June 24 average daily rates in Orange County for 30-year fixed loans with one-point fee: Conforming up to 6.078%, Jumbo up to 7.446% and Conforming-Jumbo up to 7.208% (Note: conforming-jumbo rates are for loans from $417,000 to $729,750, while conforming is up to $417,000 -- both types are sold to GSEs. Jumbos here are $730,000 or higher and not sold to GSEs.)
Source: Newspaper Chart Services 
Mortgage brokers say Countrywide bankruptcy would be ‘devastating’
August 16th, 2007, 3:01 pm · 20 Comments · posted by Jeff Collins
Register reporter Jeff Collins reports …
Leaders of state and national mortgage broker associations said today that Countrywide’s financial problems show how widespread the credit crunch has become, affecting solid companies and threatening major disruptions in the availability of home loans.
“It’s a sad day when a great company (like) Countrywide is on the brink of disaster,” San Francisco broker Ed Craine, a board member with the California Association of Mortgage Brokers, said in Long Beach at the association’s annual convention.
“This isn’t a company that opened yesterday,” Craine added. “This is America’s leading lender.”
The comments came as CAMB board members outlined proposed solutions to the current shakeup in the home loan industry. CAMB solutions include:
- That lenders adopt flexible repayment strategies for borrowers facing default and foreclosure.
- That Congress pass legislation declaring California a high cost state, raising the “conforming” loan limit above the nationwide $417,000 level so borrowers can have access to federally backed loans.
- Reforming Federal Housing Administration guidelines to increase consumer access to these products.
- FHA loan limits must mirror conforming loan limits to increase loan opportunities for borrowers with less than perfect credit.
- Wall Street must develop lending products that will be attractive for capital investors and accessible to borrowers.
(To read the association’s press release, CLICK HERE.)
In response to reporters’ questions, association leaders expressed concern about Countrywide Financial Corp.’s current liquidity problems, saying a bankruptcy would be a psychological blow that would have a “monumental” impact on the industry and consumers alike.
Craine noted that the latest news about the SoCal-based lender shows that “the credit crunch is working its way through the whole credit market.”
“The consumer will feel there is no loan availability if companies like Countrywide can’t stay open,” he said.
Upland broker John Marcell Jr., a former association president, said a Countrywide bankruptcy could have a domino effect on mid- and small- home lenders that sell their loans to the firm.
“If Countrywide disappears, there’s going to be a huge number of these smaller-sized companies no longer able to make these loans,” Marcell said.
“I think that the psychological impact to the world financial market would be significant,” added Joe Falk, a Florida broker and a past president of the National Association of Mortgage Brokers. “That would be a serious blow, (resulting in) further deterioration in access to credit. … Since they have a large market share, there would be a significant short-term disruption.”
August 16th, 2007 at 3:28 pm
Do not be surprised though as there are an awful lot of “A” paper borrowers who are defaulting on their HELOC’s” and credit lines which Countrywide are, or were aggressive at in the past. Also, If a conforming refinance borrowers home drops in value they can not refi to bail themselves out as they have been doing in the past so they also will default. You must realize the crowd mentallity out there with borrowers is if the entire world is in deafult, it is ok for me too.
Lou Pacific
Real Estate and Mortgage Consultant
Serving OC for 30 years.
August 16th, 2007 at 3:34 pm
Matt,
This “board” member from CAMB… has provided you with a list of bullet points that are primarily intended to preserve what brokers had up and until very recently, LARGE LOAN AMOUNTS for LARGE COMMISSIONS. No mention of stricter licensing criteria for loan officers, brokers, etc.
These guys from CAMB are historically full of themselves. This annual conference in Long Beach is shaping up to be a ghost town of exhibiting lenders. But, as usual, you can expect CAMB to come out afterwards and state that it was their best attended conference ever!
Time to call in the big boys at DATELINE NBC.
August 16th, 2007 at 4:15 pm
I think that all of this is a case of media overhyping an issue. The mortgage and housing industries are major employers in Orange County and some coverage of these events is understandable, but, I believe the Register is contributing to the problem.
As an industry veteran of 29 years, I can promise you that there is more liquidity (mortgage money available to the consumer and money available to the mortgage companies to lend) than any time in history if you exclude the past 3-5 years. I question the benefit that you are providing your readers by creating additional panic. I doubt very much that Countrywide is considering bankruptcy. In the not so distant past your publication has featured articles about Countrywide and Angelo Mozillo that were pretty postive. Why the sudden need to suddenly speculate so negatively about a business decision that they have made?
Finally, here is the way that I see the mortgage situation today. An adjustment is being made to credit guidelines based on slowing housing values. We had the same issues in the early 90’s the late 70’s and early 80’s and numerous other times in our history. Today we are in better shape than either of the above mentioned downturns because the basics of the economy are much more stable. In contrast to the housing market problems during the Carter Administration, inflation is low causing interest rates to remain low. Mortgage Loans and Housing are more affordable as are most consumer goods. In the early 90’s, the housing downturn in Southern California was caused by loss of employment. Many of the Southland’s military bases were closed which also caused many closures in industries that serviced that sector. Today, employment is strong.
Many of the borrowers that are facing trouble today have ways to solve their situations. Employment is great. During turbulent times in our history, our ancestors have been asked to sacrafice. Perhaps tightening a budget, taking a second job, selling a high priced vehicle, etc., should be encouraged rather than screaming about the “Mortgage Meltdown!”
August 16th, 2007 at 4:40 pm
Countrywide is not a bank and has been part of the problem. Great “all American” names like Ameriquest, Countrywide, etc.and others were allowing stated income loans to anyone breathing. Borrowers with bad credit and no down payment could not qualify for “A” paper. My advice to these potential buyers in the past and today is save your money first and clear your credit before buying.
August 16th, 2007 at 5:46 pm
Largely because mortgage brokers will have no jobs. Look for Countrywide to shut down their wholesale arm and their correspondent line.
That will be followed by every other lender in the nation as they focus on retail, in-house operations.
At that point, banks will be dealing directly with borrowers, with no middleman (mortgage brokers).
August 16th, 2007 at 6:11 pm
“No mention of stricter licensing criteria for loan officers, brokers, etc.”
Huh? How much stricter can the licensing be for brokers? You need experience, education, one tough exam, background checks, fingerprints, etc.
What about the banks’ loan officers who don’t have to undergo ANY licensing? Sure, let me trust that 21 year old with the largest financial transaction of my life. Ditech is another classic example of unregulated and unlicensed people working in a “sweatshop” environment. No one there is licensed as they are govened by the Dept of Finance, just like the banks and not the DRE. “Loan officers” at Ditech are told to tell anything to a client to get them in escrow. They must produce a quota of loans every month, or they are gone.
I am sure that ethics fly out the window with that setup. There are a lot of problems with the system, not just brokers.
August 16th, 2007 at 7:06 pm
Mark,
I got my mortgage from Ditech. Trust me, it was much more pleasurable dealing with their loan officer than with mortgage brokers that I have dealt with. Every mortgage broker thinks he is an economist and has a lock on what the Fed will do and how it will affect rates. It’s all baloney. They get paid a point or more just to act as a middleman. And when they can’t compete on rate (like in the current environment), they simply lie. One broker told me that he would be completely honest and if the product I could get from a bank was better than his, he’d advise me to go with the bank. So I showed him the bank’s rates and he actually said “you’re nothing but a number to a bank, but to me you’re a valued client, and the small savings you think they’re giving you up front is nothing in the long term.” (The small savings “up front” was a 5/8 difference in rate — which amounts to hundreds of dollars every month for as long as I have the loan.)
August 16th, 2007 at 7:19 pm
Tony,
I don’t mean to be rude but have you been living under a rock?
http://www.bloomberg.com/apps/news?pid=20601084&sid=aLOVR90.hnKA&
and http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=CFC:US&sid=aBsH3.SubKhA
“Countrywide lost $2.34, or 11 percent, to $18.95, a four- year low. David Sambol, the lender’s president and chief operating officer, said liquidity in the mortgage industry has “become constrained.” Countrywide said today it drew down an $11.5 billion bank credit line as the global credit crunch curbed access to short-term financing from debt markets.
Moody’s Investors Service cut its rating on the company’s debt three levels to Baa3, the lowest investment-grade level, from A3.
Concerns that credit-market losses were spreading were also spurred when First Magnus Financial Corp., the second-largest privately held U.S. mortgage company, said it would stop funding new loans, adding that the secondary mortgage market has collapsed.
More than 70 U.S. mortgage companies have closed operations or sought buyers since the start of 2006 as investors became concerned about rising late payments.”
When central banks have to inject billions of dollars to keep banks going and when Coutrywide has to borrow an emergency $11.5 billion all you have to have is little common sense to know that liquidity is dead. Please tell me you are not serious. All Matt is doing is reporting the news and if you want to keep your head in the sand then don’t read it. This whining about the press being doom and gloom is just that whining.
August 16th, 2007 at 8:26 pm
These guys will have to suck it up. Where were they when I had to rent for the last several years rather than make a stupid housing choice. People and companies need to be coerced into good financial decisions by, if necessary, experiencing the pain of their bad financial decisions.
fiscally responsible corporations = a robust economy.
right now we have a paper tiger of an economy; it’s built on a mountain of personal and corporate leverage. To me it’s EXTREMELY troubling that this unwinding is happening during a ’strong’ economy. The implication is that there is no safety net should we experience a weak economy.
August 16th, 2007 at 9:11 pm
Tony,
Nobody believes the baloney you guys throw out. It is a little late to poo-poo the whole problem as just some media hype. I’d say it’s safe to say in the next year or two you will be saying you had worked in the real estate industry for 29 years rather then “As an industry veteran of 29 years”.
August 16th, 2007 at 10:24 pm
Blah! Blah! Blah! To the Board of Directors of Countrywide:
If you want to borrow or raise money to stay in business, go for it. You have my blessings. But don’t bring the United States Congress into this. We the People DO NOT want the government (who we PAY taxes to) to BAIL out you greedy irresponsible CORPORATIONS and your UNEDUCATED borrowers. I DO NOT want to hear any DEMOCRAT or mortgage COMPANY executive saying that the government should step in to clean the mess.
August 16th, 2007 at 10:44 pm
I think some of you are missing my point. I realize that numerous companines have gone out of business. Many more will in the coming year or so. The issue causing them to go out of business has to do with the quality of the loans that was granted over the last several years and yes, the lack of professionalism in the industry. The “liquidity crisis” that you are citing has to do with Wall Street making the Mortgage Banking concerns buy back underporming loans or devaluing certains type of loans so that they are no longer profitable to sell. Some of these loans have been funded and the Mortgage Banking concerns are stuck with them. Compared to the last 5 years, there is a liquidity crisis, but, the array of loans available today is still far greater than it was even 10 years ago.
Tommy, by the way, I would think someone obviously as successful as yourself could debate an issue without waging personal attacks on the person with the view that you do not agree with. How long have you been successful in your career?
Graphix, I read all of the wire services also. It doesn’t mean that reporting these stories makes the entire market insolvent. The guidelines are still far more liberal than they were in any prior decade. That is the point. Has a credit tightening occured. Certainly, but no liquidity is a far reaching overstatement.
August 16th, 2007 at 10:46 pm
Dr. What-
Dude, like I have said you have such a hard on against Brokers. Why is that? I would love to see some articles bashing dirty Docs. Pharama. reps. giving kick backs to Docs. like that never happens huh Doc. Your industry is worse. Suck it.
August 17th, 2007 at 12:16 am
Huck Finn,
People have good and bad experiences with Ditech and with brokers. My point is that it is not licensing that is the problem with brokers or Ditech, it is usually a lack of ethics and moral character. You can teach anyone ethics, but how can you make them practice it?
I have low overhead ( I have a home office) and can beat Ditech and the banks most days I look at the rates. I don’t have to lie about any loan, because I deliver what I promise. I don’t “sell” loans to clients. My service is to give clients options and teach them the pros and cons of what each program can do for them. They make the decisions, all I can do is generate all the options. And because of that, I get referrals. Getting referrals means I don’t have to advertise, and that means more loans and I can pass along the savings to clients, and frequently do that. And then I get more referrals.
Funny how Business 101 builds my business for me more than lies and greed ever could. And I even sleep better at night.
August 17th, 2007 at 1:57 am
This whole mortgage problem is the cause of greedy real estate agents telling people, home prices will always go up, it’s always a good time to buy. Greedy brokers selling any load, telling clients to lie about their income. Finally the greedy home flipper.
August 17th, 2007 at 4:39 am
Tony,
Loans have changed in 10 years and now they are changing back to that. Credit tightening is not new but this is the first time it has tightened as rapidly as it ever has for residential loans. If you look back at history guidelines have been just as liberal as today (not 2005) and contracted from that.
Comparing the last 5 years to this as a liquidity crisis isn’t a fair example because there wasn’t one. The last 5 years have been on easy street and we haven’t seen a liquidity crisis since 98. In fact this is just as bad as the S&L crisis but instead it is affecting homeowners and not homebuilders first. We haven’t even seen the worst of it yet. NODs in OC for August are looking really bad and sales are just as bad.
Honestly I don’t like to be doom and gloom. But if you think it is the press like a blog of the OCR that is spreading the bad news when companies like Bear Stearns, Morgan Stanley, Goldman Sachs and Countrywide are getting hit hard from this then you really are Pollyanna.
Can people still get loans? Yes. Should they take them when we haven’t seen full impact of the REOs? That is their decision. Would it be a good decision when there are another 2000 REOs about to happen by the end of the year with NODs increasing?
Look at history, look at the NOD and foreclosure numbers, look at the housing stock and look at the sales volume. Then you will see that the problems in the 90s are nothing compared to now because of the jobs being lost then. I wouldn’t recommend buying right now to anyone.
Yeah it is sounds like doom and gloom but it is being smart. I own and I look forward to being bullish on RE again but it will be a while before that happens.
August 17th, 2007 at 7:39 am
The more that things change, the more the stay the same.
This industry is cyclical. Relax. People will always need to borrow money. People will always purchase and refinance.
If you can’t weather the storm, go work at McDonald’s until the next bandwagon comes around.
August 17th, 2007 at 10:24 am
Hey Huck Finn-yeah ditech is awesome. Go check its Better Business Rating-last time i looked was an F! Who do you think pays for all those commercials? You did…
August 18th, 2007 at 2:36 pm
I’ve been in the mortgage business for 30 plus years and we have seen the bad times and the good times. This is just another bunp in the road caused by the greedy sub-prime lenders who started it all. If you have a borrower who has bad credit and no money, what do you expect. Do you really think he will pay his mortage on time every month. The traditional lenders (Countrywide, First Magnus, banks) wanted to get on the band wagon of greed too, so they introduced sub-prime mortages. This will clean out a lot of the bad mortgage companies and loan officers and we will get on with the mortgage industry. Everyone needs a home and a mortgage.
August 20th, 2007 at 10:06 am
Hey Mark & LS,
I work at Ditech and it is amusing reading your posts. I go through more state licensing and ongoing education and training in one month than any broker will do in their career. I don’t see any BBB rating of F in my search of Ditech. Maybe you can enlighten us on that one. Ditech has a very positive name in the mortgage industry and it is only going to get better in this troubled time. Customers are going to turn to reputable lenders like us, and abandon the shady practices of most brokers when looking for a loan in the future.