Countrywide: ‘Exhibit A’ for lax lending

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Saturday night/Sunday morning reading: The New York Times’ Gretchen Morgenson writes a hard-hitting profile of Countrywide Financial, and it’s not pretty. ‘Countrywide’s entire operation, from its computer system to its incentive pay structure and financing arrangements, is intended to wring maximum profits out of the mortgage lending boom no matter what it costs borrowers.’ Morgenson writes that Countrywide pushes borrowers into higher interest rate loans, nickels-and-dimes them with unusually high fees ($100 to e-mail documents), and is ‘Exhibit A’ for lax lending. Tough stuff; it won’t win Countrywide any friends in Washington.

The N.Y. Times also reports, ‘The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.’

The Great Loan Blog has a short, sobering post worth reading:
‘The loose financing is gone. Stated loans are on life support. ... The market for ALT A and subprime mortgages is DEAD. ... It’s time to save and be prudent. Back to reality. The punch bowl of easy money is gone. Parties over it’s time to sober up.’

Our take: We agree -- two major changes have occurred in the market in the past six weeks or so. Easy money dried up; and the drumbeat of negative housing news reached the point where even the most clueless buyer can no longer buy a house in L.A. with the expectation that its value will rise quickly and significantly. These are body blows to a market that was already weakening.

Comments? Thoughts? Insights?
Photo Credit: Reuters