Countrywide in trouble? Not anymore! Credit lines shut off? They will soon be opened again as Wall Street rushes to invest in mortgage backed securities. Lenders still going out of business and people still losing their homes? Yes, but it won't halt investors anymore! Why? Because the Oracle of Omaha, Warren Buffett is considering buying a stake in Countrywide Financial. Is it set in stone? Not having Mr. Buffett's cell number to call and confirm, I could only speculate like everyone else, but it certainly is intriguing!
Can Warren Buffett single-handedly cure the problems in the industry right now? Of course not, but he could certainly halt the overreaction and end the fear. If Warren Buffett invests in something, everyone else will, and should, too. This has been the case for decades. A lot of what's happening now is based on uncertainty. There is nothing more certain in the financial world than Warren Buffett and his company, Berkshire Hathaway.
Lending has suffered from a lack of common sense for quite a while now. Buffett has always used common sense and sound financial's when deciding who to invest in. With stakes in Wells Fargo and Bank of America already, Buffett must feel very secure about the mortgage industry. If Buffett feels confident in the mortgage industry, Wall Street will as well. Will they open up the vaults and allow crazy spending again? Absolutely not, in fact, that would run counter to what Buffett believes in, but there will be money available for conforming lending.
The fact is, the mortgage industry is a sound investment. Most people pay their mortgages and pay them on time. Lenders who can offer huge blocks of conforming mortgages and have large servicing portfolios are rare and valuable. Run correctly, they are cash cows-and Buffett knows this. Again, Buffett's involvement with Countrywide is only speculation, and it's kind of sad that the industry even needs his involvement. As for myself, I feel more secure placing loans with CWD Wholesale and I may buy a few shares of Countrywide with this months check. If it's good enough for the Oracle, it's good enough for me.
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