info bank. Appreciate it.

Jason - I appreciate your shameless palm up approach to Mr. Mozilo :>}

Jason... I actually disagree a litte. During the subprime era, Countrywide's subprime division wasn't as competitive as so many others. From some information that I know of, much of what hurt CW was the pay option arms. And at the bottom of the article, the other problem was all of the 2nd lien positioned loans that CW is holding. CW's subprime did hurt them, but not as much as the other two things mentioned. And one reason was because CW's rates were sometimes higher and because they had stricter guidelines than so many... and those companies exited the industry quicker. Just my ,02 and opinion. Overall, you brought awareness and a thought provoking post.

Wayne - Besides humanity in of itself, there is no reason to garner an acquisition if it isn't making you a tad bit of money.

Christopher - I've read Sacks....he seems pretty good at what he does and what we do. I'm confident in what I've read that Mr. Sacks understands the Industry....or is one hell of Motivational Guy.

Matthew - If Wholesale ends....poverty begins....

Jo-Anne - My pipe is glass......

Matt - I give it 12 months.

Marc - It is the only one.

Gary & Richard - That's always a good investment:-)

Elizabeth- We are hiring and the benefits afford you good Health Insurance & Italian Recipes by Artie Bucco.

Lola- Grazie.

Teri - If a minority of us got it all.....we just may be superficially rich.

Marlene - Give me freedom or give me a hand-outs...

Jeff - Bill Engleman said this, "I found two items in that article particularly interesting. The first was that three quarters of Countrywide's portfolio is second lien mortgages and option ARM's. No wonder they are in trouble!"

Yup.

And still, Mr Suntan Mozillo walks with nearly 100 million...We have 60 k members, do ya think if they got 60k emails they would cut him down to a measly 20- 30 million...Great detailed post Jason...If they do cut Mozillo, he will have to cut back on his tanning and Gucci suits, he may not have enough left over for your private fund///Sorry dude, you will have to earn your money like the rest of us do...beg for it!!

JAN

2008

Jason... I wrote most of my comment before I read the article. But I did read about the home equity loans, which I added into my comment. Part of my point and that I see to many people focus on are the subprime arms. There are more and more facts telling us that it was a lot more than just these types of loans. thanks

Jason, when I started in 1991 Countrywide only did "A" paper loans and B of A was nearly impossible to deal with but kept buying up every bank I worked with. So, I don't see them as being similar at all. It will be very interesting to watch what happens. Since B of A is located in Charlotte I'm hoping it will bring in more jobs. Takeovers always mean consolidations even when told otherwise.

Nice analysis, Jason. I'd add that BoA may not be counting on a potential "turnaround" so much as the guaranteed tax breaks.

Jason: I have to disagree with you on the point about loans performing or not after they have been sold. As long as I've been honest and forthright in the way that I presented the deal to the underwriter, that is their job to review the documentation and to determine if this is a loan that they want to do or not.

Back in the hey day of the sub prime market, I had a loan that had been turned down by two of my other investors. The Countrywide rep came calling one day asking if I had any deals that I could send him. The only one that I had that didn't have a home was this one.

I told the rep that it had been turned down a couple of times and he looked at it, told me that the CW had a program that he thought it could fit in and took a copy package with him. Two days later I got a fairly clean approval. I honestly don't have any idea as to how that loan performed, but is it my fault if CW had a program that went down to a 580 FICO (or whatever, I honestly don't remember the particular program)? I presented CW with all of the facts, they made their decision to do the loan or not.

Just my opinion.

Bob Mitchell

ValueList Real Estate Services, Inc.

Mike - Speaking of which, I sure could use a good tan.

Jeff - That was part of the problem, especially those loans done at a high loan amount compared to the value of the property.

Diane - There is familiarity there, it will be interesting to see how the product line & service pan out.

Katie - Good point!

Bob - There is a lot of truth in what you said, since we have little control of what transpires in lives after the loan closes. Though, I do try to consistently stay in touch and if something is wrong....try to guide accordingly to make sure things don't snowball. It is of my opinion that our value extends beyond the loan just closing....that is customer service.

Very refreshing take, Sardi. I'll be honest, I don't think many people expect follow up from their lenders post-closing. I also think most just think you'll plug them into whatever is available without really helping them decide if it's wise. Just like we agents get a bad wrap from the perception of the huckster who forces a deal through only to disappear the second it closes, you have a similar hill to climb to gain that trust. Honest evaluation and transparency about what goes on behind the curtain, as can be found in this post, is going to reap rewards. Good job, man.

Wow! Thanks Mr. Slaybaugh. That means a ton coming from you man. Mucho Grazie!!!

That was a great post. I think there are plenty of people willing to be invested in....lol

I don't envy Mozilo's position-I don't think any of us would enjoy being the CEO, CFO, etc. of any of the major banks right now.

Other than that, well said!

Christy - That's probably a fact:-)

- It's always greener (no pun intended) on the other side.

I don't envy Mozilo's position-I don't think any of us would enjoy being the CEO, CFO, etc. of any of the major banks right now.

Other than that, well said!

Ahhhh, that was you Heather! Thanks!

You're putting up some great content here Mr. Sardi. Hope all is well with you.....

More details are out on the specifics of the BofA/Countrywide deal. Countrywide pays BofA a $160M breakup fee if the deal is canceled for any reason, this is the opposite of most M&A deals where there is a breakup fee the buyer pays. Basically BofA has 9 months to look through all of CFC's books and do due diligence, if they don't like what they see they walk away with $160M. Pretty sweet deal if your Bank of America :)

JAN

2008

Who said Countrywide "had a lot of liquidity"???

That's not what I've seen reported. If they had liquidity, they wouldn't have been looking for "liquidity".

P.S. Can't log in this morning.

Thanks Dez, hope all is well with you as well.

Matt- Sweet deal indeed. I'm not sure BofA will like what they see (3/4 of Countrywide's Portforlio is reported to be Pay-Option ARMS & Second Mortgages) yet somehow I think it will work out for the better...by getting rid of the worse.

Lenn - Lewis did. See page 3 of the article...

As far as "if they had liquidity, they wouldn't have been looking for "liquidity"...." Corporate America is an interesting Beast...or so I hear.

Why in the world would the sub-prime lender forward everything to Countrywide? I thought it was common knowledge that Countrywide sticks with at least fairly good credit loans.

JAN

2008

Lisa - Actually, CW had did have a Wholesale Sub-Prime division that did some very funky stuff. I didn't use them much myself (for the Sub-Prime stuff), but at one time they were a player in that market as well.

NOV

2008

Check out what has happened to me when I decided to use BOA Mortgage. I figure this is a great time to buy a couple of investment properties. Great credit score and monies to purchase with 20% down. Sels-employed and doing well in a crazy economy as it is right now. I figure it will take 3 to 5 years for the real-estate market to go from a BUYERS market as it is now to a SELLERS market. So, I decided to go and buy someforeclosures in a very special side of Georgia where the home values are still great and the homes are near the best schools in georgia. I got in touch with BOA Mortgage and started talking with them about my desires and they gave me a Pre-Qualification Letter so that I may present to the Seller. I started getting a HUD home and they accepted my bid so I presented this purchase contract to BOA and they started the loan process. Per the purchase contract, I am allowed 15 days to inspect the home and I DID JUST that. Found out that the home has MAJOR TERMITE problems and I decided to back out of the deal. BOA stated that my loan offer was good for 90 days. BOA then sent me AN APPROVAL LETTER good for 90 days on my mortgage and I went looking for another home and I found a really nice home that was BIGGER and better priced than the first one. So, Keep in mind I have a new pre-qualification letter for the new address of property I am purchasing and ALSO an approval letter good for 90 days. I submitted my new PURCHASE CONTRACT to BOA and this is where the nightmare started! They stated that they could no longer do the mortgage but, that because I had a letter good for 90 days, I would have to CALL the PRICING DEPARTMENT to discuss my mortgage. The person at PRICING stated that because things have changed, they could not do the mortgage BUT that if I wanted to pay down the MORTGAGE, I could bet a 5.75% fixed rate mortgage for an additional 12,000.00 on top of the 20% I was putting down. I stated that this was very unfair and then the person said they just simply could not do the mortgage. Here I am under contract to close on, get this, November 4th,2008 = election day and BOA cannot do this mortgage and I will LOST the earnest dollars I paid for I have been looking all over for an investment property being bought by an investor. I have been bankimng with BOA for MANY years and I have many accounts and monies with them to the point that I will simply just take out my monies and go to some other bank that better serves me. I really would not want this nightmare on anyone. I have filed for an extension to close on this property and looking at some private mortgage monies at higher rates JUST to purchase property and then re-finance later when tbanking industries gets better. What a day and time we are living in and through!

GOD BLESS AMERICA!

L.Soto - Perhaps there is a communication barrier, but what you wrote doesn't add up. I'm sure there are a few sides to your story so bear with me here. First off, BOA specializes in banking (deposits, investments, personal loans, mortgages, etc). You probably should of went to an entity specializing in just Mortgages. That's my piece of advice going forward. You mention a 5.75% fixed rate mortgage on an investment property. If I could offer and deliver that anytime in the recent past or foreseeable future, I'd be eating fois gras off fine china and exchanging recipes with Martha Stewart. I don't blame you for taking your fortunes elsewhere. Just realize a big name doesn't translate to a quality expert. BOA seems to be (dare I say) a healthy financial entity. Yet, it seems you were dealing with a customer service rep more than somebody who could really service your Real Estate Investment needs. BOA isn't a bad bank, but I wouldn't recommend them as your Mortgage Expert going forward.

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