Is The Federal Government Subsidizing Countrywide?

By
Mortgage and Lending with Cognicorp Mortgage Banking Advisory

 Countrywide chairman Angelo Mozilo, the Vladimir Putin of mortgage banking is now the subject of further speculation or at least the company he leads is.

Because of CFC's active involvement in sub prime lending over the last several years, it was targeted yesterday by Senator Chuck Schumer who urged the company's use of its access to the Federal Home Loan Bank's (FHLB) lending system be reviewed and possibly curtailed.

In a letter sent this week to Ronald A Rosenfeld, Chairman of the Federal Housing Finance Board, Senator Schumer expressed:

"serious concern over the lending practices of the Federal Home Loan Bank of Atlanta, specifically in regard to the significant volume of advances made to Countrywide Bank."

According to recent SEC filings, the FHLB Atlanta made advances to Countrywide of 51.1 billion as of September 30 of this year. Countrywide pledged 62.4 billion of mortgages as collateral for the advances. These transactions represent 37 percent of the FHLB's total advances as of the end of the third quarter and 78 percent of Countrywide's total portfolio of mortgage loans.

The Senator said he found the FHLB lending numbers;

"alarming as reports continue to emerge about how Countrywide's reckless and predatory lending practices were a leading contributor to today's foreclosure crisis. Moreover, it is my understanding that Countrywide's loans held for investment at the bank have been far from immune from the credit deterioration that has resulted from unsound lending."

With the Fed considering lowering the Fed rate yet again and CFC's use of Federal Home Loan Bank's (FHLB) lending system, the question to be answered is, are the taxpayers of our nation indirectly subsidizing Countrywide existence and Mozilo's subsequent generational wealth?

While having a conversation yesterday with Brian Brady, it appeared he was having similar thoughts regarding this issue and was just finishing a post regarding this. I would highly recomend visiting his post at:

  Countrywide Bankruptcy Likely? Not While the Feds Are Bailing Them Out

Another post from The Mortgage Cicerone.

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Rainmaker
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Ed Rybczynski
Integrity Real Estate - Havre de Grace, MD
Your Source for Local Real Estate

Tony

I'm so glad you wrote this.  I've been contemplating a parallel post.   Without a doubt, Countrywide is operating artificially through the grace of governmental subsidies and an influx of investment capital from sources with serupticious motives.  Left to fend for itself in the marketplace. Countrywide would have lost all footing and credibility several months ago.  I can't understand the punditry of those who claim that the company has turned around and is now steaming forward for success.  It's craziness.

Nov 30, 2007 04:22 AM #1
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Tony.... some great insight and information. I also spoke to Brian a few days ago and I am on the other side of the fence on this. I love Brian and he knows his stuff.... but my .02 and opinion says otherwise. I can't see the gov't or the Feds bailing out Countrywide.  Sure, it might be percieved because of these loans. Meaning, is someone directing them to lend CW the funds. In all honesty, who can you believe.  What can you assume.  Not until the dust settles, which could be 6 months to a year from now. All I know... and my opinion is, even though Brian thinks Wall Street loves Mozilo, this should be far from it.  If they are true money geeks on Wall Street and can read the writing on the wall, no matter what Mozilo has don't for the mortgage industry, growth, and a few other things... there will be someone that will stand up and say... he has to pay for his recklessness. There are always the Eliot Ness's of the world out there that will take that risk and stand up to this crap. Again, just my humble opinion...

jeff belonger
Nov 30, 2007 04:23 AM #2
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Ed R.... bravo... you said it better and quicker than I did....  ;o)   thanks

jeff belonger
Nov 30, 2007 04:24 AM #3
Rainmaker
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Ed Rybczynski
Integrity Real Estate - Havre de Grace, MD
Your Source for Local Real Estate
Anytime Jeff!
Nov 30, 2007 04:30 AM #4
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Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production
Glad you're back....what happened?  Where have you been?  I was going through TG detox....it was horrible.  Anyway...great post.  I have been wondering the same....it really appears that way.
Nov 30, 2007 06:32 AM #5
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