Countrywide Trolls for Customers

I thought the problem right now was supply, not demand, but this email spam that just arrived suggests otherwise:

Introducing the Combo Loan from Countrywide

Ads that make it appear Countrywide is desperate for more "homeowners with less than perfect credit" won't inspire much confidence.

Update: The Washington Post also notices:

What Credit Crunch? To Judge by Lenders' Teasers, It's Still Subprime Time, by Nancy Trejos, Washington Post: On AOL.com this week, the Internet-based loan company LendingTree offered "Bad credit options" and a $425,000 loan for only $1,376 a month. And Countrywide Financial, the nation's largest mortgage lender, declared, "Bad Credit? Call Today. Refinance or Tap into Your Home's Equity" in an online ad from its Full Spectrum Lending Division...

Comments

[anne]

http://www.nytimes.com/2007/08/25/business/25mortgage.html

August 25, 2007

As Woes Grow, Mortgage Ads Keep Up Pitch
By LOUISE STORY and VIKAS BAJAJ

Wall Street may have soured on the mortgage business. But on television, radio and the Internet, the industry is as ebullient as ever.

For example, Quicken Loans, no longer affiliated with the makers of Quicken software but the nation’s 25th-biggest lender, continues to run its signature spot on radio stations. “This is a rate alert,” the advertisement starts off, sounding much like a newscast. “Slower economic growth has caused the Fed to keep interest rates flat, and the market has responded with some of the lowest mortgage rates in years.”

As more homeowners fall behind on mortgage payments and investors abandon the industry in droves, mortgage companies are facing greater scrutiny over their lending practices and disclosures to borrowers.

One area where regulators are paying closer attention is advertising that promises tantalizingly low payments without clearly disclosing the myriad strings that accompany the debts. It is a tactic that has been widely used — and, critics say, abused — by lenders trying to lure new customers.

Mortgage lenders have spent more than $3 billion since 2000 on advertising on television, on radio and in print, said Nielsen Monitor-Plus, which tracks ad spending....

[anne]

http://www.nytimes.com/2007/08/25/business/25mortgage.html?hp

Nielsen/NetRatings estimates that mortgage companies spent $378 million in the first six months of this year on Internet display ads, and many companies also buy search advertising....

[ What puzzles me is to the extent that non-bank mortgage lenders are successful in gasining customers over the last 20 months, where is the money coming from for the loans? I also think I noticed in the New York Times that Bank of America bought at least part of a mortgage lender in recent days. Why?

Is the point of mortgage lending that little money is needed besides an advertising budget, so that mortgages are given immediately packaged and sold with no responsibility for the lender and minimal cash needed by the lender? But, then who is still buying the mortgage packages? ]

[anne]

There must still be institutional buyers of mortgage packages, even as the mortgages are considered increasingly risky if only because the institutions holding suspect mortgages will supposedly have trouble using the mortgages as collateral in turn. What the heck is the reason for buying suspect mortgage packages? There is more than I at least understand going on.

[Real Person from the Real World]

ABOVE: What puzzles me is to the extent that non-bank mortgage lenders are successful in gaining customers over the last 20 months, where is the money coming from for the loans? (Are you really so oblivious?)

The fed has been "helping" to take the pressure off, by making money available to banks. HOMES are usually a prized asset for most people. Once all this blows over, Homes will continue to be a prized asset.

Troll for suckers now, while things look desperate, and those who hang on to their homes despite the drop in valuations and rise in debt, will continue to provide a nice money stream to the companies and their investors who also weathered the crisis, that will probably more than compensate for those that fall through.

[real person from the real world]

Inside the Countrywide Lending Spree
NY TImes 8/26
By GRETCHEN MORGENSON

Countrywide’s entire operation, from its computer system to its incentive pay structure and financing arrangements, is intended to wring maximum profits out of the mortgage lending boom no matter what it costs borrowers, according to interviews with former employees and brokers who worked in different units of the company and internal documents they provided. One document, for instance, shows that until last September the computer system in the company’s subprime unit excluded borrowers’ cash reserves, which had the effect of steering them away from lower-cost loans to those that were more expensive to homeowners and more profitable to Countrywide.

But few companies benefited more from the mortgage mania than Countrywide, among the most aggressive home lenders in the nation. As such, the company is Exhibit A for the lax and, until recently, highly lucrative lending that has turned a once-hot business ice cold and has touched off a housing crisis of historic proportions.

.....As the subprime mortgage debacle began to unfold this year, Mr. Mozilo’s selling accelerated. Filings show that he made $129 million from stock sales during the last 12 months, or almost one-third of the entire amount he has reaped over the last 23 years. He still holds 1.4 million shares in Countrywide, a 0.24 percent stake that is worth $29.4 million.

Started as Countrywide Credit Industries in New York 38 years ago by Angelo R. Mozilo, a butcher’s son from the Bronx, and David Loeb, a founder of a mortgage banking firm in New York, who died in 2003, the company has become a $500 billion home loan machine with 62,000 employees, 900 offices and assets of $200 billion. Countrywide’s stock price was up 561 percent over the 10 years ended last December.

Mr. Mozilo has ridden this remarkable wave to immense riches, thanks to generous annual stock option grants. Rarely a buyer of Countrywide shares — he has not bought a share since 1987, according to Securities and Exchange Commission filings — he has been a huge seller in recent years. Since the company listed its shares on the New York Stock Exchange in 1984, he has reaped $406 million selling Countrywide stock.

[Behind on mortgage]

Thanks for the update! Very helpful post as usual. Tomas vaalue.com