Just look at the rankings for subprime lending for Countrywide:
Top subprime mortgage lenders
Rank Lender Location Q4 2006 originations, in billions
1 HSBC Finance (HSBC) Prospect Heights, IL $12.3
2 New Century Financial Irvine, CA $12.2
3 Countrywide Financial Calabasas, CA $10.1
4 WMC Mortgage (GE) Burbank, CA $9.0
5 First Franklin (Merrill Lynch) San Jose, CA $7.8
6 Wells Fargo Home Mortgage San Francisco, CA $7.4
7 Option One (H&R Block) Irvine, CA $6.1
8 Fremont Investment & Loan* Santa Monica, CA $6.0
9 Washington Mutual* Seattle, WA $5.7
10 CitiFinancial (Citigroup)* Baltimore, MD $5.0
It is ranked #3! Just behind New Century Financial. Yet the company keeps stating that they will not be harmed by the subprime market meltdown. All the while the company also has significant exposure to the ALT-A Option ARM package which is more toxic than the subprime loans. Additionally, the insiders, especially the CEO is selling his shares of the stock like something is not right at his own company. He certainly does not practice what he preaches.
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2 comments:
Exactly right Podboy.
I read somewhere (Yahoo?)that Mozilo said Countrywide had only a 6-7% exposure to sub-prime loans! How could that be? Houses have gained x4 in the last 5 years, and very few people can qualify for a fixed rate. Buyers with very good FICO scores were put into these loans because the prices are too high for their income to qualify for anything else.
Found some interesting news about Wells Fargo - they state their loans are co-issure arrangements in which Wells Fargo becomes the servicer while avoiding any involvement in the securitization or seller liability. Saposely, they don't take posession of the loans.
Does this mean WF has a direct loan feeding tube to Freddy & Fanny?
It's going to get very ugly.
First, I think that 7% exposure by CFC is a lie. When you consider that their web site still hasn't taken down the promotion for their subprime loans. Also, ALT-A option interest only loans were given to people with good credit credentials. Some of these loans were negatively amortizing loans. So, even if CFC sub prime exposure is only 7%, their ALT-A exposure is close to 45 to 55%! ALT-A is worse because they sold these loans to people that had good credit credentials and allowed these people to over stretch and buy houses they could not afford in normal conventional loans. The assumption behind selling these loans was that the housing markets would continue to appreciate and that housing bubble was neglected. Now that the bubble has began to slowly deflate (it hasn't burst yet), and the likely movement of FED action is up and not down, and because the housing markets in some areas are beginning to decline in value, these people will be upside down in their loans owing more than the value of the house. This can create a huge domino effect which would feed upon each other and decrease housing value further. This is what Alan Greenspan was alluding to when he said that subprime meltdown shouldn't affect other areas of the financial markets if the housing markets can appreciate by 10% this year. That, I think was his sarcasm regarding the whole sub prime and prime mortgage issues.
As for Wells Fargo, I am not quite sure what to make of that statement because if they are servicing the loan, they are the owners of the loan. I think that they might have sold part of the loan on the secondary market to either the re-insurance groups such as PMI or managed an agreement with the buyers of the loans that they would continue to service the loans on conditions that the buyers assume the risk. I think it is a raw deal. Let me look into this a bit more and see what I find out in terms of the mechanism.
Yes, it will get very ugly. Just remember that the main stream media does not tell the whole truth. You have to dig deep and develop your own "version" of the truth.
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