Countrywide to Refinance Up to $16 Billion of Loans (Update4)

[chpxiii]

http://www.bloomberg.com/apps/news?pid=20601087&sid=a5U5TPr9jzms&refer=home

Looks interesting.

Incidentally, my boyfriend's brother-in-law works in the foreclosure department at Countrywide. I swear he is such a judgemental b@st@rd when it comes to people foreclosing and filing for bankruptcy.

[Minnymouth]

Guess they feel they will weather better if they refinance a lot of loans then "loosing their A***" by not refinancing.

How interesting......

[SinkingFast]

Countrywide to Refinance Up to $16 Billion of Loans (Update5)

By David Mildenberg and Sebastian Boyd

Oct. 23 (Bloomberg) -- Countrywide Financial Corp., the biggest U.S. mortgage lender, will make it easier for customers to keep their homes by changing the terms on $16 billion of adjustable-rate mortgages.

About 52,000 customers with subprime loans can refinance into prime or government-backed mortgages through next year, the Calabasas, California-based company said today in a statement. Such loans usually have lower rates. Another 30,000 who may miss payments, or are already late, will get more affordable terms.

Treasury Secretary Henry Paulson last week called the housing slump ``the most significant current risk to our economy'' and urged lenders to modify more loans. Countrywide, which funded more than 1.8 million mortgages this year, has been criticized by housing advocates who say the company has done little to stem record U.S. foreclosures.

``Lending has never been an altruistic business, but having lots of failed transactions on your books is never good,'' said Keith Gumbinger, a vice president at HSH Associates, a mortgage research firm in Pompton Plains, New Jersey. While Countrywide will make less money, the modified mortgages are less likely to fail entirely, he said.

Countrywide fell 56 cents, or 3.6 percent, to $15.12 at 1:07 p.m. in New York Stock Exchange composite trading. The stock has declined 64 percent this year.

``None of our subprime borrowers that have demonstrated the ability to make payments should lose their home to foreclosure solely as a result of a rate reset,'' David Sambol, the company's president and chief operating officer, said in the statement.

Setting Standards

Overdue loans, measured as a percentage of unpaid principal, increased to 5.85 percent in September from 4.04 percent a year earlier, the company said Oct. 11. Foreclosures climbed to 1.27 percent from 0.51 percent. The data cover Countrywide's servicing business, which does billing and collections.

``This is a big step,'' said Bruce Marks, chief executive officer of Neighborhood Assistance Corporation of America, after the company's plan was announced. ``Countrywide sets the standard for servicing and how lending gets done.'' The Boston-based advocacy group has demanded Countrywide make loan modifications easier. The company's willingness to cut interest rates without penalty payments is a welcome move, Marks said.

A call to Countrywide's media relations office wasn't immediately returned.

Loans Modified

The lender's plan, which includes creating a special unit to contact borrowers, lags behind Washington Mutual Inc., the biggest U.S. savings and loan. The Seattle-based company promised $2 billion in April to refinance subprime loans at discounted rates, and the plan included an offer of a traditional 30-year fixed-rate loan. The same month, New York-based Bear Stearns Cos. set up a loan modification team at its EMC Mortgage lending unit dubbed the ``Mod Squad'' to help borrowers avoid foreclosure.

One percent of U.S. subprime mortgages with interest rates that began to adjust in January, April and July were modified to help homeowners avoid default, according to a study released last month by Moody's Investors Service. The amount isn't enough to make a meaningful cut in impending losses, Moody's said.

Subprime mortgages go to borrowers with weak or incomplete credit histories. They made up about 20 percent of home loans issued last year and about 11 percent in the first half of this year, according to Inside Mortgage Finance, an industry newsletter.

Higher Risk

Overdue payments on subprime mortgages rose to the highest level in five years in the second quarter, according to the Mortgage Bankers Association. Subprime borrowers are at a higher risk of default because some adjustable subprime loans offered below-market ``teaser'' rates in the early years. Payments can double or triple after the teaser rate expires.

While borrowers in 2005 and 2006 had counted on refinancing before the teaser rate expired, home prices have fallen the most in 16 years in the current housing slump. That has pushed the value of their homes below the amount of the mortgage, making them ineligible to refinance, and some of the nation's biggest subprime home lenders including New Century Financial Corp. have gone bankrupt or left the business.

``The liquid and liberal credit markets of those days are no more, and that means hard choices need to be made,'' HSH's Gumbinger said.

Countrywide plans to take a pretax restructuring charge of as much as $150 million to cut operations and as many as 12,000 jobs because of slower lending. Investors who buy mortgages and commercial paper curtailed purchases earlier this year on concern about rising defaults, leaving the company short on cash.

The lender was forced to tap $11.5 billion of emergency financing in August, and received a $2 billion investment from Bank of America Corp. to ease the shortage.

I copied the post here and moved the thread to the BK News Section.

Great find, CHP!!