Countrywide Says Late Payments on Subprime Loans Rose (subprime borrowers labeled "toxic waste")

[Purveyor]

March 1 (Bloomberg) -- Countrywide Financial Corp., the biggest U.S. mortgage lender, said payments were late at the end of last year on almost 20 percent of the subprime loans it tracks for other companies and investors who own them.

Delinquencies of at least 30 days on ``nonprime'' loans, those made to borrowers whose credit rating fell short of the highest criteria, widened to 19 percent as of Dec. 31 from 15 percent a year earlier, the Calabasas, California-based lender said in an annual regulatory filing with the U.S. Securities and Exchange Commission. The rate stood at 17 percent at the end of September, according to the company's last quarterly filing.

Chief Executive Officer Angelo Mozilo has said the company holds only higher-quality prime loans at its bank and pulled back from subprime lending last year.

---

``If you look at our market share, we lost some for the first time in years, but it's all in the subprime area,'' he said in a Feb. 8 interview. ``We were a dominant player, and now subprime is a pretty small portion of our business.'' One reason was that rivals were paying salespeople in the business too much, and ``the other reason was we wouldn't take the toxic waste,'' he said.

---end of excerpt---

http://www.bloomberg.com/apps/news?pid=20601103&sid=aA8HMZYtX_.w&refer=us

[notadmblnd]

1. That toxic waste he's talking about is

the common working man.

[rkc3]

3. It should be the predatory lenders who offer up loans like...

No interest, 120% of home value, and so on. Most people don't understand the problems with these loans.

And anyone who refinanced with a ARM a few years ago has to be kicking themselves. With interest rates at all-time lows, there was only one way for rates to go.

People take these loans to save a buck or two - not to pay down the debt at an accelerated rate.

Even the Fed has called these loans the biggest threat to the economy.

[InkAddict]

5. Toxic waste?

Who could have imagined... that this administration's policies would purposely outsource so many well-paying American jobs just starting with evil IT and really expensive manufacturing lineworkers (retirees notwithstanding) and leave so many Americans without incomes, group health insurance policies, 401Ks, nor the means to make fresh starts, while enabling lenders to continue to push up a bubble in housing that went OOPs, pop, reducing market values and halting sales of both new and previously owned properties? Oh spare me!

Furthermore, just when did Countrywide advocate for those to whom they made these loans, prime or subprime, some nearly decades ago? Perhaps they should have looked into their crystal ball and told their own underwriting banking mafia CEOs, warmongering politicians, and BIG DICK energy-thieves that these strategies won't work for long.

Well, the chick has come home to roost and found no nest, and now they don't like the results. Predatory and sociopathic, yes! Boohoo - not a tear here except for those they've screwed! I can't even begin a civilized RANT about what's toxic in this nation!

I see that National City Bank Mortgage will be outsourcing jobs to India. I see more sold out American homeowners and evicted renters with even less $$ to go shopping at Home Depot or anywhere else for that matter.

WHAT'S THAT BIG SUCKING SOUND??????

[InkAddict]

6. I hope they know that

life won't be worth living for more Boomers than they think and what they've set up will continue to have an adverse impact on Xs, Ys, etc. In their greed, they didn't go to bat for the common man whose toil made America great. Now those philantrophic, charitable (:sarcasm:) SOBs are going for us good by withholding access and means to re-training, affordable higher education, well-paying jobs that support a healthy society in oh so many ways, health care, affordable housing, and our kids are being used as cannonfodder. Some things have got to change! Gonna shoot us all? Guess with policies as is they won't need to though the kill-off may take just a little longer. Slow torture's, what, more appealing, or just a set up for plausible deniability?

[notadmblnd]

9. This little article should be making people more angry that it has

nt

[jaybeat]

2. tox·ic waste [tok-sik weyst]

noun

Poisonous waste materials produced by industry which cause damage in humans. Generally produced by corporations who aim to increase profits by shifting their costs of doing business onto others, or by taking advantage of individuals and groups who are most vulnerable and least able to protect themselves.

In general, companies that make toxic waste will rarely, if ever, take toxic waste.

See also: Predatory Lending, Corporate Welfare, Bait and Switch, Class Warfare

[SahaleArm]

4. It's not just at the low-end

It's also the family with a stated income of $100k-$150k buying a $800k-$1M home mortgaged at 100% on a 5-year ARM from 5 years ago which is now 2-3% higher than the original terms.

(1) Make stated income illegal.
(2) Loan-to-Value (LTV) should be no more the 90% for a fixed mortgage.
(3) No ARM's unless LTV is at 70% or less.

[Rage for Order]

10. Using your suggestions, low income people would never own a home

(1) Make stated income illegal. - What do you do about people who make the majority of their money from tips, e.g. bartenders, waitresses, etc? These people tend to have a difficult time documenting their income. When I worked at Countrywide, the income used on a stated income loan could not exceed the high end range for that job by more than 25% according to salary.com, and if it was 25% more the borrower had to provide compensating factors as to why they made more money than average in their particular field.

(2) Loan-to-Value (LTV) should be no more the 90% for a fixed mortgage. - How many poor families will be able to save up a $15,000 down payment, plus another $6,000 for closing costs, to buy a $150,000 home? If you set aside $200 a month it will take you about 8 years to be able to buy a home.

(3) No ARM's unless LTV is at 70% or less. - What about people who don't plan to be in their house more than 3 years? Should they not be able to take out a 3/1 or 5/1 ARM knowing that they'll be selling the house and moving during that time period? Or if they can use an ARM loan, they have to put down $45,000 plus $6,000 to purchase their home? How does that empower people and encourage homeownership?

Underwriting standards became too lax during the real estate boom. The minimum credit score for 100% financing kept falling; I think at one point you could get 100% financing with a 540 credit score. When I got out of the residential mortgage business a few months ago, the minimum credit score for 100% financing had risen to 620 and has probably increased to 640 by now. Investors are demanding less risk in the mortgage-backed securities they're purchasing which is leading to tighter underwriting guidelines. Imposing draconian measures such as the ones you've listed are not necessary.

[1932]

11. This may sound harsh, but why should a person who can't afford a home

have access to 110% financing that serves only to drive up the price of a home for everyone? When prices are irrationally high because of insane lending policies, it's the financial companies that win. Regular people who sell high still have to buy high, so they're not winning. The people who win are the people who charge interest on these loans.

Homeownership is good, but if it comes through outrageous levels of debt, it's not good for anyone.

[Rage for Order]

13. Nobody should have access to 110% financing

100% financing for someone with a solid credit history is one thing, but allowing people to borrow more on their home than it is worth is just dumb. Financial companies that made bad home loans are not winning right now, they're losing. Quite a few subprime mortgage lenders have gone out of business in the last couple of months. Other lenders are having to buy back unperforming loans due to shoddy underwriting when they originated the loans.

Homeownership should be attainable for those who have proven that they have the means and desire to repay their debts. The fact that they can't save $25,000 for a down payment and closing costs shouldn't preclude them from being able to get a loan if someone else thinks it's a good idea to lend them money.

[1932]

18. The financial EXECUTIVES won't lose (even if the COMPANIES go bankrupt).

FannieMae (ie, the taxpayer) will take the hit for the loans to the people who were the highest risk. The executives of the rest of the lenders will have extracted all the wealth from all the other private companies that made billions of dollar,s in the run-up to collapse and will move on to new businesses once their old companies go out of business, insulated by the limited liability the corporate form confers on them.

I think the government should regulate companies so that they can't give the sort of 100% loans that helped drive up prices making homeownership so risky, and which drove up prices so that the only people really making money were the people you charged interest on those inflated prices.

[SahaleArm]

12. No one should be able to margin 100% of any asset.

Would any brokerage allow you to margin 100% of your stocks? In the brokerage world you get margin calls; what happens when these mortgages go upside down?

(1) Stated income are almost always inflated by the buyer or the broker. Real assets (securities, bonds, cash) can offset the need for stated income. If not the Federal government (HUD) should come in to give low-interest fixed rate loans for lower income individuals.

(2) See 1 for Federal assistance. It's shouldn't be about brokers making a quick buck.

(3) There's no guarantee that they can or will sell the house. If they have enough assets then they can can get away with an ARM. It also shows they can afford not to default if they go 1-2 years over the term. You can always refi into an ARM if your LTV goes <= 70%-75%

(4) When the subprime market goes belly up investors will scream for the suggested, not so draconian, measures. But then again you're a mortgage broker not a purchaser of MBS's.

[Rage for Order]

14. No, I'm not a mortgage broker

I work in commercial real estate and don't plan to go back to residential, I have a good credit history, and I have equity in my home. It wouldn't affect me personally.

Stated income is often inflated by the buyer and/or broker, and we're seeing the results of that now. We're also seeing lenders tightening their standards on non-traditional mortgage products like these due to rising defaults. The federal gov't does have low interest, fixed rate loans for people with low income, i.e. FHA loans. However, you have to have a decent (not great) credit history to qualify. Many people didn't qualify for FHA loans and couldn't buy a house. The sub-prime mortgage industry grew as a result.

Many people get transferred by their employer every few years. They'll have a contract to work for 3 years in one city, and then they'll move to another city when their contract expires. The people shouldn't have to have a large down payment or be forced to get a 30 year fixed rate mortgage when a 3/1, 5/1, or 7/1 ARM is a better deal for them. Besides, the amount by which the interest rate can adjust on an ARM is capped at 1% to 1.5% per year, depending on the loan. The vast majority of people will not go into default after their 1st or 2nd adjustment, as it only translates to a rate that is 2%-3% higher than the initial rate.

And no, brokerages won't allow you to margin 100% of your stock, but a home will never be worth absolutely nothing. However, that is a possibility with a stock. There is no housing bubble in most of the country. Home values have been flat in many areas, but they're not falling all over the country. With very few exceptions, the rapid drop in home prices occurred in the same areas that saw a rapid increase in home values.

[SahaleArm]

17. Last question...

If a bank loans out 100% LTV on a home and the home's value dips say 5%-10%, does the bank force the buyer to pay the difference ala a margin call at a brokerage?

[1932]

19. All homeowners shouldn't have to pay inflated home just to prices just to

protect the person whose company makes them move. Shift that cost on to the person who should be bearing it: their employers. The employers should be putting cash into the hands of employees so they don't have to have 5 yr, interest only ARMs on 100% or more of the value of the home, that allow people to bid up the prices of homes and then forces everyone to either overleverage or live in the worst homes available.

If employers had to pony up the cash for making their employees' lives difficult in conjunction with lenders being regulated so that the only way they could get a mortgage is under reasonable terms that includes the buffer of a cash downpayment (that decreases the chance of negative equity), we wouldn't see inflation of real estate prices like we have.

It's not healthy for our economy that we have a real estate bubble fed by these loans which have allowed homeowners to become so overburdened with debt. Read Kevin Phillips's American Theocracy and then tell me you don't think that it's the proper roll of the government working witht he financial sector to prevent this from happening.

And a house can become worth absolutely nothing. Check your insurance policy -- nobody is covered for every conceivable loss that could occur. Actually, in some ways it is worse with a home. With a stock, you can never been on the hook for more than what you paid for the stock. Home ownership can actually put you in risk of liabilities that exceed the value of your home (in, albeit, rare circumstances that involve negligence).

[laylah]

7. Mozillo is an ASS!

I have been a customer of Countrywide for 5 years, my ex and I for about 15 years prior. We had NEVER missed a payment, nor had I until I became a "card carrying member" of the Divorced Wives Club. I was finally forced into bankruptcy :cry: and my excellent, 798 credit rating, meant absolutely nothing to those maggots! No amount of phone calls, letter writing, proving my history (which they KNEW), begging, pleading changed a damned thing! They came down, and came down hard, on me. The first chance I get, I WILL refi, and then only with a company that will guarantee me CW will have absolutely nothing to do with my mortgage! And to think Mozillo came from nowhere is (supposedly) a Democrat!

Toxic waste my a$$...pot meet kettle :grr:

Jenn

[Purveyor]

8. If you have a local 'credit union' in your area that you can join, do it

and start building a relationship with them.

Greatest thing since 'sliced bread', imho.

[mumon]

15. Get ready for a crash!

This looks like it's hitting "mid-prime" territory, from the text.

That'd be average Joes. Not people who were scam artists.

It's going to be a sharp, deep depression recession.

[Gormy Cuss]

16. The people weren't toxic waste, but the loans certainly were.

I hope that the industry is reigned in with new regulations. When the dust settles it's the poor 'homeowners' who are out of luck after walking away or declaring bankruptcy.