By STEVEN A. HOLMES
Published: September 30, 1999
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
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Tuesday, September 30, 2008
Monday, July 14, 2008
Federal Reserve Board amends Reg Z new rules take effect on October 1, 2009
Release Date: July 14, 2008
Anthony Landaeta
Posted 07/14/2008
The Federal Reserve Board on Monday approved a final rule for home mortgage loans to better protect consumers and facilitate responsible lending. The rule prohibits unfair, abusive or deceptive home mortgage lending practices and restricts certain other mortgage practices. The final rule also establishes advertising standards and requires certain mortgage disclosures to be given to consumers earlier in the transaction.
The final rule, which amends Regulation Z (Truth in Lending) and was adopted under the Home Ownership and Equity Protection Act (HOEPA), largely follows a proposal released by the Board in December 2007, with enhancements that address ensuing public comments, consumer testing, and further analysis.
"The proposed final rules are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership," said Federal Reserve Chairman Ben S. Bernanke. "Importantly, the new rules will apply to all mortgage lenders, not just those supervised and examined by the Federal Reserve. Besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers," the Chairman said.
The final rule adds four key protections for a newly defined category of "higher-priced mortgage loans" secured by a consumer's principal dwelling. For loans in this category, these protections will:
Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value. A lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan. To show that a lender violated this prohibition, a borrower does not need to demonstrate that it is part of a "pattern or practice."
Require creditors to verify the income and assets they rely upon to determine repayment ability.
Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years. This rule is substantially more restrictive than originally proposed.
Require creditors to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans.
"These changes have made for better rules that will go far in protecting consumers from unfair practices and restoring confidence in our mortgage system," said Governor Randall S. Kroszner.
In addition to the rules governing higher-priced loans, the rules adopt the following protections for loans secured by a consumer's principal dwelling, regardless of whether the loan is higher-priced:
Creditors and mortgage brokers are prohibited from coercing a real estate appraiser to misstate a home's value.
Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees. In addition, servicers are required to credit consumers' loan payments as of the date of receipt and provide a payoff statement within a reasonable time of request.
Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer's principal dwelling, such as a home improvement loan or a loan to refinance an existing loan. Currently, early cost estimates are only required for home-purchase loans. Consumers cannot be charged any fee until after they receive the early disclosures, except a reasonable fee for obtaining the consumer's credit history.
For all mortgages, the rule also sets additional advertising standards. Advertising rules now require additional information about rates, monthly payments, and other loan features. The final rule bans seven deceptive or misleading advertising practices, including representing that a rate or payment is "fixed" when it can change.
The rule's definition of "higher-priced mortgage loans" will capture virtually all loans in the subprime market, but generally exclude loans in the prime market. To provide an index, the Federal Reserve Board will publish the "average prime offer rate," based on a survey currently published by Freddie Mac. A loan is higher-priced if it is a first-lien mortgage and has an annual percentage rate that is 1.5 percentage points or more above this index, or 3.5 percentage points if it is a subordinate-lien mortgage. This definition overcomes certain technical problems with the original proposal, but the expected market coverage is similar.
One element of the original proposal has been withdrawn. The Federal Reserve Board had proposed for public comment certain requirements pertaining to so-called "yield-spread premiums." During the intervening period, the Board engaged in consumer testing that cast significant doubt on the effectiveness of the proposed rule. As part of its ongoing review of closed-end loan rules under Regulation Z, however, the Board will consider alternative approaches.
In finalizing the rule, the Board carefully considered information obtained from testimony, public hearings, consumer testing, and over 4,500 comment letters submitted during the comment period. "Listening carefully to the commenters, collecting and analyzing data, and undertaking consumer testing, has led to more effective and improved final rules," Governor Kroszner said.
The new rules take effect on October 1, 2009. The single exception is the escrow requirement, which will be phased in during 2010 to allow lenders to establish new systems as needed.
In a related move, the Board is publishing for public comment a proposal to revise the definition of "higher-priced mortgage loan" under Regulation C (Home Mortgage Disclosure), which requires lenders to report price information for such loans, to conform to the definition the Board is adopting under Regulation Z.
Anthony Landaeta
Posted 07/14/2008
The Federal Reserve Board on Monday approved a final rule for home mortgage loans to better protect consumers and facilitate responsible lending. The rule prohibits unfair, abusive or deceptive home mortgage lending practices and restricts certain other mortgage practices. The final rule also establishes advertising standards and requires certain mortgage disclosures to be given to consumers earlier in the transaction.
The final rule, which amends Regulation Z (Truth in Lending) and was adopted under the Home Ownership and Equity Protection Act (HOEPA), largely follows a proposal released by the Board in December 2007, with enhancements that address ensuing public comments, consumer testing, and further analysis.
"The proposed final rules are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership," said Federal Reserve Chairman Ben S. Bernanke. "Importantly, the new rules will apply to all mortgage lenders, not just those supervised and examined by the Federal Reserve. Besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers," the Chairman said.
The final rule adds four key protections for a newly defined category of "higher-priced mortgage loans" secured by a consumer's principal dwelling. For loans in this category, these protections will:
Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value. A lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan. To show that a lender violated this prohibition, a borrower does not need to demonstrate that it is part of a "pattern or practice."
Require creditors to verify the income and assets they rely upon to determine repayment ability.
Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years. This rule is substantially more restrictive than originally proposed.
Require creditors to establish escrow accounts for property taxes and homeowner's insurance for all first-lien mortgage loans.
"These changes have made for better rules that will go far in protecting consumers from unfair practices and restoring confidence in our mortgage system," said Governor Randall S. Kroszner.
In addition to the rules governing higher-priced loans, the rules adopt the following protections for loans secured by a consumer's principal dwelling, regardless of whether the loan is higher-priced:
Creditors and mortgage brokers are prohibited from coercing a real estate appraiser to misstate a home's value.
Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees. In addition, servicers are required to credit consumers' loan payments as of the date of receipt and provide a payoff statement within a reasonable time of request.
Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer's principal dwelling, such as a home improvement loan or a loan to refinance an existing loan. Currently, early cost estimates are only required for home-purchase loans. Consumers cannot be charged any fee until after they receive the early disclosures, except a reasonable fee for obtaining the consumer's credit history.
For all mortgages, the rule also sets additional advertising standards. Advertising rules now require additional information about rates, monthly payments, and other loan features. The final rule bans seven deceptive or misleading advertising practices, including representing that a rate or payment is "fixed" when it can change.
The rule's definition of "higher-priced mortgage loans" will capture virtually all loans in the subprime market, but generally exclude loans in the prime market. To provide an index, the Federal Reserve Board will publish the "average prime offer rate," based on a survey currently published by Freddie Mac. A loan is higher-priced if it is a first-lien mortgage and has an annual percentage rate that is 1.5 percentage points or more above this index, or 3.5 percentage points if it is a subordinate-lien mortgage. This definition overcomes certain technical problems with the original proposal, but the expected market coverage is similar.
One element of the original proposal has been withdrawn. The Federal Reserve Board had proposed for public comment certain requirements pertaining to so-called "yield-spread premiums." During the intervening period, the Board engaged in consumer testing that cast significant doubt on the effectiveness of the proposed rule. As part of its ongoing review of closed-end loan rules under Regulation Z, however, the Board will consider alternative approaches.
In finalizing the rule, the Board carefully considered information obtained from testimony, public hearings, consumer testing, and over 4,500 comment letters submitted during the comment period. "Listening carefully to the commenters, collecting and analyzing data, and undertaking consumer testing, has led to more effective and improved final rules," Governor Kroszner said.
The new rules take effect on October 1, 2009. The single exception is the escrow requirement, which will be phased in during 2010 to allow lenders to establish new systems as needed.
In a related move, the Board is publishing for public comment a proposal to revise the definition of "higher-priced mortgage loan" under Regulation C (Home Mortgage Disclosure), which requires lenders to report price information for such loans, to conform to the definition the Board is adopting under Regulation Z.
Friday, July 11, 2008
REMARKS BY HUD SECRETARY STEVE PRESTON DURING MEDIA TELECONFERENCE CALL TO DISCUSS FHASECURE EXPANSION AND PENDING CONGRESSIONAL LEGISLATION
Good morning. Thank you for phoning in. I wanted to join FHA Commissioner Brian Montgomery to talk about the next phase of FHASecure and discuss housing legislation pending before Congress.
As you know, in response to the housing crisis, FHA has expanded its mission to help more Americans facing foreclosure refinance into safer, more affordable mortgages. In late August 2007, President Bush introduced a new product called FHASecure for homeowners who were unable to make their mortgage payments after their interest rate reset. Since then, more than 260,000 families have refinanced with FHA. Hundreds of thousands more will refinance with FHA by the end of the year.
Starting on July 14th, FHASecure will begin to provide additional assistance to subprime borrowers with adjustable rate mortgages, and help to restore liquidity and stability to the markets. It will assist families who have missed up to three
monthly mortgage payments over the previous 12 months or have experienced temporary economic hardship, such as loss of overtime or medical needs, as well as those who were affected by payment shock. The expansion will also encourage lenders to voluntarily write down outstanding subprime mortgage principal.
We estimate this plan will help an additional 100,000 families refinance into more affordable FHA-insured loans by the end of the year.
The combination of all efforts under FHASecure will help a total of 500,000 families by year's end. Our monthly refinancings this fiscal year are already more than five times the level of 2006. It is clear people are coming to us as their solution for the future.
As part of this expansion, we are instituting a fairer, more flexible premium pricing structure at FHA. Like any other insurance company, FHA will begin pricing the insurance premiums for these borrowers according to their credit risk. This will eliminate a pricing inequity that treats applicants with a low risk of default the same as those with a high risk of default.
Risk-based pricing will benefit many borrowers, especially lower-income American families. In FHA's portfolio, families with the lower incomes actually have higher FICO scores. These are hard-working American families who live within their means and pay their bills on time. Pricing mechanisms should reflect that fact.
The bill currently moving through the Senate would place a moratorium on risk-based pricing. That would be a big mistake. FHA will have to increase premiums across the board on all borrowers or, alternatively, seek taxpayer funds in October to cover potential losses, or cut back on the program at the very time we are an island of hope for hundreds of thousands of Americans.
In addition to a possible moratorium on risk-based pricing, Congress may require FHA to accept mortgage insurance loans with seller-funded down payment assistance. The option for FHA not to insure such mortgages would be removed. This would not only be costly for FHA but could be expensive for taxpayers, too. Even if FHA raised premiums to a max of 2.25 percent upfront for all borrowers across the board, it would still need to seek an appropriation to cover the losses caused this practice.
We have issued a regulation to address seller-funded down payments. We are in a comment period right now, and I intend to look hard at those comments. Therefore, I do not want to discuss this matter in great detail. The comments are important to us and we will look at them carefully. But the reason for our efforts to regulate in this area is that FHA-backed mortgages with seller-funded down payments go into foreclosure at three times the rate of FHA's remaining portfolio. Because of a lack of equity, losses on these seller-funded down payment mortgages are significantly greater. We remain solvent and in good shape today. But no insurance company can continue to absorb losses of this magnitude.
At the end of the day, I hope reason will prevail. FHA is more important to the mortgage market now than it has been for many years. FHA's volume and market share continue to grow every month. I hope final legislation from Congress would put forward actions that can keep FHA solvent, self-financing, and responsibly able to help homeowners. Taxpayers should not have to absorb preventable, foreseeable losses.
We are looking for the Congress to pass responsible legislation that will help FHA continue to provide stability for the housing market and provide government-backed mortgages for low-and-moderate income families.
Thank you.
Posted Anthony Landaeta
http//anthonylandaeta.blogspot .com/
As you know, in response to the housing crisis, FHA has expanded its mission to help more Americans facing foreclosure refinance into safer, more affordable mortgages. In late August 2007, President Bush introduced a new product called FHASecure for homeowners who were unable to make their mortgage payments after their interest rate reset. Since then, more than 260,000 families have refinanced with FHA. Hundreds of thousands more will refinance with FHA by the end of the year.
Starting on July 14th, FHASecure will begin to provide additional assistance to subprime borrowers with adjustable rate mortgages, and help to restore liquidity and stability to the markets. It will assist families who have missed up to three
monthly mortgage payments over the previous 12 months or have experienced temporary economic hardship, such as loss of overtime or medical needs, as well as those who were affected by payment shock. The expansion will also encourage lenders to voluntarily write down outstanding subprime mortgage principal.
We estimate this plan will help an additional 100,000 families refinance into more affordable FHA-insured loans by the end of the year.
The combination of all efforts under FHASecure will help a total of 500,000 families by year's end. Our monthly refinancings this fiscal year are already more than five times the level of 2006. It is clear people are coming to us as their solution for the future.
As part of this expansion, we are instituting a fairer, more flexible premium pricing structure at FHA. Like any other insurance company, FHA will begin pricing the insurance premiums for these borrowers according to their credit risk. This will eliminate a pricing inequity that treats applicants with a low risk of default the same as those with a high risk of default.
Risk-based pricing will benefit many borrowers, especially lower-income American families. In FHA's portfolio, families with the lower incomes actually have higher FICO scores. These are hard-working American families who live within their means and pay their bills on time. Pricing mechanisms should reflect that fact.
The bill currently moving through the Senate would place a moratorium on risk-based pricing. That would be a big mistake. FHA will have to increase premiums across the board on all borrowers or, alternatively, seek taxpayer funds in October to cover potential losses, or cut back on the program at the very time we are an island of hope for hundreds of thousands of Americans.
In addition to a possible moratorium on risk-based pricing, Congress may require FHA to accept mortgage insurance loans with seller-funded down payment assistance. The option for FHA not to insure such mortgages would be removed. This would not only be costly for FHA but could be expensive for taxpayers, too. Even if FHA raised premiums to a max of 2.25 percent upfront for all borrowers across the board, it would still need to seek an appropriation to cover the losses caused this practice.
We have issued a regulation to address seller-funded down payments. We are in a comment period right now, and I intend to look hard at those comments. Therefore, I do not want to discuss this matter in great detail. The comments are important to us and we will look at them carefully. But the reason for our efforts to regulate in this area is that FHA-backed mortgages with seller-funded down payments go into foreclosure at three times the rate of FHA's remaining portfolio. Because of a lack of equity, losses on these seller-funded down payment mortgages are significantly greater. We remain solvent and in good shape today. But no insurance company can continue to absorb losses of this magnitude.
At the end of the day, I hope reason will prevail. FHA is more important to the mortgage market now than it has been for many years. FHA's volume and market share continue to grow every month. I hope final legislation from Congress would put forward actions that can keep FHA solvent, self-financing, and responsibly able to help homeowners. Taxpayers should not have to absorb preventable, foreseeable losses.
We are looking for the Congress to pass responsible legislation that will help FHA continue to provide stability for the housing market and provide government-backed mortgages for low-and-moderate income families.
Thank you.
Posted Anthony Landaeta
http//anthonylandaeta.blogspot .com/
Senate poised to pass housing bill
Foreclosure rescue bill takes big step forward. But all of measure's provisions aren't settled since the House wants to have another crack at it.
By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: July 10, 2008: 4:03 PM EDT
NEW YORK (CNNMoney.com) -- The saga still isn't over, but after months of debate on Capitol Hill, the Senate seemed poised Thursday to finally pass a comprehensive housing and foreclosure prevention bill this week.
The measure, which would create a new government-backed foreclosure prevention program and strengthen oversight of Fannie Mae and Freddie Mac, still faces a likely final debate in the House.
The House passed a version of the bill in May and is expected to try to amend some Senate provisions to bring them closer in line with its bill. Any changes will need to be considered by the Senate.
That likely back-and-forth makes it uncertain when lawmakers will be able to send final legislation to President Bush for his consideration. Final passage of a package has been delayed for close to two months due to substantive disagreements as well as countless procedural delays.
On the Senate floor Thursday, one of the lead authors of the bill, Senate Banking Committee Chairman Christopher Dodd, D-Conn., lamented how long it has taken to move the bill through. "Candidly, we can't wait any longer."
Dodd cited the latest foreclosure data, released Thursday, showing 250,000 new foreclosure filings in June, up 53% from a year earlier.
"A lot of us hoped the market would take care of all of this and there would be light at the end of the tunnel," Dodd said. "[But now] the only light at the end of the tunnel is a train coming."
The omnibus housing package attempts to address the housing crisis in several ways. Among them is providing more relief for some borrowers facing foreclosure; increasing access to mortgages in higher-cost areas; modernizing the loan guidelines for the Federal Housing Administration (FHA); and more stringently regulating Fannie and Freddie, the government-sponsored enterprises that have taken a beating this week amidst concern over how well funded they are.
FHA role expansion. Under the Senate bill, the FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes.
Lenders would also agree to pay upfront fees to the FHA equal to 3% of a home's appraised value. Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of their new loan balance and they must also agree to share with the government any profit they realize from selling or refinancing their home.
The cost of the new FHA program - which will only be in place for a few years - would be funded by fees from Fannie and Freddie. Thereafter those fees would finance an affordable housing trust fund also created by the bill. The House version of the bill calls for those fees to be used solely for affordable housing.
Create a new regulator for Fannie and Freddie. The GSEs, which grease the wheels of the housing market by guaranteeing the purchase and trade of mortgages, will get a new regulator under the bill. That regulator, among other things, will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging.
"We know they play a central role in our housing. We also know that together they owe over $5 trillion in debt, and they're thinly capitalized. The way to keep them [from getting into worse shape] is to create a strong regulator to make sure they're adequately capitalized," Sen. Richard Shelby, R-Ala., another key architect of the bill, said Thursday on the Senate floor.
While the Senate bill calls for the appointment of a new regulator to be made immediately, House Democrats want the appointment to be made 6 months from the date of enactment.
Raise conforming loan limits. The bill would permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to $625,000 from $417,000. The FHA maximum loan limits for high-cost areas would also increase to $625,000. The House bill raises the limit at all three agencies to nearly $730,000.
Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming.
Update FHA rules. The bill would update a number of rules for FHA loans. Among them, it would increase to 3.5% from 3% the down payment requirement for borrowers in FHA loans. And it would eliminate a program that has allowed sellers to provide down payment assistance.
The House bill had contained a modified form of the down payment assistance program.
The seller-funded program is largely the reason why the agency's reserve has fallen by $4.6 billion, according to congressional testimony of FHA Commissioner Brian Montgomery. Currently, that reserve is roughly $16.4 billion.
Provide housing-related tax credits. The Senate bill includes more than $14 billion in tax credits. One is an $8,000 tax refund for first-time home buyers. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years by the buyer.
Help states buy foreclosed properties. Despite a White House veto threat, the Senate bill still contains a provision that would provide states with $4 billion to buy and fix up foreclosed properties.
The House is expected to debate whether or not the provision should stay and also whether it should be paid for by raising an equal amount of revenue elsewhere. If not, it could be considered emergency spending, in which case lawmakers would not have to compensate for the cost of the provision.
By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: July 10, 2008: 4:03 PM EDT
NEW YORK (CNNMoney.com) -- The saga still isn't over, but after months of debate on Capitol Hill, the Senate seemed poised Thursday to finally pass a comprehensive housing and foreclosure prevention bill this week.
The measure, which would create a new government-backed foreclosure prevention program and strengthen oversight of Fannie Mae and Freddie Mac, still faces a likely final debate in the House.
The House passed a version of the bill in May and is expected to try to amend some Senate provisions to bring them closer in line with its bill. Any changes will need to be considered by the Senate.
That likely back-and-forth makes it uncertain when lawmakers will be able to send final legislation to President Bush for his consideration. Final passage of a package has been delayed for close to two months due to substantive disagreements as well as countless procedural delays.
On the Senate floor Thursday, one of the lead authors of the bill, Senate Banking Committee Chairman Christopher Dodd, D-Conn., lamented how long it has taken to move the bill through. "Candidly, we can't wait any longer."
Dodd cited the latest foreclosure data, released Thursday, showing 250,000 new foreclosure filings in June, up 53% from a year earlier.
"A lot of us hoped the market would take care of all of this and there would be light at the end of the tunnel," Dodd said. "[But now] the only light at the end of the tunnel is a train coming."
The omnibus housing package attempts to address the housing crisis in several ways. Among them is providing more relief for some borrowers facing foreclosure; increasing access to mortgages in higher-cost areas; modernizing the loan guidelines for the Federal Housing Administration (FHA); and more stringently regulating Fannie and Freddie, the government-sponsored enterprises that have taken a beating this week amidst concern over how well funded they are.
FHA role expansion. Under the Senate bill, the FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes.
Lenders would also agree to pay upfront fees to the FHA equal to 3% of a home's appraised value. Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of their new loan balance and they must also agree to share with the government any profit they realize from selling or refinancing their home.
The cost of the new FHA program - which will only be in place for a few years - would be funded by fees from Fannie and Freddie. Thereafter those fees would finance an affordable housing trust fund also created by the bill. The House version of the bill calls for those fees to be used solely for affordable housing.
Create a new regulator for Fannie and Freddie. The GSEs, which grease the wheels of the housing market by guaranteeing the purchase and trade of mortgages, will get a new regulator under the bill. That regulator, among other things, will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging.
"We know they play a central role in our housing. We also know that together they owe over $5 trillion in debt, and they're thinly capitalized. The way to keep them [from getting into worse shape] is to create a strong regulator to make sure they're adequately capitalized," Sen. Richard Shelby, R-Ala., another key architect of the bill, said Thursday on the Senate floor.
While the Senate bill calls for the appointment of a new regulator to be made immediately, House Democrats want the appointment to be made 6 months from the date of enactment.
Raise conforming loan limits. The bill would permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to $625,000 from $417,000. The FHA maximum loan limits for high-cost areas would also increase to $625,000. The House bill raises the limit at all three agencies to nearly $730,000.
Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming.
Update FHA rules. The bill would update a number of rules for FHA loans. Among them, it would increase to 3.5% from 3% the down payment requirement for borrowers in FHA loans. And it would eliminate a program that has allowed sellers to provide down payment assistance.
The House bill had contained a modified form of the down payment assistance program.
The seller-funded program is largely the reason why the agency's reserve has fallen by $4.6 billion, according to congressional testimony of FHA Commissioner Brian Montgomery. Currently, that reserve is roughly $16.4 billion.
Provide housing-related tax credits. The Senate bill includes more than $14 billion in tax credits. One is an $8,000 tax refund for first-time home buyers. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years by the buyer.
Help states buy foreclosed properties. Despite a White House veto threat, the Senate bill still contains a provision that would provide states with $4 billion to buy and fix up foreclosed properties.
The House is expected to debate whether or not the provision should stay and also whether it should be paid for by raising an equal amount of revenue elsewhere. If not, it could be considered emergency spending, in which case lawmakers would not have to compensate for the cost of the provision.
Thursday, July 10, 2008
Six months, 343,000 lost homes
Through the first half of 2008, the foreclosure rate shows little sign of letting up.
By Les Christie, CNNMoney.com staff writer
Last Updated: July 10, 2008: 8:27 AM EDT
NEW YORK (CNNMoney.com) -- The number of Americans losing their homes to foreclosure continued to soar in June, according to a report released Thursday.
RealtyTrac, an online marketer of foreclosed properties, reported that lenders repossessed 71,563 homes in June. A year ago, just 26,369 homes were taken back.
During the first six months of 2008, 343,159 Americans lost their homes, up 136% from 145,696 recorded during the same period in 2007.
The report revealed that foreclosure filings of all types, including notices of default, notices of auction sales and bank repossessions, rose 53% from June 2007, to 252,363. For the first six months, total filings rose 56% to 1.4 million.
"June was the second straight month with more than a quarter-million properties nationwide receiving foreclosure filings," said James Saccacio, chief executive officer of RealtyTrac.
There was a shred of good news: When compared with May, filings declined 3%.
Part of that decline may be traced to the actions of states, including Maryland and Massachusetts, that have put moratoriums on foreclosures, according to Rick Sharga, a spokesman for RealtyTrac.
"Massachusetts put a 90-day hold on new foreclosures," he said, "and filings dropped 3% there over last year."
But big increases were more common. In 13 states, filings more than doubled from a year earlier, including in Arizona, Nebraska and Oregon.
"The year-over-year increase of more than 50% indicates we have not yet reached the top of this foreclosure cycle," said Saccacio.
Adding to foreclosure woes is that home prices have been falling all year, down more than 14% in the first quarter, according to the latest figures from the S&P Case-Shiller Home Price Index.
Price declines strip homeowners of equity, making many mortgage borrowers owe more than their homes are worth. When they're underwater, they can't borrow against home equity to help out during a rough financial stretch.
Underwater properties are hard to sell because any deal would be for a sum below the mortgage balance - the bank would have to agree to take a loss. Many of these "short sales" get turned down and wind up as bank-owned properties.
"The real explosion has been in bank repossessions," said Sharga. "There's really no place else for these places to go except back to the lenders when they're underwater."
Two things work against short sales, according to Duane LeGate, president of HouseBuyerNetwork.com, a short-sale specialist. One is there is often a question of who has authority over the loan. Mortgage servicers are loath to make decisions that will result in losses of mortgage principal of loans in investor pools, even if it means smaller losses than foreclosures produce.
The second is manpower. Servicers simply don't have the personnel to handle the volume of short-sale and other loss-mitigation requests they've been receiving. Delays in processing short sales can mean approvals come too late.
"We hear about all these streamlined mortgage lending programs," said LeGate. "Where are the streamlined processes to undo the mortgages they originated?"
Sun Belt still hard hit
Nevada led all states in the rate of foreclosure activity for the 17th consecutive month, with one filing for every 122 households, a total of 8,713. California had the most filings with 68,666, one for every 192 households.
Other states with very high foreclosure rates included Arizona, one for every 201 households, Florida (one for every 211), Michigan (one in 375) and Ohio (one in 382).
California had seven of the 10 metropolitan areas worst hit by foreclosure. Stockton had one for every 72 households - more than six times the national average of one for every 501 households. Merced, was second with one for every 77 households, and Modesto - one in 86 - was third.
Cape Coral-Fort Myers, Fla., where one in every 91 households received a foreclosure filing, had the fourth highest rate. In Las Vegas, the only city outside of California and Florida with a foreclosure rate ranking among the top 10, one in 99 households received a foreclosure filing in June.
First Published
By Les Christie, CNNMoney.com staff writer
Last Updated: July 10, 2008: 8:27 AM EDT
NEW YORK (CNNMoney.com) -- The number of Americans losing their homes to foreclosure continued to soar in June, according to a report released Thursday.
RealtyTrac, an online marketer of foreclosed properties, reported that lenders repossessed 71,563 homes in June. A year ago, just 26,369 homes were taken back.
During the first six months of 2008, 343,159 Americans lost their homes, up 136% from 145,696 recorded during the same period in 2007.
The report revealed that foreclosure filings of all types, including notices of default, notices of auction sales and bank repossessions, rose 53% from June 2007, to 252,363. For the first six months, total filings rose 56% to 1.4 million.
"June was the second straight month with more than a quarter-million properties nationwide receiving foreclosure filings," said James Saccacio, chief executive officer of RealtyTrac.
There was a shred of good news: When compared with May, filings declined 3%.
Part of that decline may be traced to the actions of states, including Maryland and Massachusetts, that have put moratoriums on foreclosures, according to Rick Sharga, a spokesman for RealtyTrac.
"Massachusetts put a 90-day hold on new foreclosures," he said, "and filings dropped 3% there over last year."
But big increases were more common. In 13 states, filings more than doubled from a year earlier, including in Arizona, Nebraska and Oregon.
"The year-over-year increase of more than 50% indicates we have not yet reached the top of this foreclosure cycle," said Saccacio.
Adding to foreclosure woes is that home prices have been falling all year, down more than 14% in the first quarter, according to the latest figures from the S&P Case-Shiller Home Price Index.
Price declines strip homeowners of equity, making many mortgage borrowers owe more than their homes are worth. When they're underwater, they can't borrow against home equity to help out during a rough financial stretch.
Underwater properties are hard to sell because any deal would be for a sum below the mortgage balance - the bank would have to agree to take a loss. Many of these "short sales" get turned down and wind up as bank-owned properties.
"The real explosion has been in bank repossessions," said Sharga. "There's really no place else for these places to go except back to the lenders when they're underwater."
Two things work against short sales, according to Duane LeGate, president of HouseBuyerNetwork.com, a short-sale specialist. One is there is often a question of who has authority over the loan. Mortgage servicers are loath to make decisions that will result in losses of mortgage principal of loans in investor pools, even if it means smaller losses than foreclosures produce.
The second is manpower. Servicers simply don't have the personnel to handle the volume of short-sale and other loss-mitigation requests they've been receiving. Delays in processing short sales can mean approvals come too late.
"We hear about all these streamlined mortgage lending programs," said LeGate. "Where are the streamlined processes to undo the mortgages they originated?"
Sun Belt still hard hit
Nevada led all states in the rate of foreclosure activity for the 17th consecutive month, with one filing for every 122 households, a total of 8,713. California had the most filings with 68,666, one for every 192 households.
Other states with very high foreclosure rates included Arizona, one for every 201 households, Florida (one for every 211), Michigan (one in 375) and Ohio (one in 382).
California had seven of the 10 metropolitan areas worst hit by foreclosure. Stockton had one for every 72 households - more than six times the national average of one for every 501 households. Merced, was second with one for every 77 households, and Modesto - one in 86 - was third.
Cape Coral-Fort Myers, Fla., where one in every 91 households received a foreclosure filing, had the fourth highest rate. In Las Vegas, the only city outside of California and Florida with a foreclosure rate ranking among the top 10, one in 99 households received a foreclosure filing in June.
First Published
Tuesday, July 08, 2008
IndyMac Joins Roster of Banks to Fold its Mortgage "Tent."
IndyMac has announced that, effective yesterday, it is closing both its wholesale and retail production channel and will no longer accept any new mortgage loan submission or rate locks. It will also reduce its workforce to around 3,200 from the current level of 7,400. The bank will also, apparently, continue its other retail banking operations.
IndyMac Bankcorp, Inc is the holding company for IndyMac Bank, the 7th largest savings and loan and the 2nd largest independent mortgage lender in the nation. It claims to have financed the construction of over 70,000 new homes over the last five years but has consistently been listed among those financial institutions in serious trouble over the mortgage crises.
The stock had reached $.71 cents Monday after trading as high as 31.32 in the last year and was delisted from NASDAQ. There were no announcementS or news items on the Yahoo IndyMac website on Monday, but the company's own website made the following statement:
"Given the continued downward trend in home prices and a resulting increase in our forecasted credit losses and the related downward trend in the pricing of all mortgage related assets in the capital markets, especially mortgage-backed securities where we have experienced significant rating agency downgrades this quarter, we expect our loss for the second quarter to be larger than Q108, but it is difficult at this time to be more precise given the significant uncertainty surrounding accounting estimates, fair value accounting and other accounting matters.
"� We have been working closely with our federal banking regulators with respect to the actions that they and we must take to meet our mutual goal of keeping Indymac safe and sound through this crisis period. In that respect, based on information we have provided to our regulators, they have advised us that we are no longer "well capitalized", which we stated on May 12 was a possible scenario. Our regulators have also asked us to submit to them a new business plan for their review and approval, something on which we have been working with them for some time. We have agreed on the basic elements of the plan, and the regulators have directed us to begin executing on it. An important element of our plan is to improve our capital ratios. Without an external capital raise, the traditional way to improve safety and soundness is to sell assets and shrink the balance sheet, which in normal times generally has the effect of improving capital ratios and bolstering liquidity. Yet in this environment, where either there are no bids for most of IMB's mortgage loans and securities or the bid/ask spreads are abnormally wide, "fire-selling" assets would actually deplete capital further. As a result, the most realistic and cost-effective way to shrink both our balance sheet and our servicing rights asset (which, as discussed in previous communications, is up against the regulatory cap limit), is to curtail most new activity.
"As a result of the above, we have made the difficult decision, effective July 7, 2008, that we will no longer accept any new loan submissions or rate locks in our retail and wholesale forward mortgage lending channels, except for our servicing retention channel. We plan to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks. While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets. At the same time, these operations take up significant balance sheet capacity and "feed" growth in the servicing asset, an asset we need to shrink given its size relative to our existing capital."
Unfortunately, the above actions will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3,400 or so over the next couple of months, which should reduce our operating expenses by roughly 60%. We will retain about 1,100 employees in loan servicing in Kalamazoo and Austin; 350 in our servicing retention group in Irvine and Kansas City; 800 at Financial Freedom, primarily in Irvine, Sacramento, and Atlanta; 400 in our Southern California retail and web bank; 500 in portfolio management and administration, largely in Pasadena; and 250 in discontinued businesses. In building Indymac up from 4 employees in 1993 to its present size, we have had to retrench and then rebuild several times over the past 15 years, but clearly these are the largest and most difficult staff reductions we have ever had to make. If we had another alternative, we clearly would have chosen it, as we understand how painful these workforce reductions can be for the affected employees and their families. Given Indymac's current financial position and these significant layoffs, I strongly believe it is appropriate that I further materially reduce my own compensation. As a result, I have requested of Indymac's Board of Directors that they reduce my base salary by 50%.
The memo was signed by Michael W. Perry, CEO."
IndyMac Bankcorp, Inc is the holding company for IndyMac Bank, the 7th largest savings and loan and the 2nd largest independent mortgage lender in the nation. It claims to have financed the construction of over 70,000 new homes over the last five years but has consistently been listed among those financial institutions in serious trouble over the mortgage crises.
The stock had reached $.71 cents Monday after trading as high as 31.32 in the last year and was delisted from NASDAQ. There were no announcementS or news items on the Yahoo IndyMac website on Monday, but the company's own website made the following statement:
"Given the continued downward trend in home prices and a resulting increase in our forecasted credit losses and the related downward trend in the pricing of all mortgage related assets in the capital markets, especially mortgage-backed securities where we have experienced significant rating agency downgrades this quarter, we expect our loss for the second quarter to be larger than Q108, but it is difficult at this time to be more precise given the significant uncertainty surrounding accounting estimates, fair value accounting and other accounting matters.
"� We have been working closely with our federal banking regulators with respect to the actions that they and we must take to meet our mutual goal of keeping Indymac safe and sound through this crisis period. In that respect, based on information we have provided to our regulators, they have advised us that we are no longer "well capitalized", which we stated on May 12 was a possible scenario. Our regulators have also asked us to submit to them a new business plan for their review and approval, something on which we have been working with them for some time. We have agreed on the basic elements of the plan, and the regulators have directed us to begin executing on it. An important element of our plan is to improve our capital ratios. Without an external capital raise, the traditional way to improve safety and soundness is to sell assets and shrink the balance sheet, which in normal times generally has the effect of improving capital ratios and bolstering liquidity. Yet in this environment, where either there are no bids for most of IMB's mortgage loans and securities or the bid/ask spreads are abnormally wide, "fire-selling" assets would actually deplete capital further. As a result, the most realistic and cost-effective way to shrink both our balance sheet and our servicing rights asset (which, as discussed in previous communications, is up against the regulatory cap limit), is to curtail most new activity.
"As a result of the above, we have made the difficult decision, effective July 7, 2008, that we will no longer accept any new loan submissions or rate locks in our retail and wholesale forward mortgage lending channels, except for our servicing retention channel. We plan to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks. While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets. At the same time, these operations take up significant balance sheet capacity and "feed" growth in the servicing asset, an asset we need to shrink given its size relative to our existing capital."
Unfortunately, the above actions will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3,400 or so over the next couple of months, which should reduce our operating expenses by roughly 60%. We will retain about 1,100 employees in loan servicing in Kalamazoo and Austin; 350 in our servicing retention group in Irvine and Kansas City; 800 at Financial Freedom, primarily in Irvine, Sacramento, and Atlanta; 400 in our Southern California retail and web bank; 500 in portfolio management and administration, largely in Pasadena; and 250 in discontinued businesses. In building Indymac up from 4 employees in 1993 to its present size, we have had to retrench and then rebuild several times over the past 15 years, but clearly these are the largest and most difficult staff reductions we have ever had to make. If we had another alternative, we clearly would have chosen it, as we understand how painful these workforce reductions can be for the affected employees and their families. Given Indymac's current financial position and these significant layoffs, I strongly believe it is appropriate that I further materially reduce my own compensation. As a result, I have requested of Indymac's Board of Directors that they reduce my base salary by 50%.
The memo was signed by Michael W. Perry, CEO."
Wednesday, July 02, 2008
Bank Of America Completes Countrywide Financial Purchase
Bank of America Corp. has completed its purchase of Countrywide Financial Corp. The company says it will focus on responsible home lending. Bank of America also will assist new and existing customers with selecting the right products to meet their needs."Mortgages are one of the three main cornerstone consumer financial products, along with deposits and credit cards," says Kenneth D. Lewis, Bank of America chairman and chief executive officer. "This purchase significantly increases Bank of America's market share in consumer real estate, and as our companies combine, we believe Bank of America will benefit from excellent systems and a broad distribution network that will offer more ways to meet our customers' credit needs."Bank of America plans to offer the following types of first-lien mortgages: conforming loans underwritten to standard guidelines of government-sponsored enterprises and the government, including FHA and VA loans and other loans designed for low- and moderate- income borrowers; nonconforming loans with terms expected to produce no greater risk of default than conforming loans; interest-only fixed-rate and adjustable-rate mortgages (ARMs) that are subject to a 10-year minimum interest-only period, which lessens the possibility of short-term payment shock; and fixed-period ARMs that provide borrowers low initial rates with the security of fixed payments, subject to protections against steep increases in payment amounts.The company will continue its long-established policy of not originating subprime mortgages. As announced previously, Bank of America will discontinue certain nontraditional mortgages - including option-ARM loans. It also will significantly curtail some other nontraditional mortgages, such as certain low-documentation loans, and will implement enhanced borrower protections over time as part of the transition process.
Monday, June 30, 2008
WA Fines Countrywide, Seeks To Revoke Company's License
Gov. Chris Gregoire, D-Wash., says that the state of Washington plans to fine Countrywide Home Loans $1 million for discriminatory lending. In addition, the company will be required to pay more than $5 million in back assessments the company failed to pay. The state is seeking to revoke Countrywide's license to do business in Washington for its alleged illegal activity."The allegation that Countrywide preyed on minority borrowers is extremely troubling to me," Gregoire says. "And I hope to learn eventually just how much this may have contributed to foreclosures in our state. The allegation offers evidence that Countrywide engaged in a pattern to target minority groups and engage in predatory practices."The state's Department of Financial Institutions (DFI) is required to examine every home lender licensed in the state of Washington, the governor's office explains. The agency conducted its fair lending examination of Countrywide last year.At that time, DFI looked at roughly 600 individual loan files and uncovered evidence that Countrywide engaged in discriminatory lending that targeted Washington's minority communities. The agency also found significant underreporting of loans during its investigation.DFI sent Countrywide a statement of charges on June 23, notifying the company of the fine and the back assessments the state plans to pursue. The investigation continues.Source: Office Of Gov. Chris Gregoire
CA AG Sues Countrywide For Mortgage Deception
California Attorney General Edmund G. Brown Jr. has sued Countrywide Financial, its chief executive, Angelo Mozilo, and its president, David Sambol, for allegedly engaging in deceptive advertising and unfair competition by pushing homeowners into mass-produced, risky loans for the sole purpose of reselling the mortgages on the secondary market."Countrywide exploited the American Dream of homeownership and then sold its mortgages for huge profits on the secondary market," Brown states. "The company sold ever-increasing numbers of complex and risky home loans, as quickly as possible. Countrywide was, in essence, a mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers. Today’s lawsuit seeks relief for Californians who were ripped off by Countrywide’s deceptive scheme.”Brown alleges that Countrywide Financial used deceptive tactics to push homeowners into complicated, risky, and expensive loans so that the company could sell as many loans as possible to third-party investors. According to the lawsuit, the company marketed complex and difficult-to-understand loans with very low initial or “teaser” interest rates or payments.Despite receiving numerous complaints from borrowers claiming that they did not understand their loan terms, Countrywide ignored loan officers' deceptive practices and loose underwriting standards, according to Brown’s office. Countrywide also pushed its borrowers to serially refinance, repeatedly urging borrowers to obtain home loans to pay off their current debt.The case is People v. Countrywide, Los Angeles Superior Court case number LC081846.Source: Office Of California Attorney General Edmund G. Brown Jr.
Wednesday, June 25, 2008
Down payment assistance to risky borrowers $300B Housing Rescue Plan Passes
Commentary By Anthony Landaeta Jr
Posted 06/24/07 http://anthonylandaeta.blogspot.com/
Why would the Government offer loans and down payment assistance to risky borrowers after the collapse of the banking industry, isn't that what got us into too this mess in the first place with 100% financing and adjustable rates. The Government not only what's us to bail out the Bank's that created this mess but they also want to provide $14.5 Billion in a array of Tax Breaks, including a credit of up to $8,000 for first-time homebuyers who buy in the next year. $8,000 Dollars is a lot of money, so if a borrower wants to purchase a home at $265,000 through the Federal Housing Administration (FHA/HUD) there are purchasing that home with no money down which would be 100% financing, FHA requires as much as 3% in down payment so we as tax payers get to help those folks purchase there Dream Home's without any savings. "This is the government at there best" leading the charge Christopher J. Dodd, D-Conn, Rep Pelosi, Nancy D-CA with a set of weak Republicans that have no backbone with low approval ratings.
At the Capitol statement by Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, said the lending measure "would allow us to begin to put a tourniquet on the hemorrhaging of foreclosures in this country."
Dictionary meaning:
Tourniquet: Bandied Quick fix
Hemorrhaging: To lose (assets): a company that was hemorrhaging money.
Members of the Congressional Black Caucus call it unacceptable, arguing it doesn't do enough to address the needs of black Americans. (My be we should just give everyone homes for free)
"Owning a home is not a right, it has to be earned"
There estimated 400,000 distressed borrowers who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans. The Government will aid these borrowers by allowing them to refinance there home into a FHA loan where the Government will share in the portion of any profits they make from selling or refinancing their properties in the future. " Your Tax dollars work "
This is why we need checks and balances on our government having a equal Balance of independent - Democrat - Republican senators will help to ensure bills like this won't go anywhere lets hope President Bush Veto's this bill we all know a President Obama would sign this Bill, and we all know this election belongs to Obama he will be the next President, with that said a Democratic House and Senate with a Democratic President only means a large creation of Government Programs with High Taxes for the next 4 to 8 years, so hold on to your wallets because there is a lot of needy people with there hands out that the democrats have to Feed.
Anthony Landaeta Jr
Posted 06/24/07 http://anthonylandaeta.blogspot.com/
Why would the Government offer loans and down payment assistance to risky borrowers after the collapse of the banking industry, isn't that what got us into too this mess in the first place with 100% financing and adjustable rates. The Government not only what's us to bail out the Bank's that created this mess but they also want to provide $14.5 Billion in a array of Tax Breaks, including a credit of up to $8,000 for first-time homebuyers who buy in the next year. $8,000 Dollars is a lot of money, so if a borrower wants to purchase a home at $265,000 through the Federal Housing Administration (FHA/HUD) there are purchasing that home with no money down which would be 100% financing, FHA requires as much as 3% in down payment so we as tax payers get to help those folks purchase there Dream Home's without any savings. "This is the government at there best" leading the charge Christopher J. Dodd, D-Conn, Rep Pelosi, Nancy D-CA with a set of weak Republicans that have no backbone with low approval ratings.
At the Capitol statement by Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, said the lending measure "would allow us to begin to put a tourniquet on the hemorrhaging of foreclosures in this country."
Dictionary meaning:
Tourniquet: Bandied Quick fix
Hemorrhaging: To lose (assets): a company that was hemorrhaging money.
Members of the Congressional Black Caucus call it unacceptable, arguing it doesn't do enough to address the needs of black Americans. (My be we should just give everyone homes for free)
"Owning a home is not a right, it has to be earned"
There estimated 400,000 distressed borrowers who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans. The Government will aid these borrowers by allowing them to refinance there home into a FHA loan where the Government will share in the portion of any profits they make from selling or refinancing their properties in the future. " Your Tax dollars work "
This is why we need checks and balances on our government having a equal Balance of independent - Democrat - Republican senators will help to ensure bills like this won't go anywhere lets hope President Bush Veto's this bill we all know a President Obama would sign this Bill, and we all know this election belongs to Obama he will be the next President, with that said a Democratic House and Senate with a Democratic President only means a large creation of Government Programs with High Taxes for the next 4 to 8 years, so hold on to your wallets because there is a lot of needy people with there hands out that the democrats have to Feed.
Anthony Landaeta Jr
Tuesday, June 24, 2008
Closing the book on Countrywide
Shareholders of the mortgage lender are expected to approve the sale to Bank of America Wednesday. But it remains to be seen if the deal will pan out for BofA.
NEW YORK (CNNMoney.com) -- Time will tell if Bank of America's purchase of Countrywide Financial Corp. winds up being a bargain or a boondoggle.
Shareholders of the troubled mortgage lender are widely expected to approve Bank of America's (BAC, Fortune 500) all-stock offer at a meeting this Wednesday, effectively removing the final hurdle to the deal and ending Countrywide's days as an independent. Bank of America has said a deal is likely to close in the third quarter, which begins next Tuesday.
But lately, some analysts have suggested that Bank of America may suffer a classic case of buyer's remorse once it absorbs Countrywide's (CFC, Fortune 500) $95 billion loan portfolio.
Last week, equity analysts at Standard & Poor's slashed their rating of Bank of America stock to "sell" from "hold." They fear the Charlotte, N.C.-based bank may be underestimating the impact of rising consumer defaults and delinquencies at Countrywide, especially with option adjustable rate mortgages (ARM).
Last month, Paul Miller, an analyst with Friedman, Billings, Ramsey & Co., warned that Bank of America's purchase could prompt it to take anywhere between $20 billion to $30 billion in writedowns.
"BAC [Bank of America] should completely walk away from the CFC [Countrywide] deal, as CFC's loan portfolio will prove a drag on earnings and could force BAC to raise additional capital," Miller wrote in a note.
Countrywide, the nation's largest mortgage lender, clearly is struggling. The company has reported losses in its last three quarters due to soaring mortgage delinquencies and defaults by borrowers. The stock plunged from about $30 per share last August to less than $6 a share just before BofA announced the deal.
Bank of America's concerns, however, don't just end at Countrywide's balance sheet.
The Senate Ethics Committee is looking into charges that top lawmakers including Senate Banking Committee Chairman Christopher J. Dodd, D-Conn. and Sen. Kent Conrad, D-N.D. got deals on their mortgages through a program for friends of Countrywide CEO and co-founder Angelo Mozilo.
Mozilo, who grew Countrywide from its modest beginnings, will leave the company but will still receive $10 million in stock from Bank of America. That's on top of the $115 million he stood to gain after the deal was announced. He later forfeited $37.5 million in payments tied to the deal.
Countrywide has also become the target of numerous government investigations so far this year, including the state of Florida and the U.S. Trustee's office, a division of the Justice Department. Both are looking into the company's lending practices. And that's not to mention the glut of lawsuits brought by borrowers.
Some analysts think Bank of America most likely took litigation expenses into account when it drafted its offer for Countrywide though.
Still, Bank of America is also going to need to drastically cut back its combined mortgage operations once the deal is done.
To that end, the company has hinted that job cuts lay ahead, saying in January that it planned to trim 11% of the combined mortgage companies' expenses.
"It will be a long time before they need people on the servicing side and they probably will cut a substantial amount on the mortgage origination side," said Malcolm Polley, president and chief investment officer at Stewart Capital Advisors in Pittsburgh, which owns approximately 23,000 shares of Bank of America.
Long-term benefits
When Bank of America first proposed the deal back in January, Wall Street was evenly split about its merits.
Some analysts speculated that the company offered too high an asking price -- the deal originally valued Countrywide at just over $4 billion and is now worth about $2.8 billion as BofA shares have fallen along with the broader financial sector in the past few months.
In addition, the deal would mean that Bank of America, which had largely avoided the subprime mess unlike many of its peers, would now be exposed to Countrywide's risky mortgage portfolio.
Others cheered the tie-up, noting it put Bank of America in a position to expand its already vast footprint in the financial services sector, by making it the nation's biggest mortgage lender and loan servicer.
And some large institutional shareholders in Countrywide, such as the Monaco-based hedge fund SRM Global went so far as to attack top Countrywide management, claiming that the buyout price of $4 billion was not high enough.
So is Bank of America getting Countrywide on the cheap?
Despite all the doubts regarding the deal, Bank of America's management has stood firmly by the transaction since it was first announced.
"I think it could be a combination that really turns out to be very good strategically," said Bank of America chairman and CEO Kenneth Lewis earlier this month at an investor conference.
Lewis added that if his company correctly estimated the number of markdowns they would have to take, the acquisition "could be a very compelling financial transaction."
But if Bank of America expects any payoff from the Countrywide deal, it should be patient, noted David George, senior research analyst at Robert W. Baird & Co. Inc.
When the housing market finally turns around -- and most analysts expect it will at some point -- Bank of America will have a nice head start with Countrywide's well-trained sales staff and mortgage lending technology platform.
"Over the near term, I think the Countrywide deal adds increased credit risk to BofA's balance sheet," said George. "Longer term, it could be a positive transaction."
Shareholders of the troubled mortgage lender are widely expected to approve Bank of America's (BAC, Fortune 500) all-stock offer at a meeting this Wednesday, effectively removing the final hurdle to the deal and ending Countrywide's days as an independent. Bank of America has said a deal is likely to close in the third quarter, which begins next Tuesday.
But lately, some analysts have suggested that Bank of America may suffer a classic case of buyer's remorse once it absorbs Countrywide's (CFC, Fortune 500) $95 billion loan portfolio.
Last week, equity analysts at Standard & Poor's slashed their rating of Bank of America stock to "sell" from "hold." They fear the Charlotte, N.C.-based bank may be underestimating the impact of rising consumer defaults and delinquencies at Countrywide, especially with option adjustable rate mortgages (ARM).
Last month, Paul Miller, an analyst with Friedman, Billings, Ramsey & Co., warned that Bank of America's purchase could prompt it to take anywhere between $20 billion to $30 billion in writedowns.
"BAC [Bank of America] should completely walk away from the CFC [Countrywide] deal, as CFC's loan portfolio will prove a drag on earnings and could force BAC to raise additional capital," Miller wrote in a note.
Countrywide, the nation's largest mortgage lender, clearly is struggling. The company has reported losses in its last three quarters due to soaring mortgage delinquencies and defaults by borrowers. The stock plunged from about $30 per share last August to less than $6 a share just before BofA announced the deal.
Bank of America's concerns, however, don't just end at Countrywide's balance sheet.
The Senate Ethics Committee is looking into charges that top lawmakers including Senate Banking Committee Chairman Christopher J. Dodd, D-Conn. and Sen. Kent Conrad, D-N.D. got deals on their mortgages through a program for friends of Countrywide CEO and co-founder Angelo Mozilo.
Mozilo, who grew Countrywide from its modest beginnings, will leave the company but will still receive $10 million in stock from Bank of America. That's on top of the $115 million he stood to gain after the deal was announced. He later forfeited $37.5 million in payments tied to the deal.
Countrywide has also become the target of numerous government investigations so far this year, including the state of Florida and the U.S. Trustee's office, a division of the Justice Department. Both are looking into the company's lending practices. And that's not to mention the glut of lawsuits brought by borrowers.
Some analysts think Bank of America most likely took litigation expenses into account when it drafted its offer for Countrywide though.
Still, Bank of America is also going to need to drastically cut back its combined mortgage operations once the deal is done.
To that end, the company has hinted that job cuts lay ahead, saying in January that it planned to trim 11% of the combined mortgage companies' expenses.
"It will be a long time before they need people on the servicing side and they probably will cut a substantial amount on the mortgage origination side," said Malcolm Polley, president and chief investment officer at Stewart Capital Advisors in Pittsburgh, which owns approximately 23,000 shares of Bank of America.
Long-term benefits
When Bank of America first proposed the deal back in January, Wall Street was evenly split about its merits.
Some analysts speculated that the company offered too high an asking price -- the deal originally valued Countrywide at just over $4 billion and is now worth about $2.8 billion as BofA shares have fallen along with the broader financial sector in the past few months.
In addition, the deal would mean that Bank of America, which had largely avoided the subprime mess unlike many of its peers, would now be exposed to Countrywide's risky mortgage portfolio.
Others cheered the tie-up, noting it put Bank of America in a position to expand its already vast footprint in the financial services sector, by making it the nation's biggest mortgage lender and loan servicer.
And some large institutional shareholders in Countrywide, such as the Monaco-based hedge fund SRM Global went so far as to attack top Countrywide management, claiming that the buyout price of $4 billion was not high enough.
So is Bank of America getting Countrywide on the cheap?
Despite all the doubts regarding the deal, Bank of America's management has stood firmly by the transaction since it was first announced.
"I think it could be a combination that really turns out to be very good strategically," said Bank of America chairman and CEO Kenneth Lewis earlier this month at an investor conference.
Lewis added that if his company correctly estimated the number of markdowns they would have to take, the acquisition "could be a very compelling financial transaction."
But if Bank of America expects any payoff from the Countrywide deal, it should be patient, noted David George, senior research analyst at Robert W. Baird & Co. Inc.
When the housing market finally turns around -- and most analysts expect it will at some point -- Bank of America will have a nice head start with Countrywide's well-trained sales staff and mortgage lending technology platform.
"Over the near term, I think the Countrywide deal adds increased credit risk to BofA's balance sheet," said George. "Longer term, it could be a positive transaction."
Fannie, Freddie Fail to Relieve Housing by Shunning Jumbo Loans
June 24 (Bloomberg) -- Three months after Fannie Mae and Freddie Mac won the freedom to step up home-loan purchases, the government-chartered mortgage-finance companies are doing what critics in the Federal Reserve and Congress had predicted.
Instead of using powers granted by Congress to buy jumbo loans for the first time, Freddie Mac and Fannie Mae are purchasing their own mortgage-backed securities, helping reduce losses, company filings show. The large loans, above $417,000, made up almost a third of the U.S. market last year, according to the Mortgage Bankers Association.
Since the rule change took effect in March, Fannie Mae has packaged $24 million of jumbo loans into securities, while Freddie Mac added $220 million, according to the Inside Mortgage Finance newsletter. In April, the companies spent more than $32.4 billion to buy their own instruments, regulatory filings show.
``They were granted expanded opportunity to help recovery in a troubled housing market and yet have appeared to focus on their own recovery,'' said former U.S. Representative Richard Baker, a critic of the companies who left office earlier this year to run the Managed Funds Association in Washington.
Congress had kept Fannie Mae and Freddie Mac out of the jumbo market to force them to concentrate on low- and moderate- income borrowers.
The change places taxpayers at greater risk ``without facilitating the policy goals I believe the Congress had in mind when they eased these portfolio limits,'' said Baker, 60, a Louisiana Republican.
Worse Slump
The slowness of Fannie Mae and Freddie Mac in injecting cash for new jumbo loans may have exacerbated the housing slump in markets including California and Florida, where prices have already fallen more than the national average, said Jerry Howard, 53, president of the National Association of Home Builders.
``Had they been quicker into the marketplace, they could have helped slow the downward spiral in housing prices,'' Howard said.
Congress created Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, to promote home ownership by increasing financing and providing market stability. The companies own or guarantee almost half of the $12 trillion in U.S. residential mortgage debt. They profit by holding assets that yield more than their debt costs and from fees charged to guarantee bonds they create.
Fannie Mae and Freddie Mac posted record losses of $11.8 billion in the past three quarters as defaults on mortgages soared to the highest in 30 years.
Less Impact
The National Association of Realtors estimated last year that Fannie Mae and Freddie Mac would buy $150 billion of jumbo loans in 2008. UBS AG analysts now say the amount may be $74 billion; the companies' own projections indicate that they may not even reach that figure.
Freddie Mac said it would purchase $10 billion to $15 billion in jumbo loans and securities in 2008. Fannie Mae hasn't made any public commitments to buy a set amount of the assets this year.
``So far, we haven't seen as much impact as we anticipated,'' said Paul Bishop, managing director of research for the Realtors.
Fannie Mae added $4.05 billion in net purchases of its mortgage-backed securities in April, taking its portfolio to $728.4 billion, according to company filings. Freddie Mac net purchases were $28.4 billion, bringing holdings to $737.5 billion, filings show. Buying existing debt may help prop up prices for the companies' instruments.
The $168 billion fiscal-stimulus bill signed by President George W. Bush on Feb. 13 temporarily allowed Fannie Mae and Freddie Mac to buy jumbo loans in 91 of the most expensive U.S. housing markets.
Increased Limits
The increased lending power, combined with an agreement to reduce the companies' capital requirements, are part of congressional efforts to revive housing starts and the economy following restrictions placed on the companies two years ago.
Both ousted their chief executives after more than $11 billion in accounting errors were revealed. Fannie Mae restated earnings for 2002 through 2004. Freddie Mac did the same for 2000 through 2002.
Fannie Mae shares have fallen 29 percent and Freddie Mac has lost 31 percent in New York trading since Bush signed the bill.
House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said in February that Fannie Mae and Freddie Mac should buy bigger mortgages ``because we're in an economic crisis and need a short-term response.'' Frank has since said that the companies are moving too slowly and should get ``more bang for the buck'' from their spending power. Making the higher limits permanent may encourage purchases, he said.
`Some Liquidity'
Fannie Mae has moved to ``help provide some liquidity and impact on rates in this market segment,'' spokesman Brian Faith said in an e-mail. ``We're eligible to buy these loans and we want that business.''
The companies' entry into the jumbo market has increased financing and lowered rates where they are allowed to compete, Freddie Mac spokesman Brad German said. Fannie Mae and Freddie Mac can't buy multimillion mortgages so some data from high-cost markets such as Los Angeles may be skewed, he said.
``In the products where we are competing, the rates are a lot lower than for the products we can't buy,'' German said. ``We're doing what Congress intended us to do.''
Freddie Mac may do more jumbo business than it estimated this year, he said.
While jumbo loans accounted for about 29 percent of the $2.42 trillion of mortgages issued last year, they represented a fifth of applications in May, according to Inside Mortgage Finance and the Mortgage Bankers Association. About half of the market should be available for purchase by Fannie Mae and Freddie Mac. Stricter criteria set by the companies mean that less than 16 percent of loans eligible for the program actually can qualify, according to UBS and Mortgage Bankers Association data.
10 Percent
For a loan of more than $417,000, Fannie Mae and Freddie Mac require a minimum down payment of 10 percent and a credit score of 660. That compares with 3 percent and 580 for loans under $417,000 at Fannie Mae; and 5 percent, with no minimum score, at Freddie Mac. The rankings, which range from 300 to 850, are used by lenders to predict whether a borrower will repay.
``Fannie and Freddie are catering to low-risk homeowners with high credit scores and a lot of equity in their homes,'' said Dan Green, a loan broker at Mobium Mortgage Group Inc. in Cincinnati and Chicago. ``I'm sure there will be some high-cost areas in the country that will benefit. They just don't happen to be Florida, Michigan, California, Nevada.''
Jumbo loans bought by Fannie Mae and Freddie Mac carry an interest rate of 6.59 percent, more than a percentage point below regular jumbo rates of 7.68 percent, according to HSH Associates Inc.
Few Loans
Los Angeles borrowers are paying an average 7.87 percent, while Miami mortgage seekers are being charged 8.03 percent, indicating that few loans with low rates from Fannie Mae and Freddie Mac are being offered, according to HSH.
The companies' purchases of their own securities are making them riskier because they retain 100 percent of the credit and interest-rate exposure on those assets, said William Poole, president of the St. Louis Federal Reserve until March and now a senior fellow at the Cato Institute.
``Any legislation today that simply expands what they do is going in the wrong direction,'' Poole, 71, said. ``It's potentially digging the taxpayer in deeper.''
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
Instead of using powers granted by Congress to buy jumbo loans for the first time, Freddie Mac and Fannie Mae are purchasing their own mortgage-backed securities, helping reduce losses, company filings show. The large loans, above $417,000, made up almost a third of the U.S. market last year, according to the Mortgage Bankers Association.
Since the rule change took effect in March, Fannie Mae has packaged $24 million of jumbo loans into securities, while Freddie Mac added $220 million, according to the Inside Mortgage Finance newsletter. In April, the companies spent more than $32.4 billion to buy their own instruments, regulatory filings show.
``They were granted expanded opportunity to help recovery in a troubled housing market and yet have appeared to focus on their own recovery,'' said former U.S. Representative Richard Baker, a critic of the companies who left office earlier this year to run the Managed Funds Association in Washington.
Congress had kept Fannie Mae and Freddie Mac out of the jumbo market to force them to concentrate on low- and moderate- income borrowers.
The change places taxpayers at greater risk ``without facilitating the policy goals I believe the Congress had in mind when they eased these portfolio limits,'' said Baker, 60, a Louisiana Republican.
Worse Slump
The slowness of Fannie Mae and Freddie Mac in injecting cash for new jumbo loans may have exacerbated the housing slump in markets including California and Florida, where prices have already fallen more than the national average, said Jerry Howard, 53, president of the National Association of Home Builders.
``Had they been quicker into the marketplace, they could have helped slow the downward spiral in housing prices,'' Howard said.
Congress created Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, to promote home ownership by increasing financing and providing market stability. The companies own or guarantee almost half of the $12 trillion in U.S. residential mortgage debt. They profit by holding assets that yield more than their debt costs and from fees charged to guarantee bonds they create.
Fannie Mae and Freddie Mac posted record losses of $11.8 billion in the past three quarters as defaults on mortgages soared to the highest in 30 years.
Less Impact
The National Association of Realtors estimated last year that Fannie Mae and Freddie Mac would buy $150 billion of jumbo loans in 2008. UBS AG analysts now say the amount may be $74 billion; the companies' own projections indicate that they may not even reach that figure.
Freddie Mac said it would purchase $10 billion to $15 billion in jumbo loans and securities in 2008. Fannie Mae hasn't made any public commitments to buy a set amount of the assets this year.
``So far, we haven't seen as much impact as we anticipated,'' said Paul Bishop, managing director of research for the Realtors.
Fannie Mae added $4.05 billion in net purchases of its mortgage-backed securities in April, taking its portfolio to $728.4 billion, according to company filings. Freddie Mac net purchases were $28.4 billion, bringing holdings to $737.5 billion, filings show. Buying existing debt may help prop up prices for the companies' instruments.
The $168 billion fiscal-stimulus bill signed by President George W. Bush on Feb. 13 temporarily allowed Fannie Mae and Freddie Mac to buy jumbo loans in 91 of the most expensive U.S. housing markets.
Increased Limits
The increased lending power, combined with an agreement to reduce the companies' capital requirements, are part of congressional efforts to revive housing starts and the economy following restrictions placed on the companies two years ago.
Both ousted their chief executives after more than $11 billion in accounting errors were revealed. Fannie Mae restated earnings for 2002 through 2004. Freddie Mac did the same for 2000 through 2002.
Fannie Mae shares have fallen 29 percent and Freddie Mac has lost 31 percent in New York trading since Bush signed the bill.
House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said in February that Fannie Mae and Freddie Mac should buy bigger mortgages ``because we're in an economic crisis and need a short-term response.'' Frank has since said that the companies are moving too slowly and should get ``more bang for the buck'' from their spending power. Making the higher limits permanent may encourage purchases, he said.
`Some Liquidity'
Fannie Mae has moved to ``help provide some liquidity and impact on rates in this market segment,'' spokesman Brian Faith said in an e-mail. ``We're eligible to buy these loans and we want that business.''
The companies' entry into the jumbo market has increased financing and lowered rates where they are allowed to compete, Freddie Mac spokesman Brad German said. Fannie Mae and Freddie Mac can't buy multimillion mortgages so some data from high-cost markets such as Los Angeles may be skewed, he said.
``In the products where we are competing, the rates are a lot lower than for the products we can't buy,'' German said. ``We're doing what Congress intended us to do.''
Freddie Mac may do more jumbo business than it estimated this year, he said.
While jumbo loans accounted for about 29 percent of the $2.42 trillion of mortgages issued last year, they represented a fifth of applications in May, according to Inside Mortgage Finance and the Mortgage Bankers Association. About half of the market should be available for purchase by Fannie Mae and Freddie Mac. Stricter criteria set by the companies mean that less than 16 percent of loans eligible for the program actually can qualify, according to UBS and Mortgage Bankers Association data.
10 Percent
For a loan of more than $417,000, Fannie Mae and Freddie Mac require a minimum down payment of 10 percent and a credit score of 660. That compares with 3 percent and 580 for loans under $417,000 at Fannie Mae; and 5 percent, with no minimum score, at Freddie Mac. The rankings, which range from 300 to 850, are used by lenders to predict whether a borrower will repay.
``Fannie and Freddie are catering to low-risk homeowners with high credit scores and a lot of equity in their homes,'' said Dan Green, a loan broker at Mobium Mortgage Group Inc. in Cincinnati and Chicago. ``I'm sure there will be some high-cost areas in the country that will benefit. They just don't happen to be Florida, Michigan, California, Nevada.''
Jumbo loans bought by Fannie Mae and Freddie Mac carry an interest rate of 6.59 percent, more than a percentage point below regular jumbo rates of 7.68 percent, according to HSH Associates Inc.
Few Loans
Los Angeles borrowers are paying an average 7.87 percent, while Miami mortgage seekers are being charged 8.03 percent, indicating that few loans with low rates from Fannie Mae and Freddie Mac are being offered, according to HSH.
The companies' purchases of their own securities are making them riskier because they retain 100 percent of the credit and interest-rate exposure on those assets, said William Poole, president of the St. Louis Federal Reserve until March and now a senior fellow at the Cato Institute.
``Any legislation today that simply expands what they do is going in the wrong direction,'' Poole, 71, said. ``It's potentially digging the taxpayer in deeper.''
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
Wednesday, June 18, 2008
Paulson & Co. Says Writedowns May Reach $1.3 Trillion
By Tom Cahill and Poppy Trowbridge
June 18 (Bloomberg) -- John Paulson, founder of hedge fund Paulson & Co., said global writedowns and losses from the credit crisis may reach $1.3 trillion, exceeding the International Monetary Fund's $945 billion estimate.
``We're only about a third of the way through the writedowns,'' Paulson, 52, told the GAIM International hedge fund conference in Monaco today. ``There are a lot of problems out there and it will continue to be felt through the year. We don't see any signs of stabilizing.''
Paulson, whose company manages about $33 billion, shorted subprime-mortgage debt after he noticed ``bubble like'' prices that made a collapse ``inevitable.'' His Paulson Partners fund has risen about 18 percent a year since it was founded in 1994, while one of his main funds for betting on declines in subprime debt rose 591 percent last year.
The U.S. is heading into a recession as falling home prices weigh on consumer spending, Paulson said. The second half of this year will be worse than the first as the economic slowdown continues into 2009, he said. Signs of stress are ``accelerating'' in the housing market.
``I don't consider myself a bull or a bear,'' he told the audience at Monaco's Grimaldi Forum. ``I'm a realist.''
Ambac Financial Group Inc., the second-biggest bond insurer, is ``the most leveraged, troubled company out there,'' Paulson said. It is at risk of being downgraded to non-investment grade, Paulson said.
The housing and credit-market slump pushed Ambac to three straight quarterly losses after more than a decade of profit. It has written down $5.2 billion since the collapse of the U.S. subprime mortgage market last year.
A spokesman for New York-based Ambac couldn't immediately be reached for comment.
June 18 (Bloomberg) -- John Paulson, founder of hedge fund Paulson & Co., said global writedowns and losses from the credit crisis may reach $1.3 trillion, exceeding the International Monetary Fund's $945 billion estimate.
``We're only about a third of the way through the writedowns,'' Paulson, 52, told the GAIM International hedge fund conference in Monaco today. ``There are a lot of problems out there and it will continue to be felt through the year. We don't see any signs of stabilizing.''
Paulson, whose company manages about $33 billion, shorted subprime-mortgage debt after he noticed ``bubble like'' prices that made a collapse ``inevitable.'' His Paulson Partners fund has risen about 18 percent a year since it was founded in 1994, while one of his main funds for betting on declines in subprime debt rose 591 percent last year.
The U.S. is heading into a recession as falling home prices weigh on consumer spending, Paulson said. The second half of this year will be worse than the first as the economic slowdown continues into 2009, he said. Signs of stress are ``accelerating'' in the housing market.
``I don't consider myself a bull or a bear,'' he told the audience at Monaco's Grimaldi Forum. ``I'm a realist.''
Ambac Financial Group Inc., the second-biggest bond insurer, is ``the most leveraged, troubled company out there,'' Paulson said. It is at risk of being downgraded to non-investment grade, Paulson said.
The housing and credit-market slump pushed Ambac to three straight quarterly losses after more than a decade of profit. It has written down $5.2 billion since the collapse of the U.S. subprime mortgage market last year.
A spokesman for New York-based Ambac couldn't immediately be reached for comment.
Tuesday, June 17, 2008
big bank dividend cuts lie ahead
After a sharp selloff, BofA, Wachovia and other high-yielders may need to cut their payouts before long.
Colin Barr, Fortune Senior Writer
Last Updated: June 17, 2008: 9:05 AM EDT
NEW YORK (Fortune) -- Falling bank stock prices are a warning to investors not to get too attached to those fat dividend checks.
The latest struggling lender to sock shareholders is Cleveland-based KeyCorp (KEY, Fortune 500), whose shares tumbled 24% Thursday after the bank said it would slash its quarterly dividend in half to conserve $200 million annually.
But with inflation worries driving up interest rates and house prices still tumbling, the market is betting Key won't be the last bank to cut its dividend. Unusually high dividend yields could point to coming dividend cuts at banks ranging from giants Bank of America (BAC, Fortune 500) and Wachovia (WB, Fortune 500) to regionals such as Fifth Third (FITB, Fortune 500) and Regions Financial (RF, Fortune 500).
The yield is the result of dividing the annual stated dividend payout by the current stock price. A higher number is typically better for investors, of course, because it means a bigger income stream relative to how much they've invested.
But in a credit crunch-obsessed market, a high dividend yield can actually be a warning signal. That's because an increase in the bank's dividend isn't the only factor that can cause the dividend yield to rise. So can a decrease in its stock price.
And with banks facing sharply reduced earnings prospects due to rising credit losses and tightening lending standards, a high yield can spell trouble ahead.
Gary Townsend, CEO of Hill-Townsend Capital in Chevy Chase, Md., says bank stocks historically have yielded in the range of 3% to 4%. So any stock with a yield in the high single digits can be viewed as a candidate for a future dividend cutback.
"When you get to about 8%, that speculation becomes quite pronounced," says Townsend, a former Wall Street bank analyst.
Which banks are in danger?
Some of the big banks with yields around that level include Bank of America, which as a yield of almost 9% and Wachovia, whose recent price swoon has left the stock yielding more than 8% even after a dividend cut in April.
Other candidates for dividend cuts include double-digit yielders Fifth Third of Cincinnati, which yields 14% after Friday's double-digit selloff; Regions of Birmingham, Ala., which yields 11%; and U.K.-based Barclays (BCS), which recently yielded 13%.
For now, the banks aren't signaling any intention to cut their dividends. Representatives from BofA, Wachovia, Fifth Third and Regions didn't immediately reply to requests for comment.
Barclays, which isn't due to make a semiannual dividend declaration until August, told analysts on a conference call last month that it hadn't made a decision on its payout.
"We're active managers of capital and we have a range of options. We're explicitly keeping all of them open today," finance director Chris Lucas said back on May 15. "We're aware of the importance that shareholders place on dividends."
To be sure, not every bank is cutting back. CNNMoney's Paul R. La Monica recently rattled off a list of banks whose cautious underwriting and conservative financing means their dividends are probably safe.
But no one is immune from scrutiny, given that even banks that have already reduced their dividends have, under stress, gone on to do so again.
Washington Mutual (WM, Fortune 500), for instance, cut its quarterly dividend to 15 cents from 56 cents back in December. WaMu then cut it again -- to a penny a share -- in April when it sold a big stake to a group led by private equity firm TPG.
Not everyone believes a big dividend yield points to a future cutback though.
Oppenheimer analyst Meredith Whitney, who was the first Wall Street analyst to predict (correctly) a dividend reduction at Citi, said last week that a chat with BofA chief Ken Lewis led her to conclude Bank of America's dividend was safe.
Lewis later said that while he hasn't explicitly defended the bank's current dividend, which runs $2.56 a share annually, he thinks the bank would only reconsider its payout if the economy suffers a sharp slowdown - an outcome he doesn't foresee.
Analyst: Credit Trends 'Are Quite Negative'
But Townsend wrote last week at the bankstocks.com Web site that he expects BofA to cut its dividend by about 40% later this year to reduce the strain on its capital base.
Townsend points to another dividend number - the bank's profit payout ratio, which reflects the proportion of annual earnings the bank sends out to investors as common dividends - as supporting that analysis.
He estimates BofA will spend all its projected net income this year and nearly three-quarters of its profit next year on common dividends - a trend he calls unsustainable. "The market is of a mind this dividend is too high," he says.
The dividend yield and the earnings payout ratio aren't the only numbers to consider either. Banks that have raised capital via preferred stock sales - such as Citi and Bank of America -- also agree to issue preferred dividends. And those must be paid out before any common dividends can be paid.
Finally, with house prices falling, mortgage defaults on the rise and employment growth weak, credit trends right now "are quite negative," Townsend says.
That gives banks another reason to be careful about not paying out too much in dividends -- and shareholders in high-yielding bank stocks another cause for concern.
Colin Barr, Fortune Senior Writer
Last Updated: June 17, 2008: 9:05 AM EDT
NEW YORK (Fortune) -- Falling bank stock prices are a warning to investors not to get too attached to those fat dividend checks.
The latest struggling lender to sock shareholders is Cleveland-based KeyCorp (KEY, Fortune 500), whose shares tumbled 24% Thursday after the bank said it would slash its quarterly dividend in half to conserve $200 million annually.
But with inflation worries driving up interest rates and house prices still tumbling, the market is betting Key won't be the last bank to cut its dividend. Unusually high dividend yields could point to coming dividend cuts at banks ranging from giants Bank of America (BAC, Fortune 500) and Wachovia (WB, Fortune 500) to regionals such as Fifth Third (FITB, Fortune 500) and Regions Financial (RF, Fortune 500).
The yield is the result of dividing the annual stated dividend payout by the current stock price. A higher number is typically better for investors, of course, because it means a bigger income stream relative to how much they've invested.
But in a credit crunch-obsessed market, a high dividend yield can actually be a warning signal. That's because an increase in the bank's dividend isn't the only factor that can cause the dividend yield to rise. So can a decrease in its stock price.
And with banks facing sharply reduced earnings prospects due to rising credit losses and tightening lending standards, a high yield can spell trouble ahead.
Gary Townsend, CEO of Hill-Townsend Capital in Chevy Chase, Md., says bank stocks historically have yielded in the range of 3% to 4%. So any stock with a yield in the high single digits can be viewed as a candidate for a future dividend cutback.
"When you get to about 8%, that speculation becomes quite pronounced," says Townsend, a former Wall Street bank analyst.
Which banks are in danger?
Some of the big banks with yields around that level include Bank of America, which as a yield of almost 9% and Wachovia, whose recent price swoon has left the stock yielding more than 8% even after a dividend cut in April.
Other candidates for dividend cuts include double-digit yielders Fifth Third of Cincinnati, which yields 14% after Friday's double-digit selloff; Regions of Birmingham, Ala., which yields 11%; and U.K.-based Barclays (BCS), which recently yielded 13%.
For now, the banks aren't signaling any intention to cut their dividends. Representatives from BofA, Wachovia, Fifth Third and Regions didn't immediately reply to requests for comment.
Barclays, which isn't due to make a semiannual dividend declaration until August, told analysts on a conference call last month that it hadn't made a decision on its payout.
"We're active managers of capital and we have a range of options. We're explicitly keeping all of them open today," finance director Chris Lucas said back on May 15. "We're aware of the importance that shareholders place on dividends."
To be sure, not every bank is cutting back. CNNMoney's Paul R. La Monica recently rattled off a list of banks whose cautious underwriting and conservative financing means their dividends are probably safe.
But no one is immune from scrutiny, given that even banks that have already reduced their dividends have, under stress, gone on to do so again.
Washington Mutual (WM, Fortune 500), for instance, cut its quarterly dividend to 15 cents from 56 cents back in December. WaMu then cut it again -- to a penny a share -- in April when it sold a big stake to a group led by private equity firm TPG.
Not everyone believes a big dividend yield points to a future cutback though.
Oppenheimer analyst Meredith Whitney, who was the first Wall Street analyst to predict (correctly) a dividend reduction at Citi, said last week that a chat with BofA chief Ken Lewis led her to conclude Bank of America's dividend was safe.
Lewis later said that while he hasn't explicitly defended the bank's current dividend, which runs $2.56 a share annually, he thinks the bank would only reconsider its payout if the economy suffers a sharp slowdown - an outcome he doesn't foresee.
Analyst: Credit Trends 'Are Quite Negative'
But Townsend wrote last week at the bankstocks.com Web site that he expects BofA to cut its dividend by about 40% later this year to reduce the strain on its capital base.
Townsend points to another dividend number - the bank's profit payout ratio, which reflects the proportion of annual earnings the bank sends out to investors as common dividends - as supporting that analysis.
He estimates BofA will spend all its projected net income this year and nearly three-quarters of its profit next year on common dividends - a trend he calls unsustainable. "The market is of a mind this dividend is too high," he says.
The dividend yield and the earnings payout ratio aren't the only numbers to consider either. Banks that have raised capital via preferred stock sales - such as Citi and Bank of America -- also agree to issue preferred dividends. And those must be paid out before any common dividends can be paid.
Finally, with house prices falling, mortgage defaults on the rise and employment growth weak, credit trends right now "are quite negative," Townsend says.
That gives banks another reason to be careful about not paying out too much in dividends -- and shareholders in high-yielding bank stocks another cause for concern.
Friday, June 13, 2008
Angelo Mozilo the SCUM and part of the Mortgage Problem Handle's his Friend's alot better who work for the Goverment "Countrywide's Many 'Friends'
There are two articles here the first one Shows the great Angelo Mozilo, Chief executive of countrywide Financial on how he treats the regular folks out there and then the second article for those who work in the government but first here is a statement from Chris Dodd website:
Statement of Chairman Dodd on Countrywide-NACA Partnership
October 24, 2007
"Countrywide has taken a step in the right direction in authorizing the Neighborhood Assistance Corporation of America (NACA) to help its borrowers. Under Bruce Mark's leadership, NACA has a strong record of helping homeowners navigate the daunting process of modifying their loans in order to make them more affordable and to avoid foreclosure. But Countrywide must ensure that each and every one of its subprime borrowers has access to equally effective help. To that end, Countrywide should make sure that all homeowners that may struggle to pay their mortgages are given the opportunity, on the same terms, to get their loans modified to ensure long-term affordability. "Furthermore, Countrywide is just one piece of a very large and complex puzzle. There are many other lenders that have issued loans with unreasonable terms, and they bear the same responsibility to help their borrowers. We need a transparent set of rules and standards which all lenders will use to modify loans on the scale that will be necessary to help borrowers avoid the wave of foreclosures looming on the horizon."
Chris Dodd is the Chairman of the Banking committee
Statement of Chairman Dodd on Countrywide-NACA Partnership
October 24, 2007
"Countrywide has taken a step in the right direction in authorizing the Neighborhood Assistance Corporation of America (NACA) to help its borrowers. Under Bruce Mark's leadership, NACA has a strong record of helping homeowners navigate the daunting process of modifying their loans in order to make them more affordable and to avoid foreclosure. But Countrywide must ensure that each and every one of its subprime borrowers has access to equally effective help. To that end, Countrywide should make sure that all homeowners that may struggle to pay their mortgages are given the opportunity, on the same terms, to get their loans modified to ensure long-term affordability. "Furthermore, Countrywide is just one piece of a very large and complex puzzle. There are many other lenders that have issued loans with unreasonable terms, and they bear the same responsibility to help their borrowers. We need a transparent set of rules and standards which all lenders will use to modify loans on the scale that will be necessary to help borrowers avoid the wave of foreclosures looming on the horizon."
Chris Dodd is the Chairman of the Banking committee
Do I need too say more
Chris Dodd does have relationships with CEO's of big banking firms.
First Elected:1980
Next Election:2010
Committee Assignments:
Banking, Housing, and Urban Affairs
Foreign Relations
Health, Education, Labor and Pensions
Rules and Administration
2003 - 2008 Cycle Fundraising
Raised: $8,411,725
Spent:$9,927,354
Cash on Hand:$88,921
Debts:$0
Last Report: Monday, March 31, 2008
Top 5 Contributors
-->SAC Capital Partners $322,100
Citigroup Inc $316,294
United Technologies $268,800
American International Group $214,678
Bear Stearns $205,100
Top 5 Industries -->Securities & Investment $4,268,046
Lawyers/Law Firms $1,938,450
Insurance $1,418,422
Real Estate $1,233,999
Commercial Banks $858,344
Next Election:2010
Committee Assignments:
Banking, Housing, and Urban Affairs
Foreign Relations
Health, Education, Labor and Pensions
Rules and Administration
2003 - 2008 Cycle Fundraising
Raised: $8,411,725
Spent:$9,927,354
Cash on Hand:$88,921
Debts:$0
Last Report: Monday, March 31, 2008
Top 5 Contributors
-->SAC Capital Partners $322,100
Citigroup Inc $316,294
United Technologies $268,800
American International Group $214,678
Bear Stearns $205,100
Top 5 Industries -->Securities & Investment $4,268,046
Lawyers/Law Firms $1,938,450
Insurance $1,418,422
Real Estate $1,233,999
Commercial Banks $858,344
NOTE: All the numbers on this page are for the 2003-2008 election cycle and based on Federal Election Commission data available electronically on June 06, 2008. ("Help! The numbers don't add up...")
Countrywide has also contributed a total of $21,000 Bought out by Bof A
Bears and Sterns No longer $316,294
Citigroup Inc On there way out $205,100
Where is CNN, NBC,MSNBC,CBS,ABC Oh I forgot there to busy going after BUSH!!!! where is the out rage on this while Everbody is losing there homes Oh I forgot there Democrats Now am sure there is atleast one Republican who will get cought up in this and then Lou Dobbs and all of the other media will pick it up and talk about it for the next 5 years
"Countrywide is reportedly under F.B.I. investigation for alleged securities fraud, and Mozilo has drawn criticism for unloading $474 million in Countrywide shares between 2004 and 2007 as the housing crisis neared. He’s defended the sales as part of his retirement planning."
A Real Countrywide Email From the Office of Angelo Mozilo - Email Below Calls Homeowner Disgusting
By Moe Bedard on May 20th, 2008
It isn’t every day that you get to see behind the scenes of the housing and mortgage crisis. Mainstream media usually tells the same homeowner story of pain and suffering and then the “made up” stories from the lenders and servicers who are masters of deception and lip service.
Here is an email that was forwarded to me by a Countrywide Home Loans borrower named Dan Bailey. Don joined my forum to get free foreclosure help and assisitance in obtaining a loan modification from Countrywide and that is just what he got. He followed or advice to a “t”, wrote his hardship letter (we provide free samples here and on the forum) and then proceeded to email and fax his information to the email list we provided him.
Email from Dan to Countrywide after he received the disturbing email from the Office of Angelo Mozilo sent to him by accident:
Hello,
I took the advice on this forum, and e-mailed my hardship letter to the list of e-mail addresses posted in the threads. Two minutes later, I received a reply……a mistaken reply by Angelo Mozilo to the rest of the people on the list. Here it is. Nothing like this to kick a person while they are down. What hope do I have …
“removed@yahoo.comCC: Steve_Bailey@Countrywide.ComSubject: Re: bailey acct# xxxxxxxxxxFrom: Angelo_Mozilo@countrywide.com Add Mobile AlertDate: Mon, 19 May 2008 06:41:34 -0700
This has already been sent on to our senior manager who will determine the facts behind your request and he will take the appropriate actions.
Dan Bailey 05/19/2008 06:37 AMTo Angelo_Mozilo@countrywide.comccSubject Re: bailey acct# xxxxxxxxxx
Interesting to find that you think my letter is disgusting. I will send this on….
Angelo_Mozilo@countrywide.com wrote:
This is unbelievable. Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the internet. Disgusting.
Original email. Did this warrant this response from Angelo Mozilo? I sure don’t think so!!!!
Dan Bailey Photography Studio05/19/2008 06:12 AM To advocacy@countrywide.com, customer_service@countrywide.com, pressroom@countrywide.com, david_bigelow@countrywide.com, angelo_mozilo@countrywide.com, lisa_riordan@countrywide.com, elizabeth_moyer@countrywide.com, sarah_perek@countrywide.com, chris_oltmann@countrywide.com, gabrielle_williams@countrywide.com, maheshika_ruwanpathirana@countrywide.com, adrienne_ely@countrywide.com, raquel_robinson@countrywide.com, linda_turner@countrywide.com, daniel_whitehead@countrywide.com, melissa_guerra@countrywide.com, mary_archer@countrywide.com, aline_ramirez@countrywide.com, kacie_miller@countrywide.com, patricia_mckenzie@countrywide.comccSubject bailey acct# xxxxxxxxxxx
To Whom It May Concern:
I am writing this letter to explain my unfortunate set of circumstances that have caused me to become delinquent on my mortgage. I have done everything in my power to make ends meet but unfortunately I have fallen short and would like you to consider working with me to modify my loan. My number one goal is to keep my home that I have lived in for sixteen years, remodeled with my own sweat equity and I would really appreciate the opportunity to do that. My home is not large or in an upscale neighborhood, it is a “shotgun” bungalow style of only 900 sq. ft. built in 1921. I moved into this home in May of 1992…this was the same year I got clean and sober from drugs and alcohol, and have been ever since, this home means the world to me.
The main reason that caused me to have a hardship and to be late is my misunderstanding of the original loan. I was told that after the first year of payments, I would be able to refinance to a better fixed rate- then the bottom fell out of the industry. My payments for that first year were on time. I also lost my second income due to physical conditions in a very physically demanding industry.
As my ARM payments increased, I have had less money to put towards making my business (income) work. I had been unable to generate business because all of my funds were going towards attempting to make my loan payments. This, coupled with major repairs to my vehicle (93 jeep) and paying out of pocket for medical and dental issues (I have no ins.) caused me to fall further and further behind, destroying my credit rating.
Now, it’s to the point where I cannot afford to pay what is owed to Countrywide. It is my full intention to pay what I owe. But at this time I have exhausted all of my income and resources so I am turning to you for help.
I feel that a loan modification would benefit us both. With that, and knowing my home will not be foreclosed, I would be able to obtain a roommate in order to generate more income, have the funds to generate more business and have a good working relationship with Countrywide. I would appreciate if you can work with me to lower my delinquent amount owed and payment so I can keep my home and also afford to make amends with your firm.
I truly hope that you will consider working with me and I am anxious to get this settled so we all can move on.
Sincerely and Respectfully,
Daniel A Bailey Jr.Loan # xxxxxxxxxxxDan BaileyWelcome
Dan Bailey
Moe@LoanSafe.org> wrote:Dear Dan, Thanks for sharing your story with the community. I spoke with Cat and she had mentioned the content of the email for CW and I was upset and anxious to get this story out to the media. She emailed me a copy, but nothing was in the email and I feel this email needs to be shown to everyone. My blogs and forums are read by many lenders and government officials and this would pull the wool from their eyes on inter office communications and how they really feel. Thanks!
–Best Regards,
Moe BedardFounder & VP
Loan Safe Solutionshttp://www.loansafe.org/http://www.loanworkout.org/951-531-0148 Direct800-734-8819 Fax—————————————————————–This message may contain Loan Safe Advocacy Group Privileged/Proprietary information. If this email is not intended for you, and you are not responsible for the delivery of this email message to the addressee, do not keep, copy or deliver this email message to anyone. Please destroy this email in its entirety and notify the sender by reply email. Your cooperation is appreciated.—————————————————————–
Don’s final email to Countrywide:
Mr./Ms Jemisaon,
In attempting to come to some way to save my home, I took the advice on forming my hardship letter from a forum. Why? Not all of us have been to a university to study business and we need some help in dealing with these matters. (perhaps, if we had, we would not have fallen for what we did, to start with) To have recieved the e-mail that I did, stating by one of your employees, that what I did was “disgusting” and “unbelievable” has been just about the final straw. I am trying to do the right thing, I am trying with every ounce of what I have left in me not to blow my brains out ovewr losing the home I have been in for 16 years. The only hope I had left was that perhaps the countrywide company did want to help the people it is servicing….then I receive that responce to my letter. Just great. Now I know, that it is all a nice fat laughing matter to those who are supposed to help.
Us poor stupid “theys” that he is reffering to, are human beings trying to do their best….
By Moe Bedard on May 20th, 2008
It isn’t every day that you get to see behind the scenes of the housing and mortgage crisis. Mainstream media usually tells the same homeowner story of pain and suffering and then the “made up” stories from the lenders and servicers who are masters of deception and lip service.
Here is an email that was forwarded to me by a Countrywide Home Loans borrower named Dan Bailey. Don joined my forum to get free foreclosure help and assisitance in obtaining a loan modification from Countrywide and that is just what he got. He followed or advice to a “t”, wrote his hardship letter (we provide free samples here and on the forum) and then proceeded to email and fax his information to the email list we provided him.
Email from Dan to Countrywide after he received the disturbing email from the Office of Angelo Mozilo sent to him by accident:
Hello,
I took the advice on this forum, and e-mailed my hardship letter to the list of e-mail addresses posted in the threads. Two minutes later, I received a reply……a mistaken reply by Angelo Mozilo to the rest of the people on the list. Here it is. Nothing like this to kick a person while they are down. What hope do I have …
“removed@yahoo.comCC: Steve_Bailey@Countrywide.ComSubject: Re: bailey acct# xxxxxxxxxxFrom: Angelo_Mozilo@countrywide.com Add Mobile AlertDate: Mon, 19 May 2008 06:41:34 -0700
This has already been sent on to our senior manager who will determine the facts behind your request and he will take the appropriate actions.
Dan Bailey 05/19/2008 06:37 AMTo Angelo_Mozilo@countrywide.comccSubject Re: bailey acct# xxxxxxxxxx
Interesting to find that you think my letter is disgusting. I will send this on….
Angelo_Mozilo@countrywide.com wrote:
This is unbelievable. Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the internet. Disgusting.
Original email. Did this warrant this response from Angelo Mozilo? I sure don’t think so!!!!
Dan Bailey Photography Studio05/19/2008 06:12 AM To advocacy@countrywide.com, customer_service@countrywide.com, pressroom@countrywide.com, david_bigelow@countrywide.com, angelo_mozilo@countrywide.com, lisa_riordan@countrywide.com, elizabeth_moyer@countrywide.com, sarah_perek@countrywide.com, chris_oltmann@countrywide.com, gabrielle_williams@countrywide.com, maheshika_ruwanpathirana@countrywide.com, adrienne_ely@countrywide.com, raquel_robinson@countrywide.com, linda_turner@countrywide.com, daniel_whitehead@countrywide.com, melissa_guerra@countrywide.com, mary_archer@countrywide.com, aline_ramirez@countrywide.com, kacie_miller@countrywide.com, patricia_mckenzie@countrywide.comccSubject bailey acct# xxxxxxxxxxx
To Whom It May Concern:
I am writing this letter to explain my unfortunate set of circumstances that have caused me to become delinquent on my mortgage. I have done everything in my power to make ends meet but unfortunately I have fallen short and would like you to consider working with me to modify my loan. My number one goal is to keep my home that I have lived in for sixteen years, remodeled with my own sweat equity and I would really appreciate the opportunity to do that. My home is not large or in an upscale neighborhood, it is a “shotgun” bungalow style of only 900 sq. ft. built in 1921. I moved into this home in May of 1992…this was the same year I got clean and sober from drugs and alcohol, and have been ever since, this home means the world to me.
The main reason that caused me to have a hardship and to be late is my misunderstanding of the original loan. I was told that after the first year of payments, I would be able to refinance to a better fixed rate- then the bottom fell out of the industry. My payments for that first year were on time. I also lost my second income due to physical conditions in a very physically demanding industry.
As my ARM payments increased, I have had less money to put towards making my business (income) work. I had been unable to generate business because all of my funds were going towards attempting to make my loan payments. This, coupled with major repairs to my vehicle (93 jeep) and paying out of pocket for medical and dental issues (I have no ins.) caused me to fall further and further behind, destroying my credit rating.
Now, it’s to the point where I cannot afford to pay what is owed to Countrywide. It is my full intention to pay what I owe. But at this time I have exhausted all of my income and resources so I am turning to you for help.
I feel that a loan modification would benefit us both. With that, and knowing my home will not be foreclosed, I would be able to obtain a roommate in order to generate more income, have the funds to generate more business and have a good working relationship with Countrywide. I would appreciate if you can work with me to lower my delinquent amount owed and payment so I can keep my home and also afford to make amends with your firm.
I truly hope that you will consider working with me and I am anxious to get this settled so we all can move on.
Sincerely and Respectfully,
Daniel A Bailey Jr.Loan # xxxxxxxxxxxDan BaileyWelcome
Dan Bailey
Moe@LoanSafe.org> wrote:Dear Dan, Thanks for sharing your story with the community. I spoke with Cat and she had mentioned the content of the email for CW and I was upset and anxious to get this story out to the media. She emailed me a copy, but nothing was in the email and I feel this email needs to be shown to everyone. My blogs and forums are read by many lenders and government officials and this would pull the wool from their eyes on inter office communications and how they really feel. Thanks!
–Best Regards,
Moe BedardFounder & VP
Loan Safe Solutionshttp://www.loansafe.org/http://www.loanworkout.org/951-531-0148 Direct800-734-8819 Fax—————————————————————–This message may contain Loan Safe Advocacy Group Privileged/Proprietary information. If this email is not intended for you, and you are not responsible for the delivery of this email message to the addressee, do not keep, copy or deliver this email message to anyone. Please destroy this email in its entirety and notify the sender by reply email. Your cooperation is appreciated.—————————————————————–
Don’s final email to Countrywide:
Mr./Ms Jemisaon,
In attempting to come to some way to save my home, I took the advice on forming my hardship letter from a forum. Why? Not all of us have been to a university to study business and we need some help in dealing with these matters. (perhaps, if we had, we would not have fallen for what we did, to start with) To have recieved the e-mail that I did, stating by one of your employees, that what I did was “disgusting” and “unbelievable” has been just about the final straw. I am trying to do the right thing, I am trying with every ounce of what I have left in me not to blow my brains out ovewr losing the home I have been in for 16 years. The only hope I had left was that perhaps the countrywide company did want to help the people it is servicing….then I receive that responce to my letter. Just great. Now I know, that it is all a nice fat laughing matter to those who are supposed to help.
Us poor stupid “theys” that he is reffering to, are human beings trying to do their best….
by Daniel Golden Jun 12 2008
Senators Dodd and Conrad are among the government officials who scored V.I.P. loans from C.E.O. Angelo Mozilo. An exclusive Portfolio investigation.
Two U.S. senators, two former Cabinet members, and a former ambassador to the United Nations received loans from Countrywide Financial through a little-known program that waived points, lender fees, and company borrowing rules for prominent people.Senators Christopher Dodd, Democrat from Connecticut and chairman of the Banking Committee, and Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans.Other participants in the V.I.P. program included former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke. Jackson was deputy H.U.D. secretary in the Bush administration when he received the loans in 2003. Shalala, who received two loans in 2002, had by then left the Clinton administration for her current position as president of the University of Miami. She is scheduled to receive a Presidential Medal of Freedom on June 19. Holbrooke, whose stint as U.N. ambassador ended in 2001, was also working in the private sector when he and his family received V.I.P. loans. He was an adviser to Hillary Clinton’s presidential campaign. James Johnson, who had been advising presidential candidate Barack Obama on the selection of a running mate, resigned from the Obama campaign Wednesday after the Wall Street Journal reported that he received Countrywide loans at below-market rates.Most of the officials belonged to a group of V.I.P. loan recipients known in company documents and emails as “F.O.A.'s”—Friends of Angelo, a reference to Countrywide chief executive Angelo Mozilo. While the V.I.P. program also serviced friends and contacts of other Countrywide executives, the F.O.A.’s made up the biggest subset.According to company documents and emails, the V.I.P.'s received better deals than those available to ordinary borrowers. Home-loan customers can reduce their interest rates by paying “points”—one point equals 1 percent of the loan’s value. For V.I.P.'s, Countrywide often waived at least half a point and eliminated fees amounting to hundreds of dollars for underwriting, processing and document preparation. If interest rates fell while a V.I.P. loan was pending, Countrywide provided a free “float-down” to the lower rate, eschewing its usual charge of half a point. Some V.I.P.'s who bought or refinanced investment properties were often given the lower interest rate associated with primary residences.Unless they asked, V.I.P. borrowers weren’t told exactly how many points were waived on their loans, the former employee says. However, they were typically assured that they were receiving the “Friends of Angelo” discount, and that Mozilo had personally priced their loans.The V.I.P. loans to public officials in a position to advance Countrywide’s interests raise legal and ethical questions. Countrywide’s ethics code bars directors, officers and employees from “improperly influencing the decisions of government employees or contractors by offering or promising to give money, gifts, loans, rewards, favors, or anything else of value.” Federal employees are prohibited from receiving gifts offered because of their official position, including loans on terms not generally available to the public. Senate rules prohibit members from knowingly receiving gifts worth $100 or more in a calendar year from private entities that, like Countrywide, employ a registered lobbyist.
Senator Dodd received two loans in 2003 through Countrywide’s V.I.P. program. He borrowed $506,000 to refinance his Washington townhouse, and $275,042 to refinance a home in East Haddam, Connecticut. Countrywide waived three-eighths of a point, or about $2,000, on the first loan, and one-fourth of a point, about $700, on the second, according to internal documents. Both loans were for 30 years, with the first five years at a fixed rate.The interest rate on the loans, originally pegged at 4.875%, was reduced to 4.25% on the Washington home and 4.5% on the Connecticut property by the time the loans were funded. The lower rates save the senator about $58,000 on his Washington residence over the life of the loan, and $17,000 on the Connecticut home. The former employee says the float-downs were free. Senator Dodd’s wife, Jackie Clegg, said in a brief interview that two other lenders they checked with offered comparable interest rates. The senator’s office said Thursday afternoon that it is preparing a response. Countrywide has also contributed a total of $21,000 to Dodd’s campaigns since 1997. While a presidential candidate last year, he filed a bill to ban lenders from charging prepayment penalties and steering home buyers to more costly loans—both practices in which Countrywide reportedly engaged. He also called for criminal charges for such predatory lending. Senator Conrad borrowed $1.07 million in 2004 to refinance his vacation home with a balcony and wraparound porch in Bethany Beach, Delaware, a block from the ocean. Mozilo instructed a subordinate to “take off 1 point,” or $10,700, according to a March 17, 2004, email.Later that year, Conrad refinanced an eight-unit apartment building that he and his brothers owned in Bismarck, North Dakota. According to the former employee, the loan violated Countrywide’s normal policy of providing loans for buildings of four units or fewer. In an April 23, 2004, email, Mozilo encouraged an employee to “make an exception due to the fact that the borrower is a senator.”Senator Conrad acknowledged in a statement that he received financing from Countrywide. “I never met Angelo Mozilo,” he said. “I have no way of knowing how they categorized my loan. I never asked for, expected or was aware of any special treatment…From what we have been able to determine, it appears that we were given a competitive rate.”A spokeswoman for Countrywide, which is slated to be acquired by Bank of America, declined to comment. A Bank of America spokesman said that senior executives there “do not get involved in the origination of mortgages,” but will refer inquiring friends to the right loan programs.Mozilo co-founded Countrywide in 1969 and helped build it into the nation’s largest home mortgage lender. While interest rates were dropping in the first half of this decade, prompting widespread demand for refinances and home-equity loans, Countrywide loaned hundreds of millions of dollars per year through its V.I.P. program to politicians, government officials, business executives, entertainment celebrities and other customers singled out for special treatment. Account executives at Countrywide’s call center in Rosemead, California, handled the bulk of the loan applications, which were processed by a separate V.I.P. underwriting unit that had its own branch number in Countrywide’s record-keeping system.Jackson, the former H.U.D. secretary, borrowed $346,331 from Countrywide in June 2003 to refinance his Alexandria, Virginia, townhouse. That December, he applied for a $308,000 mortgage to buy a vacation home on a golf course in Hilton Head Island, South Carolina. The loan came through on January 21, 2004, a week before President Bush named him to the H.U.D. post. He resigned in March 2008 amid unrelated cronyism allegations.
Two U.S. senators, two former Cabinet members, and a former ambassador to the United Nations received loans from Countrywide Financial through a little-known program that waived points, lender fees, and company borrowing rules for prominent people.Senators Christopher Dodd, Democrat from Connecticut and chairman of the Banking Committee, and Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans.Other participants in the V.I.P. program included former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke. Jackson was deputy H.U.D. secretary in the Bush administration when he received the loans in 2003. Shalala, who received two loans in 2002, had by then left the Clinton administration for her current position as president of the University of Miami. She is scheduled to receive a Presidential Medal of Freedom on June 19. Holbrooke, whose stint as U.N. ambassador ended in 2001, was also working in the private sector when he and his family received V.I.P. loans. He was an adviser to Hillary Clinton’s presidential campaign. James Johnson, who had been advising presidential candidate Barack Obama on the selection of a running mate, resigned from the Obama campaign Wednesday after the Wall Street Journal reported that he received Countrywide loans at below-market rates.Most of the officials belonged to a group of V.I.P. loan recipients known in company documents and emails as “F.O.A.'s”—Friends of Angelo, a reference to Countrywide chief executive Angelo Mozilo. While the V.I.P. program also serviced friends and contacts of other Countrywide executives, the F.O.A.’s made up the biggest subset.According to company documents and emails, the V.I.P.'s received better deals than those available to ordinary borrowers. Home-loan customers can reduce their interest rates by paying “points”—one point equals 1 percent of the loan’s value. For V.I.P.'s, Countrywide often waived at least half a point and eliminated fees amounting to hundreds of dollars for underwriting, processing and document preparation. If interest rates fell while a V.I.P. loan was pending, Countrywide provided a free “float-down” to the lower rate, eschewing its usual charge of half a point. Some V.I.P.'s who bought or refinanced investment properties were often given the lower interest rate associated with primary residences.Unless they asked, V.I.P. borrowers weren’t told exactly how many points were waived on their loans, the former employee says. However, they were typically assured that they were receiving the “Friends of Angelo” discount, and that Mozilo had personally priced their loans.The V.I.P. loans to public officials in a position to advance Countrywide’s interests raise legal and ethical questions. Countrywide’s ethics code bars directors, officers and employees from “improperly influencing the decisions of government employees or contractors by offering or promising to give money, gifts, loans, rewards, favors, or anything else of value.” Federal employees are prohibited from receiving gifts offered because of their official position, including loans on terms not generally available to the public. Senate rules prohibit members from knowingly receiving gifts worth $100 or more in a calendar year from private entities that, like Countrywide, employ a registered lobbyist.
Senator Dodd received two loans in 2003 through Countrywide’s V.I.P. program. He borrowed $506,000 to refinance his Washington townhouse, and $275,042 to refinance a home in East Haddam, Connecticut. Countrywide waived three-eighths of a point, or about $2,000, on the first loan, and one-fourth of a point, about $700, on the second, according to internal documents. Both loans were for 30 years, with the first five years at a fixed rate.The interest rate on the loans, originally pegged at 4.875%, was reduced to 4.25% on the Washington home and 4.5% on the Connecticut property by the time the loans were funded. The lower rates save the senator about $58,000 on his Washington residence over the life of the loan, and $17,000 on the Connecticut home. The former employee says the float-downs were free. Senator Dodd’s wife, Jackie Clegg, said in a brief interview that two other lenders they checked with offered comparable interest rates. The senator’s office said Thursday afternoon that it is preparing a response. Countrywide has also contributed a total of $21,000 to Dodd’s campaigns since 1997. While a presidential candidate last year, he filed a bill to ban lenders from charging prepayment penalties and steering home buyers to more costly loans—both practices in which Countrywide reportedly engaged. He also called for criminal charges for such predatory lending. Senator Conrad borrowed $1.07 million in 2004 to refinance his vacation home with a balcony and wraparound porch in Bethany Beach, Delaware, a block from the ocean. Mozilo instructed a subordinate to “take off 1 point,” or $10,700, according to a March 17, 2004, email.Later that year, Conrad refinanced an eight-unit apartment building that he and his brothers owned in Bismarck, North Dakota. According to the former employee, the loan violated Countrywide’s normal policy of providing loans for buildings of four units or fewer. In an April 23, 2004, email, Mozilo encouraged an employee to “make an exception due to the fact that the borrower is a senator.”Senator Conrad acknowledged in a statement that he received financing from Countrywide. “I never met Angelo Mozilo,” he said. “I have no way of knowing how they categorized my loan. I never asked for, expected or was aware of any special treatment…From what we have been able to determine, it appears that we were given a competitive rate.”A spokeswoman for Countrywide, which is slated to be acquired by Bank of America, declined to comment. A Bank of America spokesman said that senior executives there “do not get involved in the origination of mortgages,” but will refer inquiring friends to the right loan programs.Mozilo co-founded Countrywide in 1969 and helped build it into the nation’s largest home mortgage lender. While interest rates were dropping in the first half of this decade, prompting widespread demand for refinances and home-equity loans, Countrywide loaned hundreds of millions of dollars per year through its V.I.P. program to politicians, government officials, business executives, entertainment celebrities and other customers singled out for special treatment. Account executives at Countrywide’s call center in Rosemead, California, handled the bulk of the loan applications, which were processed by a separate V.I.P. underwriting unit that had its own branch number in Countrywide’s record-keeping system.Jackson, the former H.U.D. secretary, borrowed $346,331 from Countrywide in June 2003 to refinance his Alexandria, Virginia, townhouse. That December, he applied for a $308,000 mortgage to buy a vacation home on a golf course in Hilton Head Island, South Carolina. The loan came through on January 21, 2004, a week before President Bush named him to the H.U.D. post. He resigned in March 2008 amid unrelated cronyism allegations.
Senators Dodd and Conrad are among the government officials who scored V.I.P. loans from C.E.O. Angelo Mozilo. An exclusive Portfolio investigation.
Two U.S. senators, two former Cabinet members, and a former ambassador to the United Nations received loans from Countrywide Financial through a little-known program that waived points, lender fees, and company borrowing rules for prominent people.Senators Christopher Dodd, Democrat from Connecticut and chairman of the Banking Committee, and Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans.Other participants in the V.I.P. program included former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke. Jackson was deputy H.U.D. secretary in the Bush administration when he received the loans in 2003. Shalala, who received two loans in 2002, had by then left the Clinton administration for her current position as president of the University of Miami. She is scheduled to receive a Presidential Medal of Freedom on June 19. Holbrooke, whose stint as U.N. ambassador ended in 2001, was also working in the private sector when he and his family received V.I.P. loans. He was an adviser to Hillary Clinton’s presidential campaign. James Johnson, who had been advising presidential candidate Barack Obama on the selection of a running mate, resigned from the Obama campaign Wednesday after the Wall Street Journal reported that he received Countrywide loans at below-market rates.Most of the officials belonged to a group of V.I.P. loan recipients known in company documents and emails as “F.O.A.'s”—Friends of Angelo, a reference to Countrywide chief executive Angelo Mozilo. While the V.I.P. program also serviced friends and contacts of other Countrywide executives, the F.O.A.’s made up the biggest subset.According to company documents and emails, the V.I.P.'s received better deals than those available to ordinary borrowers. Home-loan customers can reduce their interest rates by paying “points”—one point equals 1 percent of the loan’s value. For V.I.P.'s, Countrywide often waived at least half a point and eliminated fees amounting to hundreds of dollars for underwriting, processing and document preparation. If interest rates fell while a V.I.P. loan was pending, Countrywide provided a free “float-down” to the lower rate, eschewing its usual charge of half a point. Some V.I.P.'s who bought or refinanced investment properties were often given the lower interest rate associated with primary residences.Unless they asked, V.I.P. borrowers weren’t told exactly how many points were waived on their loans, the former employee says. However, they were typically assured that they were receiving the “Friends of Angelo” discount, and that Mozilo had personally priced their loans.The V.I.P. loans to public officials in a position to advance Countrywide’s interests raise legal and ethical questions. Countrywide’s ethics code bars directors, officers and employees from “improperly influencing the decisions of government employees or contractors by offering or promising to give money, gifts, loans, rewards, favors, or anything else of value.” Federal employees are prohibited from receiving gifts offered because of their official position, including loans on terms not generally available to the public. Senate rules prohibit members from knowingly receiving gifts worth $100 or more in a calendar year from private entities that, like Countrywide, employ a registered lobbyist.
Senator Dodd received two loans in 2003 through Countrywide’s V.I.P. program. He borrowed $506,000 to refinance his Washington townhouse, and $275,042 to refinance a home in East Haddam, Connecticut. Countrywide waived three-eighths of a point, or about $2,000, on the first loan, and one-fourth of a point, about $700, on the second, according to internal documents. Both loans were for 30 years, with the first five years at a fixed rate.The interest rate on the loans, originally pegged at 4.875%, was reduced to 4.25% on the Washington home and 4.5% on the Connecticut property by the time the loans were funded. The lower rates save the senator about $58,000 on his Washington residence over the life of the loan, and $17,000 on the Connecticut home. The former employee says the float-downs were free. Senator Dodd’s wife, Jackie Clegg, said in a brief interview that two other lenders they checked with offered comparable interest rates. The senator’s office said Thursday afternoon that it is preparing a response. Countrywide has also contributed a total of $21,000 to Dodd’s campaigns since 1997. While a presidential candidate last year, he filed a bill to ban lenders from charging prepayment penalties and steering home buyers to more costly loans—both practices in which Countrywide reportedly engaged. He also called for criminal charges for such predatory lending. Senator Conrad borrowed $1.07 million in 2004 to refinance his vacation home with a balcony and wraparound porch in Bethany Beach, Delaware, a block from the ocean. Mozilo instructed a subordinate to “take off 1 point,” or $10,700, according to a March 17, 2004, email.Later that year, Conrad refinanced an eight-unit apartment building that he and his brothers owned in Bismarck, North Dakota. According to the former employee, the loan violated Countrywide’s normal policy of providing loans for buildings of four units or fewer. In an April 23, 2004, email, Mozilo encouraged an employee to “make an exception due to the fact that the borrower is a senator.”Senator Conrad acknowledged in a statement that he received financing from Countrywide. “I never met Angelo Mozilo,” he said. “I have no way of knowing how they categorized my loan. I never asked for, expected or was aware of any special treatment…From what we have been able to determine, it appears that we were given a competitive rate.”A spokeswoman for Countrywide, which is slated to be acquired by Bank of America, declined to comment. A Bank of America spokesman said that senior executives there “do not get involved in the origination of mortgages,” but will refer inquiring friends to the right loan programs.Mozilo co-founded Countrywide in 1969 and helped build it into the nation’s largest home mortgage lender. While interest rates were dropping in the first half of this decade, prompting widespread demand for refinances and home-equity loans, Countrywide loaned hundreds of millions of dollars per year through its V.I.P. program to politicians, government officials, business executives, entertainment celebrities and other customers singled out for special treatment. Account executives at Countrywide’s call center in Rosemead, California, handled the bulk of the loan applications, which were processed by a separate V.I.P. underwriting unit that had its own branch number in Countrywide’s record-keeping system.Jackson, the former H.U.D. secretary, borrowed $346,331 from Countrywide in June 2003 to refinance his Alexandria, Virginia, townhouse. That December, he applied for a $308,000 mortgage to buy a vacation home on a golf course in Hilton Head Island, South Carolina. The loan came through on January 21, 2004, a week before President Bush named him to the H.U.D. post. He resigned in March 2008 amid unrelated cronyism allegations.
Two U.S. senators, two former Cabinet members, and a former ambassador to the United Nations received loans from Countrywide Financial through a little-known program that waived points, lender fees, and company borrowing rules for prominent people.Senators Christopher Dodd, Democrat from Connecticut and chairman of the Banking Committee, and Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans.Other participants in the V.I.P. program included former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke. Jackson was deputy H.U.D. secretary in the Bush administration when he received the loans in 2003. Shalala, who received two loans in 2002, had by then left the Clinton administration for her current position as president of the University of Miami. She is scheduled to receive a Presidential Medal of Freedom on June 19. Holbrooke, whose stint as U.N. ambassador ended in 2001, was also working in the private sector when he and his family received V.I.P. loans. He was an adviser to Hillary Clinton’s presidential campaign. James Johnson, who had been advising presidential candidate Barack Obama on the selection of a running mate, resigned from the Obama campaign Wednesday after the Wall Street Journal reported that he received Countrywide loans at below-market rates.Most of the officials belonged to a group of V.I.P. loan recipients known in company documents and emails as “F.O.A.'s”—Friends of Angelo, a reference to Countrywide chief executive Angelo Mozilo. While the V.I.P. program also serviced friends and contacts of other Countrywide executives, the F.O.A.’s made up the biggest subset.According to company documents and emails, the V.I.P.'s received better deals than those available to ordinary borrowers. Home-loan customers can reduce their interest rates by paying “points”—one point equals 1 percent of the loan’s value. For V.I.P.'s, Countrywide often waived at least half a point and eliminated fees amounting to hundreds of dollars for underwriting, processing and document preparation. If interest rates fell while a V.I.P. loan was pending, Countrywide provided a free “float-down” to the lower rate, eschewing its usual charge of half a point. Some V.I.P.'s who bought or refinanced investment properties were often given the lower interest rate associated with primary residences.Unless they asked, V.I.P. borrowers weren’t told exactly how many points were waived on their loans, the former employee says. However, they were typically assured that they were receiving the “Friends of Angelo” discount, and that Mozilo had personally priced their loans.The V.I.P. loans to public officials in a position to advance Countrywide’s interests raise legal and ethical questions. Countrywide’s ethics code bars directors, officers and employees from “improperly influencing the decisions of government employees or contractors by offering or promising to give money, gifts, loans, rewards, favors, or anything else of value.” Federal employees are prohibited from receiving gifts offered because of their official position, including loans on terms not generally available to the public. Senate rules prohibit members from knowingly receiving gifts worth $100 or more in a calendar year from private entities that, like Countrywide, employ a registered lobbyist.
Senator Dodd received two loans in 2003 through Countrywide’s V.I.P. program. He borrowed $506,000 to refinance his Washington townhouse, and $275,042 to refinance a home in East Haddam, Connecticut. Countrywide waived three-eighths of a point, or about $2,000, on the first loan, and one-fourth of a point, about $700, on the second, according to internal documents. Both loans were for 30 years, with the first five years at a fixed rate.The interest rate on the loans, originally pegged at 4.875%, was reduced to 4.25% on the Washington home and 4.5% on the Connecticut property by the time the loans were funded. The lower rates save the senator about $58,000 on his Washington residence over the life of the loan, and $17,000 on the Connecticut home. The former employee says the float-downs were free. Senator Dodd’s wife, Jackie Clegg, said in a brief interview that two other lenders they checked with offered comparable interest rates. The senator’s office said Thursday afternoon that it is preparing a response. Countrywide has also contributed a total of $21,000 to Dodd’s campaigns since 1997. While a presidential candidate last year, he filed a bill to ban lenders from charging prepayment penalties and steering home buyers to more costly loans—both practices in which Countrywide reportedly engaged. He also called for criminal charges for such predatory lending. Senator Conrad borrowed $1.07 million in 2004 to refinance his vacation home with a balcony and wraparound porch in Bethany Beach, Delaware, a block from the ocean. Mozilo instructed a subordinate to “take off 1 point,” or $10,700, according to a March 17, 2004, email.Later that year, Conrad refinanced an eight-unit apartment building that he and his brothers owned in Bismarck, North Dakota. According to the former employee, the loan violated Countrywide’s normal policy of providing loans for buildings of four units or fewer. In an April 23, 2004, email, Mozilo encouraged an employee to “make an exception due to the fact that the borrower is a senator.”Senator Conrad acknowledged in a statement that he received financing from Countrywide. “I never met Angelo Mozilo,” he said. “I have no way of knowing how they categorized my loan. I never asked for, expected or was aware of any special treatment…From what we have been able to determine, it appears that we were given a competitive rate.”A spokeswoman for Countrywide, which is slated to be acquired by Bank of America, declined to comment. A Bank of America spokesman said that senior executives there “do not get involved in the origination of mortgages,” but will refer inquiring friends to the right loan programs.Mozilo co-founded Countrywide in 1969 and helped build it into the nation’s largest home mortgage lender. While interest rates were dropping in the first half of this decade, prompting widespread demand for refinances and home-equity loans, Countrywide loaned hundreds of millions of dollars per year through its V.I.P. program to politicians, government officials, business executives, entertainment celebrities and other customers singled out for special treatment. Account executives at Countrywide’s call center in Rosemead, California, handled the bulk of the loan applications, which were processed by a separate V.I.P. underwriting unit that had its own branch number in Countrywide’s record-keeping system.Jackson, the former H.U.D. secretary, borrowed $346,331 from Countrywide in June 2003 to refinance his Alexandria, Virginia, townhouse. That December, he applied for a $308,000 mortgage to buy a vacation home on a golf course in Hilton Head Island, South Carolina. The loan came through on January 21, 2004, a week before President Bush named him to the H.U.D. post. He resigned in March 2008 amid unrelated cronyism allegations.
H.U.D. has wide-ranging relationships with Countrywide and other lenders. It regulates real estate settlements and closing costs, and runs the Federal Housing Administration, which guarantees mortgages.The former employee says that Jackson received discounts on both loans. Defending his transactions, Jackson said he was a Countrywide borrower long before he met Mozilo or worked for H.U.D. Asked if he received any breaks on the loans, he said, “Not to my knowledge. If I did, it certainly wasn’t discussed with me.”Former H.H.S. secretary Donna Shalala received two V.I.P. loans, for $338,685 and $202,300, in 2002. “Normally, I would not ask for special consideration toward a certain loan/customer, but the complexity of the Shalala deal calls for it,” one Countrywide executive wrote in an August 20, 2002, email, explaining that the University of Miami president was buying an interest in a timeshare. “Angelo asked me to ensure that we ‘knock her socks off’ with our great service.” On September 21, another Countrywide staffer wrote that Shalala’s loans were “ready to close…I floated both of them down to current pricing.” Shalala did not respond to messages, and an assistant at the University of Miami said that she was traveling. Holbrooke’s wife, author Kati Marton, received loans totalling $1.4 million to refinance two properties in 2002. “Look for these,” one Countrywide manager wrote in a September 27, 2002, email, alluding to Marton’s loan applications. “These loans are incredibly important to Angelo and as such they are incredibly important to us.” The next year, Holbrooke borrowed $1.2 million to refinance a vacation home in Telluride, Colorado. Countrywide waived at least 1.25 points, or $15,000. “Per Angelo, this loan is to be at zero points,” a Countrywide manager wrote in a February 20, 2003, email. Also in 2003, Holbrooke’s son, David, and daughter-in-law Sarah received a half-point discount on a $559,500 loan, or about $2,800, when they refinanced their Brooklyn high-rise co-op, and five-eighths of a point discount on a $428,000 loan, or about $2,600, when they bought the floor above it. Neither Holbrooke nor his wife and son returned messages.Holbrooke and Johnson are both vice chairmen of the private banking firm Perseus. Besides the discounted interest rates reported by the Journal, Countrywide also waived points for Johnson, a former chief executive of government-sponsored mortgage reseller Fannie Mae. In 2003, Countrywide took 1.375 points, about $13,000, off a nearly $1 million loan to refinance Johnson’s Washington home. When he borrowed almost $1.3 million in 2003 that same year to refinance a 4,400-square-foot, Southwestern-style home with four bedrooms and five baths beside the second green of a golf course in Palm Desert, California, Countrywide waived 1.875 points, or about $24,000. In 2004, Johnson borrowed $3 million to upgrade to a larger estate—a 5,875-square-foot house, with a guesthouse and pool—on the same course. Although the size of the loan exceeded Countrywide’s limit for a second home, Mozilo told an employee to “do the deal.”Brian Brooks, a lawyer for Johnson, said that he never asked for a discount on his loans, and that it is “common knowledge” that individuals of high income and high net worth receive lower rates than other borrowers. “We don’t see anything out of the ordinary here.” Widely criticized for spurring the country’s mortgage crisis with over-aggressive lending policies, Countrywide saw its share price plunge from $45 in February 2007 to less than $5 in January 2008, when Bank of America agreed to acquire the company in a $4 billion stock swap.Countrywide is reportedly under F.B.I. investigation for alleged securities fraud, and Mozilo has drawn criticism for unloading $474 million in Countrywide shares between 2004 and 2007 as the housing crisis neared. He’s defended the sales as part of his retirement planning.
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