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Countrywide Financial Corporation


Luke_Wilbur
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Countrywide Financial Corporation (NYSE) is a diversified financial marketing and service holding company engaged primarily in residential mortgage banking and related businesses. Countrywide is one of the biggest online advertisers in the U.S.

 

Countrywide Financial is composed of: Mortgage Banking, which originates, purchases, securitizes, and services mortgages. In 2006 Countrywide financed over 425 billion dollars, that is approximately 17 to 20% of all mortgages in the Unites States, at a value of about 3½% of United States GDP, a proportion greater than any other single mortgage lender.

 

In order to understand Countrywide's relationship to the current secondary mortgage crisis (which has amounted to about $1 trillion in emergency liquidity from central banks) it is wise to look at past American economic history. Start with the National City Bank (New York City), Morgan Bank, and Chase Manhattan involvement with the Crash of 1929. Shares of Countrywide have lost half their value this year. The company was forced earlier this month to draw down an $11.5 billion credit line after it was unable to get funding by selling mortgages in the secondary markets. On Wednesday, Countrywide received a $2 billion injection from Bank of America Corp. helping the largest U.S. mortgage lender shore up its finances as it struggles with a liquidity crunch. Bank of America, the second-largest U.S. bank, said it bought non-voting preferred stock that yields 7.25 percent and can be converted into Countrywide common stock at $18 per share, 17.5 percent below the shares' Wednesday closing price. Countrywide shares soared 20 percent in after-hours trading. The investment came six days after Countrywide stunned investors by tapping an entire $11.5 billion credit line because it was having difficulty selling short-term debt.

 

The reason? The U.S. housing industry keeps getting sicker.

 

Standard & Poor's reported Tuesday U.S. home prices fell 3.2 percent during the second quarter. The report offered little evidence the struggling housing market is near recovery. Sinking home values are just one of the factors hurting the mortgage industry. People are more likely to default on their home loans when their houses are losing value. Many of the residential mortgage-backed securities issued in late 2005 and much of 2006 now have sufficient seasoning to evidence delinquency, default, and loss trendlines that are indicative of weak future credit performance. The levels of loss continue to exceed historical precedents and our initial expectations.

 

On a macroeconomic level, Countrywide and other mortgage lenders can expect that the U.S. housing market, especially the subprime sector, will continue to decline before it improves, and home prices will continue to come under stress. Weakness in the property markets continues to exacerbate losses, with little prospect for improvement in the near term. Furthermore, Standard & Poor's Ratings Services expect losses will continue to increase, as borrowers experience rising loan payments due to the resetting terms of their adjustable-rate loans and principal amortization that occurs after the interest-only period ends for both adjustable-rate and fixed-rate loans.

 

What makes matters worse is data collected under the Home Mortgage Disclosure Act (HMDA) have consistently revealed that certain minorities are more likely to receive high-cost mortgages than other racial or ethnic groups. These data indicate that recent subprime lending practices are likely to have a disproportionate impact on these minorities. For example, a 2006 Federal Reserve study relying on HMDA data from 2005 found that 55 percent of African-Americans and 46 percent of Hispanics received "higher-priced" conventional home purchase loans where higher-priced refers to first-lien mortgages with interest rates that exceeded the equivalent maturity Treasury rate by 3 percentage points. This compared to only 17 percent for non-Hispanic whites. The study indicated that borrower-related factors, such as income, loan amount, and gender, accounted for only one-fifth of this disparity measured relative to non-Hispanic whites.

 

Credit is the economy's life blood. If it becomes too hard to get, spending and investment by people and businesses can stall, short-circuiting economic growth.

 

Fitch Ratings cut its servicer ratings for Countrywide Home Loans Inc on Friday citing troubles in the residential mortgage market. Among Fitch's ratings cuts, Countrywide Home Loans' servicer ratings for Alt-A and subprime products were cut to "RPS1-" from "RPS1," Fitch said. Fitch last week cut parent Countrywide Financial Corp's rating to "BBB-plus," or three levels above junk, from "A," five levels above.

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  • 4 months later...
Guest JaneSays

This is a good read. Have faith in our country.

 

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http://www.bloomberg.com/apps/news?pid=206...id=axDP4bTsHOQY

 

 

Jan. 18 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis is finally making a sensible acquisition.

 

He's offering to buy Countrywide Financial Corp., the biggest mortgage lender in the U.S., on the cheap. Bank of America is paying $4 billion in stock for a company whose net worth on Sept. 30 was three times that and whose market value a year ago was six times that.

 

Granted, Countrywide shares are in the gutter for a reason. Lewis will have to write down the mortgage holdings of the Calabasas, California, lender by a sum that will dwarf the purchase price.

 

Still, Lewis, 60, and Bank of America's boss since 2001, is reversing a long trend in overpriced bank takeovers. The banks' theory was that to increase deposits and earnings they had to merge with each other and slash expenses. The chief beneficiaries were stockholders of the banks that sold out.

 

Lewis himself offered a 43 percent premium over market value to the shareholders of FleetBoston Financial Corp., a New England bank, in 2003. In mid-2005, he bid 31 percent over the market for MBNA Corp., a large credit-card company.

 

His low-ball bid for Countrywide last Friday sandbagged speculators who bet that the Charlotte, North Carolina, bank would pay a premium again. Countrywide shares had leaped to $7.75 on Jan. 10 from the previous day's $5.12. Then Lewis bid just $7.16, or 0.1822 of a Bank of America share, for each Countrywide share. Countrywide closed yesterday at $5.48.

 

Top Dog

 

Lewis must think he's the one getting a bargain. With Countrywide in tow, Bank of America will originate about 25 percent of U.S. mortgages and handle 17 percent of the business that bills mortgage customers and collects their payments. The combined companies won't make subprime mortgages and will make few purchases of packages of loans containing risky loans, Lewis said.

 

Countrywide's mortgage losses may also provide tax benefits, since the red ink can be used to offset Bank of America's profit. Bank of America may save $500 million in U.S. income taxes in the first five years after the takeover, columnist Allan Sloan said in the Washington Post this week, quoting long-time Wall Street tax analyst Robert Willens.

 

There are no big rewards without commensurate risk. Bank of America will charge $1.2 billion against its earnings as it merges the companies and cuts their costs. This at a time when the bank's profit already is being savaged by its own mortgages losses.

 

The bank's fourth-quarter earnings probably fell 79 percent to $1.1 billion from those in the same 2006 period, according to a Bloomberg survey.

 

Stock Swoon

 

Bank of America stock has dropped from $55.08 in November 2006 to yesterday's $36.91 -- only marginally higher than the $35.74 of five years earlier.

 

Lewis also is still digesting two other takeovers from 2007. He bought LaSalle Bank in Chicago from ABN Amro Holding NV for $21 billion and U.S. Trust Co. from Charles Schwab Corp. for $3.3 billion.

 

It's possible that Lewis is being sucked deeper into a hole at Countrywide. Last August, he paid $2 billion for Countrywide preferred stock convertible into common shares at $18 -- 2 1/2 times the value he now puts on Countrywide.

 

Countrywide's losses might mount ever higher, diminishing Bank of America's earnings -- and Lewis's reputation.

 

My bet is that the opposite will happen. Mortgages were a solid business before the subprime silliness took over and will be again. Lewis's gamble on Countrywide will do more for Bank of America shareholders than his high-priced takeovers ever did.

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  • 1 year later...
Guest Pay Attention

This is an interesting one:

 

Cervantes v. Countrywide Home Loans, Inc., et al

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Plaintiff: Olga Cervantes

Defendant: Countrywide Home Loans, Inc., Mortgage Electronic Registration Systems, Inc., MERSCORP, Inc., Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, GMAC Mortgage, L.L.C., National City Mortgage, J.P. Morgan Chase Bank, N.A., CitiMortgage, Inc., HSBC Mortgage Corporation, U.S.A., American International Group, Inc., AIG United Guaranty Corporation, AIG Federal Savings Bank, Wells Fargo Bank, N.A., Bank of America, N.A., First American Title Insurance Corporation, GE Money Bank, John Does I-X, Black and White Partnership I-X, ABC Corporation I-X, Wells Fargo Home Mortgage and Jane Does I-X

 

Case Number: 2:2009cv00517

Filed: March 13, 2009

 

Court: Arizona District Court

Office: Other Statutory Actions Office [ Court Info ]

County: Maricopa

Presiding Judge: Judge Roslyn O Silver

Presiding Judge: Magistrate Judge Edward C Voss

 

Nature of Suit: Other Statutes - Other Statutory Actions

Cause: Federal Question

Jurisdiction: Federal Question

Jury Demanded By: 15:1601 Truth in Lending

Amount Demanded: $15,000,000,000.00

., et al

 

 

Plaintiff: Olga Cervantes

Defendant: Countrywide Home Loans, Inc., Mortgage Electronic Registration Systems, Inc., MERSCORP, Inc., Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, GMAC Mortgage, L.L.C., National City Mortgage, J.P. Morgan Chase Bank, N.A., CitiMortgage, Inc., HSBC Mortgage Corporation, U.S.A., American International Group, Inc., AIG United Guaranty Corporation, AIG Federal Savings Bank, Wells Fargo Bank, N.A., Bank of America, N.A., First American Title Insurance Corporation, GE Money Bank, John Does I-X, Black and White Partnership I-X, ABC Corporation I-X, Wells Fargo Home Mortgage and Jane Does I-X

 

Case Number: 2:2009cv00517

Filed: March 13, 2009

 

Court: Arizona District Court

Office: Other Statutory Actions Office

County: Maricopa

Presiding Judge: Judge Roslyn O Silver

Presiding Judge: Magistrate Judge Edward C Voss

 

Nature of Suit: Other Statutes - Other Statutory Actions

Cause: Federal Question

Jurisdiction: Federal Question

Jury Demanded By: 15:1601 Truth in Lending

Amount Demanded: $15,000,000,000.00

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