Well, I can say that the tone has certainly changed in the last 24-48 hours in our industry. I don't know if fear is driving all of the doom and gloom comments by Active Rainers, but many of you are really scaring me.........
Have you lost your minds? The company is not failing, though it is making some noticeable changes which I haven't seen anyone pick up on.
Let me also say that as I've been an originator for many years, I'm not a fan of the company for some of its subprime practices. I also do not like that they not only allow, but almost encouraged their originators to charge overages that invariably cost the consumer money in closing costs, a higher rate, or sometimes both......but fair is fair, and I respect the business model they've built up over the years.
Let's have some fun, and see what everyone thinks:
Comment/Assumption #1 that I've read on other AR posts:
Countrywide is heading down the same path as American Home Mortgage (another large lender) and will be going bankrupt soon;
Fact:
Yes, the company is in a very different position than they are used to being in financially as they like everyone else sell the mortgage backed securities for all jumbo loans to the secondary market and its investors. They have approximately $110 BILLION in available liquid cash and commitments. Borrowing $11 billion is only 10% of their utilization of their available credit lines and cash. If this was a credit score, would you re-score them from 800 scores down to 580 because they used 10% of their available credit?
What should you be worried about?
That they've hidden in some of their memos and press releases that indicate 90% of their loans from this point forward will be conforming loans that can be sold to Fannie Mae and Freddie Mac. Hmm...little scary....what happens to the jumbo market? Is this how we spread the risk to the government?
Comment/Assumption #2:
CW will be out of business within the next couple of weeks.
Fact:
If the company did not FUND or ORIGINATE one additional loan from this day forward, they would stay open for the next 90 days at least.
What is more likely to happen?
The company will continue to bring on as many originators as possible to increase revenues moving forward. You know all those good people we know from the 100's of companies that have gone bankrupt, like AHM, First Magnus, New Century, yada yada yada.....
You could also see them become a takeover target. Bank of America comes to mind. Great brand presence, gigantic assets, national distribution, relatively low market share in the mortgage markets, but could easily become #1. B of A has done it before; if they can't build it to be the best and the largest, then buy it!
The government responds as part of a reorganization, realizing that CW is as valuable to the economy as the airlines are to travel, and helps them with a 1 year plan. This time frame is realistically all the time that the company would need to stop the bleeding and reorganize.
Or.....the company comes back as a completely different company than you see today because it gets broken up, allowing all of that previous market share to get spread amongst various organizations. That's the beauty of a market; it may be painful at times, but it tends to solve its own problems.
Here's the other thought I had....and regrettably its not a good one, but it brings in a CHUNK of cash.
Sell the portfolios of bank owned properties. You're going to have to sell them at 45 to 60 cents on the dollar. You will hope and pray they are not in your communities BUT if they do it right, the private money and other institutional investors can buy some portfolios of properties (trust me they have the cash...I've seen it and cannot believe it), but they can turn a 1500 home bulk portfolio with a debt of $6 billion that is being purchased at a great discount and STILL double their money in today's environment. They could push these homes and portfolios out to the real estate community though I suspect they will simply negotiate the price away to sell them in bulk.
Gives them an instant cash infusion, gets rid of the REO's that are accumulating on their balance sheets, and lets their loss mitigation groups start working on the wave of defaults that aren't even here yet!
So it may not be pretty, but it is not insurmountable. We just need to push forward.
I would encourage everyone to do as short of an escrow as humanly possible so you really don't get caught up in deals not closing at the last minute. Having two approvals out there sounds wise, but if you start flooding the market with twice as many transactions, you'll only create another refi scenario from a couple of years ago when the title and escrow companies had no idea how many "real" deals were out there, so everything took longer than it should have.
Let's not feed the frenzy too much.....knowing that we've moved out of a supply and demand market into a risk-based market, we should expect and anticipate that the landscape of the mortgage industry can and will change constantly in the coming days, months, and years. Let's hope that everything we've dealt with thus far makes the market and industry a better place moving forward.
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