Countrywide: “Saving its own skin”?
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More on Countrywide’s announced plans to help borrowers restructure their mortgages: Fellow real estate blogger Diana Olick of CNBC, in a quick piece of analysis, observes, ‘... Countrywide is saving its own skin, as well as saving home ownership. The company simply has to do this because there is no way it can survive otherwise. Obviously they are seeing the recovery rates and just don’t want to risk it. This is a pre-emptive strike, and I say no matter what the motivation, it’s a positive move from Countrywide.’
Backstory: Olick quotes mortgage data expert Janet Tavakoli, who in turn reports that sub-prime loans are failing at shockingly high rates -- far higher than any financial institution has yet acknowledged:“Last week I met with a major mortgage servicer of geographically diverse U.S. subprime loans. They work 13-hour days trying to salvage what they can, doing anything to avoid reporting a delinquency or foreclosure. They disclosed disturbing information unavailable even on trustee reports. The servicer asserted the rating agencies are incorrect in their optimism; recovery rates of 60% are unattainable. My average recovery rate assumption of 30% is also currently unattainable.’
Our take: We would add one more piece of analysis: The Bush administration, in the person of Treasury Secretary Paulson, took the mortgage industry to the woodshed, in public, recently. He all but ordered lenders and servicers to take the moves Countrywide took today.
Thoughts? Comments? More soon on this story.