Sincerely,
Nima Rezvan
Home Loan Consultant
Countrywide Home Loans
48 Westport Avenue
Norwalk, CT 06851
203.913.6016 (direct)
203.845.2363 (fax)
Nima_Rezvan@countrywide.com (email)
http://www.MyNima.com (website)
Countrywide, America's #1 Home Loan Lender
The highest compliment my clients can give me is the referral of their friends, family and business partners.
Wow, I have to say the comments in this post are the meat and heart of this discussion. I'm very impressed with the level-headed analysis of both Brian Brady and Tony Gallegos. Have to agree with their points which seem very reasonable and not at all mean spirited.
Everyone seems to admire Nima as a professional.
Most reasonable people do not wish for Countrywide to fail, however in light of what is happening in this market, things are not as rosey as the excecs at Countrywide are trying to make them out to be.
This is sad. Countrywide management messed up really, really bad. People are in foreclosure because of the type of loans that Countrywide talked people into. They screwed over a lot of families and now their screwing over their own employees. Hundreds or even thousand of their employees will soon get layed off. All they ever cared about was volume; nothing else.
Gena - It seems as you have and emotional tie to Countrywide and the news of their difficulties is particularly distressing?
Yes, Im sure Wells Fargo, B of A, WAMU each have pockets or neighborhoods in which their foreclosure rates is high (that is true with all large national lenders). Reason - They were probably the preferred lender on that particular subdivision. However the facts are that Countrywide has a substantially higher overall foreclosure rate than Wells. Both regulators and Bond rating agencies have independently stated the underwriting and risk controls have been superior to those of Countrywide. Wells chose not to provide neg-am loans to their customer and even their sub-prime loan pools have the lowest default rates in the industry. That is one of the major reasons why regulators, industry analysts, the media and others are so high on Wells Fargo. In addition, Wells is on solid financial ground and has been the number one retail mortgage lender in the nation for 15 straight years.
Every major lender had something to do with the situation that is happening today it's not just CW or WF or WAMU or BofA it is a combination of them all. CW catches most of the heat when comparing to the biggies of the industry because they are the biggest. Kind of like the heat that Mortgage Brokers are catching. Since Brokers originated somewhere around 65% of the loans wouldn't it make sense that most of the problems originated with brokers?
I am a broker so I am likely more sensitive to this, but if you listen to the media pundits, the Presidential Candidates and just about everybody talking about the problems it all comes back to brokers. Now some are saying its all CW, come on you can't have it both ways is it the Brokers or the Big Companies? Could it be that the problems were caused by all sectors of the industry?
This is also why I think that if anything is going to be done to help curb this kind of crap then it needs to go across ALL originators not just brokers or originators that aren't part of Federally Chartered Banks.
I spoke with an originator with WAMU- a federally chartered bank- that told me her boss and his boss told them it was okay to do stated W-2 Option ARMs on all their clients even if they had to inflate the income to make the deal work. She was told the bank knows that this is happening and they are taking that into account when they price the loans. I told her it was fraud and she said no its not because her boss and his boss told her it wasn't. I wish I had that much power. My point is the problems were across the board not just in one company or with brokers only.
Hell I guess I am guilty because I didn't dig further into deals with other lenders that looked fishy, had inflated appraisals and the like. Is it my fault to because I didn't turn them in? Should I have called the Feds about the girl at WAMU? I don't know the answer to that question, but I do think that those companies and those originators that really pushed these types of fraudulent loans will get theirs in the end. It's just too bad the good companies may get caught in the crossfire.
Haha ...what a bunch of hipocrites...
Most of you are the most ridiculous cheerleaders for the market...Oh yeah, RE never goes down, etc...
The world will be a better place when half of active rain is gone, and the longterm folks are left!
If you believe in CW ...buy it...
Me, I have made a bundle shorting the stock, the home builders, etc...
ARM resets just starting...sellers reluctant to drop prices, can't buy if you can't sell...
I see a lot of H2's and BMWs being sold on the cheap these days.
...Looking forward to buying a nice new car from a former CW agent in the next 6 months!
<b>karen<b>,
You are commenting on topic you know little about..you realize that a BIG reason why Countrywide has so many more foreclosures is because they purchase loans from OTHER lenders. That's right they are not the biggest originator of loans they are the biggest SERVICER of loans. What does that matter? Because it was not necessarily their loan officer or wholesale department selling the loan. They purchase portfolios of loans and then service them. I really can't stand when people are so narrow minded about something so complex.
Nima,
Countrywide is the leader in the mortgage industry. They are also the biggest donater to lobby's to stop regulation in the industry. I heard a rumor that they might go to offerangel.com to build consumer confidence and retain their payoffs and attempt to self regulate without being forced into new laws. Is this true??? It was going throught the grapevine in my office. Joy, Prudential, CA
Joy - I think it is fairly well documented and known Countrywide acquired much of their volume from both Correspondent lending (that's when they purchase loans from OTHER lenders) and Wholesale lending channels. Nevertheless, they established the loan perameters and programs in which they purchased these loans. Approximately, 50% of their volume came from Option-ARM, sub-prime and Alt-A product that has disinegrated and where their troubles are stemming. To quote Brian Brady above:
"he (Mozilo) was the poster boy for the crazy lending we've done these past 4 years"
Yes, Countrywide has been the number one lender when you combine their correspondent, wholesale and retail volume, however, how much of it was done with loans that were frought with fraud or approved and funded irresponsibly? While Wells, was the number two lender through all three channels, they have been the number one retail lender fifteen years running. Other strong lenders like Chase, B of A and Wells CHOSE not to purchase the volume Countrywide acquired through correspondent channels for exactly the reason you stated. All the lenders mentioned above where in position to do so, however because of the potential (and now real) risks, they wisely passed. Long story short, any bigh lender can go out and buy the market...history is frought with company's that did so. It however does not always prove to be the prudent thing to do.
There is a difference between foreclosure rate and number of foreclosures. And Countrywide's rate in both exceeds that of Citi, Wells, Chase and B of A when their correspndent and wholesale servicing portfolio's are stacked ranked.
Because Countrywide is the biggest contributer to lobby's fighting regulation in the industry doesn't make them angels. Darn, Big Tobacco is one of the nations biggest lobby's.
Because someone says something you don't like doesn't mean you are right...that to me that is narrow minded.
Wells Fargo is the biggest servicer my friend ;)
Why would countrywide invest in bad loans?
"That's right they are not the biggest originator of loans they are the biggest SERVICER of loans. What does that matter? Because it was not necessarily their loan officer or wholesale department selling the loan. They purchase portfolios of loans and then service them."
In a couple of months, Wells Fargo, BOFA, Wachovia, Chase and Citi will be the only lenders standing tall. Even credit unions will be doing a lot better than Countrywide ;)
Joy:"You are commenting on topic you know little about..you realize that a BIG reason why Countrywide has so many more foreclosures is because they purchase loans from OTHER lenders. That's right they are not the biggest originator of loans they are the biggest SERVICER of loans. What does that matter? Because it was not necessarily their loan officer or wholesale department selling the loan. They purchase portfolios of loans and then service them. I really can't stand when people are so narrow minded about something so complex. "
Before talking down to people for commenting on something they know nothing about you might want to actually know something about the topic. Owning the servicing rights for the loan (as CFC does for $1.4 trillion of loans) is not the same as owning the loan, they are getting paid to SERVICE the loan (collect payments, manage non-performing assets). The actually portfolio of loans that CFC holds for investment is currently $74 billion as of Q2 of 2007.
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Thanks for the update. Countrywide wholesale is a favorite because of the great communication your underwriters in Arizona have with their customers. Account Exec Nathan Baker is tops, too! I've subscribed to your blog and made you an associate. See you (metaphorically) soon!
Mike in Tucson
THIS BLOG: I am willing to speak with you on the phone or by email if you have any questions/concerns as I do not want to post any comments towards any of your comments. Thank you all for visiting this blog and for commenting as well.
NEW BLOG: Mortgage Man's Top 10 SIGNS WE ARE IN A NEW MARKET
Countrywide's Lending Practices on Subprime Loans
Countrywide's Lending Practices on Subprime Loans
On Sunday, August 26, 2007, the New York Times ran an article on the front page of the business section
challenging certain business practices of Countrywide Financial Corporation, and particularly its subprime
operation. This article contained numerous inaccuracies and "facts" taken out of context to place
Countrywide in the worst possible light.
Countrywide chose not to respond to this article because we felt that most readers would have the
reaction to the article that Thomas Brown of Bankstocks.com had when he wrote his piece entitled,
"Everything but Evidence." In addition, Countrywide has been working diligently to ensure that we
continue delivering value to the American people as we have been doing for the past almost 40 years. As
some of our constituencies have assumed that the article is true in all respects, this rebuttal is intended to
set the record straight.
Additionally, we have reached out to Senator Schumer to reassure him that Countrywide's business
practices were not accurately portrayed in the New York Times article. For example:
• Countrywide's business processes are designed to prohibit steering borrowers who qualify for
prime loans into subprime loans. In fact, the majority of consumers who come through
Countrywide's retail subprime channel receive a prime loan.
• Second, Countrywide's loan officers do not receive higher commissions for subprime loans with
prepayment penalties.
• Third, Countrywide prides itself on the extraordinary efforts we are undertaking to assist
borrowers who are experiencing difficulty making their loan payments, and in fact we have found
solutions to keep more than 35,000 borrowers out of foreclosure during this year alone. The
company has a team of 2,500 employees in its Home Retention Division dedicated full-time to
these efforts.
Countrywide's mission is to deliver and help preserve homeownership for Americans who have the desire
and financial ability to own a home. Countrywide's business model is based upon acting responsibly in all
of its lending practices. Countrywide does not tolerate steering of borrowers into loans they cannot afford,
and the company categorically rejects any assertion to the contrary. In fact, Countrywide has done more
than any other lender to ensure that borrowers receive the appropriate loan options.
Countrywide has become the nation's leading mortgage lender by acting in the interests of our
customers. The company has made loans to 25 million families throughout our 40 year history and has
become a leader by delivering value to our borrowers.
Subprime Originations Processes
Borrowers who come to Countrywide through our retail subprime channel go through our automated
underwriting systems, which are designed to determine whether a borrower could qualify for a prime loan.
If they do qualify for a prime loan, then they are provided with that option along with others. Ultimately, it
is the borrower's choice as to what loan meets his or her needs, based upon their individual financial
situation. In fact, the majority of consumers who come through Countrywide's retail subprime channel
receive a prime loan. Countrywide provides full and comprehensive disclosures to all borrowers.
In 2006, subprime loans comprised only approximately 9% of Countrywide's entire loan originations. For
the month of July 2007, this percentage has decreased to less than 5%.
Countrywide has been committed to serving borrowers who are unable to qualify for a prime product,
either due to past or current credit problems, financial situation or because the borrower cannot or
chooses not to meet prime market guidelines. Our objective is to understand the financial needs of our
borrowers and to offer them the best product choices for their individual situations.
Countrywide's systems, scripting, training, policies and procedures focus on providing loan options that
meet a borrower's individual objectives. We are committed to supporting every effort to help borrowers
make informed credit decisions and understand the options available to them. A proprietary financial
benefits worksheet is used with every subprime borrower to determine the benefit of the loan products
offered. We make loans that provide a financial benefit to the borrower.
Underwriting Standards
Countrywide adheres to underwriting standards that require that no loan will be made unless we have a
reasonable expectation that the borrower has the capacity to repay the loan. Loans are not made based
solely on the equity available in the property.
Underwriting Controls
Countrywide has controls throughout the process to ensure compliance with our policies. An automated
underwriting system is used at the point of sale to determine possible loan options available for the
customer based on the information provided during the application process. Countrywide then reviews
the loan application, credit report, estimated property value, loan program and pricing to ensure that the
loan being originated meets the borrower's needs. Once this is complete, the loan application, financial
benefits worksheet and verification information is submitted to centralized Underwriting, Document
Preparation and Funding Departments.
Countrywide has established disposable income guidance as part of the overall analysis in determining
the borrower's ability to repay the loan. Use of such guidelines is a fairly standard practice in subprime
lending. It is also standard practice for VA lending. The dollar amounts used for Countrywide's guidance
generally track the amounts recommended by the VA for their loans.
Post-funding audits are conducted to assess adherence to our standards. Employees are encouraged to
report any wrongdoing to an anonymous, externally managed Ethics Hotline. In those cases when
policies have not been followed, the company will, as appropriate, make refunds to impacted borrowers or
modify the terms of the loan. Moreover, employees who do not follow policy are subject to immediate
disciplinary action up to and including the termination of employment.
2/28s and 3/27s Hybrid ARMs
Historically, the most popular subprime products were what the industry calls hybrid "2/28s" and "3/27s."
Based upon changes in the secondary markets, the vast majority of these loan programs have been
eliminated. These products have a low initial rate for two or three years and thereafter adjust to a higher
rate. The premise behind these loans is that subprime borrowers have two or three years to improve their
credit in order to then qualify for a prime loan. Our experience with hybrid ARMs was that they provided a
valuable tool for customers to overcome temporary financial setbacks and in the past few years to be able
to afford a first home. From 2000 through 2005, for Countrywide customers who refinanced their hybrid
ARM with Countrywide, almost 50% received a prime loan. In addition, many borrowers received fixed
rate loans, both prime and subprime.
Prepayment Penalties
Subprime borrowers are informed about the options between loans with prepayment penalties and those
without. When opting for a loan with a prepayment penalty, the borrower receives a benefit such as a
lower rate or lower points, and the terms of the prepayment penalty are fully disclosed to the borrower.
Our Account Executives do not receive additional compensation for subprime loans with prepayment
penalties.
Lead Generation
As with any sales organization, lead generation comes from a number of sources including our retail loan
origination division, advertising, word of mouth, direct mail and our loan servicing portfolio. Regardless of
the channel through which the borrower was referred, Countrywide follows the same protocol to ensure
that our subprime borrowers receive a benefit from their loans.
Account Executive Compensation
Originating a subprime loan is more time intensive than a prime loan and, therefore, Account Executives
are compensated for the extra time, effort and resources needed to fund a subprime loan. Our Account
Executives are not rewarded by the features of the loan product they originate (i.e. an adjustable rate vs.
a fixed rate loan) or whether there is a prepayment penalty.
Fee Disclosure
All points and fees are fully disclosed to our borrowers. Within three days of receiving an application,
Countrywide provides borrowers with a Good Faith Estimate of all points, fees and charges that may be
incurred for the particular transaction, including third party charges. In addition, at the closing and before
signing, the borrower receives an additional disclosure of all fees and charges associated with the loan.
Loan Related Fees
LandSafe is an affiliate of Countrywide that provides appraisals and closing related services. LandSafe
was created to provide our customers high-quality, competitively priced, service focused closing services.
LandSafe and Countrywide Tax Service Company regularly obtain market pricing surveys to ensure that
their fees reflect the costs of services provided and are competitive in the marketplace.
Mortgage Brokers
Countrywide's Wholesale Lending Division does not control the price that mortgage brokers charge
consumers. Before a mortgage broker submits an application to a lender, the broker works with the
consumer to determine the best loan options. Our mortgage broker web site helps the broker make a
determination as to the possible loan options available to the customer based on the information provided
to the broker during the application process. The final pricing is determined in negotiations between the
broker and the consumer. At that point, the information is submitted to our wholesale subprime unit.
Profit margins on subprime loans are in line with prime loans.
The secondary market prices loans with prepayment penalties more favorably than loans without this
feature. Loans with prepayment penalties are less likely to pay off during the prepayment period,
providing investors with more of a guarantee on their return. This more favorable pricing is made
available to the broker, who is encouraged to discuss this feature with the borrower as part of the
discussion on total compensation. We make available to borrowers who come to us through brokers a
brochure that describes the various elements of broker compensation, including yield spread premiums
and prepayment penalties.
Conclusion
Countrywide is proud of the work we have done over nearly 40 years by helping millions of American
families achieve the dream of homeownership. We categorically reject recent criticisms that have been
leveled against the company based upon false facts and mischaracterizations of our lending practices.
Our tens of thousands of employees strive every day to deliver outstanding value to our customers and
business partners, and we will not waver from our mission of homeownership.
_______________________________________________________________________________
Nima Rezvan
Home Loan Consultant
Countrywide Home Loans
203.913.6016
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