I read late today that Countrywide Home Loans will be laying off 12,000 people or up to 20% of its workforce. Their CEO, Angelo Mozilo, stated he had never encountered market forces such as they are now. The goal is to switch everything over to their bank. What this probably means is their underwriting and ability to generate new loans will be much more restrictive. Anything that is Fannie Mae or Freddie Mac approved will be o.k. Anything that is non-conforming (over $417,000 loan amount or "exotic" such as payment option loans) may not happen.
I feel bad, obviously, for the continued displacement of workers from our business. I'm not sure there are other mortgage jobs out there right now. Stay tuned as this saga continues. Remember that ARM's are still adjusting in record numbers until June of 2008. In the Pacific Northwest, we've been more fortunate due to strong job growth although I did read that 33% of the loans here did not close in August due to changing loan conditions.
If you're a loan originator, make sure you are doing your homework with your borrower before submitting their loan. And it might not hurt to submit to more than one lender. If you're a borrower, choose a lender who is stable (banks are always a good bet as they have multiple streams of income) and can do the plain vanilla (Fannie Mae) type loans. I'm talking 30 year fixed loans. Pricing is awfully good right now-6.125% if you have good credit with 80% loan-to-value or better. Plus , there are serious rumblings that the Federal Reserve will reduce interest rates at their next meeting coming up later on this month. Although a Federal Reserve interest rate cut won't impact borrowing rates immediately, it usually does not too long thereafter.
Again, I've said all along this is not a short term fix. It's obviously going to take some time to sort this mess out. Eventually, our business will see great times again. And there are pockets of hope. I got an email from a realtor in Marin County (San Francisco) and he said business was strong. Also, if you're an investor with great credit and assets, I believe there are some terrific buys to be had in depressed areas. Have a nice weekend and I'll talk to you soon!
Paul
Paul McFadden
Countrywide is living on borrowered time. No company needs 11.5 billion dollar credit line, unless they are in big trouble. I smell a merger in the waters for the future?,
Most big companies have room to cut staff. When the market is hot, they go out and find talent on every level. When markets slow down, they start tightening up the belts. I just hope they are not too late.
Great Post.
Thanks, Gary, for your comments. It's funny. I just lost a jumbo loan to CW. We'll see if they can deliver. Take care.
Paul
Leo: I wish you would tell that to my clients who just picked CW over me. Oh well, I hope their loan closes. Have a nice weekend!
Paul
Rebecca: It will be interesting to see how it all shakes out. There have been some rumors that Bank of America may be a suitor. If that's the case, then it makes sense that Countrywide would shed staff that may duplicate what BofA already has. Talk to you soon!
Paul
Hi Diane: I agree with you. It just won't be as easy for a borrower to get a loan. Banks obviously underwrite more conservatively, especially these days. Not that that's a bad thing! Take care.
Paul
Eric: That's an interesting thought. We'll have to see what happens. Have a great day!
Paul
Vicky: I agree with you. Even up here in the Seattle area where homes are fairly expensive, there are increasingly good buys as most listings have had their prices reduced. Enjoy your day!
Paul