Countrywide Moves to Ease Mortgage Problems
Published October 25th, 2007
The lender says a new refinancing plan could help homeowners avoid foreclosure. But the biggest beneficiaries may be financial players like hedge funds
On the eve of the mortgage rate resets for a swath of subprime and prime mortgages, Countrywide Financial (CFC) on Oct. 23 unveiled a new program that will help up to 82,000 homeowners avoid foreclosure by allowing them to refinance or modify their mortgage loans. But analysts say that the program, which the company’s COO called an “unprecedented remedy” in a press release, is just calling public attention to something that Countrywide and other large mortgage servicers have already been doing.
The largest mortgage lender in the U.S. said it has created a special finance unit with about 2,700 employees to work with borrowers who, for the most part, are current on their mortgage payments but may have trouble continuing to make payments once their adjustable rate mortgages reset at higher levels.
Calabasas, Cal.-based Countrywide may need a bit of good P.R. in advance of its third-quarter earnings release, scheduled for Oct. 26. Analysts expect the company to report a net loss of $1.10 a share.
The company said it’s prepared to refinance up to $10 billion in mortgages and modify the terms of another $4 billion in mortgages that don’t qualify for refinancing. The company will give borrowers who qualify the option to refinance into a prime loan or one insured by the Federal Housing Administration. For borrowers with credit issues, the company will offer Fannie Mae or Freddie Mac’s expanded criteria programs. So far this year, Countrywide said it’s helped more than 31,000 borrowers refinance to prime fixed-rate mortgages totaling more than $5 billion.
Countrywide also plans to offer an pre-determined reduced rate to borrowers of an additional $2.2 billion who are late on their loan payments and having trouble paying because of a recent rate reset.
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