Countrywide home loans got downgraded on Friday to a credit rating of "junk" by wall street analysts. Bank of America recently agreed to buy into Countrywide stock, and help them reorganize debt not to exceed $25 billion. The reality however, is that Bank Of America will be holding the portfolio of Countrywides $95 billion basket of junk loans. Home equity lines of credit that are maxed out on loan to value, pay option arms, hybrid option arms, subprime 2 and 3 year adjustable rate mortgages, are what mainly makes up this worthless portfolio
Many analysts are asking if the Bank Of America deal to acquire Country Wide Home loans will hold up. Bank Of America is continuing to do its due diligence on Countrywide, and analysts think Bank Of America should lower its price on Countrywide or walk away from the deal completely. Countrywide has reported a $893 million deficit for the first quarter of 2008, it's third straight quarterly loss. The company has negative equity, and will definetly affect the earnings of Bank of America upon the finalization of the acquisiion. Analysts are targeting a proper price target of $2 a share versus the $7 a share it has agred upon.
In the past, and even now, Countrywide continues to market its core basket of goods, and slick attempts at getting a consumer to call on their loan officers. No closing cost loans, combo loans, and whatever spin they can think of to try and help a consumer, in my opinion is alot of puffery. If someone called you from Countrywide during the refinance boom, you definetly were under the impression that this company was credible, knew what they were doing, and you felt a sense of security. Now, as everything is slowly unraveling, all you need to do is take a look at the timeline of events tracking the actions of their CEO, Angelo Mozilo, and you will get a clear picture of what greed look like, what it does in times of crisis, and what it continues to do, when it's own company is on the firing line. If there is a golden parachute that exists for Angelo Mozilo, he is riding high above the clouds right now, with over $480 million in buyouts and stock selling money he has acquired in the last two years. Not bad for a company that reported an $893 million loss in Q1 of 2008. Way to go Countrywide!
Please note this is not an attempt to berate Countrywide, however it is factual, and any consumer should be aware, especially in this arket, all of the lending choices available to them. As a mortgage broker, if I do not provide world class service to my customers on our initial conversation, I am doing them a disservice.
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