The nation's number one mortgage lender, Countrywide Financial (NYSE: CFC) just keeps making headlines. Today's big news shows that the company saw a forty percent year over year drop in loan fundings. Countrywide said that its loan funding in November was $23 billion, sharply lower from $38.3 billion a year earlier. The reason for the drop off? You guessed it... the evaporation of subprime and adjustable rate loans being issued by the company.
I know that I when I look back on 2007, the one word that will probably jump out more than any other is subprime. It has pretty much dominated the economic landscape and the scary part is that we still have not reached the bottom of the rabbit hole yet. No one is sure just how hard the economy will be hit, or when we can expect to see the real estate market start to turn around.
Let's take a look at Countrywide's loans back in November 2006. Last year, the company funded $3.06 billion in subprime mortgages, and $14.3 billion worth of adjustable interest rate loans. This comes out to slightly over $17 billion total. In this November, the company only funded $17 million in subprime loans, and $3.33 billion in adjustable interest rate loans, for a combined amount of under $3.4 billion. The roughly $14 billion drop is pretty much the exact drop in the overall mortgage fundings that the company has witnessed over the past 12months.
The reason why I think that looking at these numbers is important, is that we can see that regular mortgage fundings have not dropped really. That, if nothing else, I think is a slight positive sign to the overall real estate market.
What surprises me the most, is that company actually funded over $3 billion in adjustable interest rate loans. I am really not sure who was most mislead in these loans, Countrywide, or the loan applicants that assumed these loans.
In other news, I also ran across this story that the Illinois attorney general has subpoenaed documents from Countrywide in her investigation in the company's lending practices, which have led to large numbers of foreclosures, many of which resulted from, you guessed it, adjustable rate loans.
The attorney general is trying to prove that Chicago mortgage company One Source Mortgage, purposefully mislead loan applicants regarding the risks and dangers of assuming these sorts of loans. One Source Mortgage recently closed shop, but the reason why Countrywide is coming into the investigation is that the company was One Source's primary lender.
Countrywide's stock is trading down 5.2 percent on the day.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
The reason why I think that looking at these numbers is important, is that we can see that regular mortgage fundings have not dropped really. That, if nothing else, I think is a slight positive sign to the overall real estate market.
What surprises me the most, is that company actually funded over $3 billion in adjustable interest rate loans. I am really not sure who was most mislead in these loans, Countrywide, or the loan applicants that assumed these loans.
In other news, I also ran across this story that the Illinois attorney general has subpoenaed documents from Countrywide in her investigation in the company's lending practices, which have led to large numbers of foreclosures, many of which resulted from, you guessed it, adjustable rate loans.
The attorney general is trying to prove that Chicago mortgage company One Source Mortgage, purposefully mislead loan applicants regarding the risks and dangers of assuming these sorts of loans. One Source Mortgage recently closed shop, but the reason why Countrywide is coming into the investigation is that the company was One Source's primary lender.
Countrywide's stock is trading down 5.2 percent on the day.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
12-13-2007 @ 5:18PM
Americas Watchdog said...
We have the National Mortgage Complaint Center & we think Wall Street is in for a very big surprise when the 4th quarter results hit in early 2008. We don't actually care what CFC says or the "numbers they report to the Street". We also think that too many get lost on the idea our real estate disaster is related to sub-prime mortgages. In reality this crisis is about value, and or the lack there of. Many individuals who financed or refinanced their home after 2004 now owe more than their home is worth. Thats with a 10% down payment/10% equity. We estimate this number is over 15 million homeowners.
What we find astonoshing is the wizards on CNBC dismissing the seriousness of the real estate issue now facing the US. Its not sub-prime.......... its value. If the 15 million + homeowners elect to walk away, because they figure out its better than paying on an upside down mortgage that cannot be refinanced..............your rabbit hole is going to be kind of deep, and we are not sure how you dig it out of it. CFC like other big lenders were pushing valuations. So were the top 20 homebuilders. Pushing values happened long before sub-prime......it started back in 2002. The Fed cannot fix this, even if they lower rates to zero. Valuations will first have to arrive at the real world bus stop before that happens. In the mean time pension funds and others are going to have to start wondering who will be able to pick up the bar tab, after all the greed related to the non-stop real estate happy hour that actually ended a couple of years ago. We don't think even the Federal Government will be able to pay it.
Doubt us about value-Google WA MU New York Appraisals. CFC's appraisal unit is called "Land Safe". It gets worse. Most of the top 20 homebuilders that delivered most of our nations "new homes" have another big problem. In the Southeast, Southwest, West, and Texas they employed sub-contractors who ----opps-----forgot to pay taxes on the million plus illegal workers actually building the homes. No one seems to want to talk about that either. That is for the last 7 plus years. Its only about $100,000,000,000 in unpaid state or federal taxes that they owe. On this one you do not have to visit Google..............simply hop an an airplane and visit construction sites in Las Vegas, Phoenix or Orlando. As we recall CNBC's Maria likes to fly on the CitiGroup jet. I wonder if on one of her free rides anyone ever explained CDO's or SIV's to her?
Perhaps pension fund managers got to ride on the big jet too. When they threw their clients money down on the table and bet on yields, they should have first checked to see if their dollar was really worth a dollar. Turns out they bet a buck on something only worth .80 cents.
As long as we are on the topic of the truth......we wonder why the US House or Senate have not changed the rules about disclosures of "Yield spread premiums"..............its a big kick back scheme that relates to increasing a borrowers interest rate. Mortgage Brokers have to disclose it, banks and mortgage bankers do not. Swine like Senate Banking Chairman Dodd are so busy at the campaign donation table, we think he figured no one would notice. We noticed. So will lots of voters when this all gets explained to them.
And it was just a couple of years ago that everyone in Washington DC & Wall Street were taking credit for 75 million US Homeowners. Three quarters of whom pay a higher monthly mortgage payment than what they could have received had there been such a thing as transparent mortgage transactions or who paid 10% to 20% than the house was actually worth. Who knew?