How bad were those Countrywide loans?

Worth noting from today's Wall Street Journal, an article gives a glimpse at just how bad the underwriting at Countrywide was in the company's final years as an independent company:

New information about Countrywide loans in an amended complaint brought by the state of California against Countrywide "... provide(s) a close look at the 158,000 mortgages that had been slated for sale by Countrywide Home Loans before last summer's credit crunch," the Journal reports. "Nearly 48% of non-prime loans and  21% of pay-option adjustable-rate mortgages in that portfolio were in some stage of delinquency or foreclosure..."

A spokesman for Bank of America, which now owns Countrywide, tells the Journal 9.53% of all loans owned by Countrywide were 30 days or more past due as of the end of April.

-- Peter Viles
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

Photo: Associated Press

Comments

[sheila]

Just read an interesting blog posting by Mozilo's sister.

Of note: MOZILO IS A REPUBLICAN

Secondly, here's an excerpt about the non-event of the "Friends of Angelo" loan program:

"There is also the so-called "FOA (Friends of Angelo) scandal." Will all FOA's please stand up? They will include: strangers, Senators, neighbors, cab drivers, doormen, nannies, even a sister or two. FOA was the name given to Angelo's personal pipeline of loans because he didn't work out of a branch office. And yes, he did give deals. Not illegal, shady deals, just plain old American, good deals. People from all mortgage companies have room in negotiating mortgages -- it's a completely legitimate business practice. Nothing was illegal or unseemly. Angelo originated loans. He'd say to me, "If any of your friends are looking for a loan, tell them to call Countrywide, tell them to say they are an FOA." They did call, and some of them got rates better than those offered by other companies. Some of them did not, and went elsewhere. I myself did not have a Countrywide loan for many years because Washington Mutual beat the "FOA" rate I was offered. I know, it's not sinister or interesting, but it's the truth."

[Roger Ramjet]

Same old stuff. Get as much money as you can. Then split. Be sitt'en on a beach somewhere collecting 6%. Sorry it did not work for you Jeff Skilling of Enron shame, but you see Jeffy baby, you did'nt get out in time! Same goes for you,Mozilllllooooo......

[peteviles]

Sheila writes, "I just read an interesting blog posting by Mozilo's sister."

Thanks, Sheila. We were reading it at the same time, I just posted a link to it, it's the top item on the blog at 12:15 pm

[E]

Apparently not bad enough for his dimwitted sister to realize that he's no saint.

But then I'm sure there have been mass murderers who's families thought that we "just didn't know them" like they did.

[Laker]

"...........48% of non-prime loans and 21% of pay-option adjustable-rate mortgages in that portfolio were in some stage of delinquency or foreclosure..."

"......9.53% of all loans owned by Countrywide were 30 days or more past due as of the end of April....."

Indymac had about 11% of loans on portfolio late/past due/foreclosure, so they CW was not far behind.
Also, almost HALF of non-prime loans are in default????????
AND 21% of Option ARMS in default?
Wow....
I'm not an expert in mortgages, but i once read a bank official document that stated that mortgages are designed such that there is about 1% of default in any normal batch/portfolio. And the bank would be find with that.
If default rate goes to 2%, that is not small change. For the novice, you might think it just increased 1%... like what will happen if you get your paycheck cut by 1%....nothing really.
But for banks having 1% acceptable default rate to go to 2% means DOUBLE the risk capital that is not there. That 1% is the difference between a solvent and insolvent bank. The reason is leverage, the bank loans money it does not have....(like buying a house with 5% down, you leverage 95%...)
Under FDIC, any bank with nonperforming assets that exceed 5% is insolvent, and FDIC steps in....
Indymac was almost 11%,
Countrywide is about 9.5%,

We do not know WAMU, Downey Saving, Merril, etc..
I have a good feeling that WAMU is in the same group of 5-10% nonperforming loans...so is Downey and others...
FDIC just wants to avoid taking over banks...but the more they wait, the worse it would be.

[Bill]

Forclose on the people and put the inventory on the market so some of us who actually pay attention to legal contracts and get good mortgages can pick up some investment properties.

[syscom3]

Maybe begin criminal complaints against the people who lied on their loans.

Not much would ever be collected, but just for show ...... it might be worth it. Put the fear in god for the next round of applicants.