Country Wide is Back in the News...
And this time they have not come out to deny that they are in serious hot water as it seems to be their customary policy. This time it appears to be 100% true. If you haven't read, the CW Giant has just written down more losses; it seems that they have found themselves in a siutation in where they owe more debt than they own in value of performing assets! What's worse is that a few of the portfolios of assets that they are counting toward their performing assets are questionable at best.
Bank of America is planning to renegiotiate the deal from $7 per share to $2 per share or less... and if they cannot come to terms they are considering walking from the deal just like Microsoft did to Yahoo. If BofA walks from the CW deal Cw can definitely not stand on their own legs right now. We may see another government bailout; as bad as that is for the economy overall... or we may see the Giant fall and cause a terrible rippling affect throughout the finacial hemisphere of our national economy!
If CW falls so soon after Bear Sterns we will see more of a restriction of credit lending guidelines and it will become even more difficult to obtain financing. Good borrowers will be denied and great borrowers will be scrutinized. Underwriting teams across the board for the best lenders will reduce the appraised value of peoples homes and many loans will be denied as a result of declining market conditions!
A lot of bad things will happen to good people and the nation as a whole will suffer because of the huge gape in our economic engine. Credit in every industry is falling apart at the seams; cars are being repossessed, homes are being foreclosed on, and debts are being sent in to collections.
We are feeling the pinch the most in the real estate and real estate financing industries because they have been carrying the economy for many years; after all they are the largest most common investments for the average person.
In the coming months underwriters are going to be wary and it is important to make sure that you are working with a professional. If you do not know someone seek a referral from someone you trust. Times are too tough to trust just anyone to such an important transaction, so find a professional and do your research to make sure that you fully understand the terms of the transaction before you sign on the dotted line!
Christopher Ohlsen
Mortgage Advisor
Young Realty Group, Inc. - Naples, FL
Broker/Owner
If BOA read the blogs on Active Rain, they would run as fast as possible in the other direction. Wonder why they are reconsidering? I hear of some CW borrowers that have not paid their mortgage in over a year and still no foreclosure papers filed???
May 05, 2008 02:40 PM
Residential, Investment properties, rehab projects, property management, luxury homes, new construction! - Katy, TX
Broker, Katy, Houston, Cypress 77450,77494,77095
BOA wants countrywide...it's just a matter of the price. If CW fails, then they have bought a multibillion dollar writeoff for pennies on the dollar. If CW ends up working out, then they have increased their portfolio worth...it's all a matter of price at this point. BOA would probably be dumb NOT to pick up CW if the price is right!
May 05, 2008 02:52 PM
DDR Realty - Newburgh, NY
GRI, SRES - DDR Realty - Orange County, NY
"The bigger they come, the harder they fall," is oh so true when it comes to Wall Street.
May 06, 2008 02:46 AM
Credit Werx, LLC. - Malone, NY
Lori - Yeah they would; If I were BOA I would run in the other direction. Yeah I have heard similar things... seems as though they are trying to hold off on foreclosure actions in an (illegal) attempt to report bad debts as performing assets.
Ron - If the price is right then maybe they should take the deal. It is all about price, however CW has around 50 billion in combined write offs that BOA will have to absorb and in addition to that many assets that CW is reporting as performing assets are actually non-performing and/or questionable at best. For instance their Option ARM portfolio has not been "stress tested" yet because the majority of the portfolio has not re-cast yet. That is another 14 billion that could go south. It really depends on the price and how things play out but in the end this could be a move that ends up hurting and/or de-valuing BOA in the long run.
Rosario - That is a very true statement especially on Wall Street. Bear Sterns almost made a huge splash until the government stepped up to give our hard earned tax dollars that (in my opinion) should be being used to support the infrastructure of our security and well being up as collateral to back a deal between 2 major financial firms. That did avoid an immediate impact but we are stilling feeling the pinch from the collapse of Bear Sterns via increased scrutiny from underwriting on loan files (and therefore real estate sales that require financing) and will for quite some time; I'd rather of taken a major hit immediately so that we can begin recovery immediately but instead we will be experiencing a lessor hit for a longer time and our recovery time will be much longer. Another great rule of thumb to follow is "pay now or pay later".
May 06, 2008 04:04 AM
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