Countrywide’s swan song: some dismal option-ARM data
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Paul Jackson at HousingWire.com has pulled some ugly numbers out of Countrywide Financial’s final quarterly financial filing with the Securities and Exchange Commission.
As Wall Street well knows, so-called pay-option adjustable-rate mortgages ‘are a problem, and Countrywide holds ’em in spades,’ Jackson notes. He writes:
Countrywide held $25.4 billion in pay option mortgages at the end of June; a full 12.4% of those loans were 90 or more days delinquent. Want to know more? Get ready to cringe: 83% of the portfolio was underwritten via low-doc or no-doc programs, and 72% of those borrowers still paying on the loans elected to make less than a full interest payment in June.
All of which suggests significant losses on those loans are ahead for Countrywide’s new owner, Bank of America Corp. The question is whether BofA already has adequately accounted for the coming wreck.
Read Jackson’s post here.
BofA took control of Calabasas-based Countrywide on July 1. Because it still was an independent company on June 30, Countrywide filed the required quarterly financial report for the three months ended in June.
The filing was sent to the SEC on Monday. It could just be a coincidence, but shares of BofA plunged on Tuesday and Wednesday, falling much more than the average financial stock in the Standard & Poor’s 500 index.
BofA slumped 6.7% on Tuesday and 7.3% on Wednesday (to $28.86), compared with declines of 5.2% and 3%, respectively, for the S&P financial-sector index.