Countrywide/BofA – A Direct Threat to Borrowers & Shareholders

Posted on September 3rd, 2008 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research

I am infuriated.  You will not believe this story.  This sure looks as though Countrywide/BofA has conspired to decieve a homeowner and shareholders.  They are getting these borrowers at their weakest moment with a plan that is portrayed as ‘help’ but will ultimately lead to disaster.  This is much worse than stated income, no doc and no appraisal loans were in the first place. WHERE ARE THE REGULATORS!  If you can’t see this train coming down the line in 5-years you are blind.

For those of you who do not believe the housing and mortgage implosion will be around for years, here ya go. I can talk about subprime being the proverbial ‘canary in the coal mine’, default rates, loan loss reserves, max-neg caps, Pay Option ARMs, cure rates, capital ratios, write-downs, Alt-A, Jumbo Prime and the GSE’s faulty underwriting systems until I am blue in the face, but none of these things seem as overwhelming as this story.  I understand and can quantify the prior list of threats.  Countrywide has taken this to an entirely different level.  

Meet The New Game in Loss Mitigation – Put it off for 5-years with 2% rates and 200% LTV workouts; make the borrower sign away their life waiving all future claims; then tell the shareholders it is ‘performing’. In 5-years this will bury the borrower beyond all recognition and force them into bankruptcy, but until then ‘problem solved’.  WHERE ARE THE REGULATORS!

  This is a true story that happened last week.

This borrower has an $800k Pay Option ARM obtained in 2005.  They bought a $1.1 million home with 25% down. Last month they hit their max negative cap of 115% and their payment went from roughly $3k per month to $5k per month.  The total outstanding balance with the accrued negative amortization stood just above $900k. The home is now a rental and the gross rents are roughly $3k per month.  The borrower moved out a few months back and are now renting closer to their jobs. The home is currently worth $515k according to Zillow.

They called Countrywide for help. Boy, did Countrywide help…helped themselves.  

Countrywide immediately sent them documents making the new monthly payment less than $1600 per month by giving them 2% interest only for the next 5-years. Plus taxes and insurance the new payment is magically around $3k per month. At the end of 5-years it returns to its original terms, which will be a fully-amortizing loan that must pay off within the remaining 23-years. At this point undoubtedly the borrower will default.  This 5-year ‘deal’ is far worse than an original 100% 2/28 or Pay Option ARM ever was.

The borrower received the documentation on a Friday and had to have them back by the following Tuesday or the ‘deal’ would be rescinded. The borrower also had to agree to waive their rights against any claims against Countrywide in the future for any purpose.  The borrower accepted  immediately.  Countrywide saved themselves by throwing the borrower under the bus.  WHERE ARE THE REGULATORS! They are too busy blaming everyone else and not doing their jobs.

 Essentially Countrwide:

  • Refinanced a $515k home with a loan balance of $900k
  • Put the borrower underwater by $385k in a pen stroke without recourse
  • Stuck the borrower in a home that they can’t sell or refinance
  • lured the borrower by using lo w monthly payments
  • Hid an ultimate default and subsequent foreclosure
  • Averted a 50% write-down and pushed out the loss indefinitely into the future
  • WHERE ARE THE REGULATORS!

This is why homeowners should never manage their own mortgage modification. Investors should never listen to the banks with respect to their exposure either.  Banks are in such self-preservation mode, you do not stand a chance. Typical home owners have such little understanding of the market, interest rates, qualifying ratios, banks thresholds, the consequences of their actions or even of their own household balance sheet that a self-negotiated mortgage modification will end up looking like the one described here.  The consumer stands no chance. I am all for banks ‘working out’ loans but this out of control.  WHERE ARE THE REGULATORS!

For those of who who did not read my mortgage modification posts a couple of months ago or watch the Youtube versions, please review. It could save your financial future. -Best, Mr Mortgage

Mr Mortgage on Mortgage Modifications

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  • 111 Responses to “Countrywide/BofA – A Direct Threat to Borrowers & Shareholders”

    1. Can there be some sort of public service that warns these people? I mean, anybody who is stupid enough to fall for this (and I have no doubt at all there will be MANY) is not reading Mr. Mortgage blogs. Their sophistication of the market is no more than that of a child, and are unlikely to be exposed to any information that warns them of this crap.

    2. “Can there be some sort of public service that warns these people? I mean, anybody who is stupid enough to fall for this (and I have no doubt at all there will be MANY) is not reading Mr. Mortgage blogs. Their sophistication of the market is no more than that of a child, and are unlikely to be exposed to any information that warns them of this crap.”

      Right on the money^^^. That is why I can’t stand all the crying about upholding your commitments. These mortgage holders are crooks trying to get what they can, while they can. Beware.

    3. What is the difference between a whiny home loan borrower and Countrywide, Bear Stearn’s, Fannie Mae and Freddie Mac?

      When the banks or investors whine, the government cares and hands them billions of our tax paying dollars. This after years of unbelievable profits. They could give a s*!t about the people, so we should give a S**t about ourselves. If one more person on this site say’s its the borrowers fault and why should we care, I will vomit. We are the only ones who are going to look out for ourselves in these times regardless of who’s fault it is. This site is informational and will help so that maybe we don’t become ignorant to the next set of corporate great opportunities available to us.

      I heard a funny but true joke the oher day “if a borrower forecloses on his home loan, he becomes a dead beat, But if Countrywide or Bear Stearn’s forecloses on billions of loans , the government hands them billions of dollars.

      Thank you for the information Mr. Mortgage and posters.

    4. Google “Countrywide Sucks” – the entire planet should be educated on how horrible this company is

    5. Lets look at this. He has a rental, if he walked away now he would not be covered by the Mortgage Relief Act because it is not his principal residence. His only protection is insolvency or bankruptcy. It appears he is probably insolvent (more liabilities than assets). The refi would most likely be recourse not non-recourse like the article states. That means he would probably be underwater by over $400K by the time the 5 years are up. Now the bank can go after him. Although it states his new payment is only $1,600 with the property taxes and insurance he is not making anything. He would be forced into bankruptcy because the loan would be recourse. That will cost him. But everything relies on whether he is insolvent now or not.

    6. Essentially Countrwide:

      “Refinanced a $515k home with a loan balance of $900k” His origininal loan was $920,000 already 115% of his cap
      “Put the borrower underwater by $385k in a pen stroke without recourse” Borrower already under water $400k + downpaymt & close cost $320k
      “Stuck the borrower in a home that they can’t sell or refinance” ** Borrower was already stuck with home can’t sell can’t refi
      “lured the borrower by using lo w monthly payments” * Borrower had no where to go there were already lured
      “Hid an ultimate default and subsequent foreclosure” ** This was 100% fate already & potentially could be Speculation
      “Averted a 50% write-down and pushed out the loss indefinitely into the future” — Averted 30%-40% – This is good thing Buyer not psycologically devasted – Buyer has ability to try and bail themselves out in 5 years. No option but to lose now, Yes maybe at no consequence but Credit Ding & Mental Anquish. (I just don’t see this as harmful) The House Market Tanked big time it keeps getting worse because Banks didn’t try Loan Mod’s in the beginning. Banks can’t loan on properties that have no appraisal value — Why is it to anyones benefit to have the bank fail ? The fewer banks that are out there the more chance for the solitary TAKE ADVANTAGE of the Monopoly there is.
      “WHERE ARE THE REGULATORS!” — The Regulators have no clue their fix has done little to help the homeless and the more companies that go under the more job losses, the more foreclosures the more the housing declines, the more writeoffs the more liquiditity the banks needs and no more loans, which again means no more home sales, lower prices, this entire event has more ability to self perpetuate the problem. Like the Rumor that causes everyone to go close their bank accounts.
      “This is why homeowners should never manage their own mortgage modification.” What would you have done differently ? Is Your Solution – foreclose ? — no loan modification. Is that that your solution? You speak to John and Jane Doe everyday .. you already know how naive they are, So why would they take your advice to walk a way ? How would you guarantee them that it is in their best interest to walk away. These people don’t sound like the irresponsible buyer, they put a lot of money down, they tried to make payments they tried to keep up by moving out and renting their residence and did keep them current for 3 years. Now they have 5 more years on this loan at the same monthy payment and it is not getting any bigger, which it was before. They have a 2% interest rate. Would it have been better to have the loan amount modified to $800k (original) and have a 6% interest rate fully amortized ?
      What deal do you think you could have got them ? “Typical home owners have such little understanding of the market, interest rates, qualifying ratios, banks thresholds, the consequences of their actions or even of their own household balance sheet that a self-negotiated mortgage modification will end up looking like the one described here. The consumer stands no chance. I am all for banks ’working out’ loans but this out of control.” — What would have been fair? And what about the guy next door who has a fully amortized loan, and is mananging to keep paying on his upside down loan? And the many other neighbors who for now have a job, and are still able to pay.
      I’m totally against the “teaser Rate loans” and even advertising the low rate that only 1 in million ready to close that day can get. Where were the regulators then? The regulators are not fixing the problem. To me this step may help, just like Jimmy Stewart in It’s a good Life. The people and the bank were saved because people didn’t Panic & BAIL. We don’t need people BAILING just because they have a non-recourse loan.

    7. […] the borrowers will get from BofA will be of the kind I mentioned in a recent post, ‘Countrywide/BofA – A Direct Threat to Borrowers’, where Countrywide gave a borrower a $900k five year 2% interest only loan on a $500k home […]

    8. […] ‘relief’ the borrowers will get from BofA will be of the kind I mentioned in a recent post, ‘Countrywide/BofA – A Direct Threat to Borrowers’, where Countrywide gave a borrower a $900k five year 2% interest only loan on a $500k home […]

    9. […] BofA/Countrywide – A Direct Threat to Borrowers & Shareholders […]

    10. This new loan mod is 100% done by design so thank your international bankers (AKA: The Federal Reserve). It’s design is meant to keep you and our country enslaved in debt for as long as possible. The people that operate the banking system don’t give 2 squirts of piss about you or your family as long as it turns a profit. Get clear on this, Profit is the ultimate goal under any circumstance.

      This mod, just like the boom, is done by design. The worm-hole and how deep it goes is so foreign to 99% of the population that we buy into this crap decade after decade and the corps are getting ready to pull our underware down to our ankles and spank our ignorant butts again.

      Don’t think this is the way things work? Stop watching the tv and start reading or watching things that will open your mind. Our entire country and large percentages of our world are systematically controlled by the corporations that run our government, select our Presidents, feed us news and media, and LOAN us money.

      3 movies you can watch right now for free are “Loose Change Final Cut” This movie is about 9-1-1 (We haven’t forgot about that already have we). Although it’s not directly related to the subject at hand, it is intertwined because it demonstrates what our government is capable of with respect to its citizens. Remember, nothing stands in the way of PROFIT…..nothing. The other 2 movies are Zeitgeist and Zeitgeist Addendum. Watch them in this order. All of the movies are FREE and available at Google Video. By the time you get to the mid way point of the third film you will see how the world operates and who controls it. There are tons of other films out there about these types of subject but people usually just want to be entertained and not educated.

      Before you sttart ranting about how I’m just some wacko that fell down with last week’s rain dig deeper and follow the money back to its origin. I am a former mortgage officer (14 yrs), Police officer (20 yrs), and former Military Officer (7 yrs). No one was more shocked than me.

      I hope you all have a safe & happy New Year.

      P.S. It’s no wonder JP Morgan Chase (and Wamu now) and BofA are doing these loans. They are a couple of the corps at the very top of the food chain. Before they prey was greed. Now the prey is the desperate.

    11. i think you are twisting the fact. the guy get the good deal by putting off the problem for next 5 years. what other solution would you have rather wining?

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